Sustainable Capitalism

This is a paper I wrote 2003 and sent to the UK conservative party. No idea if anyone read it, but sad to say, after this paper, the conservatives “went green”.

Although from before I knew there is no real science backing the catastrophic predictions of global warming, not too many embarrassing statements but enough to make me cringe, this one (albeit in an appendix) is particularly awful:

The biggest effect of global warming is likely to be harvest failures in all countries but particularly damaging in undeveloped countries. History shows that this results in political instability, an increase in extremists such as anti-western groupings and a rise population migration.


Sustainable Capital: The intrinsic value of society, environment and economy that remains substantially available over a 25 year period for the next generation.

A paper prepared by:
Michael Haseler BSc. MBA
©Michael Haseler 2003

Summary

Capitalism is being blamed for a wasteful society that is causing global warming.

Sustainability is simple common sense, but has received almost a religious status amongst some followers; that it is some mystical force that will “heal of the planet”, if only enough people would forsake the evil of consumption and follow the true “sustainable” way.

This report examines whether capitalism and sustainability can co-exist. It draws the conclusion that the principles have no incompatibility. Moreover, it concludes that the implementation of sustainability would be bettered by taking the long term intrinsic value encompassed in the concept of “capital” and using this as the basis for a model for our economic, social and environmental resources. This model is “Sustainable Capital”

The problem with present UK environmental policy is that it is too focused on environmental issues and ignores the wider economic and social issues. Thus, the UK incurs all the additional environmental costs, without gaining the potential economic opportunities. The result is likely to be an inability to sustain public support as the small number of additional UK jobs is unlikely to replace jobs lost as the UK switches from petroleum and gas. This is literally unsustainable.

Sustainability and capitalism share a more rigorous longer-term perspective. But, the electorate, news media and NGOs all shout about the latest, most “cuddly” and often contradictory issue and few remember the lesson that sustainability is a wider, longer perspective with equity of effort on the environment, society and the economy.

The government have proposed metrics for sustainability, which are a first step. Unfortunately, these are not developed to measure sustainability, but are a selection of “sustainable looking” metrics. The result it that they are too short term, hard to interpret, contradictory and some essential figures such as raw material resource are entirely missing.

Most noticeably, an increase in oil consumption will increase GDP, whereas in fact the raw material resource for future plastics, etc. has decreased. As oil depletion and global warming are major problems for the future, this counter-intuitive rise in “sustainability” with increased oil consumption is grossly misleading.

This report proposes a new form of metric: Sustainable Capital. Just as the asset value of a company complements the short-term metric of turnover, Sustainable Capital, the long term asset value of the whole economy, society and environment, complements current metrics such as GDP: a short term, measure of economic activity.

Measuring Sustainable capital would introduce a regular methodical account of the assets we hold in trust for the next generation. It would focus on the necessary, encouraging proactive considered measures and avoiding the environmental tokenism.

This report does not underestimate the problems of using this new metric. Accountancy overcame similar problems in valuing aspects of a company such as “goodwill”, “training & skills”, etc. and despite similar problems, a useful metric is feasible.

Introduction

Anti-capitalism and anti-globalisation movements are growing. Many ordinary people now view capitalism and by extension any pro-business politician as fundamentally immoral and the cause of unsustainability in the world. In truth sustainability is as much to do with economics or business, as society and the environment.

Global warming and resource depletion is a growing problem and the root cause of the prominence of the concept of sustainability.

This paper examines whether capitalism and sustainability are indeed opposing philosophies and draws the conclusion that capitalism and sustainability share a common long term perspective and that they can both be encompassed in a new model.

Capitalism is Morally Neutral

At the heart of capitalism is the concept of a free-market where free-competition means the price of goods and services adapt so the quantity of supply matches the demand. The free market doesn’t include within it the concept of moral value, but nether-the-less it has proven effective at providing certain social benefit such as general improvement to health and living standards.

Capitalism is not necessarily “anti-society” or even “right wing”. Capitalism creates paid labour and a freedom to move between employers. Capitalism was only possible when money/capital replaced feudal obligations as the main source of project funding. Far from capitalism enslaving labour, capitalism and the use of money freed people from feudal slavery and its introduction was a huge shift of society to the “left”.

