Archive for the ‘Economic & political’ Category

My Thoughts on Wages of Tea Pickers in India

Saturday, September 26th, 2015
Tea Picking In Darjeeling

Tea Plucker in Darjeeling, India

I have prevaricated about writing about the recent BBC investigation into conditions on some Assam tea estates, but felt that I really had to write something.  I did give a 2 minute response on BBC Radio York, but that was a tongue-tied minute or two.

I was dismayed by the conditions and experiences of tea workers shown in File on Four’s investigation.  But I was not surprised.  We (that’s everybody) all know, deep down, that tea is a product founded during colonialism and continued under unequal power relations.

Isn’t that why Fairtrade was started in the first place? Isn’t that part of the rationale behind the Ethical Tea Partnership, Tea2030 and the Rainforest Alliance?  Doesn’t Oxfam campaign on policies of unfair pay, unequal power and poor conditions within the tea industry all the time?

Yet tea remains an industry dominated by multi-national corporations, many with their own plantations – Twinings and Fortnum & Mason by the Weston Family; Lipton and PG Tips by Unilever; and Tea Pigs and Tetley Tea by Tata and so on.

However, while Oxfam released a report on wages in the tea industry in 2013, not much seems to have happened since.  Tea workers in Assam earned INR 115 versus a minimum wage of INR 177 (BBC, 2015), as against INR 89 and INR 159 respectively in 2012 (Ethical Consumer, 2013).  I think the ideas of the tea industry are sensible but far too gently paced, and the tea majors could work much quicker to transform the social conditions of the tea industry.  Tea2030 includes all the key UK players, so it is not as if they don’t have the power nor the management know-how to undertake change?

I must admit to a feeling of powerlessness ourselves . Firstly, as a micro-tea business, we sell less tea than your average Starbucks outlet.  So we must rely on the social standards set by outside agencies when buying our teas – Fairtrade, Organic and UTZ.  And I did naively think that by buying mainly Fairtrade teas we would be automatically protected from low wages, but this only requires a minimum wage to be paid with the commitment to move towards a living wage.  But what we don’t want, or expect to be providing, is certified poverty through Steenbergs-branded products.

So I have double-checked wages, conditions and child labour at the main suppliers of the teas we buy tea; these are summarised below.  We have been assured that no children are employed in any of the plantations, and that Indian law requires that no-one under 18 years old can be employed on plantations.

Tables on (i) Wages at Tea Plantations from which Steenbergs sources its main teas; (ii) Social conditions at those tea plantations

Analysis of Daily Pay Rates At Indian And Sri Lankan Tea Estates In 2015

Table describing social and environmental conditions at certian tea estates in India and Sri Lanka

It is up to us to address these issues by how we (in Britain, Europe and the USA) trade.  We must be mindful of that the rules and laws in India, for example, are for them to determine rather than for us to seek to impose any neo-colonial views onto them from outside.Which begs the questions: (i) why were 14 year olds working on Assam tea plantations if the law is no-one below 18 years old can work.  I accept that extreme poverty was the underlying reason given, which relates back to the inadequacy of wages paid and insufficient safety nets when wage-earners become ill or incapacitated; (ii) how are wages calculated?; (iii) where are the unions to protect the workers on  the tea estates in the BBC report?

My suspicions are as follows:

  • Minimum wages for plantation workers are lower than normal workers because they are meant to be provided with housing and ancillary housing-related and social benefits. However, these social benefits are expected to be on top of the minimum wage rather than deducted from it.  This means that some workers are being hit twice, i.e. by a lower minimum wage then having benefits-in-kind deducted, meaning very little cash is actually earned.
  • Many of the workers are regarded as itinerant, casual or whatever you wish to call them, so perhaps they do not have the benefit of trade union representation. Perhaps worryingly pickers are so poor that they cannot pay the unions anything, so fall even outside their interests.  It really would be worrying if workers could be regarded so poor that they were not getting union representation on a pro bono basis.  Unions are important to act as a bulwark against potentially stronger interests of the tea owners.
  • There is no living wage calculated for tea workers. While I accept that Britain is only just moving to a living wage in 2016, why has neither Fairtrade nor the Ethical Tea Partnership come up with a figure for a living wage?  This would at least underpin any criticism of pay in the sector.  Even saying that all pluckers must be paid the minimum wage in cash without deductions and all benefits to be on top would be a big protection.  Much of the issue seems to lie with how the benefits are valued – so a house is worth so many rupees, but who values it? and what value does it have without a working toilet, no potable water and a leaking roof – little or none?
  • Perhaps we are all guilty of normalising the status quo. Quaint, picturesque pictures of pluckers in local dress are good photos (as above), but like farmers in Africa or Eastern Europe these pretty images hide the poverty and hardship of actually toiling on the land.  Perhaps we feel this is how it is and feel powerless to change the system.  Perhaps we feel disconnected from the pluckers in India, Sri Lanka and Kenya, yet we are connected directly to them through what we pay for the tea on retailers’ shelves.  Should we just accept we pay too little for our cuppa?

Overall, I know this is a very complex area, with many nuances, but we should all feel more responsible for how we spend our money and the impacts our purchases can have on those who make the products in China, India and the UK.  We cannot always shrug our shoulders and say it is someone else’s problem.

What we will do in the short term is make sure we ask the right questions of our suppliers, which I admit we have naively not been doing.

So it will not just be questions about the environment, but also about pay, working conditions and union representation, because even if Steenbergs is a relatively powerless micro-business we can at least make do better in making sure our tea comes from sources that seem to be addressing wages and treating their people humanely, seriously and responsibly.

