Sunday, March 22, 2015

Resource Economics

If economics is primarily concerned with allocation of resources among competing wants, it ought to be concerned with the health of resources & ensuring their continued supply. It does nothing of the kind but mainstream economics tries to interpret & analyze the working of Industrial Capitalism and that too without any attempt to probe the foundations on which Industrial Capitalism stands.

Ideally environmental economics should fill in these gaps but again it seems to be content in finding out & advocating certain palliatives which tend to bring in distributive justice in societal wealth distribution. The concept of sustainable development is introduced to counter the increasing depletion & deterioration of resources and promote their wise use. Resources are divided into man-made capital and natural capital. Economic sustainability is ensured if & when man-made capital substitutes for natural capital. But environmental sustainability cannot be achieved. Therefore the two are not perfect substitutable. Certain other requirements are to be fulfilled if environmental sustainability is to be achieved.

Ultimately it all boils down to putting restrictions on economic activity and irrational preferences expressed in the market. A centrally directed planning approach cannot be accepted as it involves denial of consumer sovereignty and individual liberty. Some writers adopt a view that ecosystem requirements are more important than consumer sovereignty. But it is by no means easy to judge ecosystem requirements when natural ecosystems are hard to find as most of them are impacted and modified by human activities and fulfilling ecosystem requirements may prefer and satisfy wants of certain consumers which denying those of others.

A more realistic approach would be to recognize that environmental problems have emerged essentially as and when technology was geared to increase the scale of economic activity to gigantic proportions. It is in response to the necessity of continuously increasing production to satisfy on the one hand the increasing wants of consumers and on the other the belief that increase in production will lead to a trickle-down effect to achieve a better distribution of wealth in a society.

Scaling down economic activity may involve use of efficient technology to minimize energy and material use, use of alternative sources of energy and even materials and properly ascribing prices to environmental (free goods) and nature’s services. It is a moot question however, if distributive justice and societal welfare can be achieved if all this is adopted.

A fourth approach which prescribes local resources use to satisfy local wants is likely to bring in far more social equity than the thrice approaches mentioned above. The problems of limiting consumer sovereignty and reducing the scale of production are sought to be addressed here not by establishing a central planning authority but- by decentralizing authority as well as investment. If priority is given to use of local resources their care, maintenance and enhancement should also have top priority. Under Panchayat Raj adequate powers are available to grass root institutions to achieve this. Some enlightened Panchayats are already taking advantage of powers conferred on them.

If wise utilization of local resources results in an agricultural surplus over and above the basic necessities of the local population, it can be marketed and profits can accrue to the Panchayat. Local resources thereby will be given a value which is honored by the market. This value can be enhanced, local purchasing power increased, if local cultivars can be demonstrated to possess a unique taste, high nutritional qualities and durability. Marketing of such products will bring in higher profits and large purchasing power to grassroots organizations and rural public, thereby enhancing their interest and capacity to care for the quality and quantity of local resources.

Demand and supply will have then an organic relationship with such basic resources as soil and water and will not be driven solely by advances in technology as happens today.

Mainstream economics has been accused of not caring for the quality of consumer choices and the resultant composition of output. Irrational consumer preferences propelled slowly by technological advance have resulted in a product- mix containing mainly of intermediate goods demanded by the rich and privileged when much of the resources are allocated to such production, the owners of resources are only interested in the amount of rent that they would collect and not exactly care and maintenance of resources. They will be more interested in high short-term gains and not lower but assured gains over a longer time.

When demand and supply are organically related the character of demand and the composition of supply are likely to be different giving priority to satisfaction of basic needs of the masses than production of higher values, intermediate goods meant for the rich.

Eventually industrial capitalism and fossil fuel economy are likely to be replaced by natural capitalism and carbohydrates based economy.

All this of course is easier said than done. A complete change of paradigms is in order. The legal emphasis needs to change from laws protecting exploitation of resources to laws protecting conservation of resources. Technological content needs to change in a similar fashion. We need greater doses and variety in what today is called appropriate technology- small scale and energy and material efficient. Likewise radical changes are needed in our educational system. It may be easier to motivate groups of children in rural areas to take care of their own local resources such as the hill behind the village, the stream flowing through it, the quality of soil in their fields and the wild flora and fauna in and around the village. City children are already goaded to demonstrate against air pollution and traffic indiscipline. They can be further exposed to the realities of city’s impact on the surrounding countryside and how resources and landscapes destroyed during city’s expansion can be restored and regenerated.

Such a paradigm change may also involve tremendous saving- in terms of reduced or abolished subsidies, in terms of saving in energy and materials use, in terms of transport and traffic and in terms of reduced waste and garbage and obviating the need for centralized gigantic projects.

As resources are diverted away from production of unnecessary or intermediate goods, the entire culture based on demand stimulation and promotion of a voluptuous life style should be replaced by one which emphasizes quality of life including adequate medical care, healthy and nutritious food for all, outdoor games and healthy recreation care of the aged and disabled and promotion of arts and crafts.

The present political parties both in power and in the opposition are incapable of bringing about such a paradigm change. A properly organized Green Party with strong rural roots and urban branches appears to be the harbinger of change.

Something needs to be stated about the ownership of natural resources. It is not necessary to do away with individual ownership. At the village level individual ownership of land etc. can be retained but its use should be according to the needs of the village plan. Water may be individually allocated according to the crop pattern decided by the village. (Phad (fxD) system from north Maharashtra which implies exactly these things needs to be popularized)

As villages become self-reliant in resource use, as quality of life in villages is enhanced, the supply of resources to cities (having top priority today) will be reduced putting a stop to today’s unending urban growth. It may even result in reverse migration from urban to rural areas.

Lastly a word about the necessity of globalization, integrating Indian economy with the emerging world order.  Ideally this paradigm also needs to change.

India is location in the world is unique, a fact recognized by travelers who crisscrossed India from east and west since ancient times. The result is high biodiversity and resource availability. With their proper care and utilization Indians can be self-sufficient despite the population pressure. Globalization is sought by countries which are or have become poor in resources and biodiversity. They need resources from other countries to satisfy the needs of their pampered life style. They cannot survive without export and import- export of technology and weapons and import of natural resources. India however, can be quite selective in adopting globalization. We need technology and knowledge to bolster our security needs. We do not need technology and knowledge which guzzle our resources and cater to individual ego (like expensive cars). On the other hand we can export knowledge based on the study of biodiversity such as their case & maintenance & innovative uses for medicine, as raw materials etc.

In essence care & wise utilization of resources opens up tremendous opportunities of employment, increase in purchasing power of the masses, and enhancement of the quality of life in rural areas.


                                                                                                                       Prakash Gole