The main argument used against capitalism is that the amoral free-market inevitably causes immoral actions. The “free-market” may be amoral but it could not exist in a moral vacuum. A strong society is needed to provide a high degree of trust to oil commerce & provide rules and regulation to prevent the natural tendency towards monopoly, which destroys free-markets. E.g.:

  • An efficient market needs a high degree of trust and consensus between sellers and purchasers otherwise there would be a high cost in every transaction with purchasers checking each item before they are willing to part with their money.
  • Regulation of a market is needed to force competition. Otherwise the strong will monopolise the market, create barriers to stop entry of competitors to the market, and use anti-competitive pricing and behaviour to obtain “corrupt” profits.
  • If inequity within society grows, the consensus that society is “fair” declines and illegal activity increases. This lack of support for society creates economic and social costs such as higher costs of law enforcement, which are born by the free-market. In the extreme, unregulated black-markets undermining the “free-market”, become the norm.

Capitalism is simply a series of amoral, apolitical rules, regulations; it needs a strong social environment to allow a free-market to operate.

Sustainable Development

The term “sustainable development” was first coined in 1980; the concept however, predates the actual term. It derives from concepts developed in the 1950s and 1960s focussing on development based on improving economic growth through efficiency. The main tenet then was that strong economic growth would “trickle down” to lesser-developed regions. In the 1970s this approach lost credibility and there was a shift toward equitable growth, with an emphasis on social development.

Also the 1970s saw increasing concern that human activities were inextricably linked to the global socio-economic system and natural environment. It was generally acknowledged that environmental degradations were an impediment to social and economic development, particularly in developing countries. The Brundtland report in 1987, “Our common future”, gave what is now a generally held definition of for sustainable development:

Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

Later reports have sought to refine the definition and it now commonly includes:

Social progress, economic development and environmental protection”

“Sustainable development” derived from a context where there had been previous inequitable economic development (e.g. a third world nation.) and it is clear that the original evidence from the third world related to “catch-up” development which does not necessarily apply to the situation in richer countries with mature economies.

In a real sense, the concept of sustainable development has moved away from the evidence and its application in richer nations is a loose interpretation focussed mainly on the strong environmental aspect and ignoring the economics aspects from which it grew.

To make sense of sustainability and apply it appropriately needs an understanding of the rational:

Policy implementing change has a much wider impact than the specific actions would suggest. Before implementing change, policy makers should consider the wider and long term impacts throughout the economy, environment and society.

Governments have adopted “sustainable development” to address electors concern for the environment. Much of what we see is disjointed environmental policies “bolted on” to the government machinery (see appendix 5). These are token gestures given the real size of problems – the UK petroleum fields running dry and global warming (See Appendix 2).

The Royal Commission on Environmental Pollution suggested in their major report “Energy – the changing climate” that we should aim to reduce CO2 emissions by 60% by 2050. The government response has been a piece meal patchwork of policies. For example, the renewables obligation only supports renewable electricity. Scotland has made this a flagship policy with a 40% “renewables” target, but in fact the result will be only 8% of all energy comes from renewables.

Even a few percent reduction in energy use will tend to tip the economy into recession. A 60% reduction could see a century when recession is the norm. There is an economic imperative to act, which far exceeds the present environmental tokenism.

Our children could quite rightly point to this generation as having squandered the necessary resources to run their economies.

Capitalism and Sustainability are Long Term

Capitalism stems from financing of projects through the social/financial entity of the company. The difference between capital investments and other money is that capital is a long-term investment to buy assets that have a sense of intrinsic long term value.

Sustainability also includes the concept of long term value: of providing to the next generation a society, economy and environment that enables them to meet their needs. The assessment of what is needed to be sustainable and to assess whether we are meeting these requirements needs some form of measurement that encompass the intrinsic value that remains to future generations.

Accounting for Long Term Value

Capitalism works because the financial investor need not be the same person as that who operates the company. But this separation of operator and financier has a cost in that the financier is not in control of their investment. Companies and investors need a mechanism to provide metrics that demonstrate that the investment value of a company is being maintained. So accountants are essential to the process of providing financial transparency through company accounts. The value of these companies is provided by the capital or asset value of the company. The Capital value reflects the intrinsic value of the company as an ongoing entity.

Sustainability is similarly an obligation of those who control the resources to ensure that they maintain the intrinsic value for a group with an interest, namely the next generation.

