School of Economic Science Annual Economics Lecture, 2010
Ian Mason, Principal and Head of Law and Economics, School of Economic Science.
You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete. Buckminster Fuller
In the School of Economic Science we do our best to speak the same language in bad times as in good. Throughout the boom years from 1998 to 2007 the School consistently called for a new understanding of economics which could result in a much fairer distribution of wealth, less harm to the planet, free but fair trade, honest credit, a revised relationship with land and environment and a renewed sense of human dignity, idealism and potential. In 2003 students in the School formulated and published the Waterperry Declaration boldly asserting that ‘People prosper where justice and equity are honoured. Today a fifth of the world’s population lacks the means to feed itself. This injustice and inequity will be resolved when the recognition of our common humanity becomes the foundation of our conduct.’
The Declaration pointed out that there were then 820 million people in the world suffering malnutrition or starvation, whilst in other places there were considerable surpluses of food. People went without, even as their own countries sent food abroad. Countries were importing food, even as their own producers fell into poverty.
In some countries, poor government was creating conflict or corruption which together with ecological damage made the poor even more vulnerable to disaster. Meanwhile the exploitation of new technologies threatened to upset long established relationships between communities and the natural world. The opening of developing markets to international trade was seen to secure neither prosperity nor social harmony for those living in them. At the heart of all this, exploitation of political power and of control over resources, combined with an unwillingness to address market failure was seen as endangering our entire world.
In 2007 we witnessed a financial collapse which did indeed endanger our entire world and probably still does. While those events raised serious questions about the viability of economic practices at all levels, what we now see is a desperate rush to restore what was lost with as little amendment as possible. Sadly, in the process, the number of people suffering severe malnutrition or starvation has risen to over one billion while many millions of others face hardship and deprivation.
But the opportunity is always available to put an end to this if the necessary courage and vision can be found. What really matters now is to open up to the possibilities that a new, more inclusive, economics based on principles of justice and equity can offer and see how the possibilities can be realised.
They will not be realised without concerted effort and considerable determination, but if humanity can summon the courage and vision to open up the possibilities in our own minds then new understandings can flow into our social and economic arrangements to the benefit of the entire living world.
The concept of an entire living world – is all important. It is already dawning on the modern consciousness under the influence of recent advances in scientific understanding, that the world we live in may itself be alive: that the biosphere which sustains every aspect of human life is in fact a self-organising system with many, if not all, the properties of a living organism. This is the conclusion of the well-researched and well-attested Gaia theory and recent advances in systems science. We can no longer think of ourselves, the human population, as somehow abstracted from a mechanical universe when we recognize that in fact we are a component part of a much larger living system.
This realization brings an immediate humility and new direction to human thought. We can no longer afford to think of ourselves as masters of the universe or to direct our economic affairs as though we were. In fact we are a highly developed and specialized part of a much greater whole and the task before us is to come to a new understanding of what that part is and how it may best be played. Our sense of a common humanity is of the greatest importance in this, but our sense of a greater wholeness even more so.
Such humility and sense of wholeness brings with it a sense of our own immense power to affect the systems of which we are part. In the last ten thousand years the human race has had a profound impact on the face of the Earth. We have learned to clear forests and cultivate savannahs; to stop up and divert rivers and river systems; to mine the depths, to engineer soils and living organisms, to harvest great lakes and oceans: and until recently we have thought we could do so with impunity and without restraint. The time has come to apply our new understanding so as to forge a new and mutually enhancing relationship, particularly including our economic relationship, with the wonderful life of the planet we live on.
This could begin with learning to love ourselves for all that is best in being human. We can rediscover our capacity to care for each other and for our surroundings and to put our sense of care before any self-interest. This is why it is said that justice and equity matter and why people prosper where they are honoured. They express qualities of our sense of care, our love for our fellows and for nature, and our unity with them. A new respect and a new humility born of the new understanding of the world we inhabit does offer the prospect of a new and more benign economics with power to enrich all aspects of human life while playing an enhancing role as part of nature herself.
