Cutting out a Sustainable Economy

The choice of who allocates resources is crucial. We see spectacular examples of government mismanagement. The market should be left free to allocate resources. Markets alone can assemble and convey essential information about security and value. Prices and profits will work to maximize production and minimize resource use.

Market mechanisms are sufficient to protect forests, for instance. Growing scarcity will drive up the price of wood, reduce consumption, as well as prompt landowners to plant more trees in anticipation of higher prices.

Traditional economics asks how to produce what for whom. Sustainable economics examines these same questions, but includes future generations in the ‘for whom.’ It asks how irreplaceable resources—water, air, soil, and fish and wildlife—can be adequately conserved. It also recognizes that economic mechanisms that do not efficiently and equitably satisfy human needs are not likely to be sustainable.

Sustainable economics analyze issues complicated by politics, ideology, and nationalism. It tries to ascertain what works to make resource use more efficient. How do people behave in relation to their, natural resources? How does a country’s economic system alter its prospects for survival? Measuring national performance in food security, energy efficiency, environmental pollution and equity can form the beginnings of an answer.

The issue is not socialism versus capitalism; it is the efficacy with which economic systems achieve their intended ends. Ideally nations could be graded for degree of market orientation and assessed for changes in resource use. But no one has invented a grading system for economic philosophy or environmental sustainability. It is instructive, nonetheless, to categorize nations as centrally planned or not and to assess their resource-use efficiency. A centrally planned economy is one that through price controls, state ownership, or allocation of capital effectively, managers more than half of a nation’s industrial and agricultural production.

From the end of World War 11 until a few years ago, centralized state planning has served as a model for almost half the world. Newly independent developing countries faced with the choice between centralized control and market orientation usually chose the former. That their foreign ruler had been capitalists turned them against market systems, while the tradition of colonialism eased the transition to tight central control. In the postwar era, many military states and even most market-orientated nations also expanded the role of government in the day-to-day management of their economies.

The world today is at a turning point in economic management. The abrupt Chinese shift to market mechanisms is the most dramatic example, not only because of the vast number of people affected, but because of the reform’s spectacular early successes. Many African nations, plagued with agricultural decline, have begun to extend market incentives for agriculture. Latin Americans, burdened with debt, have moved to sell off state-owned companies. Meanwhile the Soviet Union, its confidence in uninterrupted growth shaken, is debating the need for economic reform. Ironically, although Western governments have also begun to sell off state-owned concerns, they increasingly subsidize private agriculture, restrict trade, and permit concentration of economic power in industrial conglomerates.

The efficiency with which nations produce food and consume energy provides a useful indicator of their progress toward sustainability. Countries of all political stripes seek to avoid excessive dependence on food imports. Air and water pollution and land degradation are closely associated with agricultural production and energy-use efficiency. Thus, if market pricing and competition provide greater efficiency, both economists and environmentalists have a stake in the changing role of the market in the world’s economies.

Some environmentalists reject both markets and bureaucratic planning as incapable of dealing with the crisis of sustainability. Putting a sober twist on an old joke: ‘In capitalism, man exploits man; in socialism, it’s the other way around,’ they say both exploit nature. But important differences exist between systems, as shown by comparing their efficiency in agricultural production.

Agricultural production can critically affect the consumption and disruption of resources—water, wood, and air. Soil erosion and deforestation can result from low agricultural productivity if new, marginal lands are pressed into production to make up for lost potential. Overuse of chemicals can cause water pollution. Efficiency is consequently an essential ingredient of agricultural sustainability. Economists define efficiency, roughly, as maximizing output while minimizing input. When farmers produce a given value of grain with a least-cost combination of land, labor, fertilizer, and machinery, production is efficient. When grain production increases faster than consumption of the inputs, productivity and the outlook for sustained production improve. When productivity declines, a society is headed for trouble. Inflation, the need for costly imports, even famine can result.

