Dismantling the Global Debt-based Ponzi Scheme

Originally published by Food and Water Watch on http://blogs.worldwatch.org/sustainabilitypossible/dismantling-the-global-debt-based-ponzi-scheme/#comment-210

Recently, Food & Water Watch organized a discussion on alternatives to pay-to-pollute, market-based environmental regimes and the spread of the market paradigm throughout our society. Lorenzo Fioramonti, author of Gross Domestic Problem, started the discussion by strongly criticizing the GDP, the “most well-known statistic in the contemporary world”. As he noted, this indicator only measures priced objects and forget to consider what is free, including nature, and can even increase while Earth’s biocapacity—which the economy ultimately depends on—decreases. He called GDP a “Global, Debt-based Ponzi scheme” and said we need to use alternatives to measure ecosystems’ services. Indicators have already been created, such as the System of Environmental-Economic Accounting or World Bank’s WAVES (Wealth Accounting and the Valuation of Ecosystem Services). The consequence of these mechanisms is that when we price nature, we give a definite value to all ecosystems services. According to Fioramonti, it is a dangerous method because it leads to the inclusion of nature into the financial system. This strategy is defended by the neo-liberal conservation movement and many businessmen. In short, they want to save nature by selling it. Nature simply becomes “natural capital” we need to manage.

This introduction helped set up other panelists’ criticisms of the current obsession with financializing nature. One example was given by Niranjali Amerasinghe of CIEL: REDD+. It is an interesting project because it recognizes the important role of forests in climate change mitigation. But the system focuses too much on carbon and don’t recognize that forests have many roles, from water management to providing local communities their basic needs. By creating a carbon market, the system put a variable price on forest which is quite distinct from its real value. It also has to face difficulties to account for emission reductions because of the many loopholes in definition of forests and forest management as well as a lack of transparency. But it can be effective when it is paired with a decentralized community-based governance system, like in Nepal.

As was discussed in the panel, and is explored in this Food & Water Watch fact sheet, cap-and-trade is the most well-known example of this market-based approach to regulation. It can be a dangerous method because it gives (or sells) the right to pollute instead of eliminating pollution. We grant the right to pollute to the highest bidder. Moreover, price volatility leads to periods of cheap rights to pollute, as happened in Europe where the ton of carbon emitted started at $32.50 in 2005 and plunged to $3.90 in early 2013. As Michele Merkel of FWW noted, many cap-and-trade systems led to less reductions than regulatory programs. And finally, as several panelists and guests noted, these prices never reflect the real cost of this carbon. If we created a cap-and-trade system considering the true cost of carbon emissions, the price of fossil fuels would skyrocket.

As Fioramonti noted, the true value of things is different from their price, which is basically a measure of exchange. The question is: do we want to rely on market-based schemes to protect the environment, when its destruction is in large part due to them? In 2007, Nicholas Stern, World Bank chief economist, described climate change as “the greatest widest-ranging market failure”. The financial sector is looking for new ways to fuel its profits, and with the increasing awareness around environmental issues, nature management looks like a promising market. Transferring the administration of our common resources to banks and hedge funds would lead environmental protection to become the second goal of our global conservation system. It also means we can create a senseless system where a few big players can have enough to corner the market on nature. How can we avoid this? By considering common resources as a common good. It means working especially on long-term sustainability, which is something finance doesn’t do well.

There are many ways to reach this goal. The first step towards a sustainable management of nature is to get rid of GDP. As Fioramonti said, it will allow a discussion on how to develop governance systems able to protect commons. We need to develop tools to measure the value (not the price) of nature as well as the price of inaction. Market-oriented environmentalists argue that finance can bring the money needed to develop these tools, but as panelists noted, there are other ways to get that money, such as a carbon tax or a tax on financial transactions. The challenge is to shift the debate away from seeing financialization of nature as a solution—but as just one more way to profit from the rapid decline of our planet. The faster the debate changes, the more we’ll be able to develop strategies to sustain people and the ecosystems they depend on.


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