GEOG 352: Day 17

1. GEOG 352: Day 17 Finishing Up Capital; Chapters 21-25

2. Today’s Election Day in the U.S. If You Like Political Cartoons, You Might Like This One…

3. Housekeeping Items • A reminder about Wednesday’s film, “Green Fire” and the Urban Fest on Friday from 3 to 9:30. Please register with Pamela if you’re planning to come, and take posters if you can distribute them. • Thursday, I will show part of “Poor No More” about social programs in Scandinavia. Today, I will finish up our discussion of capital – financial and cultural – and start on Chapters 21-25 on Thursday. • I need volunteers to present next week!!

4. Housekeeping Items • Speaking of Scandinavia, this was the source of the Natural Step program developed by Dr. Karl-HenrikRobèrt, which has been successfully applied to communities (Whistler) and businesses (Ikea, etc.). • Its four principles are: ∙to eliminate dependence on fossil fuels and use of scarce metals/ minerals; ∙to eliminate dependence on persistent chemicals and wasteful use of synthetic substances (e.g. plastics); ∙to eliminate encroachment on nature, and ∙to meet human needs fairly and efficiently. • I was wondering how IKEA manages to achieve this given their high-volume retail business that products that are not always very durable.

5. Financial Capital • Money and credit are a pillar of the global financial order. • They are more mobile than ever. • Nonetheless the financial system also remains very unevenly developed, with much of the activity being concentrated in super-centres such as New York and London. • Money and credit are ‘lubricants’ of capitalist society, without which the system would grind to a halt.

6. Financial Capital • Businesses require start-up capital and, to make loans, financial institutions need money from their customers. Increasingly, consumers need credit to go on consuming and, unless you are super-wealthy, you need a mortgage to buy a house or condo. • As one book says, “money is a measure and store of value. It can be anything that is accepted as payment for goods [or services]” – cowry shells, grain, weapons, cattle, cigarettes, precious metals, paper money, IOUs in the form of cheques, and debit and credit card payments (the former being equal to cash, the latter being an IOU on which you are charged interest by the bank).

7. Financial Capital • Money – in addition to being a measure and store of value (for instance, in theory my paycheque reflects the value of my labour which I can store for future use), and a medium of exchange and circulation (including credit) so I can spend my salary the things I need – it also serves as a universal equivalent. • Despite differences in currency, I can use my money to buy objects or services in any corner of the globe. For investors, financiers, and consumers, the electronic nature of transactions means that they can be instantaneous, overcoming the friction of distance and greatly intensifying time-space compression.

8. Financial capital • When you have money, it’s much easier to make more of it because you can invest it or loan it out. Of course, you can also lose your shirt. One of the things that pissed off the Argentines during the economic crisis there is that the rich took their money offshore in the dead of night, whereas the accounts of ordinary Argentines were frozen. • In the old days before deposit insurance, if a bank lost its money through risky investments or as a result of a depression, people could lose their life savings, and during the 2007-08 meltdown a number of pensioners lost all the money in their pension funds. • Credit and financing allows surpluses elsewhere in the financial system/ economy to be transferred to the underwriting of new projects that are capital-deficient.

9. Financial capital • Of course, financial capital can and very often is abused, as we saw most clearly in The Inside Job. CULTURAL CAPITAL we have discussed implicitly: • The traditional knowledge and culture of indigenous people and peasant farmers (as discussed by Vandana Shiva); • The sense of history embodied in the built environment and the sense of heritage and continuity that some environ-ments maintain to the benefit of their residents and visitors; • The vitality of the arts and culture sector which both enriches the lives of the inhabitants of communities and offers an economic resource with a large multiplier factor and a basis for tourism, including ecotourism; • A sense of identity that enables people to resist oppression.

10. Chapter 21 of Daly and Farley • A constant themethroughout the book isthatmarkets have manystrengths, but optimizingaccess to non-marketgoods (equity, environmentalhealth) is not one of them • The authors arguethatthereare alternatives to the status quo, and thatsome alternatives are betterthanothers. • Within the context of three macro-goals (ecologicalscale, just distribution, and allocativeefficiency), theyoffer six design principles for a steady-state economy: • -eachpolicy goal needsitsown instrument(s) to optimize (eventhoughtheycan serve more than one goal, theycan’toptimize more than one) [seefootnote p. 414].

11. Design Principles for Policy Instruments • -one shouldachieve macro-levelcontrolwith minimal sacrifice of micro-levelfreedomandvariability(for instance, as with per capita CO2emissions); • -leave a margin of errorwhendealingwith the biosphysicalenvironment (‘precautionaryprinciple’) and in thiswayalsoavoiddraconian discipline in the future; • -startfromwherewe are (a policy of resolutegradualism); • -adaptpolicies to changing conditions, both in the external world and in the state of ourknowledge (metaphor of a sailboat);

12. Design Principles for Policy Instruments 21 • -implementsubsidiarity (develop and implementpolicyat the appropriatelevel – e.g. solidwaste as a municipal responsibility vs. climate change as a global issue, with initiatives beingundertakenat the national level). • As theymakeclearthroughout the book, the three macro-goals are not of equalimportance. They rate them: scalejustdistributionallocation

13. Design Principles for Policy Instruments 21 • How canwemakethesepolicy objectives and principles a bit more concrete? • While the marketis good atdeliveringefficiency (one of the three macro-goals), itis not good atdeliveringappropriatescale or just distribution, each of whichisalso a condition, ultimately ,for efficiency. • For instance, having a market for CO2 or SO2maybe the most efficient way of gettingresults in terms of reducingemissions, but without a scaledecision as to an optimal level of emission, and withoutdecidingwho has the right to emit and who the atmospherebelongs to, one cannot have a properemissionsmarket.

14. Design Principles for Policy Instruments 21 • Theyrecommend in most cases startingwithinflows, not outflows, thoughitis not a hard and fastrule. For instance, itiseasier to prevent pollution beforeitiscreatedthanat the end of the pipe. Also: sources are generallyowned and sinksare not, the latter thusbeing harder to regulate (rememberopen accesssystems?) • Theyrecommendagainst setting quantityandpriceat the same time; theyprefer setting quantities (i.e. quotas). • Limitscanbe set on extraction on privatelyownedsources and potentiallyalso on outflows to sinks.

15. Design Principles for Policy Instruments • Whatevertheirpropertystatus, these are aspects of natural capital that affect all of us. • The source vs. sink issue illustrates the dilemma of addressingconflictingprinciples – itis more efficient to tacklethings at the source end, but this islessincrementalthantacklingthings at the sink end. • One cantaxeither inputs or outputs, but itisbetter to do soat the depletion (source) end, as thiscanbeused to adjustprices. • As time permits, wewill continue with Ch. 21, and go on to 22-24.