Activity is not Value

It is a mistake in valuing a company to think that the amount of trade is a measure of the company value. This is not true. The sales value or turnover of the company is not an indicator of value but one of activity. Turnover and capital-value are fundamentally different:

  • A company can be very active but unprofitable with the result that it has a high turnover but its capital value declines.
  • A company that sheds unprofitable business will see a drop in turnover but an increase in profit and an increase in its capital assets.
  • Turnover gives no indication of whether a company is making enough provision to cover the cost of replacing equipment wear and tear. “Depreciation of assets” is just a fancy term for “setting aside enough money” to cover “wear and tear” and eventual replacement.

Similarly, if we are to ensure that the actions we undertake will be sustainable, we need some type of measurement to account for the long-term sustainable or intrinsic value of what we have to pass onto future generations.

A problem with the current thinking behind sustainability is that it is reactive to current issues. It seldom differentiates between long term issues that would have an impact on the next generation and short term issues that don’t; they may be dramatic, stir up strong emotions, but should not be included in a sustainability agenda, as they don’t affect the next generation.

For example:

  • A forest fire is dramatic but in reality it is part of the natural cycle and the forest will rejuvenate.
  • Quarrying for minerals creates a temporary scar, which will heal with time, and the jobs the quarry creates could maintain a local community long enough to secure other employment. The long term environmental impacts of the quarry are minimal, but the loss of the jobs could destroy a community.
  • Traditional economics measures GDP. This is a measure of income & expenditure and largely related to consumption. Perversely, GDP tends to go up as resources are consumed when the intrinsic value of what is left actually declines.
  • Traditional measurements of society concentrate very much on the here and now: unemployment, homeless and those currently ill. It fails to focus on longer term issues that could prevent these problems arising: good schooling, employment (long-term unemployment affects health) and the long term inter-generational effects of a dependency culture.
  • Traditionally economics sees any job as equivalent in value. The result is government supports “inward investment” that attracts shallow easy-come easy-go companies. Without key skills like R&D, purchasing or project management, their short stay fails to strengthen the local economy: they don’t build a skilled local supplier network, they don’t invest in the key skills that people can use to add value to future employers, and their employees have no better skills or experience to set up their own business.

Sustainable capital

“Sustainable capital” is a term this report uses to describe a mechanism of accounting that ensures we measure and hopefully maintain the long-term intrinsic value of the economy, society and environment. It is complementary to short term metrics such as GDP. In essence it is the principle of accounting used on a whole economy, society and environment:

Area

Activity

Underlying Value

Economy

GDP

Sustainable capital

Company

Turnover

Capital

Company turnover gives an idea of company value but only capital value measures the true long-term value; GDP or gross domestic product is the total market value of all final goods and services produced in a country in a given year and like turnover, It reflects the activity in the economy but does not account for any reduction in natural, social or economic capital because it does not reflect the intrinsic value.

Sustainability comprises three main areas: economy, environment and society. Thus Sustainable Capital has within it three facets making overall Sustainable Capital value: economic capital, environmental capital and social capital.

Sustainable Capital

Sustainable Capital

The fundamental difference between Sustainable Capital and traditional economics is that Economics’ main measure, GDP, is a short-term view. GDP measures income and consumption. Just as a company can increase turnover by neglecting its capital assets, so a country can increase GDP by consuming long term resources. The rate at which we spend or earn is not a measure of our wealth, even if we narrowly define wealth in terms of money: a person may be a millionaire and live frugally or a jackpot winner may quickly spend everything and have no wealth remaining.

The real measure of our wealth is more than current economic activity; it is the total wealth of all aspects. Today’s, natural resources are the basis of the future economy not only for this generation but also for all generations on earth. The strength of society is as much an economic asset as a social asset. An economy is also a social asset and an efficient economy is also an efficient user of resources.

The idea of Sustainable Capital must encompass the stored wealth that we pass on to the next generation: our economic infrastructure, the health & learning of our society, resources like petroleum, minerals or the ability of the planet to soak up waste like CO2. The hidden danger of traditional economics is that a reduction in the value of these “assets” does not affect traditional economics main measure: GDP.

So what really makes Sustainable capital an effective measure is simply that it is better accounting: we measure our wealth by our long-term assets and not the short-term consumption or destruction of assets that reduce our wealth as provided by GDP.

Implementation

Sustainable Capital must be more than a vague concept to be a real contender to complement metrics like GDP. But it its implementation will not be easy.