Declining Cork Farms – The Price of Progress?

Friday, July 24th, 2015
Cork Trees

A copse of cork trees in Alentejo

We have just returned from a fortnight in the baking heat of Alentejo.  The temperature ranged around 35oC, reaching 40oC on a couple of melting afternoons.  But the pool was our saviour.

Everywhere we looked there were cork trees, growing individually, in small groups or large plantations.  Their ancient-looking, gnarled branches seemed like witch’s fingers pointing crookedly to the blue skies.

Many of their stems were a deep red-brown colour, similar to the rusty coloured rich Alentejan soils.  This was where they have been skilfully cut to remove the corky layer of bark from their stems.  Harvesting is done every 9-10 years, so it’s roughly 1 in 9 that have this rich brown trunk.

Apparently, half of the world’s corks come from here.  It’s an industry started by Dom Pérignon, the monk Champagne maker, in the seventeenth century.  While Dom Pérignon is famed for wine-making, he also introduced the cork as the stopper of choice instead of wood.

Cork is perfect as it’s inert, sustainable and biodegradable.  It also makes a nice plup sound when pulled out.

Bark growing on cork tree

Bark growing on cork tree

Cork bark

Cork Drying In Yard

But now we replacing these with plastic stoppers or screw caps.  These are promoted because they have no different taste impact versus cork, plus for screw-caps convenience is given as a plus point.

However, I now can’t help feeling this is a mistake.

Cork is sustainable, renewable and biodegradable.  Cork supports unique ecosystems in the Alentejo, as well as supporting a rural economy.

Whereas plastic stoppers are just that plastic.  They are not “green” – neither recyclable nor sustainable nor renewable – and do not help rural economies.  Screw caps are recyclable in theory, but they certainly don’t help the Alentejo.

The consequence is that cork farms are being abandoned or cut down or not replanted after forest fires.


I’m going to stop buying plastic tops and screw cap bottles, now.

Cork Trees in Alentejo

Cork Trees in Alentejo

Is social media really so benign?

Monday, June 25th, 2012

The penny finally dropped today about the creeping commercialisation of all of our private conversations and lives.  On the BBC Today programme today, Evan Davies said follow us on Twitter after a piece on Arcelor Mittal in Liberia, which questioned how well they were doing in creating economic well-being.  And I realised that that is advertising and that even though the BBC might not think it they are actually endorsing a commercial organisation, which is against their editorial policies (see 14.4.20, but I am sure that the BBC will argue that it is justified under 14.4.19 under “external sites it may be editorially justifiable to link to“).

Now you might say “get real”, I am and we have Facebook and Twitter on Steenbergs websites, but we are a commercial organisation and are using it for commercial purposes, yet I would love daily free links and endorsements by the BBC or other organisations in the same way that both Facebook and Twitter get, as they quietly become embedded into websites and the TV and we frame our daily lives through digital media.  You can follow the sport on the BBC with lots of Twitter links from outside into the BBC website and by following the Twitter tag #BBCtennis, which seems clearly to be endorsement to me.  Nice and useful, but in the end it is creating free capital for Twitter (or Facebook) that it can then use as content and ways of targeting, and marketing at, people, which enables them to generate excess profits and value by users giving media content away for free.  I accept the arguement that it is the free market that created these new modes of communication and media, and as a libertarian I do not like the concept of political regulation of media and communications, however I still believe we need more debate on how much influence, and reliance, can or should be given to just a few digital media channels rather than almost no discussion as is the current situation.

More and more we converse, chatter and debate online through emails (relatively private), as well as Facebook and Twitter that are much less private.  We seem mostly to be comfortable and complicit in the sharing of so much that used to closely held with friends and family and non-commercialised in general conversations between people face-to-face or over the phone, or by letter.  We have digitised ourselves, which has its own issues as “digital stuff” does not disappear after we have said it, but hangs around for a long time.  That is one issue.  But also, we seem okay with giving this knowledge away for free to somebody to commercialise themselves, whether that is our conversations or data about our habits and private lives; with media content via this blog or photography through Flickr, one has the option whether or not to give away such content as free, and I,for one, do believe in giving the content to others for their own commercial use as that is one of the benefits of I the Internet, however I have personally edited what I put onto the web and made choices about whether I accept that it will have become public and free for others to use, but I do not believe that our private conversations and activities should be so casually given up or are subject to the same degree of perosnal censorship.  Things are said much more casually over Facebook and Twitter without any mediation and without the capacity to retract mistakes or change views through time, as our words and pictures leave a trail that we cannot leave so easily behind or forget quickly enough.

I do not know the answer and can only pose the question about whether this is a good thing.  However, I reckon we will look back in the future and regret giving up so much privacy to a few monopolistic media-communications companies, while ironically at the same time focusing our anger at media businesses like News Corporation, which might no longer be as powerful as Facebook, Google and Twitter*, while being remarkably chilled about giving away our privacy and knowledge freely to such digital media companies.  And guess what you can actually follow the Leveson inquiry on Twitter because it is “advertised” on their government web site – nice to be promoted by the state and by a media enquiry as something valid, legimate and of integrity, but then Twitter is now regarded as an essential communications tool rather than part of the media!

Overall, there is not enough debate or concern about this area, because it is new, it works, is fun and useful and the answers are too difficult, so who actually cares – certainly not those (the political establishment) with the power to debate and take action on it?

* You can be sure that as the politicians are investigating the media and especially News Corporation that news publishing and its influence is no longer as powerful, so can now be regulated with inpunity.

Grants – What A Waste Of Time?