In this spirit, when we turn to the world of economics, we see that we are not merely engaged in some process of extraction that may end in some satisfaction, but in a process of transformation which is in fact a celebration of life and creativity. Seeing this, we can readily adapt agriculture and industry to comply with this understanding. In many places this is already happening, and in some it has never ceased. In fact new initiatives and experiments are taking place the world over which are consistent with, and in many cases based on, principles such as are advocated here. They range from transition towns in Devon, and in London Boroughs like Lambeth and Camden, through revised small-hold horticulture in India and elsewhere, to serious proposals for monetary and financial reform.
One person who was fully convinced of the need for and possibility of such a revised view of economics was Dr. E.F. Schumacher, author of the popular and famous 1974 book, Small is Beautiful. One chapter in that book was devoted to speculation on what an economy based on the philosophy of Buddhism would look like. Schumacher’s view was that it would look completely different from an economy based on the economics of production and consumption because its philosophical foundation would be completely different.
As Schumacher puts it: ‘The Buddhist point of view takes the function of work to be at least threefold: to give a man a chance to utilize and develop his faculties; to enable him to overcome his ego-centredness by joining with other people in a common task; and to bring forth the goods and services needed for a becoming existence.
‘ …the Buddhist sees the essence of civilisation not in a multiplication of wants, but in the purification of human character. Character, at the same time, is formed primarily by a man’s work. And work, properly conducted in conditions of human dignity and freedom, blesses those who do it and also their products.’
In Schumacher’s view, Buddhist economics would be ‘a study of how to attain given ends with the minimum means’, and he added, ‘… since consumption is merely a means to human well-being, the aim should be to obtain the maximum of well-being with the minimum of consumption’.
In the School we would add to this the importance of access to the naturally occurring materials necessary for all forms of agriculture and industry. At every turn, economic life begins and ends in the natural environment represented by the land surface of the Earth. It is the relationship with land more than anything else that determines the effects and success of economic arrangements at all levels from the most simple food gathering and cultivation to the most complex financial sophistications.
The important feature of Schumacher’s economics, of course, is that it brings out the effect of a particular philosophic outlook on human economic arrangements. In the School, we too have found that economics and philosophy are inextricably linked and while the philosophy is not specifically Buddhist there are some broad philosophic principles that have much in common with Schumacher’s approach. Philosophy as we find and work with it in the School introduces concepts of unity, justice and equity into the theory and practice of economics. Taken together, these three imply a fair share of nature’s provision for everyone combined with a proper respect for the welfare and integrity of the natural world.
In this light, poverty and deprivation anywhere signal failure to understand the laws of economics or, if they are understood, to apply them properly. This lecture is intended to show that where philosophic insights and values are applied to economics new possibilities emerge that can flow into social and economic arrangements to the benefit of the entire living world. The suggestion is that, by working together with the rest of the living world, it is possible for the human world to become a world without want. It is also intended to stress the importance of the entire living world, which is represented in economics by land, to economic life, however sophisticated.
Here in the UK, most people live and work at the sophisticated end of the economic spectrum where the underlying importance of land, representing the entire living world, is not always quite so obvious. Agriculture, for example, accounts for less than 0.9% of our economy although agricultural land accounts for more than 76% of total land use (DEFRA – 2008). Services ranging from wholesale and retail through financial services to education and health account for 76.2% of our economy and industry and manufacturing for 22.8%.
Nevertheless, it remains important to give full attention to the food economy. The reason for this is that it is easy to forget in places like the UK that food production accounts for the livelihoods of more than half of the world’s total population. In addition – no economy can succeed which cannot feed its population. That is what defeated the Soviet experiment in the 1980’s and without due care, it could just as easily defeat the experiment in global capitalism.
In the UK, the food industry as a whole accounts for 7% of national output and 3.7 million jobs. According to DEFRA food is Britain’s largest manufacturing sector. Britain produces 60% of its own food although the proportion is falling – in the 1930’s it was only 30%. However a Cabinet Office Report which resulted in DEFRA’s new food strategy for the next 20 years reports that consolidation of manufacturing sites, distribution centres, higher truck load factors, faster order-to-delivery times and ever lower stock levels make for an ever leaner food supply.
