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THE GREEN ECONOMY: A LOAD OF OLD BULL?

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By Molly Scott-Cato

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The Montréal Review, March 2013

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 "Green Economics: An Introduction to Theory, Policy and Practice" by Molly Scott-Cato (Routledge, 2008)

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Britain, and the EU generally, is in the throes of a crisis of confidence in its food supply. The largely unregulated and highly competitive process of producing what ends up on our plates has been offering evidence of poor quality, dishonest labelling, and probably criminal fraud. Consumers are pulling ready-meals out of their freezers and wondering whether they contain beef, horse, dog, or rat: confidence is lost and tempers are frayed.

In Victorian schools children used to be subjected to what was known as an 'object lesson': a natural creature was brought into the classroom to be minutely considered and dissected. Some lessons learned were anatomical and biological; but deeply moral and spiritual messages were also garnered from consideration of a beetle or cornflower. In such a way I think we can use the horsemeat scandal to teach us a lot about not just the global food industry but also the industrial economy in general. The moral lessons can help to guide us towards a sustainable and equitable economy for the future.

An economy within social and environmental control

In the wake of the discovery of horse-meat in our food supply, just as in the aftermath of the revelation of the irresponsible and anti-social behaviour of our financial institutions, considerable emphasis has been placed on the notion of 'regulation'. Regulation means the establishment and enforcement of rules to guide the behaviour of the private corporations to whom control of systems of production and distribution is ceded. In the case of the food industry, we accept its consolidation and domination by a small number of global players. As a green economist I find the use of this managerialist term misguided, as though the role of politicians should be limited to one of oversight and monitoring.

In a green economy politicians would have a much more muscular role, creating by democratic agreement the framework within which economic activity can take place. The economy would be viewed as a community operating for the social and environmental benefit of all, rather than the narrow interest of the few. Perhaps most fundamentally they would return to what in North America was known as 'anti-trust' activity, that is to say they would ensure that there is fair competition in our system of production and exchange. Without it there is no basis for arguing that capitalism is a system that serves our interests or is even efficient in terms of its use of resources.

Take the global music industry as one example of the trend towards consolidation and away from competition. Consolidation in the global music industry has been intense in recent years, with the industry now dominated by the 'big four', Universal Music Group, Sony, EMI and Warner Music Group, who together account for 75% of the global music market (see more detail in Table 1). It is clear that this is not the sort of competitive environment that was described in the previous section and is used to justify the superiority of the market system as a form of economic organisation. At the harder end of the global economy, the mining industry is also becoming highly consolidated, with a small number of multinational corporations-primarily BHP Billiton, Vale and Rio Tinto-coming to own most of the world's scarce mineral resources.

Table 9.1. Proportions of Global Sales by Leading Corporation and Independent Labels, 2011

UMG

27.9

Sony

21.9

EMI

9.9

Warner

15.1

Indie

25.2

Source: Music & Copyright annual survey

Xi3, B. (2012), 'Mining Overview ', Columbia University Consulting Club, 5 March 2012

Sharing costs and benefits fairly

The dominance of corporations extends to the political realm as a result of the influence their political donations buy. In this context it is unsurprising that corporation tax have been on a relentless downward trend in recent years. In the UK the main rate of Corporation Tax will fall to just 21% from 28% in 2010. This compares with rates of 40% in the US, 33% in France and 29% in Germany. Chancellor George Osborne boasts of his generosity to corporates: 'This is the lowest rate of any major western economy. It is an advert for our country that says: come here; invest here; create jobs here; Britain is open for business', he proudly claimed.

