John Michael Greer’s The Wealth of Nature: Economics as if Survival Mattered, castigates what Greer perceives as the failure of modern economic thinking and suggests an alternative approach based on the thinking of Ernest Friedrich Schumacher, author of the 1970s bestseller, Small Is Beautiful: Economics as if People Mattered. The echo in the title is clever and is meant to show how far down the road to destruction Greer thinks we have wandered since the 1970s.
Where Dimitry Orlov paints his collapse theory with big, broad, impressionistic brush strokes (see Part One and Part Two of this blog series), making some clearly astounding and somewhat preposterous claims along the way in the finest tradition of satirical authors (such as “the purpose of the American education system is not to educate but to institutionalise children”), Greer reasons in a much more deliberate fashion. The failure of classical economics is that it fails completely to grasp Schumacher’s distinction between primary and secondary goods. In Schumacher’s thinking, the distinction has to do with the fact that the resources provided by nature come first, and secondary goods are whatever is made by humans with natural processes as an inevitable and unavoidable input.
If you are armed with Schumacher’s distinction as your starting point, then the notion of sustainability or the lack of it is front-and-centre in your thinking. Use up nature’s bounty and that’s the end of your secondary production process. Conserve it and you get to stay in business, just as a firm that conserves its capital gets to stay in the game while one that runs through its capital goes bust. If we’d been smart, we would have used the oil discoveries of the 1970s to buy time to shift advanced economies to a sustainable platform. We weren’t smart and we ran through that part of nature’s bounty at a goodly clip.
Learning from History
As an instance of the blindness that afflicts modern economic thinking, Greer picks up on the claim of David Ricardo, one of the founding fathers of modern economics, that land retains its “original and indestructible” economic value no matter what economic use is made of it.
“This is an odd claim. Even in the early nineteenth century, when Ricardo originally made it, plenty of people could have set him straight; the fact that bad farming practices could make soil useless for farming was well-known in Ricardo’s time, and so was the impact of industrial pollution – though, of course, we have gained a great deal more bitter experience with both since then.”
Nor was Ricardo alone in this error. Marx, too, Greer points out, “explicitly rejected the idea that the 'free gifts of Nature' could have any value at all – a view that led the Soviet system to leave a truly astounding legacy of industrial pollution behind it. Greer’s point is that “fertile land suitable for growing crops does not simply happen. Like anything else of value, it must be made, and once made, it must be maintained.”
This line of thinking takes Greer and Orlov in the same direction.
Modern crop production and industrial agriculture runs on oil, which powers the tractors, natural gas, which supplies the feedstocks for the fertiliser industry, and energy, which powers the chemical plants that create the pesticides that make modern industrial scale farming possible. Cut back on the availability of oil, an inevitability once Peak Oil occurs, and disastrous food shortages are not far off, given the nature of the production base behind agri-commodities. Both Greer and Orlov point out that there is no fundamental necessity for food production to be predicated on oil. The whole organic farming concept came out of a study of Asian farming methods which are about as low tech as it gets. Shortages in primary grains will lead to sky-high commodity prices and food riots in many countries. If we were practicing economics as if survival mattered, we’d be doing things differently, Greer points out. Unfortunately, we’re not…
“What must be understood here is that human economic activity is far less independent of the natural world than too many economists try to pretend. The scale of this dependence is as rarely recognised as it is hard to overstate…”
Greer cites the work of the economist Robert Costanza, who led a team which tried to put a value on the replacement cost of “natural services”, and came up with a figure that was roughly three times the annual global GDP.
“In other words, out of every dollar of value circulating in the world’s human economies something like 75 cents were provided by natural processes rather than human labor. What’s more, most, if not all of that 75 cents of value had to be there in advance for the production of the other 25 cents to be possible at all. Before you can begin farming, for example, you need to have arable soil, water and an adequate growing season, as well as more specialized natural services such as pollination. These are nonnegotiable requirements. If you don’t have them, you can’t farm. The same is true of every other kind of productive work in the human economy: Nature’s contribution comes first, and generally determines how much the human economy can produce.”
The punch line for Greer is the need for a revitalisation of Schumacher’s vision for less developed economies, reapplied to advanced economies that are about to implode as a consequence of running through Nature’s bounty like a prodigal son. Human happiness requires paid work. This being the case, low tech work that involves many hands is often a much better solution than high-tech, capital-intensive structures predicated on the extravagant use of natural resources. He argues that it is a lesson we need to absorb and act on – fast.
John Michael Greer's The Wealth of Nature: Economics as if Survival Mattered, along with Dmitry Orlov's Reinventing Collapse: The Soviet Experience and American Prospect, are available from New Society Publishers.
Further reading on developing economies, rebalancing and sustainability:
- The Impact of Demographics on Business and the World Economy by Gabriel Stein
- Coping with the Crisis: Risks, Options, and Priorities for Developing Countries by Justin Yifu Lin
- Deleveraging, Deflation, and Rebalancing in the Global Economy by Paul Brain and Laurie Carroll
Tags: advanced economies , David Ricardo , developing economies , Dmitry Orlov , energy crisis , Ernest Friedrich Schumacher , farming , global recession , John Michael Greer , natural gas , oil discoveries , Peak Oil , rebalancing , Reinventing Collapse: The Soviet Experience and American Prospects , Robert Constanza , Small Is Beautiful: Economics as if People Mattered , sustainability , sustainable development , The Wealth of Nature: Economics as if Survival Mattered , unsustainable development