Land and labor productivity, two partial but important measures of performance, reveal several advantages of market orientation. Crop production per hectare is generally higher in market-orientated countries. Of course, factors others than the economic system affect these ratings, such as rainfall levels, inherent soil fertility, and farm price policies that may either encourage or discourage farm efficiency. Japan’s population pressure, for example, has pushed it to increase land productivity, but this explains only about a third of the more efficient record it has than the Soviet Union. The remainder is attributable to policies that, among other things, keep prices high, encourage larger numbers of people to farm, and keep farm size low. Similar policies have placed market oriented Hungary even higher in land productivity.

Ranking nations by agricultural labor productivity shows a dramatic advantage for market economies. European countries enjoy labor productivity rates often double of countries like Poland, Cuba and Lithuania.

Labor productivity naturally tends to be higher when farmers earn high incomes, which in turn indicates higher levels of development, a central goal of economic policy. Strictly regulated prices reduce profitability for farmers, and deprive them of capital to invest in machinery and fertilizers to raise productivity.

Land productivity says little about the ‘total factor’ productivity of an agricultural system, which also takes into account inputs of labor, fertilizer, and machinery or animals. Efficiency can be distorted and productivity diminished by poorly crafted policies. For example, high price subsidies and protective trade barriers account for part of the relatively high land productivity in Japan. Consumers bear the cost of these distortions, paying almost three times the import price of food commodities.

Total factor productivity is relatively easy to determine in a perfectly competitive economy. Ideally, price signals instruct farmers on how much to spend on production, and they maximize their earnings by choosing the least-cost combination of labor, land, machinery, and fertilizer. According to microeconomic theory, they produce at the level at which the cost of their last, or marginal, unit of production—their most expensive ton of grain—just equals the price they receive. They maximize profits in this case, making efficiency and productivity almost synonymous. In non-market economies, on the other hand, prices of resources usually do not reflect their scarcity, and so resources must be allocated by plan, a fact that directly affects productivity.

In Europe resource efficiency in agricultural sector is frequently undermined by heavy farm production subsidies, both with trade barriers and direct budgetary expenditures. The United States is by no means unique among market-oriented countries in failing to adjust agricultural policies properly.

Common Market countries’ agricultural policies drive prices one fourth above world market levels on most products. Such subsidies hurt not only domestic consumers but also exporters of developing countries who could produce more efficiently and sell cheaper. The policies have the aim of preserving and sustaining the farm sector and its way of life. Cut the goal could be equally well served without the damage caused by price distortions if governments substituted direct income transfers for agricultural price supports.

Western nations, nonetheless, have long satisfied basic and fiber needs, and government policies have played a major role in this success. When policies such as minimum price supports are introduced in order to ensure food security and stabilize markets—this is, when supports are set below international market levels—they can be useful. When supports exceed world market levels, however, they interfere with trade, stimulate environmentally disruptive over production, waste taxpayers’ and consumers’ money. These distortions, like their more pervasive counterparts in planned economies, have political motivations that may well be worthy. But their impact on environmental and economic sustainability cannot be ignored. Ultimately, they become counterproductive.Asif J. Mir, Organizational Transformation

The McWorld raiding the Culture

Today’s global economy has a tendency to insulate consumers from the various negative impacts of their purchases by stretching the distance between different phases of a product’s lifecycle—from raw material extraction to processing, use, and disposal. Yet at the same time, social challenges accompanying economic globalization call for innovative forms of political mobilization across international borders. Shifting to more sustainable patterns of consumption and production worldwide will require pursuing new ground rules in order to forge a global economy based on protecting cultural values.

What we see is the onrush of the economic, technological, and ecological forces mesmerizing peoples everywhere with fast music, fast computers, and fast food—one McWorld tied together by communications, information, entertainment, commerce and especially the culture.

Today, the global spread of McWorld is rapidly bringing the consumer society of USA to the rest of the planet. The globalization of the consumer economy is closely linked with the general economic boom and growth in the movement of goods, services, and money across international borders, which accelerated during the 1990s.