Tuesday, November 15th, 2011

We have been looking at investing money in automating many of our currently manual processes to include filling, capping and metal detection.  As part of this plan, we had looked into getting some grant support rather than doing it all through external lease finance or debt funding.  As a microbusiness, this would have enabled us to invest more now rather than doing it in a piecemeal fashion and taking more time to complete the project.  However, having provided an expression of interest, the response is that the old Rural scheme is winding down and will be replaced by a new scheme that is yet to be launched.  While applications can be made in the new year, these will go towards a national appraisal scheme rather than local appriasal and it would be June/Jule 2012 before any contract could be provided, if successful.  That is a long, long time away, especially for something that is uncertain in any case.  Also, by making appraisal national, there will be a bias from North to South, rather than looking at each regional on its local merits.  If this is how the government aims to kick start the economy, it is a remarkably slow process, and I have not even explained the bureaucratic appraisal process.  We will scale back our investment plans, do it ourself and give a big thumbs down to the government’s plans.

Youth Unemployment – The Real Issue

Sunday, November 13th, 2011

In amongst all the fantastical numbers that economists bandy around at the moment, there are some frightening figures that get lost in amongst the other seemingly more pressing numbers.  Amongst these, youth unemployment is the most worrying and is perhaps the biggest issue of all.

In the UK, youth unemployment is 21.3% against a total rate of 8.1%  (September 2011).  In Italy, youth unemployment is 29.3% with a national figure of 8.35% (August 2011).  Youth unemployment in Greece is 36% against a national level of 18.4% (August 2011) .  In Spain, youth unemployment is 46.2% with a national figure of 22.6% (September 2011). And this is not just an issue for those in Southern Europe, so in Sweden youth unemployment is 4 times higher than for workers aged 25 – 54, while in Ireland youth unemployment stands at 31.5% against a national level of 14.4% (October 2011) with 100 people emigrating every day at the highest levels since the Great Famine over 150 years ago.

Studies in the UK suggest that the cost of youth unemployment is £4.7 billion a year and £8.1 billion a year from reports by the Recruitment and Employment Confederation Taskforce as well as the London School of Economics.

This is a waste of the young peoples’ lives, dreams and hopes, as well as a mammoth waste of capital resources.  Even more than that it creates a very unstable structure for the welfare state:

  1. Failing to secure employment for a large proportion of young, let all the underemployment of many of those that find employment, is a failure of the education system, because expenditure on teaching is being frittered away by not getting graduating pupils into useful employment.  This means the wealth of the nation is being gradually eroded away through education that has no economic or intellectual value.  Apprenticeships could start to treat this scar.
  2. Then there is the structural issue for the welfare state.  At its simplest, the welfare state is pyramid scheme that relies on enough new employees entering the tax system to finance those who are retiring, needing geriatric care or other benefits.  However, if employees are not starting young and so failing to start paying taxes, then the whole structure will perhaps become irreperably destabilised, while at the other end employees are looking for more benefits from state funded pensions and geriatric care.  With high youth unemployment, the welfare machine cannot function for long before it will simply grind to a halt.  The simple truth is that the pension schemes written for public sector workers in the UK and across Europe cannot be funded as there are not enough people generating new money in our economies to finance them, and without getting the young to start creating real wealth we have not a hope of paying me a sou of my state pension, while my small private pension has shown no growth in years and will not keep me living for longer than a few days, so I expect that I will need to work until I drop.  Incentivising businesses to start recuiting the youth or schemes that will find the entrepreneurs of tomorrow are vital.

Every year more young people leave school, yet with funding cuts more will fail to find university courses to meet their needs and so exacerbating youth unemployment.  While older workers no longer need to retire and as pension schemes fail to provide people with the retirement they crave, job blocks will be created, preventing young people even starting on the employment process.

Unless this issue of youth unemployment is tackled head on and quickly, not only will there be a dangerous restlessness amongst the young unemployed, but the whole edifice of social welfare is liable to topple over under its own grandiose ambitions.

These are dangerous times and we ignore this issue at our peril.  Who will speak for the young?  Not the main political parties, not employers, not the unions, not religious leaders, so they will speak for themselves with protests without care for the consequences for the nation states of Europe, as we do not worry enough for them.

Update 16/11/2011: youth unemployment in the UK rose to 1.02 million or a rate of 21.9% for 16 – 24 year olds against a national rate of 8.3%.   This is a waste of our young, energetic and resourceful youth – who will stand up for them, rather than speak platitudes to them?  What is frightening is how the unemployment rate has grown strongly since 2000, so it is the collective failures of both previous Labour and now the current Lib-Con Governments rather than something that should be used for party politicking being any of the sides, i.e. they have all been pretty useless in addressing this issue.

Updated 19/11/2011:  Sara Blecher’s film on train surfing shows the nihilism that can enter the soul of the young when there is no hope and no father figures, or male role models to bring them into manhood.  It could be a bleak future, a Lord of the Flies’ world.  Let us all work to give the young back their dreams and hopes for the future and fight back the bleakness of self-destructive nihilism.

European Bailouts And The Structure Of The Financial System

Thursday, November 10th, 2011

There has been a lot of news recently about European bailouts, sit-ins and protests around St Paul’s (there is also an anti-capitalist camp by Grey’s Monument in Newcastle and probably elsewhere, but as usual London-Centric news of the UK largely ignores all those in the rest of Britain) and austerity measures in Greece, then maybe Italy, Governments changing in Greece and Ireland, soon Italy and so on.  But strangely very little is made of where all this money has gone – trillions of pounds, Euros and dollars have vanished, but where have they gone to.  I know that capitalism is about creative destruction but that is destruction on a colossal scale.