The government rightly sees this situation as less than satisfactory. Not only are we dependent on overseas production for the remaining 40% of our food production, we are also increasingly dependent on overseas production for the oil, coal and bio-fuels that make it possible for so small a proportion of our population to produce such a high proportion of our food. Food security and resilience to external shocks have become high priorities for government for good reason.
The first of these reasons is drought. In 2009 countries that account for two thirds of the world’s food production experienced severe drought conditions. These include China, Australia, much of Africa, Brazil, Argentina and the US. As a result, in all these places, planting for 2010 has been lower and production for 2010 is also expected to be lower. Already we are seeing an end to the era of cheap food as prices on the international markets rise. But there is more to it all than that. Nearly all these places are also experiencing severe soil depletion as a result of intensive farming practices. Shortage of water and poor soil is not a combination that makes it easy to feed an inexorably rising world population.
But there are other reasons as well. According to Indian scientist and activist, Dr Vandana Shiva, founder of Navdanya, the Indian seed collection and preservation network. ‘Industrial agriculture is threatening the food security of our planet’. While over a billion people suffer starvation or severe malnutrition a small number of international corporations are tightening their grip on the world’s food supplies. Shiva sees them working on three main fronts. First, they are steadily tightening their grip on seed supplies, especially through the introduction of patented GM varieties. Secondly, they are steadily driving small -holders who specialise in varied food production from their land in order to create industrial scale farming units. Thirdly, control of the entire retail chain is concentrating in fewer and fewer hands, forcing suppliers to seek ever cheaper means of production, mostly through mechanisation, and forcing small scale farmers out of the market.
The world’s highest traded crops, such as corn, soya, rice and cotton are all treated as commodities and the biggest trade in all of them is in genetically modified varieties. Industrial scale farming certainly produces more of these commodities, but it is well established that it produces less actual food per acre and it also leaves food producers, the farmers themselves, hungry. Dr Shiva also points out that because the commodity markets do not distinguish between food for people, food for cattle, food for fuel and food for industry, we do not notice that the increasing hunger of machines is beginning to make greater demands on modern food production than the hunger of human beings.
In India, despite annual GDP growth rates in the region of nine per cent, every fourth Indian is seriously hungry. Even in this era of cheap food, sufficient nourishing food is beyond the purchasing power of twenty five per cent of the population and yet land and resources are being diverted from food production to commodity production.
According to Dr. Shiva, and many others, the intelligent response to all this is that ecological agriculture is the only road to freedom. Small farms rooted in biodiversity can produce up to ten times as much food per acre with the added bonus of being the most efficient way of converting atmospheric carbon dioxide into healthy humus for fertile soils.
This view is certainly shared by Patrick Holden, chairman of the UK’s Soil Association, the organic certification and campaigning organisation. He sees the same tendency to fewer and fewer producers, processors, packers and distributors in the UK food industry. He reports, for example that eighty per cent of carrots in the UK come from just ten carrot growers while all our supermarket milk comes from only five major processors who may soon be reduced to four. He also reports that those who thought that we had succeeded in keeping GM foods out of the UK are deluding themselves: more than one million tons of GM soya and maize is fed to UK pigs, chickens and dairy cows annually with no labelling requirement on the final product.
Holden would also agree with Liz Hosken of the Gaia Foundation who views all this as evidence of what Gandhi would have described as a deeply violent society which institutionalises violence to the soil, to seed, to animals, to farmers, to consumers and to ourselves by the food we put in our bodies. Gandhi’s response, she says, would be to fight back non-violently by not participating in violent systems and building alternatives. This means choosing, and taking the trouble, to eat less violently produced food and supporting local growers and retailers by choosing food produced locally and with integrity. Every penny of our household food budget is a vote for the system that produces what we buy. It means rediscovering how to nurture the soil so that the soil nurtures us, knowing the story of the food that we eat and reclaiming food sovereignty and security by growing as much of our own food as possible.