McDonald’s operates 30,000 restaurants in 119 countries and serves 46 million customers each day. Its total revenue was $15.4 billion in 2002. On opening day in Kuwait City, the line for the McDonald’s drive-through was over 10 kilometers long. McDonald's has also spread expeditiously across Pakistan in almost 5 years with 18 restaurants in major cities. Strangely, there is no McDonald’s outlet in Peshawar and Quetta. McDonald’s costs the same in Pakistan as in the US, and given the per capita GDP disparity between the two countries, it is the cheapest food in one country, while being one of the most expensive in the other.

Pizza Hut also operates a chain of outlets in Pakistan and planning further to invest approximately 1 billion rupees in expansion. The money is being used to open 20 new outlets.

Coca-Cola sells more than 300 drink brands in over 200 countries. More than 70 percent of the corporation’s income originates outside of the United States, and its net revenues reached $19.6 billion in 2002.

Meanwhile, corporate strategies focused on boosting consumer demand in Pakistan have lead to increases in purchases of all manner of goods, from cars and televisions to paper and fast food. While it is ethically problematic to suggest that developing countries are not entitled to have the same options for material consumption that have long been taken for granted by western consumers, the global adoption of industrial country–style consumption patterns would place unbearable strains on local cultures.

The 1990s saw the emergence of many important international agreements and commitments embracing the need to transform unsustainable patterns of consumption and production. Agenda 21, the action plan that emerged from the 1992 Earth Summit in Rio de Janeiro, called on international institutions and national governments to promote greater energy and resource efficiency, minimize waste generation, encourage environmentally sound purchasing, and shift toward pricing systems that incorporate hidden environmental costs.

The UN Commission on Sustainable Development has provided a useful annual venue for governments and others to discuss consumption and production issues. The deliberations have produced little concrete action though. There is no voice raised for conservation of social values.

At the 2002 World Summit on Sustainable Development in Johannesburg, South Africa, governments agreed to develop a 10-year framework of programs to accelerate the shift toward sustainable consumption and production. These include offering a better range of products and services to consumers, providing more information about the health and safety of various products, and establishing programs of capacity building and technology transfer to help share these gains with developing countries. The World Summit also generated more than 230 partnership agreements among diverse stakeholders.

The Organization for Economic Co-operation and Development has sponsored a series of meetings and papers aimed at encouraging governments to implement innovative sustainable consumption and production policies.

In all these forums, apart from consumption and production, no emphasis is laid on the issue of social influence. Unfortunately, the limited gains made since 1992 in shifting toward more-sustainable patterns of consumption and production have been largely overwhelmed by the continued global growth of the consumer society. The controversial lifestyle issues continue to haunt.

The breakdown of WTO negotiations in Cancún in September 2003 provided reform-minded governments and activists with an opportunity to push for bringing future trade negotiations into better balance with sustainable development concerns. The way forward, nevertheless, is not yet clear.

Several new initiatives have emerged in the corporate and financial sectors, including the United Nations’ Global Compact, which calls on participating companies to integrate nine core values related to human rights, labor standards, and environmental protection into their operations, and the Equator Principles, which call on leading banks to manage environmental and social risks in their lending operations.

The international trade negotiations can provide opportunities to push for policy reforms needed to promote more-sustainable consumption and production. All the same, WTO rules and negotiations can also be used to protect cultures and social taboos of the host countries of MNCs.

Brands like McDonald’s, Pizza Hut, Pepsi and Coca-Cola are not just cultural aggression but also an expression of power; once America lost its power these will go. It is nonetheless impossible to filter culture. In the past we hated the British raj but gradually adopted its symbols. Today we hate America and don’t want to adopt what we think is its culture. Pakistan must save its own culture to counter the onslaught. There is a need for reform in our culture, but this should not be obfuscated through this hatred or that. The only answer to the American cultural onslaught is the protection of Pakistan’s own culture. www.asifjmir.com

Child Labor

We often hear about goals of education relate to ‘meeting our children’s needs,’ ‘responsible citizenship’ and ‘equipping students for the future.’ Yet, what do such goals mean when millions of our children are forced to work? How much actual attention is given to the circumstances of this segment of our future? How much consideration is given to the needs not only of this generation but future generations? How seriously do we care about human values when we see around innocent child laborers selling newspapers at traffic lights, serving tea at kiosks, or weaving a carpet? Is this the future we are talking about? How might we enhance the quality of our responses to unmet poor children’s needs? How might we begin to contribute more effectively to building cultures of peace and sustainable futures? No easy answers.