In any case since the crisis commenced in 2007 when the world woke up to bankruptcy at the heart the banking system and then later to poor credit of nation states like Greece, I have been pondering the causes and the solutions to the issues.  And while I have very few answers, I have changed my mind on a number of things and one of the main ones relates to the structure of the system, and in particular regulation.

Firstly, let me dispel an important myth.  At its heart, banking and investment banking is not a difficult area and is not that complex, nor is it that interesting and exciting.  Overall, it is a low risk and rather boring type of business activity; I expect some will take issue with that point of view however real banking is prudential and understated.  It does not make anything, but serves to facilitate other people to do things whether it is a government to build a school, or you or I to buy a house, or it looks after our wages until we can do the weekly shop or so we can save for our pensions.

This underlying dullness is perhaps the start of the problem as bankers and investment bankers have sought to make their lives more interesting, so they changed the nature of their business by taking on extra risk to make an excruciatingly boring way of life much more exciting.  The question then becomes how and why were they able to increase systemic risk within the financial system and so bring nation states to their knees with their reckless financial engineering.

I think the answer lies with the regulations put in place by governments, together with an unwitting collusion between governments, regulators and those in the financial sector.  What has happened is that unregulatable monopolies have been created by the regulations themselves; financial businesses appear complex because of the regulatory environment and as the regulations become more complex, financial institutions (whether investment bankers, bankers or auditors) work at ways to get round or benefit from the regulatory environment.  It is a bit like computer hackers and creators of viruses who are constantly trying to beat the firewalls and security systems that exist, appearing one step ahead as they seek mistakes and flaws in the Microsoft or antivirus programs.  And similar to the financial sector, because we (the uninitiated) do not know the language or understand the rules or know the players, therefore we cannot simply go up to them and say quite simply “stop messing with our computers” or “don’t use my savings or taxes as collateral for that”.

So my view is simple – reduce and simplify the regulatory environment for financial services, so that normal people can (a) understand what is going on; and (b) have a voice to be able to say “don’t use my money for that”.

Now most regulators and investment managers will pat me on the head and say “now, now, you simply do not understand the complexities, so why not go back to your day job”, but I say the problem is that those who are meant to be scrutinising the systems are actually part of the system nor do they own the money that is being used as capital, which belongs to depositors whether direct or indirectly via pension schemes or taxes etc, but benefit in terms of wages and salaries from keeping a complex status quo.  And to those who say it is complex – no it is not, investors are simply making judgments about what shares to buy when and where, or bonds or whatever – that is pretty basic stuff and is really a matter of investment quality, an understanding of human behaviour and, frankly, a good old punt*.  But it is a bet with other people’s money.  For example, MF Global collapsed because it made £4 billion in big bets on Eurozone sovereign debt that went wrong, while Bear Stearns collapsed due to overexposure to sub-prime mortgages.  The clue is that regulatory systems does not stop these investment banking collapses nor does it pick up credit issues due to poor loan quality with commercial banks until after the event like at Dexia, HBOS, Royal Bank of Scotland or the need for extra capital like at ING or WestLB – just as a few examples.  They are simply too close to the action, in fact they are part of the system itself and are not independent from it.

Will anyone change the system.  Of course not, because it would mean losing many highly paid and important people losing their jobs!  And also, because governments need these systems to create “money” for them to finance their own pipe dreams.

*  There are parts of the industry that try to minimise risks by manufacturing insurance-style instruments that seek to mitigate downside risk for some business areas or hedge, but most of these instruments are purely used within the financial sector to create extra return, or to use the flip-side of extra return to increase systemic risk.  It is that link between return and risk that most people seem to just ignore – to increase the profits of an essentially boring and low return business sector (accounting, banking, insurance) you need to increase the risk level, then the question is who gets the profits and who bears the increased risks, and it is this basic division between who has the upside and the downside that has created the problem we suffer from.

Food Waste, Food Poverty And Fareshare

Monday, October 3rd, 2011

Food waste is criminal, so it is brilliant when you hear or read of charities like FareShare that collect and distribute surplus food from retailers that would otherwise be thrown away.  FareShare works closely with companies like M&S, Nestlé and Sainsbury’s.  Food poverty is a big issue that needs to be addressed, while charities that look after people can benefit from any savings made by food charity so they can focus on spending money on areas that are important to them like their staffing.  Interesting articles on the BBC website that address waste include the following three:, and  At Steenbergs, we are lucky in that our product waste is next to zero as our ingredients have long shelf lives and can be stored at room temperature.

So I became a little bemused, and angry, to discover that the local Boots stores, and for all I know all their shops across the country, have been told that all sandwiches beyond their display date must be chucked away.  In the past, they could be sold to staff at a discount, which is not great in the first place.  But why doesn’t Boots give these to charities like the Salvation Army who could make use of these for the benefit of people in food poverty?  And does this happen across all Boots stores?

Strange that Boots devotes a big part of their website to Corporate Social Responsibility, but this seems only to be a tick-box exercise to paint an image of caring through showing off how much money they have given, rather than starting from a caring attitude and empathy to other people.  When CSR becomes something to be met for bureaucratic reasons rather than from the heart, silly wastes like throwing out sandwiches shows the real soul of the corporation.

Sustainability and some final thoughts

Saturday, August 27th, 2011

In the end, politics, economics and perhaps even environmentalism are practical matters dressed up as intellectual theory, following on from my previous blog on the theory behind sustainability.