These prescriptions are excellent for those who can afford them, but there is another all important factor. The drive for cheaper and cheaper food is because billions of people the world over cannot afford to pay for food that has been produced locally with care and integrity. The reasons for this lie in the prevailing economics which forces people into a working environment where they must compete with their fellows for jobs by accepting wages that have already been competed to a minimum or by selling at prices that have already been competed to a minimum. In the UK, for example, the proportion of GDP that is paid in wages has been steadily declining for years.
This has become a global phenomenon. British, and much European, agriculture is no longer economic because agricultural labour is so much cheaper in other parts of the world – and so is agricultural land. Farm gate food prices will not provide what has become an acceptable income to the inhabitants of Britain while also paying for the land to grow it on. Elsewhere, they are not sufficient to support a small farmer and his family while at the same time providing sufficient revenue to pay for seed, fertiliser and machinery.
All this plays into the hands of industrial scale farming enterprises. They have the capacity to provide the capital inputs which dispense with the need for ‘expensive’ human eyes, hands and energy by replacing them with machines. This is what capital inputs have become: not the provision of tools and equipment that make human work more effective and productive, but the replacement of human work fuelled by nourishing food with immense machines fuelled by oil – and now, increasingly by organically produced fuels whose production is displacing human food production and having devastating effects on the environment.
This raises serious questions to be addressed by economists. First, why has the human relationship with land and the capacity to grow food become so distorted that farmers can no longer grow the food that they and their neighbours need? Secondly, who is benefiting from this situation and to what purpose? Thirdly, how can economics, and through economics, governments and policy makers, address the position?
These questions do not readily admit of short and easy answers, but the beginnings of answers are not too difficult to see. In most westernised economies the relationship with the land has been distorted by believing that land can be privately owned without obligation and can be bought and sold with impunity. The older understanding that the land does not belong to anyone and that we humans belong to the land has been lost to modern economics. The real beneficiaries of this situation are those who can establish ownership and control of productive land and whose primary purpose is to benefit themselves and their shareholders (for many of them do have shareholders) but not to benefit those who must live and work on the land if they can. This position could be addressed by governments and policymakers by the establishment and enforcement of simple obligations on those who claim exclusive ownership or occupation of land. Such obligations are routinely applied to tenants by landlords. There is no reason why they could not equally be applied by governments local or national, to landlords.
Two things seem to be necessary to bring this about. The first is a revised understanding of the underlying economics of the entire system. The second is political will. Every individual can help with both of these by demanding examination of the key questions and insisting that their representatives do so as well. The establishment of justice and equity in economic life depends upon us all taking up this cause.
In this context, and to show that all this has a distinctly practical aspect, it is worth drawing attention to the 2007 Thailand Human Development Report. The Report describes the development and application in Thailand of what came to be called the Sufficiency Economy, the brain-child of King Bhumipol of Thailand who came to the throne in 1946 and continues even now to develop his ideas in practice. The period following 1946 was an era of rapid development in Thailand to the extent that from the 1970’s to the late 1990’s Thailand was becoming a fifth Asian tiger economy. However, well over 50% of the population were smallholder farmers who found themselves in danger of being ignored or even becoming victims of successful development.
Seeing this, King Bhumpol’s idea was to develop technologies, infrastructure and production systems which were appropriate for small-scale farmers in this era of development. From early in his reign he launched and supported projects to support the economy around the small-scale farmers who accounted for the largest proportion of his population. This developed into what came to be known as the Sufficiency Economy.
The Report describes the sufficiency economy as ‘an approach to life and conduct which is applicable at every level through the family and community to the management and development of the nation. It promotes a middle path, especially in a developing economy to keep up with the world in the era of globalisation. The sufficiency economy has three key principles: moderation; wisdom or insight; and the need for built in resilience against the risks which arise from internal and external change. Those applying these principles are expected to value knowledge, integrity, and honesty, and to conduct their lives with perseverance, tolerance, wisdom and insight’.
