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5 economic myths that stand in the way of a more equal world (Part II)

5 economic myths that stand in the way of a more equal world (Part II)

Myth 4: The best way to understand productivity so as to grow economies is to measure it as how quickly and how cheaply we can produce something.

[size=1.125]High “productivity” — the ability to produce a lot of goods cheaply, efficiently and quickly to promote relentless consumption — has led to a vast increase in the amount we can produce and consume and has improved, in theory, average living standards around the world.

[size=1.125]However, this narrow definition of productivity misses the huge external costs to the environment and the effects on the poor majority in the developing world, and it does not reflect the realities of our time. It might have been an appropriate measure around 100 years ago when the world had over 1.5 billion people and natural resources were abundant. But we live in a very different world today, one with 7.5 billion people and one in which abundance has been replaced by scarcity. If these external costs were instead paid by businesses, many of the world’s major industries could no longer make a profit.

[size=1.125]An illustrative example is a comparison between industrial farming and organic farming. The former, by relying on chemical fertilizer, economies of scale and mechanization, has driven its business costs down far enough to undercut other farmers on price. This has made small-scale farming uneconomical in many parts of the world. However, industrial farming has a high external cost and results in the scourge of over-consumption and food wastage (which, if it were a country, would be the third largest emitter of carbon emissions). It has transformed diets and eating habits: industrial corn and soya bean farming in the United States is the classic example of this, which led to the world being flooded with junk snacks. Organic farming, on the other hand, relies on intense labor and natural inputs to achieve smaller yields than industrial farming, with higher business costs yet lower external costs.

[size=1.125]If we are to understand how our economy actually consumes resources, we need a more honest assessment of how ‘productive’ it actually is.

[size=1.125]Our narrow view of productivity would deem industrial farming more productive than organic farming, due to its ability to produce more food for less. However, industrial farming has significant social and environmental repercussions. Fertilizer runoff can pollute water sources, endangering sources of drinking water and encouraging the growth of harmful algae blooms. The monocultures grown by industrial farms — necessary to achieve scale — lead to soil exhaustion, requiring agribusinesses to use even more fertilizer to replenish the soil.

[size=1.125]The mechanization and automation of some farming tasks lowers employment in the area, which in turn has economic effects on the wider community. Finally, large industrial farms need more and more land to lower costs even further, pushing smallholder farmers off their property (sometimes illegally). If any of these costs were tabulated and included, the industrial farm would no longer seem as “productive” as the smaller and slower, yet cleaner and employment-generating, organic farm.

[size=1.125]This is true of the entire economy. The only reason some industries and sectors appear productive is that they make other people pay some of the costs, selectively removing them from their business models. It is the same with carbon emissions, whose effect is only now more widely understood. If we are to understand how our economy actually consumes resources, we need a more honest assessment of how “productive” it actually is.

[size=1.125]We need to challenge the continuous drive for productivity increases in developing country factories by replacing people with automation. This is another example of an inappropriate definition of productivity resulting in social consequences that governments need to take action about. Why would a large country like India, with so many still seeking work, look to displace labor with mechanization, just for the sake of lowering the cost of production? Even some technology business leaders are starting to worry about the social repercussions of automation and digitization. Bill Gates, for example, has called for a tax on robots.

Myth 5: We can fight climate change through the free market and technological innovation instead of actual hard limits on carbon emissions and consumption.

[size=1.125]The argument is that market forces will encourage sustainability: as resources become scarcer, they will increase in price, encouraging energy- and resource-efficiency, lowered emissions and, thus, lowered resource use. Market-driven approaches would, in theory, allow everyone to preserve their high living standards while protecting the Earth.

[size=1.125]While we can understand why those working against action on climate change would subscribe to these views, even supporters of action on climate change are unwilling to speak plainly. They justify action on climate change by referring to “green jobs” or “the renewable economy,” and criticized the U.S. withdrawal from the Paris climate agreement as much on lost economic opportunities than any social or environmental damage.

[size=1.125]This turns climate change action into an economic cost-benefit analysis. It would deem action on climate change a failure if it shaves, say, 1 percent off of economic growth even though from an environmental and social stability standpoint, that is a small price to pay for a sustainable planet.

[size=1.125]The only way to reduce carbon emissions is not to consume and produce more efficiently, but to actually consume and produce less.[size=1.125]produce more efficiently, but to actually consume and produce less. Neither the free market nor a faith in technological development will encourage the restraint we need. Companies will also not be a vehicle to a more sustainable lifestyle, as their businesses are predicated upon people consuming more, not less.


[size=1.125]The only way to reduce carbon emissions is not to consume and

[size=1.125]These myths all serve to sustain an economic model that does not distribute wealth creation equitably and is at the same time at war with the planet. Yet the developing world is rushing to embrace them, often faster and on a bigger scale than even the developed world.

[size=1.125]The effects of these neoliberal myths have already caused a great deal of harm, but it would catastrophic if they are embraced by the world’s largest economies ― all of which, with the exception of the United States, are in the developing world. If this happens, the world will continue to see an escalation of social unrest and will face a bleak future as it continues to pursue a resource-intense economic model. It’s time for these myths to die, and for the developing world to create bold new ideas that better fit its circumstances.

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凡事唯有投入,結果才能深入; 凡事唯有付出,結果才能傑出; 凡事唯有磨鍊,結果才能熟練; 凡事唯有不煩,結果才能不凡。
你雖不能改變環境, 但卻可以轉換心境;你雖不能樣樣勝利,但卻可以事事盡力。
Dr. Chao Yuang Shiang (PH.D in management), Assistant Professor,Dep. of Finance & Institute of financial management, Nan Hua University.
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