Economics is good at analysing what happens at the point when things of value are exchanged, but is not much good at anything else.  Real economics cannot tell you how to sustain you or your family.  For example, were you have a budget of £100 to spend on your weekly shop, it cannot tell you what is the best way to spend that money on in terms of your health, or taste or what you have in your cupboards or what takes your fancy as you walk around the store.  It cannot tell you why you prefer one brand over another or why we buy olive oil from one country of origin over another, because none of us really make rational decisions based on utility, however neat a theory.  In fact, many of our decisions are decidedly irrational – for example, it is cheaper and quite easy to cook meals from scratch yet we buy, for example, fish pie or pancakes ready-made rather than make them ourselves.  A rational economist might say that we do this because we can use our labour or time more effectively elsewhere, but how many actually do redeploy that small amount of money or time rationally to optimise their wage earning potential – very few, methinks.

For me, I think the best way to think about sustainability is to think of families rather than economics, or at least money economics.  To keep a family going into the future, you first need to have children, which is rarely an economic decision, because under most cost-benefit analyses there is no rational economic justification in having children, but our desire to continue and sustain our genes into the future simply overrides and ignores any financial considerations.  Then you need to consider how you equip your children to sustain themselves in the future and the key things are to give them the capabilities to navigate their way through their own futures, with all its ups and downs, twists and turns.  So we educate them formally to enable them to open up their minds and get employment, and informally we teach them a moral code of what is good and bad and that hard work, honesty, fairness and good manners will get them pretty much anything they desire in time, or at least laziness, dishonesty, unfairness and bad manners will not get you far in life.  We might try and give them some seed capital to buy a home, but they may not get much financial support until they themselves have had a family and we can bequeath them something after death.  Finally, throughout all of this we nurture and love them as best we can.  And so it is in real life with economic sustainability, we must focus on the means of giving people the capabilities to navigate future generations through future uncertainties rather than get bogged down with numbers, which are but meaningless figures on a page or spreadsheet – one can create almost any set of numbers or scenarios that you desire to justify any position you want but to what useful end.

But while Governments, quangoes and international bodies like the World Bank or the United Nations can help with this in certain areas, they are not the best placed to act as custodians of economic sustainability.  Firstly, they have no long term perspective as their terms of office are short and their times of influence are probably even shorter.  Secondly, Governments are remarkably bad custodians of peoples’ money, even as they need that money as it is their lifeblood.  They tax and spend with impunity because they are dealing with other peoples’ money rather than their own.  Milton Friedman perhaps explained this best as he wrote in his book “Free To Choose” – “There are four ways in which you can spend money.  You can spend your own money on yourself.  When you do that, why then you really watch out what you’re doing, and you try to get the most for your money.  Then you can spend your own money on somebody else. For example, I buy a birthday present for someone.  Well, then I’m not so careful about the content of the present, but I’m very careful about the cost.  Then, I can spend somebody else’s money on myself.  And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch!  Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get.   And that’s government.  And that’s close to 40% of our national income.”

These capacities of Government to tax and spend are the root of their power and without this ability to take and then distribute with seeming largesse, Governments are nothing.  Hence, sustainability becomes another self-justification for why Governments must tax and spend, even though individuals and private collectives may be better at optimising humankind’s response to sustainability.  This takes the environment out of sustainability and it simply becomes a matter of power and control over capital.  For me, economics and environmentalism are different ways of looking at resource allocation, where money has been hugely successful at getting people to organise themselves to do things they do not want to do for a cash reward and also to exploit the natural capital resources (but note per my previous blog that money does not buy happinness or well-being beyond $10,000, while people will do charity and community projects for little or no finacial reward).  Conversely, environmentalism explains that there are limits to the natural capital available and we must all be mindful of this.  They are different, but overlap where the externalities from the economy degrade nature and where natural capital is available for exploitation.  However, they are not the same thing and do not overlap at all times.  Hence, they are different ways of looking at the world we live in, and we must be careful in merging them together.

So we must keep sustainability away from economists, Governments and politicians and per Ostrom focus on personal and community selflessness over selfishness, and look to our children and future generations rather than just the here and now.  Similarly, I would argue money is economics, and that money and sustainability do not mix.  However, I expect politicians, economists and everyone to argue that they all mix perfectly happily together, so the future will be a great and wonderful place.

Is There Any Need For Sustainability?

Thursday, August 25th, 2011

I have recently read Tim Jackson’s “Prosperity Without Growth – Economics for a Finite Planet“.  It proposes that we refocus how we manage our economies to take into account the limits on the earth, but is rather vague exactly how we should do this – relying on less consumerism, more community-based activities and public ownership, but without answering the central question of how and who pays for all of these things.  He accepts that some of these things are already available and people are involved in community activities, but that they are small parts of society, yet he then brushes over the fact that these are currently a minority precisely because most people do not want to work in their allotment or do yoga.  This core structural issue is at the heart of the problem and is the hardest part to change – we are taxed so we must work, so there is insufficient time available to do many of those fulfilling things in life, so we must consume to make up for the time we do not have and chose a few hobbies for the little spare time we have to keep us sane, yet more public ownership and livelihoods simply increases the tax requirement etc etc.  However, what the book does usefully do is focus on the question itself, i.e. how to have sustainability and continue with a market economy and addresses the concerns posed by the classic book of Meadows et al of “The Limits To Growth”  from the 1970s in a new millennial context, without actually adding much to the basic concept that the earth has limits and while we are still within these boundaries today at some point not very far in the future growth in population and resource use because of economic growth will bring these constraints into play, which arguably is the same problem raised by Thomas Malthus in 1798.  Tim Jackson essentially says we must reduce economic growth, accepting that this runs counter to the way the economic discourse is built.  So what is the issue with sustainability and economics?

