The Oxford Martin School Blog
Is the planet full? Not if we transform financial sector values
02 Dec 2011 1 comment(s)
How can the financial sector become a servant of our development rather than the driver? asked Ian Johnson, Secretary General of the Club of Rome in the final seminar of the series ‘Is the Planet full?’
Describing the mess in the financial sector he commented, “Finance is divorced from the economy and indifferent to the social costs of systemic risk. The financial sector is not supporting real investment, jobs and new capital.”
Calling for new thinking to define growth, not as wealth, but as “prosperity adding” Johnson proposed new enlightened debate on values. Taking the example of a tropical forest, Johnson said that the financial value (in terms of proceeds from its wood and land) is not the same as the economic value which would take into account all aspects of the forest in terms of biodiversity, potential for carbon capture etc. Similarly with food, the commodity price does not reflect the real value of the water and land used to produce it.
When it comes to energy, Johnson suggested the need for a more level playing field. “We should reduce subsidies which distort relative energy prices” he said, calling for a review of the alternatives. Britain is not sure where it stands in the nuclear debate and Johnson feels that the prices for nuclear exclude the real costs and potential risks (in terms of closing antiquated nuclear power stations). “If we are not taking the nuclear route, Britain needs to invest heavily in renewables and in energy savings,” he said. Critically, he believes that despite the fact that there are still oil reserves available, its very high cost means that we may now have reached the point of uneconomic oil.
Johnson was reflecting on the questions asked back in 1972 in the book ‘Limits to Growth’ by Dennis Meadows. The book, commissioned by the Club of Rome, modelled the consequences of a rapidly growing world population and finite resource supplies, saying:
- The planet earth is finite
- Physical growth (population, GDP, food, energy, etc) must eventually stop on a finite planet.
- It is still possible to stop the growth in a way that is peaceful, equitable, and sustainable.
- Achieving that will require strong, proactive policies that include social as well as technical measures.
- A quicker start will give better results.
Despite much criticism of the book from the economic community, Johnson believes the questions asked forty years ago are just as valid today. “’Limits to Growth’ spawned enquiry into new economics,” he explained. “If we’re not a full planet, then consumption levels have to change and adapt so that we can all live within the planet’s means.”
This blog comes from the seminar series on "Is the planet full?"