Some random musings on natural capital.
Sacrifice may have been a way for societies to avoid creating ecological debt.
Ecological debt is another way of describing the damage to nature inflicted by human activity. Arguably ecological debt starts when modern humans appear and start to kill off megafauna, so it goes back over 20,000 years. Perhaps it goes back even further to the time when ancient humans discovered how to control fire.
Every economic transaction creates ecological debt. This started when the first human killed an extra mammoth, to place in cold storage for the winter. It speeded up considerably when neolithic proto farmers collected seed of individual grasses that held onto their seeds longer than others, and cereal farming was born. And when gold and silver started to be extracted from the ground to create “money” things ramped up another magnitude.
Now money is created electronically – by central banks or through the creation of commercial debt. Ecological debt is created every time an extra pound Euro or dollar is created.
Sacrifice was a way for people to repay ecological debt, or at least give them the feeling that it was being repaid. In some cases, there could be a real reduction in debt.
Sacrificing an animal to bury under a newly planted fruit tree would provide real fertility for that tree. And sacrificing a domestic animal to provide meat for a large wild predator (such as a Tiger) would enable the Tiger to survive and at the same time reduce the chances of it eating other stock, or indeed people.
Human sacrifice may have been used to quell angry gods who would otherwise wreak vengeance on people, in the form of plagues, crop pests, drought or flood. Those angry gods may actually have been the consequences of an unsustainable accumulation of ecological debt – deforestation, soil exhaustion, mono-cropping.
Our ecological debt has grown out of all proportion and is now threatening the future survival of people on earth.
Now we need to reintroduce the notion of sacrifice, but without the ritual killing of animals (or people). We need to sacrifice money. Burning piles of cash won’t really address the problem – most money in circulation is electronic. In any case, simply reducing the amount of money in the system will not address the ecological debt, though it may help reduce the ecological deficit.
The sacrificed money has to be spent on reducing the ecological debt.
For instance, 10 million pounds could buy you a luxury yacht. This would generate an ecological debt, comprised of the ecological footprint of the materials used in the manufacture, plus the energy costs of running the yacht, and ultimately the cost of its disposal when it was no longer wanted.
Alternatively that same £10M could be spent buying a chunk of rainforest and supporting a local community there to protect it and make sustainable use of its resources. Or it could be spent paying to create a sustainable fishing project involving the creation of no-take zones, and the resources need to protect them. Or it could be spent on a campaign to change the way people behave, such as reducing the amount of plastic entering the sea.
But whoever has the £10M decides whether to buy the yacht of the rainforest. They may well choose the yacht. There is a discussion around philanthropy here, but that’s for another day.
So the decision needs to be taken out of the hands of the person with the money. This is, after all, the basis for things like regulation and taxation.
Going back to the point that ecological debt is created every time new money is created, the sacrifice needs to operate at the source of the problem.
Let’s argue that for every £100M of money created by central or commercial banks, £10M is also created as the money sacrifice and deposited in an ecological account. You could call it a tithe, which is another form of sacrifice.
Whereas in the past the tithe was paid to the church and used by the church as it saw fit (which may have included helping the poor and disabled, or even commissioning works of art, but did not generally redeem ecological debt), this modern tithe would be allocated to spend reducing the ecological debt, according to the greatest need.
Who would actually incur the debt? Would it be the bank that created the money in the first place, or the debtor who asked for the loan?
If the bank was a central bank, then the ecological debt would be incurred by that country, and its currency would be slightly devalued, with a small contribution to inflation each time it happened.
As inflation (beyond a small amount) is generally seen as a bad thing, this might serve to introduce some serious thinking about the benefits, or otherwise, of creating new money (currently happening through quantitative easing.) Rules might be introduced to ensure that ecological debt was not incurred through the creation of new money – using a “polluter pays” principle, ecological destructive projects looking for loans would be rejected.
In the spirit of looking for the solutions to problems at their source, commercial banks should pay the tithe on every commercial loan they create. Again, they would then impose conditions on the loans to their debtors to ensure that the ecological debt was repaid by them, or that the activities the loan funded not only did not incur additional ecological debt, but actively repaid it.
Of course this would lead to possibly endless discussions around priorities, but it would do two things which I think would be beneficial. Firstly, it would make a direct connection between money and its impact on nature – it would incorporate the notion of natural capital into the notion of capital, at source. Every time money was created, natural capital would be on the agenda. This should serve to affect behaviour and decisions.
Secondly, and less importantly, it would create a significant fund to help reduce the human impact on nature.
Obviously I’m not an economist and there may be very good reasons why this wouldn’t work and is nonsense. Please let me know what you think.
Photo by Ceridwen [CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)%5D, via Wikimedia Commons
The title is taken from Numbers 28:15
This are interesting ideas. To a certain extent, we have put the first tentative step on this road with the plastic bag tax. (I myself, because I think 5p is nowhere near enough, perform a larger sacrifice and give £5 to Surfers Against Sewage for every new plastic bag I get: £35 so far this year, which isn’t doing too badly I think.) I would previously have argued for the gradual extension of this through other overtly environmentally-destructive transactions, but I think you may a good case for simply tying it directly to economic activity: a green Robin Hood Tax. I am not an economist either, but my brother is and I shall bounce these ideas off him…
thanks Stuart. Yes as I was writing it it occurred to me that there might be similarities with the financial transaction tax (Robin Hood tax).