Sustainability is a key concern in the 21st century.  The Brundtland definition of sustainability is “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (WCED, 1987).  This can be further clarified as the concept that “the current generation does not have the right to consume or damage the environment or the planet in a way that gives its successor worse life chances that itself enjoyed” (House of Lords, 1999).  However, while the understanding of the environment has increased in the last 100 years, mainstream economics as used by policymakers remains based on ideas developed by Jeremy Bentham towards the end of the 18th century, as expanded by John Stuart Mill in the 19th century.  This raises the issue of whether economic analysis needs to change better to address sustainability in environmental policy response.

Mainstream economic analysis is based on utilitarianism.  This assumes that individuals are rational economic actors whose primary purpose is the self-interested pursuit of happiness, or utility, and that the best route to this end is through the purchase of those goods and services they want at rationally negotiated market prices.  Therefore, when considering welfare, policymakers should arguably consider the aggregate effect of these transactions in an economy, together with the market prices paid, and that their policies should ensure “the provision of the greatest happiness for the greatest number” (Bentham, 1789).  Furthermore, while acknowledging that some individuals may suffer or not reap the benefits of the market economy, “it is the price we pay for progress and the general good” (Galbraith, 1987).

The principal measurement used to inform policy is Gross Domestic Product (“GDP”), which is the value of the goods and services flowing through an economy over a period of time.  As consumption provides utility, GDP is a proxy for the aggregate happiness of individuals within an economy and Government policy should, therefore, provide the conditions for growth in GDP/capita.  Other economic methods that follow include cost-benefit analysis and discounting, both of which are used to evaluate the financial impacts of specific projects or policy areas.  However, as discussed below, the goal of sustainability in environmental policy is not adequately addressed by these economic tools.

While it is assumed that the more income consumers earn the more they can purchase in the market, so increasing their happiness, evidence by Richard Easterlin found that increases in happiness become slight or negligible beyond middle income levels (Easterlin, 1972 and 2001), while Gregg Easterbrook found that even though people’s objective well-being was increasing they continued to feel life was getting worse so their subjective well-being would stay unchanged or even fall.  Similarly, Amartya Sen focuses on the capabilities and freedoms of individuals to live the life they chose as being important to well-being (Sen, 1993, 1998 and 1999).  Therefore, what matters is what people are able to achieve or do, rather than the products or services that they consume, so learning at school or university is not a matter of utility but of what people may become from having studied even as governments seek to make it into a commercial contract through Student Loans or similar financial systems.  Economic development, therefore, occurs when there are more opportunities open for people to do things they value, rather than when GDP/capita or individual income has grown.  Whereas, unsustainability occurs when individuals become less capable of doing things over time, for example health deteriorates because of air pollution or toxic waste, or the opportunity to farm is reduced due to salinization of the soil or water shortages, or freedoms are curtailed, for example when decisions are made today that preclude choices being made by successor generations, such as decisions made in this generation that affect the environment over 100,000s if not millions of years, for example nuclear power and related nuclear waste dumps like that at Gorleben in Germany.  People will, also, do things for no financial reason, for example vote in elections, tend the plants in a public space or look after someone else’s children, so we are not solely economic beings even if politicians and sociologists wish to cast us as such; in fact I would argue we are human beings first and economic animals second, third or fourth.  So a economy focussing on the capability to flourish is better than one focussed on our ability to consume, i.e. a world according to Sen is better than one based on Bentham.

Traditional measures for well-being have targeted GDP growth.  However, GDP measures material throughput in an economy and does not provide useful information on sustainability.  For example, GDP is the aggregate of monetary transactions in a country, so it excludes bartering, free and unrecorded cash services such as voluntary work for charities, or domestic activities like cooking and housecleaning.  Furthermore, it is an income and expenditure statement rather than a balance sheet, so does not account for changes in the resources of a nation, whether these are physical like forestry and mineral reserves or intangible like education, health and landscape.  Finally, GDP is a snapshot in time of the activity of an economy in totality, so neither provides information about the future nor the equitable distribution of transactions through a society now or in the future.  Understanding the distribution of wealth in economies is important as poverty can be a driver for environmental degradation, and so sustainability.

Mainstream economic analysis, including GDP, does not properly consider the impact of livelihoods on the environment.  The activities of humans through work and consumption cause changes to the environment, which can be encapsulated in the impact equation: I = P x R x T, which is a rehash of Paul Ehrlich’s impact equation.  This summarises environmental impact (I) as resulting from the scale of resource use (R) consumed by a population (P) through using particular technologies (T).  Mainstream economics treats these impacts, or disutilities, as externalities or market failures either to be ignored or to be borne equally by the whole population and environment, because they do not have direct monetary values that are easily measured.  For example, packaging in the UK is transferred from manufacturer to individuals, then to the wider population and environment when it is sent to landfill, shifting the original environmental cost from the manufacturer to the environment, which must bear the sustainability burden, and the taxpayer, who finances the costs.  However, economics dominates political discourse, because money is power and power is money, so these externalities must be monetised and internalized into economic analysis before they can inform policymaking and bring sustainability onto the political agenda.