For centuries accountants have sought to devise reasonable sets of guidelines to define the ordinary “capital” value of a business. These are questions of what constitutes value in a company:

  • Goodwill – is the idea that a company is worth more if it has built up goodwill with customers & suppliers.
  • Intellectual property: the value of ideas and sellable ideas.
  • Depreciation tries to account for the decrease in value of capital assets. Some assets don’t decrease their value (gold), others lose half their value on purchase and the value of others is so transitory that the idea of “intrinsic” value is laughable.
  • Human capital is an attempt to show the investment a company has made in training its employees.
  • How does a company put a value on an asset that is invaluable to them but worthless to others?
  • What is the value of company branding?
  • A company with a large order book is worth more than one with none, so although this is not “long-term” or “intrinsic”, it does have value.

Sustainable Capital should not be rejected simply because it is difficult to implement.

Timescale

Conventional capital refers to items that sustain most of their value between successive years. Sustainability is longer and the Brundtland report was helpful in providing the concept of “the next generation”.

So what time period represents “a generation”? Within some third world countries the figure is less than 25 years due to women entering child rearing at an early age and dying young. In developed countries a figure of 35 years or greater is more representative. These will change and can only be guidelines. 25, 30 and 331/3 years are possible candidates but 25 years is a regular anniversary and easy to use.

This report proposes that Sustainable Capital is:

The intrinsic value of society, environment and economy that remains substantially available over a 25 year period for the next generation.

Measurement

We need items that maintain their intrinsic value into the next generation. Within this time period things we think of long-term are just transitory. Companies rise and fall, people change occupation, children are born, go to school and become adults, oil reserves are found and consumed and even buildings rise and fall.

What we normally count as “capital” is in this context only transitory “consumables”. We need things that maintain their value beyond the current company, occupation, lifestyle, etc. and which maintain their value beyond the short-term measures.

Area

Sustainable Capital

>25years

Transitory

A few years

Economy Transport infrastructureIndustry clustersExperienceUniversityWork ethos

Promote enterprise

Housing

New ideas, learning

Science.

CompaniesIndividual jobs
Society EducationSocial structuresLaw, cultureHealthHousing quality

Social care (life, drugs sexual health)

Relationship education

Anti-poverty

Longer lives

OccupationChildrenSome Relationships
Environment Raw material reservesNatural environmentBio-diversityForestsScenery Mines/reservesCrops

Next Steps

This report outlines a proposal to introduce a new broad measurement called “Sustainable Capital”.

There would be three main facets to this measurement resulting from the three main facets of sustainability.

Just as the Doomsday book would have seemed impossible to some in its time, so too this metric that aims to measure “everything in the realm” may look impossible.

The census has now replaced the doomsday and has been joined by other metrics such as GDP as the basis for many decisions from the planning of local services to the assessment of the impact of government policy.

The present metrics are too focussed on the short term and we need to add metrics that assess longer term impacts and include such aspects as the use of finite resources.

Each year accountants undertake a stock take of all the assets of a company. We as a country should similarly implement a mechanism to take stock of the assets we hold in trust for the future.

Appendix 1 – Definitions & Notes

Economics: The scientific study of the choices made by individuals and societies in regard to the alternative uses of scarce resources which are employed to satisfy wants.

Gross Domestic Product: The total market value of all final goods and services produced in a country in a given year

GDP = Consumer Spending

+ Business and Residential Investment

+ Government Spending

- Trade Deficit.

Recession: Two consecutive quarters of declining GDP.

Fiscal Policy: All policy by the government involving the collection and spending of revenue; i.e. “tax and spend” policy

Capital: Used in a number of ways:

  • To differentiate certain assets from income and cash flow.
  • To refer to the value of a business owner’s investment i.e. the equity in the business
  • In a limited company, this equity is represented by share capital plus reserves.
  • Capital expenditure is the purchase of new fixed assets.
  • A capital asset is one likely to be held for a long period.
  • A fixed asset recorded in the accounts is said to be ‘capitalised’.
Capitalism

Economic system characterized by the following: private property ownership exists; individuals and companies are allowed to compete for their own economic gain; and free market forces determine the prices of goods and services. Such a system is based on the premise of separating the state and business activities. Capitalists believe that markets are efficient and should thus function without interference, and the role of the state is to regulate and protect.