Comments from Dr. Neal Hockley, Lecturer in Economics and Policy and Bangor University Environment School (via Twitter)
1)”damage” is normative. For much of human existence damage has been seen as “improvement”. Thus as investment.
2) “Every economic transaction creates ecological debt.” why? What if I pay someone to restore an ecosystem?
3) “Reducing the amount of money in the system … may help reduce the ecological deficit”. Because it slows growth? I think it’s a mistake to assume growth = ecological damage. Focus on the damage, not the growth.
4) You seem to agree with these points: “£10M could be spent buying a chunk of rainforest…” i.e. not every transaction damages
5) “So the decision needs to be taken out of the hands of the person” Questionable whether governments, on averageg, are wiser than people with respect to the environment.
6) Effectively you suggest a tax on money creation, for environmental purposes. But that taxes ALL economic activity equally, whereas damage is not equal for all economic activity
7) I’d prefer to tax externalities/reduction of natural capital directly. Otherwise you’d be deterred from borrowing money to buy rainforest!
8) That’s my 2p worth. What you propose isn’t that different to current taxation (which falls fairly equally on good and bad stuff) except for the specific environmental fund?
10) All that said, suspect many ecological economists might be more positive than I (and I recognize limitations of Pigovian taxes)
11) I suppose key questions are
1) how much does damage vary per unit of economic activity
2) how successfully can we identify and tax differential damage
Hi Miles, interesting article and interesting idea. I would say though that lending is probably something we don’t want to be providing a disincentive for, given the current unstable state of the credit markets. What you’re proposing is effectively a tax on credit, and something I don’t think any government would want to go for, given its potential impact on investment and the wider economy.
In his latest article on neoliberalism, Monbiot argues: “Interest payments, overwhelmingly, are a transfer of money from the poor to the rich.” http://www.theguardian.com/books/2016/apr/15/neoliberalism-ideology-problem-george-monbiot
Not sure about that, but if its true your system would be burdening the poor with the costs of environmental protection.
I do think its a neat idea, but maybe the tax needs to come in at some other point, to restrict something that is unquestionably bad for society and the environment – ring fencing the sugar tax for environmental benefit, or something similar?
thanks Jimmy. No, I am sure you are right, that no Government would want to go anywhere near anything like what I am suggesting. It’s not a serious policy proposal, more about me thinking aloud. I enjoyed George’s piece on neoliberalism, though it was all about the problems, rather than any solutions. I wouldnt advocate my approach as an alternative to taxation on eg consumption etc, but additional to it. The tax though, if you want to call it that, would be imposed on the provider of credit, not the consumer. To what extent it could be passed on to the consumer would depend on how it was set up. As Neal suggested in his comments, those rules would need to identify when the monetary credit was being used to cause a greater ecological debt and when it was a lesser one. Though I’m not sure I agreed with him that there were examples when such credit created no ecological debt at all. That seemed a bit optimistic to me.
Miles, great article. Very thought provoking.
I’m no economist either but didn’t we (“we” as in the UK and other countries) start something similar recently called Biodiversity Offsetting, whereby developments (e.g. a new supermarket) that damages habitat on or in the vicinity of the development site, is “offset” by creating replacement habitat in another area paid for by the developer. The offsetting might not be direct but via payment into a Bidoversity Bank (in the UK it’s the “Environment Bank” http://www.environmentbank.com/) the funds from which are then used to pay for offsetting schemes elsewhere around the country. I’m not sure how successful this has been or what the take up is like. I know that the Chairman is David Hill, who is also coincidentally Deputy Chairman of Natural England. Mmmmm… not sure about the conflict of interest here? I mean… what’s in it for The Environment Bank? They’re a financial business so how much of the proceeds do they trouser?
Like Neal I would prefer it if we were to tax the negative externalities associated with development and production. I read recently while researching a book chapter that the environmental commons (air, water, space, etc.) are worth trillions to the global economy and yet are largely not costed. The polluter pays principle should be more widely employed, including impacts of upstream land use on downstream communities.
@Stuart. Good for you! I try to offset my footprint through my work (is that possible?) and through regular donations to Trees for Life to plant trees in the Highlands. I’m sure neither do much to completely offset my impact and that of my family and obsession with restoring old British motorcycles, but it’s better than nothing.
thanks Steve. I’ve written copiously about biodiversity offsetting – which in principle sounds quite attractive, but at least in this country is firmly placed in the neoliberal approach, to create a market in tradeable biodiversity credits. I’m no fan.
I’m with you on taxing externalities – and the polluter pays principle is a mainstay of that approach.
The general natural capital approach is to find an economic value for nature and slot that into the existing system. I’m asking whether we need to fundamentally rethink our understanding of what money is, and how nature gives money its value.
As an ex-biker, I’m intrigued by your obsession with old British bikes – tell me more!
I see David Hill has come out to say “Biodiversity Offsetting” has become a toxic term. Hmmm… I think we could’ve foreseen that.
Bikes? 1939 BSA Silver Star 350cc, 1951 Vincent Comet 500cc, 1954 Matchless G3LS 350cc and 2003 BMW R1150GSA …and no more room in the garage! :o)
thanks Steve. I have to say it made my day, though David was courteous as ever when we spoke after the event.
Ah those bikes are all treasure (well apart from the last one which is just the job for getting around rewilded land). I havent had a bike for nearly 10 years but if I got one it would be a pre-war one. Sadly I don’t have a garage.