Finally, the most complex aspect of sustainability is time and how to evaluate future costs today.  Economists utilise financial models to provide policymakers with analyses of forecasted budget scenarios, so enabling assessments to be made of the impacts of “green” standards and taxes on the economy and the cost-benefit of specific political responses.  However, this sophistication hides the fact that forecasts are based on the past, with its uncertainties, discounted back by the relevant rate of time preference. Therefore, forecasting sometimes becomes a discussion over discount rates.  However, discounting creates an issue, being that the greater the risks and uncertainties involved the higher the discount rate, so the lower the current value of future costs.  This approach is, therefore, neither equitable nor appropriate for sustainability where the well-being of future generations should be considered equally to our own.  The societal discount rate for sustainability should tend towards zero (Anand & Sen, 2000) to prevent policymakers devaluing future uncertain, but large, impacts compared to current known, but smaller, environmental problems.

These analytical problems are highlighted in the Stern report on the economics of climate change.  Climate change occurs over the long-term and contains significant uncertainties in how it might operate over this time period in terms of scale, location and timing.  Arguably, it may impact future generations more than the current one, although as successors will have greater wealth and knowledge, they ought to be better able to finance and develop technology to ameliorate any disbenefits.  These issues create problems for policymakers regarding the equitable distribution of uncertain economic costs over generations and across future global populations, i.e. sustainability in terms of costs, capabilities and freedoms over time.  Stern used an utilitarian approach that focused on “the maximisation of the sum across individuals of social utilities of consumption”, cost-benefit analysis and GDP forecasts run over 200 years discounted back at 1.4%i (Stern, 2006b).  Critics of the report advocate rates of around 3-5½% (Dietz, 2008; Dasgupta, 2006; Nordhaus, 2007; Tol, 2006).  Under Stern, estimates of the costs of climate change were of losing “at least 5% of global GDP each year, now and forever” (Stern, 2006a), but by using the alternative rates the impact falls to 1.4-2.5%i.  Effectively, it becomes an ethical judgement over the value of equity between generations, or sustainability – discount rates close to zero place relatively higher values on future generations, while higher rates place lower values on successors.  Or to be brutal, it uses sophistication to hide the fact that the report hinges on the gut feeling of economists and politicians over what values to place on the financial numbers, as influenced by all the baggage of individual presumptions and political leanings in making these big leaps of faith.  I have no issue with making assumptions and running complex models, but the complexity of the modelling should not be used to hide that the report is but a finger in the air, albeit a very clever one!

Therefore, economic analysis needs to change to address these problems and so better inform policymakers about sustainability.  Here are some quick thoughts on ways that these issues can be addressed.

Firstly, policymakers need to consider a broader range of statistics beyond a narrow focus on GDP.  These indicators should include both financial and non-financial data and cover tangible and intangible assets and externalities of an economy, environmental quality and the well-being of the population.  For example, assets may include values for agricultural land, mineral reserves and woodland, together with estimates for education and health.  Sustainability indicators and externalities may comprise data on biodiversity, greenhouse gas emissions, soil fertility, air and water quality, and waste to landfill.  Well-being could comprise both objective and subjective measurements of well-being, targeting capabilities and freedoms as well as happiness.

In the UK, many of these are already compiled, for example net domestic product (GDP less depreciation) and greenhouse gas emissions, while a new well-being index will include environmental and sustainability measures from 2012.  For example, there is the Happiness Index, which shows the UK’s happiness declined by -10.7% from 1961 – 2005 and that of Australia grew by 21.3% over the same period, or the Human Development Index as developed by Haq and Sen, which currently ranks Australia top and the UK 22nd.  Although these statistics may be measured, sustainability perhaps needs to become central to policymaking.  For example, biodiversity indicators currently have warnings against breeding birds and plant diversity, yet these changes are not driving meaningful policy response (Defra, 2011).  The issue may be that there are too many measurements being compiled versus the relative clarity of GDP, therefore they could be reduced to a smaller number of indicators, for example ecological footprint provides a clear, measureable link between economic activity and environmental burden.  In addition, policymakers should include targets and responses for use when these limits are breached, for example greenhouse gas emissions’ targets are clear and measureable and so policy responses can be proportionate.

However, I fear that sustainability and the environment just do not rank up there against education, health and crime, for example.  This is perhaps because the questions are just too complex and the answers too difficult or wishy-washy for politicians to contemplate, so there is a need for politicians to focus on policy areas that can be addressed within the relatively short term of a political election cycle and are simple enough to be communicable to the media and electorate – a sort of knowledge elitism that goes along the lines of “that’s all a bit too difficult for you, the masses out there, just leave and trust us the politicians and our cronies to sort it out, because we know the best…there, there” with a gentle pat on the head.

Secondly, policymakers must address future uncertainties.  Utilitarianism is reductive and, using projections with suitable discount rates, provides clear choices for policymakers.  However, the environment is entangled and has many unintended consequences, so forecasts based on the past can result in incorrect predictions.  These complexities and uncertainties can cause relatively poor forecasting especially of sudden changes to environmental systems.  For example, policymakers neither predicted the collapse in the Canadian cod fisheries in 1991-1994 (NAFO, 2009) nor the credit crisis that began in 2007, both of which have resulted in significant economic and environmental changes.  No scientist predicted the BP oil disaster in the Gulf of Mexico in 2010, or the Japanese tsunami of 2011 with its devastating human, environmental and economic consequences.  Or to abuse a quote from Harold Macmillan “Events, my dear boy, events” are what make rigid policies tricky.  Therefore, economic analysis should include the effects of high impact, low probability events on sustainability and consider using a precautionary approach to prepare for such eventualities, and even if the responses and policies of those in power does not go down those low probability routes, they should build in sufficient flex into our systems to be able to adjust to new information and haul back systems from potential collapse if and when needed.  We must be wary of committing to routes that are completely fixed in stone, forever, because in a Pythonesque way “noone expects the unexpected”.  Hence, even Rory McIlroy in his amazing golf at the Congressional in the 2011 US Open hit his second shot on the 18th in round two into the lake to give him his first dropped shots and a double bogey – you just never really know what might happen.  In fact, the answer to this issue for economics may be to look at ecosystems themselves and apply understandings of environmental knowledge to financial systems.  This is an approach that Andrew Haldane, the Bank of England Director For Financial Stability, is looking at with Robert May.  They are suggesting that complex systems can be more fragile than simple ones, i.e. the Amazonian rainforest is more prone to collapse than the African savannah or a big multidisciplinary bank is more likely to collapse than, say, a small mortgage and savings focused building society. 