Socialism

Economic system which is based on cooperation rather than competition and which utilizes centralized planning and distribution.

Economy
  • Activities related to the production and distribution of goods and services in a particular geographic region.
  • The correct and effective use of available resources.
Sustainable Development

The Brundtland report in 1987, “Our common future”, gave what is now a generally held definition of for sustainable development:

Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

gwAppendix 2 – Global Warming

Changes in temperature since 1860 are shown in the graph. The data shows that the planet has warmed by about 0.7 degrees Celsius in the last 100 years, with the most rapid rise occurring since the mid 1970s

There are many possible factors that could be responsible for this change. The most widely accepted explanation is that the cause is the emission of greenhouse gases, particularly CO2. CO2 is part of the natural cycle of plant growth and decay, but the main problem is the burning of carbon containing fuels like petroleum and oil, which normally lock up vast quantities of “CO2” in the ground. Recently it has been possible to estimate the effect of the current output of CO2 by computer modelling and the best estimates are that the rate of temperature rise will increase and over the next 100 years we would see the average global temperature rise between 1.4°C and 5.8°C. This may not sound much but the average global temperature during the last ice age was only 5°C less than it is today!

As any farmer will know, even a small change in rainfall or temperature can have a dramatic effect on the harvest. Moreover, global warming is predicted to bring more of the catastrophic events such as flood, drought and storms. Clearly parts of the developing world, which have the least resources to cope with the changes, will be the hardest hit. Particularly when increasing population is already creating problems in these areas.

The biggest effect of global warming is likely to be harvest failures in all countries but particularly damaging in undeveloped countries.

History shows that this results in political instability, an increase in extremists such as anti-western groupings and a rise population migration.

Appendix 3 – Green Economics

Green economics is a branch of green thinking. A summary is included here to provide an indication of how others have addressed the issues this report addresses.

Green economics attempts to add a degree of moral value to the amoral concept of monetary value. Its main focus is on the concepts of “use-value”, intrinsic value & quality rather than the “exchange-value” (money) of traditional economics.

By redefining the concept of money, it tries to make money a means to facilitate the adoption of green values such as human welfare and environment, and thereby reduce the emphasis on material acquisition which creates wasteful consumption.

Green economics is an attempt to marry the benefits of our economic system with green ideas that reduce the harm of our present system. It recognises that the quest to accumulate money or capital did drive a powerful industrialization process that provided many human benefits such as improved health, more leisure time and greater human rights, but tries to counterbalance the effects of blind material and monetary growth that has the potential to generate more destruction than real wealth.

Although the aim is laudable, the amorality concept of money does not fit easily with the moral value that is needed to achieve the aims of green economics. The attractiveness over e.g. a barter system is the simplicity and universal acceptance of money. To make money value dependant on whether it is a £ paid for oil or a £ for renewable energy, would remove this universal benefit. Money is a simple efficient medium of exchange because it is value-free. It provides a mechanism to separate the goods from their value and thus there is a universally accepted and trusted value for exchange or accumulation; a separate and divisible exchange value that exists separately from the substance of the items being exchanged.

To make transactions involve more than monetary value would require either a parallel monetary system to allow the exchange of “intrinsic value”, which would effectively double the complexity of each and every transaction leading to increased inefficiency or it would require some way to tag money so that it maintains information on its history to allow value judgements that effectively blacklists or promote some money based on its history. Both are laudable but impractical.

So although Green economics aims to meet human and environmental need, it is difficult to see how it would implement the key concept of “intrinsic value”. Without a workable mechanism or actionable framework beyond the present concepts of taxation/support green economics it is no different from the present regulation that is used to modify market behaviour – green economics seems to be little more than the economics of implementing green policy.

Appendix 4 – Development vs. Sustainability.

The underlying worry with the concept of “sustainable development” is that it originates from an assumption that economic development is necessary and good and that it can and must be made sustainable. Within the context of bringing an undeveloped country up to the level of developed countries the extent and timescale to which it refers is limited. However, it was not intended as a principle to promote continued development for an unlimited period of time.

Common sense tells us that limited resources will naturally curtail development reliant on those resources at some point. The very concept of “sustainable development” may therefore be unsustainable. It does however, provide a useful paradigm that should put more emphasis on holistic, inclusive policy rather than the piecemeal approach we often see.