It is important to understand that sufficiency in this context is not to be confused with self-sufficiency or with any kind of turning inward or rejection of the global economy. Nor is it a turning back to an older or simpler way of life. Sufficiency economics is entirely forward-looking and intended to enable people and their economies to remain self-reliant and independent while participating fully in the global economy. ‘Sufficiency’ means ‘not too little, not too much’ as is consistent with the Buddhist middle way – but it is not a purely Buddhist conception either. It is simply a guide for finding the right balance between internal resources and external pressures, between the needs of society at the grass-roots and the imperatives of the global economy.
In 2006, former UN General Secretary Kofi Annan described the philosophy of the sufficiency economy as ‘of great relevance to communities everywhere during these times of rapid globalization. The philosophy’s ‘middle way’ approach strongly reinforces the United Nations’ own advocacy of a people-centred and sustainable path towards human development…’
Behind the development of this thinking lay the less satisfactory effects of rapid economic development in Thailand. In 1985 manufactured goods had overtaken agricultural produce as the country’s main export and by the early 1990s a new Japanese factory was opening in Thailand every three days. Around a million people were moving from agriculture into the industrial economy every year. GDP growth was spectacular, averaging 7.6 per cent per annum. Per capita income between 1957 and 1997 multiplied seven times.
But there were side-effects: inequality; environmental decline; social disruption and individual loss of control were all taking their toll, particularly on the majority rural populations. Inequality arose as people found themselves denied access to the land, water and forests that were fundamental to their livelihoods. Between 1947 and 2000 two thirds of Thailand’s forests disappeared while increasing demands for water for urban and industrial use began to create water shortages. Meanwhile, old customs of shared labour and other forms of local exchange disappeared as market agriculture intensified. As a result people became more and more involved in production systems over which they had no effective control. Rural debt escalated relentlessly and a feeling of helplessness began to dominate rural life. As the Report puts it ‘Villages had their own systems of insurance and defence to deal with such matters and, whether effective or not, they were the product of local wisdom. But in the new era, world prices replaced rainfall as the source of insecurity, and market forces supplanted wild animals as the predators’.
Seeing all this, the king mobilised farmers, local wise men, monks, development workers, officials, teachers, academics and philosophers to address the key themes that he identified. These were to:
– Rebuild a sense of community, real or imagined, in order to have greater strength to face up to global forces.
– Retreat somewhat towards self-reliance in order to withstand shocks.
– Draw attention to Buddhism with its stress on moderation and spiritual well-being as an antidote to the emphasis on maximising growth and consumption.
– Build horizontal networks to pool thinking and share techniques.
With these intentions they set about rebuilding the economy from the bottom up. The start was to develop a model of a self-reliant family farm using natural cultivation methods and an appropriate mix of land use: a pond for water storage and for rearing fish for food; a paddy field for rice; a field for other crops and fruit and a place for a house. To bring this about farmers were encouraged to desist from commodity farming and to re-orientate around providing first for themselves and their families and then for their local communities. This was the first stage of the process. The Report emphasises that self-reliance does not mean isolation. The model farm was expected to create a surplus beyond household consumption and this surplus could be exchanged on the local market.
The second stage of rebuilding is aimed at creating self-reliance at the community level by increasing the production and availability of local goods and services through mobilising households’ surplus resources within its local community. This might be done through cooperative forms of production, community savings groups, community health centres and community forms of a social safety net.
At the third stage, the community could engage with the economy beyond the village to sell its excess products and to gain new technology and resources for products, such as founding its own rice mill or tapping the services of banks and other economic institutions; and to negotiate with business corporations for mutual advantage.
As King Bhumipol put it: ‘Progress is not just about planting enough rice to eat. There must be enough to create schools, even works of art, so that Thailand prospers in every way, with no hunger or poverty, food for body and soul, and many other things. His guiding principles throughout were: Build a base of self reliance before moving ahead. Be economical. Learn continuously’.
According to the Report, Thai economists quickly grasped that embracing the sufficiency economy does not require them to abandon the theories and techniques they used as their professional tools. The sufficiency economy emphasises the importance of shielding the country against shocks. Just as the agricultural theory stresses that communities need a base of strength and self-reliance to be able to deal with the world beyond the community, a country also needs a strong internal foundation in order to survive and prosper in a volatile world-wide economy. The sufficiency economy is not a rejection of globalisation, but rather a means of succeeding in globalisation.
