“Enjoy this magnificent stadium, Lisa, because you and Bart and your children will be paying for this long after the team have moved on to some other city.”
– Homer Simpson.
Climate change and the credit crunch share something in common – they are both about spending the future. Otherwise know as “credit”.
Some would argue that credit is “fictitious” wealth. I would argue its a bit more subtle than that — credit is about spending future wealth now. A credit card allows you to spend next months earning this month. A mortgage allows you to spend your next 25 yrs of earnings on a house to live in now, as you earn, not after. It’s a seductive model. Indeed, over the last 20 yrs, it’s been such a compelling concept that banks (and whole countries) have dug deeper and deeper into future earnings.
Sensible banks offer credit to people who are extremely likely to make money in the future. But the future is an unmeasurable quantity — it’s not fictitious as there is real value in what will happen in the future, but the final result is uncertain. Credit is not a concept of the modern world. Ever since human beings first domesticated and became farmers, instead of wandering the plains, there have been individuals who understand the principle of future return – of investment. You plant a seed, it grows, you harvest the return. A planted field has real value, even if the true value is not yet realised. Its very tempting to accept an offer of reaping your harvest before you sow the seeds. But it’s a very dangerous game to play, as the world is now starting to realise.
Banks play this game all the time, with our money. They do this because they want to tap into new money to sustain the economic growth of the previous decades. Future wealth is “new” to the system because it brings money forward from the future, in the same way that a credit card gives you “new” spending power… but only the first time you use the credit, then you are tied in to a cycle of spending this month and paying for it next month – the “boost” to your spending power is only temporary. So to keep that growth the banks needed to look longer into the future, or, to find new people who’s future earnings weren’t yet in the system. It is my guess the politicians turned a blind eye to this because national economic growth offers greater international competitiveness, and if one country was doing this, it’s tempting (some would say essential) to follow suit. Credit is not intrinsically a bad thing – just as farmers invest in seeds, so do people and institutions invest in companies. The money a company receives today is based on an expected growth of earnings that will eventually pay back the investment. That’s the model we have that creates private sector jobs, that then pays the tax that supports the fundamental workings of our society. While the blame for the credit crunch should lie squarely with the greed of the bankers and the impotence of the politicians, we shouldn’t forget that most of us benefited from it. The increased growth and competitiveness allows us to live at a quality of life that is beyond what we can actually afford.
The similarity to the global environment is striking.
When I look at deforestation I have always asked myself (and others), “who is responsible for the future?” Unlike agriculture, which has a return on the investment within a year, forests take at least a generation to pay pack on the investment. For some hardwood species, you may be talking about at least 50 years or more. In the developed world, many of the trees you will see around you were likely planted by people who never lived to see them grow to maturity.
We currently run the developed world on environmental credit. We are living beyond our means. In terms of the environment, we spend more than we earn. We are so ineffective at tapping the current supply of energy that arrives everyday from the sun that we do one of two things. We eat into our savings (fossil fuels) with barely a thought for what happens when the savings run out, let alone think about leaving the savings for a rainy day. And secondly, we are using up tomorrow’s environmental earnings in the same naive and irresponsible way. It’s not just that we destroy the commodity of the forest by uncontrollably logging it, but we remove their capacity to regrow and generate environmental services – we are diminishing our future earning power from the environment as well.
In environmental terms, we currently spend more than we earn.
The energy that humans use in a day is only a tiny proportion of the energy that arrives each day from the sun, but we use only a tiny fraction again of that. The idea of renewable energy is that you use energy as you receive it – you spend only what you earn. Solar power is the most obvious way in which we can do that, but the solar radiation also drives hydroelectricity (it evaporates the oceans into water vapour that ends up as rain on the land surface), wind and wave power (differentiation in solar heating of the Earth’s surface causes the wind) and ground-source heat pumps (small increases in heat due to solar radiation over a large area are compressed to large increases in heat over a small area). The other two sources of what is effectively sustainable power sources over many millennia are geothermal energy (tapping the heat of the Earth’s interior) and tidal (gravitational changes across the oceans caused by the rotation of the Moon around the Earth). Nuclear is also a potential source of energy, but that also contains an element of spending the future – the radioactive waste and contaminated ground will last for hundreds of thousands of years, and the true cost is therefore impossible to quantify.
Our personal transport (cars), our comfortable homes with central heating, air conditioning, running water and electricity, our health and social services, our long haul holidays, our readily accessible choice of out-of-season fresh fruit and veg…. We aren’t paying for all of this: our children and our grandchildren will be paying for it, and they will still be paying for it long after we are all gone. We might think we will be leaving our children a nice little inheritance – the house and the leftover savings. In fact, we will be leaving them an enormous debt. The austerity measures that will come as a consequence of the Climate Crunch will make the current austerity measures seem like a walk in the park.
So, what can we do?
Well, all I suggest is that we change the way we think about all the usual stuff: supporting renewable energy, recycling, reducing your carbon and water footprints – don’t think of these as chores or penance, but rather think of them as investments. Think of them as “putting a little away for the kids”. Think of it as moving towards “living within our means” – just as we are thinking more carefully about doing that economically, we can also start to think of this environmentally. Most importantly, when you vote, don’t be seduced by the short-term gains that politicians are forced to offer. In western democracies, it is the politicians who still have the opportunities to change these things, but only if the electorate chooses to support them. Politicians will only change if the electorate changes first. The future is our responsibility and it requires us to act accordingly. No politician will act in the best interests of our children’s children, unless we compel them to do so through the ballot box.
The Credit Crunch should be a stark warning of what happens when you try to milk a system so dry that you not only spend all your wealth as you earn it, but you also spend your future wealth before you earn it. Let’s see if we can avoid doing the same with planet Earth.