A more fundamental problem is that the measures for development may not actually reflect improvement but instead measure activity. In a similar way that turnover of a company shows commercial activity, but not necessarily profitable activity or an increase in its long-term asset value; so GDP shows economic activity but not necessary any improvement in long term value of the society, the environment or economy.

This is because higher GDP may be as a result of longer working hours, families deprived of parents and a generally “poorer” society. Higher GDP can be achieved by consuming resources that deprive the next generation of their essential raw materials, and higher GDP may be as a result of short-term asset stripping and failure to invest in skills, infrastructure and indigenous companies that in the longer term results in a deteriorating economic performance.

Appendix 5 -Windmills & Global Warming

For decades, environmental groups pushed for renewable energy. To make this media friendly (FOE Energy spokesperson) they focussed on wind turbines for the simplicity of the message.

With mounting evidence for global warming and a public that wanted action, the government implemented the renewables obligation. Despite its name, it only supports renewables used to produce electricity and predominantly wind produced electricity despite problems in terms of intermittent production. This policy is best described as: “All spin and little action”.

Heating Transport Electricity Cement etc.
Reduce Use Insulation Planning Product efficiency Longer life buildings
Improve Efficiency Boiler efficiency Engine Efficiency Generation nearer to use ?
Renewables/Non CO2 processes Wood burning. Solar heating, Bio-diesels Wind, Wave, Hydro Lime mortars?

If, instead of grasping at the “media friendly” solution offered by environmentalists, the government had looked instead at what is necessary to address the problem, it would find that in the UK, CO2 is produced from three main energy uses: Heating, Transport and electricity. (CO2 is also produced in the manufacture of cement). If the government had been serious, there would be action in every single area; instead most areas have no real action except wind energy.

The result in Scotland is that the executives’ high-profile policy of 40% “renewables” will in fact result in a total of only 8% of energy coming from renewable sources

Appendix 6 – Inward investment vs. Indigenous growth

Recently there have been a number of incidents where foreign companies, that came to Scotland due to the high levels of government grants, have closed down. Quite understandably, indigenous companies see these grants as supporting short term businesses, which stay only so long as the grant money is available, after which they will move elsewhere.

This money would be much better spent supporting indigenous companies, which are here for the long term. The concept of investing in indigenous companies rather than foreign investment appears intuitive, but there are always exceptions – the foreign company that does a lot to boost the economy and creates spin-offs that attract further investment and the indigenous company that closes despite support.

The model of Sustainable Capital shows where we must invest to achieve sustainable economic development because it looks at a longer time period of 25 years. Over this time period companies are almost consumables within the economy. What we must ask is: “what is it in this government support that will retain value over a 25year period?”

The answer is that simply looking at the number of jobs is nonsense. There is little likelihood of the company still being in business in 25 years time. However, the skills, capital assets, and industry infrastructure are capable of sustaining this time period.

We should no longer ask questions like how many jobs, but instead how many spin off companies will be created. We should no longer think of training for the company, but how that training will be utilised as people move to other companies. We should view “assets” & equipment like PCs that last only a few years as consumables in our calculations and look to buildings, roads and other assets like clusters of industry that will be around for the next generation.

Appendix 7 – Government “sustainable Development” Headline Indicators

Economic Growth

H1 Economic output Total output of the economy (GDP and GDP per head) Activity
H2 Investment Total investment and investment in social assets in areas such as transport, health, education, water and refuse disposal, expressed as a percentage of GDP. Investment
H3 Employment Proportion of persons (men, women, all persons) in the UK of working age who are in work, May-July each year. Activity

Social Progress

H4 Poverty and social exclusion Percentage of the elderly in fuel poverty in England, children living in families with persistently low incomes in Great Britain, working age people with no qualifications, and working age people in workless households in the UK. Long term?
H5 Education Percentage of people aged 19 with level 2 qualifications in the UK Investment
H6 Health Life expectancy at birth, and expectancy at birth of years lived in good or fairly good general health in Great Britain. Investment
H7 Housing Percentage of households living in non-decent housing, England.
H8 Crime The numbers of offences recorded by the police per 100,000 population, England and Wales. Investment

Environmental Protection

H9 Climate change Emissions of carbon dioxide and the basket of greenhouse gases, United Kingdom Long-term
H10 Air quality Average number of days per site when air pollution is moderate or higher, United Kingdom Short-term
H11 Road traffic Total road traffic volume(billion vehicle kilometres) and road traffic intensity (vehicle kilometres per GDP), Great Britain ?
H12 River water quality Percentage of total river length of good or fair chemical quality and good or fair biological quality, United Kingdom Short-term
H13 Wildlife An index of the populations of the more common species of native wild breeding birds, United Kingdom Long-term
H14 Land use Percentage of new homes built on previously developed land, England Long-term
H15 Waste Waste arisings and management and Household waste, United Kingdom Short-term

Appendix 8 – Wind Energy is Unsustainable

The UK and Scottish government have provided a number of supportive measures for renewable energy mainly under the Renewables Obligation and Renewables Obligation Scotland.

