Friday, November 21, 2014

Environmentalism Reconsidered - Lessons from the Canadian Cod Fishery

Environment and the connection to human enterprise

While most agree aggressive action is warranted in improving how we utilized resources that affect the carbon content of the air, the market has started to that for us. Until about 20 years ago, there was an almost perfect correlation between US GDP and energy consumption. Then something happen, the US economy started becoming an economy of intellectual endeavour and technologies came into play that made human action less energy intensive and that correlation has now broken. GDP is now consistently trending upward and away from energy consumption. The monetary system - the abstract representation of human endeavour, indicates as humans interact with their environment, there is a tendency for this abstract entity to also reflect the needs of nature. Is this perfect, no, are there market driven Faustian events, yes. With very little tweaking however, the monetary entity can be evolved to provide incentive for harmonising human action with natural systems. This requires good policy, policy that accelerates human action in accord with nature and expands human prosperity.

As a Canadian I witnessed the collapse of the cod fishery off our east coast. Successive governments engaged in policies that exacerbated the faustian effects of extraction of value from common property. The Canadian Government failed by falling prey to political pressure to save a way of life, as opposed to rational management of a resource. In a circumstance where the market was the only determination of viability of the Cod fishery over fishing could occur, and as the fish stocks depleted so would the fishermen, in much the same way a natural predator responds to depletion in prey, erroneously referred to as the “balance of nature”. In an act of complete perversion the Canadian government instituted a “fishing for stamps” program which allowed fishermen to collect unemployment insurance payments for only a very short period of work. This act extended the economic viability of fishing and depleted resource and provided incentive to fish to the point of the decimation of the cod fishery.

This demonstrates a queer dynamic of values colliding to create disaster. In western society we have a thing called the work ethic, which states that the only valid way to garner sustenance is by work, and if not fully engaged work,  then at least a token effort. So the government said to the fishermen, if you work a little bit, we will extend you financial benefits for sustenance. So instead of pursuing another means of livelihood in a viable industry, they continued to fish Cod. The government would have been better off to pay them to stop fishing, purchase their assets and pay them out, a Cod fishermen’s golden parachute if you will. The next value was the preservation of a way of life and the support of communities. This value contributed to the “fish for stamps” program and many other programs geared toward extending the viability of Cod fishing, where the Cod were disappearing. So in an effort to save communities, the government contributed to a circumstance where the traditional rational for that communities existence is more severely curtailed than if “nature had taken its course”. The value of environmental protection found expression in fishing limits and other management efforts to preserve the fishery’s viability, whatever the methods employed; the outcome indicates the effectiveness the government’s ability to manage a resource. The Canadian Cod fishery’s destruction was a tragedy of the commons in the traditional sense and in an expanded sense; as common concern trumped rational action.    

If nothing else, the overall dynamic around the destruction of the Canadian Cod fishery demonstrates how poor a bedfellow “social activism” makes to environmentalism.  The feeble attempts at placating social concern severed to generate a circumstance were both the environmental concern and the social concerns were both ill served. In the case of the Cod fishery, the outcome would likely have been better absent government intervention as financial imperatives would have resulted in lower fishing participation.   

The scarcity doctrine lingered in the background as fishermen believed the world held little else for them and government held an impoverished view of fishermen’s ability to adapt. I would wager that had government adopted a view of abundance and provided generous mitigation to the fishermen subjected to government miss-management, the entity called the Government of Canada would be better off now, because the fishing industry would once again be enjoying the benefit of a reinvigorated fishery.

Strengthening the ties between carbon and the economy

We need only to strengthen the ties mildly, between the abstract representation of human endeavour (the monetary system) and the environment to gain alignment between human action and natural systems. We have successfully globalized the monetary system in a manner that permits efficient international interaction; we need now to imbue that system with a connection to the natural world. The key is full and equitable participation.

To date efforts in linking the economy and the environment have been curtailing participation by creating a circumstance where major emitters are deterred by structural disadvantage in proposed solutions. Had the world approached Kyoto purely on the basis of environmental concern, Kyoto would have had a greater chance of acceptance. Proponents however, chose to engage in redistribution by placing the majority of the burden on first world countries and relinquishing responsibility from other countries. The Cap and Trade proposals were as much a redistribution program as an environmental program. Their justification for this approach was that the first world countries had created most of the problem so they should pay the biggest penalty, the underpinning was a social justice imperative of the “rich should pay”; this may sound fair but political realities drove the refusal of major players. This is an example where the social justice movement scuttled environmental progress. We can learn from the past, but only the future matters, and asking people to accept disadvantage in the future is sure to meet strong residence. Placing a price on carbon is an effective means to link the economy to the environment; the key is its universal application.

The Kyoto protocol was a starting point in the process of creating a worldwide link of the economy with the environment, the creation and negotiations of the cap and trade program needed to take place at the world trade organisation, perhaps as an extension of the Doha trade talks. While this would bring another level of complexity to the Doha process, it would be the best place for Cap and Trade to be developed, as Cap and Trade development would have taken place in the context of the multitude of other considerations in the development of a world trading system. The WTO is keenly aware of the asymmetry of prosperity and the influences it has in generating a world trading system, as such their expertise provides the greatest opportunity for the successful development of a cap and trade system.       

The flow of capital can provide some illumination as to the possibilities for the effective connection between the environment and the economy. The international clearing bank effectively manages the most complex transfer of funds to and from countries in an almost instantaneous fashion. The financial system is a complex entity and yet there is an international organisation that provides for the flow of capital in and instantaneously anywhere in the world. The emergence of this organisation happened because people prosper as a result of its creation and operation. A similar mechanism can function to facilitate as seamless a circumstance for cap and trade and other programs; the key though is universal benefit.   

There are many examples of existing organisations that can provide a conduit for the strengthening of the connection of the financial and real economies with natural systems, fostering universal attachment in the context of pursuing prosperity. Yet the environmental movement, I believe under the influence of social activist interlopers, have chosen to demonise these promising institutions. Rather than seeing an existing functioning entity with capabilities that satisfy green causes, they have chosen instead to reinvent the wheel absent considering the functionality these organisations represent.

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