That the shameful practice of child labor should have played an important role in the Industrial Revolution from its outset is not to be wondered at. The displaced working classes, from the seventeenth century on, took it for granted that a family would not be able to support itself if the children were not employed. The children of the poor were forced by economic conditions to work, as Charles Dickens, with his family in debtor's prison, worked at age 12 in the Blacking Factory. In 1840 perhaps only twenty percent of the children of London had any schooling, a number which had risen by 1860, when perhaps half of the children between 5 and 15 were in some sort of school, if only a day school (of the sort in which Dickens's Pip finds himself in Great Expectations) or a Sunday school; the others were working.

Child labor is a pervasive problem. Children work for a variety of reasons, the most important being poverty and the induced pressure upon them to escape from this plight. Though children are not well paid, they still serve as major contributors to family income in Pakistan. Schooling problems also contribute to child labor, whether it is the inaccessibility of schools or the lack of quality education which spurs parents to enter their children in more profitable pursuits. Traditional factors such as rigid cultural and social roles in Pakistan further limit educational attainment and increase child labor.

There are 19 million working children in Pakistan, 7 million below the age of 10 and 12 million between the ages of 10-14. Everyday sun sets by shoving over 100 children into the labor market. The number of child workers under 15 years is estimated to be not less than 8 million. Punjab accounts for 60% of the total child labor. More than two-thirds of child laborers are working in the agricultural sector. Of 20 million bonded laborers 7.5 million are children and 1.2 million children are bonded in the carpet factories. Nearly 250,000 children working in brick kilns are bonded laborers, driven into a miserable state by the fact that their entire families have been 'pawned' to the owners by virtue of their having pledged their labor in return for some money taken. Children are sometimes kidnapped to be used as forced labor.

The newly emerged affluent class in urban cities employs some 6.7% of female child workers in domestic help. These domestic workers generally have to work for 15 hours a day, seven days a week.

Bonded labor, a contemporary form of slavery according to the UN definition, unfortunately holds strong in certain sectors in Pakistan, such as brick manufacture, construction, sports goods manufacture and carpet-weaving.

Demand for child labor is so high that children are often sold by desperate parents. They are then forced to work long hours, day and night, unable to attend school, and often subject to abuse and malnourishment. This perpetuates a cycle of poverty since most of these children never get the education and training needed to obtain a livable wage.

As a peace educator, human rights activist and a father of seven year old son, I am the first to admit that we have done nothing to halt child labor and just about 19 million child laborers continue to work in Pakistan. What inconsequential the government has done is measly cosmetics. This is just to show to the West that child labor is not involved in the production of export oriented goods. We have done nothing to remove the horrific and reckless conditions that push children to child labor. Rather than working together to help build a better world, in which poor children have the possibility to live, to laugh, to play, to share, to care and to transform into responsible citizens, we may fatalistically accept a foreclosed future. Rather than building intergenerational partnerships, the well being of children today and of successive generations may be stolen or colonized through our lack of quality responses.

We can, we must, and we should stop the exploitation of children. In 1999, when the member states of the ILO unanimously voted to adopt Convention 182 on the Worst Forms of Child Labor, the world community made a commitment to stop the suffering of millions of children. It was recognized that ending the commercial exploitation of children must be one of humankind's top priorities. It was accepted as a cause that demands immediate attention and a high priority action. Caught in a nightmare that never seems to end, a significant part of Pakistan’s future endures the worst forms of child labor. More than just words and passing resolutions, child labor is a part of the reality of our world today. No one will say that children should suffer. No one will support that children should work 14 hours a day. But who will step forward to stop this? (www.asifjmir.com)