Apart from the obvious problem of only addressing electricity as covered in Appendix 5, the other glaring problem is that this policy is failing to address economic needs and create employment.

Wind energy is a capital intensive industry with low running costs. As such the main employment in wind energy is in the building and construction of wind farms and we can effectively ignore jobs in operations & maintenance, as the contribution is very low. Of all the jobs, over 60% of the jobs come from wind turbine manufacture. The others are mainly in foundation and civil works which unlike the wind turbines are unlikely to result in much export work.

In the UK there are no indigenous companies that have been successful (as of Jul 2003) in selling wind turbines. The only industry we have is a Danish owned manufacturing plant in Campbelltown that employs less than 200 people, a few small wind blade companies, and a UK company (DeWind) that is yet to sell any turbines.

Compared to the 30,000 employed in the Danish wind industry, the UK industry is tiny.

Unfortunately the UK has a hands off approach which although normally quite acceptable, in this case the whole UK market for renewable energy has been created and moulded by the government. If it does not create employment it is clearly the government’s responsibility.

The reason for the relative success of the Danish industry comes down to appropriate support for companies to get them started and maintain them in business. Even the Spanish have shown that a government willing to act can force companies into joint ventures from which it now has two of the main wind turbine companies.

In contrast to the failure to create renewables jobs when Scotland has the best wind and wave resource in Europe, the offshore oil and gas industry supports 265,000 jobs (2001) and Scottish tourist industry employs over 180,000 people. (1998).

Oil will quite clearly going to see a reduction in jobs as the oil will runs out or the government forces a reduction in use. Wind farms could also impact jobs in tourism if they are put in inappropriate places.

The net result of UK Energy policy is therefore likely to be a reduction in employment particularly in Scotland. This is particularly serious given the poor state of the Scottish economy, and will doubtless raise serious concerns with Scottish electors likely to lead to a rejection of this policy.

The government have failed to learn the basics of sustainability. In implementing a narrow environmental agenda, they have failed to take account of the wider social and particularly economic issues. This is particularly ironic for a policy under the banner of sustainability as it is exactly the type of failing that led to the development of the concept of sustainable development. This report concludes:

Sustainable development” is been implemented in an unsustainable way.

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3 Responses to Sustainable Capitalism

  1. TinyCO2 says:

    One of the things that doesn’t seem to have been chewed over by consensus supporters is where people fit in their plans for the future. What would make people embrace sustainability other than scarcity of supply? We have a society that doesn’t even believe in natural poverty, insisting we boost people’s salaries or unemployment benefit. What would make them embrace an artificially generated one?

    There is no definition of ‘enough’ so how can there be a point where someone has too much? Do those who see the future in terms of sustainability go further and imagine how such a world would rate success? What would people aim for? If people were not engaged in making stuff for other people, what would they do? How would we be entertained? If I were to go all sci fi, I’d imagine a word where we live virtual lives, consuming to our heart’s content but never owning or doing those things in reality.

    Society needs to have those debates regardless of AGW because consumption isn’t making us very happy but without totalitarianism, governments can’t force people to embrace austerity. It needs to be something we migrate to naturally. A good example of self sustaining change is ebay, where people recyle without the need for encouragement.

  2. It’s a sad fact that in a free market people tend to maximize their energy efficiency so as to maximize the benefit for their available energy supply. However, those who do not like what others do with “their” energy, believe they are being “wasteful” (not using energy for what they think is important).

    So, they then try to regulate our use of energy in order to discourage us from being energy efficient in maximizing the utility form energy and they distort the market so that it takes even more energy (money) to do what we want to do and this they believe will make us become like them.

    The reality is that it just removes utility and adds to energy consumption – thus making us even less sustainable and giving future generations less utility.

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