The Report outlines a number of successful applications of sufficiency economy thinking at all levels of economic activity in Thailand from government policy to rural farms and forests. It has applications for businesses of all sizes, for human development policies and for national economic management. Successive governments have been persuaded to adopt the sufficiency approach because they find that it is not incompatible with more conventional economic systems and they have been happy to encourage the growth of strength from within and to think in terms of longer term stability and future generations.
Although the Report does not spell it out, a little investigation shows that whatever its merits, which appear to be considerable, the sufficiency economy does come up against the same problem as every other attempt at reform in economics. Land reform in Thailand is and has been as controversial as anywhere else.
Thailand is one of the few countries to have escaped colonisation in any of its recent history with the result that until well into the 20th century traditional forms of land holding survived in many parts of the country. Such systems were often informal and did not rely on any kind of formal land titles. People tended to use the land their forefathers had used and communities had traditional methods of allocating land holdings to families and individuals. In some parts of the country land holdings were restricted to the amount of land that an individual or family could use themselves. This did, of course mean that there was little in the way of a market in land and that land was rarely used as collateral for credit.
It also, however, meant that there were many who could take advantage of King Bhumipol’s approach to rebuilding the economy from its roots. The whole system of the sufficiency economy is based on small scale, independent land holdings.
During the period of rapid expansion in the 1970’s and 1980’s this changed substantially. The World Bank sponsored an extensive land titling drive as part of a structural adjustment programme to modernise the Thai economy. The aim, which was successful, was to create an active market in land and to enable land to be used as collateral for credit in order to stimulate investment. At the same time, large areas which were presumed to be unoccupied or unclaimed land were taken into State ownership and declared to be Forest Land with significant restrictions on its use. In this process, little regard was paid to the fact that the forest land supported a substantial population who remain landless to this day, and are consequently among the poorest sections of society in Thailand.
Meanwhile, the burgeoning new economy produced a significant body of potential investors who lost no time in buying up landholdings wherever they could. Land prices doubled, encouraging this process and pricing the poorest sections of society out of the market. The displaced populations inevitably moved to the cities in search of jobs, providing cheap labour necessary to the rapidly expanding economy.
At the same time, lack of rigorous control of the titling process encouraged corrupt land deals to the extent that it was not unusual for communities and individuals to find that land they had used for years had been sold to absentee landlords without them knowing anything about it. In some cases this eventually led to small scale local revolts and land reclamation by direct action as well as to calls for land reform.
In this, Thailand experienced the same process as almost every developing economy anywhere on the globe. Land titling does indeed stimulate economic development and encourage investment but it does so at the expense of all those who lose their land in the process.
However, notwithstanding the problems of land tenure and land reform that accompany developing economies around the world, King Bhumipol’s experiment with the sufficiency economy does show that where there is determination and political will it is possible to build on the sort of values expressed by Dr Schumacher forty odd years ago. It shows that there are alternatives to rebuilding the flawed edifice of modern economics with its equally flawed foundations.
The idea of sufficiency – sufficiency of living conditions, of consumption both of food and of material goods, and sufficiency of profit, is entirely consistent with ideals of justice and equity for everyone. The experience in Thailand shows that ideals of justice and equity can be successfully applied to give a ‘middle way’ between heedless progress and apparent helplessness provided that people want it. In the School of Economic Science we hold to the view that justice and equity can and should shine through economic life. It may not happen soon, but it is possible.
This lecture is intended to point to some of the real needs and possibilities of the present time. The School offers economics-with-justice alongside practical philosophy. We hope that the example of Thailand shows that philosophy can also be practical economics. It is the two together, economics with philosophy that may offer a new direction to a troubled world and offer a transformation into a world without want.
An updated version of this lecture, together with other lectures given by Ian Mason has now been published and is available from our online bookshop as “One World, One Wealth.”