The other side of the coin is the avoidance of taxation by multinational corporations who can locate their head offices in the jurisdictions with the lowest tax regimes. Such behaviour is seriously undermining the tax base that pays for the national infrastructure on which the same companies depend, making them massive corporate free-riders. Here a useful example is Amazon which literally free rides on Britain's roads having paid not tax to the UK last year. (1)

The transfer of the costs of infrastructure from private companies to the citizenry is the reason the systems we rely on our breaking down. In the European context a prominent example is the trans-European road network that underpins the lengthy supply chains that waste energy but are an essential part of the 'single market'. Here we see the European Union most under corporate pressure, with its Council  Directive  96/53/EC of 25 July 1996  obliging  us to upgrade our roads to permit 40-tonne axle lorries by January 1999. As ever larger lorries have pounded our carriageways costs have risen and the quality of the road surface has declined.

Challenging wasteful global supply chains

By contrast in a green economy the role of the politician would include such matters as introducing tax regimes to force corporations to contribute a fair amount via the tax system to the infrastructure and services their business models depend on. Green politicians would also challenge the massively increased volume of trade that has typified globalisation. To replace the WTO we could substitute a GAST - a general agreement on sustainable trade. This would encourage the development of resilient local economies to increase security and reduce the wasteful energy use associated with items that could be produced much closer to home. In the UK resource insecurity is exacerbated by the fact that the ports are geographically concentrated in the south-east, an area particularly vulnerable to sea-level rise: 63% of total container volumes were handled by just three ports in the south-east in 2004. (2)

In terms of the relationship between the economy and the environment, again the political authority has an important role to play. Part of the explanation for the failure to identify the problems with our meat supply is the lengthy and complex supply chains that dominate our agricultural and industrial sectors. In the era of climate change this is also extremely wasteful in terms of energy. Before products arrive in our shops the components that make them up have often travelled the world many times, again wasting energy and creating carbon dioxide emissions that have not increased human well-being.

Although the market economy prides itself on its dynamism the reality is that it is failing to respond to the challenge of the environmental crisis on either the scale or at the speed that we require. Corporate commitments to maximise shareholder value mean that executives focus on increasing profits rather than introducing innovative products or switching to new markets. Here is another role for policy-makers in creating tax incentives to encourage truly green production. The Australian government has boldly introduced a carbon tax which has proved more effective than the EU emissions trading scheme in reducing CO2 emissions. (3)

Elsewhere I have suggested something more radical in the form of Ecological Enterprise Zones. (4) These would be local economies that would act as pioneers of the low-consumption low-energy lifestyles that a sustainable future requires. In return for promising to reduce the levels of throughout of materials and energy the economies would be given considerable leeway in terms of other taxation rates. This would enable rapid innovation and facilitate the transition of our systems of provisioning towards locally based resilient alternatives to the global supply chains of today. If the watchword at the individual level is transition then at the industrial level it is conversion. We need industrial conversion on a vast scale and at a rapid pace. Although the ecological crisis has been evident for several decades, action is quite inadequate and too slow. The urgency of this task require political commitment: the market has demonstrated that it is not up to the task.

The repeated message running through this article is that for too long we have believed the ideology that markets will solve problems. If the horsemeat scandal has made one thing clear it is that businesses whose objective is to make profit cannot be trusted to prioritise social welfare, much less address urgent ecological problems. Across the world local communities are taking the initiative to build sustainable futures but to support these personal transitions and incentivise rapid industrial conversion we must demand from our politicians that they take courage and return again to their traditional role of strategically planning our economic life.

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Molly Scott Cato is Professor of Strategy and Sustainability in the Business School of Roehampton University and author of Green Economics: Theory, Policy and Practice (London: Earthscan, 2009) and Environment and Economy (London: Routledge, 2011). She is a green economist who is also well-known in the field of co-operative studies. She is author of

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(1) Public Accounts Committee (2013), 29th Report: Public Accounts Committee - Twenty-Ninth Report 
Tax avoidance: tackling marketed avoidance schemes

(2) Defra (Food Chain Analysis Group) (2006), Food Security and the UK: An Evidence and Analysis Paper (London: TSO).

(3) 'Emissions fall since introduction of carbon tax', Sunshine Coast Daily, 28 Feb. 2013.

(4) Green House evidence to the House of Commons: Environmental Audit Committee inquiry 'A Green Economy: Twelfth Report of Session 2010-12.

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