Thirdly, economic analysis should focus on systems and processes rather than financial outcomes.  It is difficult, if not meaningless, to place monetary values on non-instrumental things such as a beautiful landscape or a glorious sunset, or as one of the Pevensey residents said “You can’t put nature on the stockmarket” (Burgess, 1998).  This creates a problem as to get sustainability into the economic discourse and so onto the political agenda, you must monetise it, but this reduces sustainability to choices based on financial values and cost-benefit analyses while excluding non-instrumental values.  An alternative approach is to focus on the systems within economies and how economic processes impact, or are affected by, the environment rather than on the financial outcomes.  For example, these interrelationships between the environment and the economy form the basis for the concepts of the commons and ecological footprints, both of which offer alternative economic models to utilitarianism. So while the original work on the tragedy of the commons by Garrett Hardin was depressing, work by Elinor Ostrom has shown how a decentralised system can manage the commons effectively, together with proposing a framework for how this collective approach can be applied to sustainability in social-environmental systems (Ostrom, 2009).  Therefore, economists could focus on how to provide individuals and communities with the capabilities and freedoms to understand how changes to the environment occur, as well as the tools and powers to respond to change collectively without Government intervention and without pursuing individual, rational goals that may be negative for the common good over the longer term, i.e. selflessness over selfishness.

I see this individualistic, decentralised approach as key to the future.  However, I worry that sustainability, ecological modernisation and the environment will be all used as excuses (or justification) for greater Government and “expert” meddling in peoples’ private and business lives whether through regulation or taxation.

In conclusion, mainstream economic analysis focuses on the maximisation of utility in a population through managing GDP over time.  However, a narrow focus on GDP does not properly address sustainability, because it focuses on consumption within an economy rather than good and bad changes to its asset base, it externalizes the environmental and societal costs of economic activity and it fails to consider the capabilities and freedoms of citizens now or in the future.  Changes are needed to include indicators of changes to intangible and tangible assets, the external costs of human activities and the well-being of individuals or even happiness.  Furthermore, a less monetary approach should be adopted that analyses the processes and systems within economies and how economies, societies and environments interact and can respond to changes in real-time and over longer timescales.


Anand, S. and Sen, A. K. (2000) Human development and economic sustainability, World Development, 28 (12): 2029 – 2049, Available from the Internet at (Accessed August 2011)

Bentham, J. (1789) An Introduction to the Principles of Morals and Legislation, Mineola NY, Dover Publications (reprinted)

Burgess, J., Clark, J., and Harrison, C. M. (1998) Respondents’ evaluations of a CV survey: a case study based on an economic valutaion of The Wildlife Enhancement Scheme, Pevensey Levels in East Sussex, Area, 1998; 30.1, 19-27

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Galbraith, J. K. (1987) A History of Economics, London, Penguin Books

House of Lords (1999) Management of Nuclear Waste, Select Committee on Science and Technology, Session 1998-99, Third Report, London, HMSO, Available from the Internet at (Accessed August 2011)

NAFO (2009) Northwest Atlantic Fisheries Organization, Canada, Available from the Internet at (Accessed August 2011)

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Sports And Winning

Sunday, July 10th, 2011

I read with amusement about the Duke and Duchess of Cambridge competing against each other in a dragonboat race in Quebec and that the Duke won and he reportedly said to Kate “There is no chivalry in sport.”  At this time of the year as we seem to move from one school sports day to another via a school swimming gala, I thought about sport and how important it is. 

The other day Jay played a game of U11s cricket for Studley Roger versus Knaresborough Forest and Studley Roger were winning until the last pair went in and were out 3 times, so losing 18 runs for their team (they play pairs cricket).  One of those who was out came back in tears, threw his helmet down and sat on a bench with his back to everyone, so his mother went over and used those disastrous words “Don’t worry, it’s just a game”, to which he rightly replied “No, it’s not just a game: I let down my friends and we lost” or as Bill Shankly said “Some people think football is a matter of life and death.  I assure you it’s much more serious than that.”

Sport teaches us teamwork, including responsibilities to others, and individual skills.  Most importantly it teaches us about working hard to succeed and win.  Sport is nothing without winning, without the sweet joy of beating others in a race or a football match, but it also teaches us to hurt when we lose.  There is nothing worse than measly phrases that go along the lines of “It’s all about the taking part”.  No, it is about hurting when you lose, getting up from the floor and trying harder to get better and win next time.  There is too much sympathy given to average performances, and mediocrity in general, and we must all strive in our lives to do a bit better and to win a little more.  Then when we have won and done with winning, we can be gracious in our success and spread some of your joy in winning to help others improve and teach and hand on our secrets of success.

Sport, also, teaches us about taking risks, embracing risk to achieve things we never expected to be able to do.  We live lives that are too soft and cosseted by rules and regulations, so have become almost incapable of understanding and balancing risks in our daily lives, expecting rewards to come to us without any risk attached or hard work put in.  We must all get real.