AVAY SHUKLA | 5 NOVEMBER, 2019
Time to Put the Eco Back Into Economics!
Automobile Slump is good!
A fair number of my friends are economists, though none of them has won the Nobel prize yet, nor is any one likely to. One of them, whose research is on the Game Theory, did come within sniffing distance of it, but has now beaten a hasty retreat.
Now, Game Theory is a mathematical model which maximises the chances of success by studying strategic decision making between rational individuals. My friend gave in for two reasons: one, he couldn't explain how the BJP's mathematics always managed to convert a minority in votes into a majority in seats, as in Haryana, Goa, and Karnataka.
Two, there was the small matter of being branded an anti-national, which is the fate that has befallen our last two Economics Nobel laureates, Amartya Sen and Abhijit Banerjee. Now that economist gurus like Piush Goel and Rakesh Sinha have questioned not only their left leanings but also their "foreign wives", can another sedition case be far behind?
Of course, our Prime Minister did have a cordial meeting ( without the hugs) with Banerjee but my friend is not taken in by this familiar drill where the PM provides the fake veneer of civility while the real message is conveyed by his underlings.
He will henceforth confine his investigations to underwears-an emerging field of economic theory which somehow escaped the attentions of Marx ( Karl, not Groucho), Keynes, Milton Friedman, Adam Smith, von Hayek, to mention just a few.
But as usual I digress. The reason I mention my economist friends is because I suspect I am about to lose all of them pronto. For I cannot share their feelings of doom and gloom about our current economic downturn.
I am overjoyed that auto sales have fallen by 24% and that the blighters sold 184000 fewer cars last month.
I am ecstatic that NHAI is unable to build more highways because it cannot pay its contractors.
I silently thank the Houthi rebels for knocking out 5% of global crude production by bombing the Saudi refinery.
I cannot conceal my glee at the fact that airlines are shutting down, that transport of goods has fallen by 30%, that consumption of meat is declining and more people than ever are content to eat stalks and leaves , that more and more citizens are beginning to resist Aarey type choices.
For this is my simple and sacrilegious theory: some things which may be bad for conventional economics are good for our planet. I call this ECO-nomics, i.e. economics based on ecology.
For the simple and inescapable fact is that the planet cannot be held hostage to GDP any longer. As Professor Robert Gordon of North-Western University, Chicago, has pointed out, global GDP has been growing at 2% per annum since 1900 and can grow no further. Infinite growth in a world with finite resources is not possible without irreparably damaging the environment.
No economist ( or politician), however, will admit this or prescribe the only sane solution: make life styles simpler, consume less of everything, don't use technology only for physical convenience or monetary profits. The world needs to move from the classic consumption driven model to a "nonsumption" model or a "minimalist" life style. In other words, consume less of everything- goods, services, natural resources.
The theory of constantly driving up "demand" so that "supply" can be increased to further raise GDP is proving to be disastrous for the planet's well being and survival. The current emphasis on just GDP is not only counter productive, it is also misleading because it does not factor in the cost of natural capital expended, i.e. the environmental costs.
Not surprisingly, a recent UN study found that if this were factored in then the GDP of 140 countries would be in the negative! GDP should be replaced by a more accurate SDP or Sustainable Domestic Product- i.e. GDP minus the environmental costs. Let us look at just a few sectors where ever increasing demand is playing havoc with the planet.
Why do we need more vehicles? The world already has 1.2 billion passenger cars ( i.e. one for every six individuals) and this will reach 2 billion by 2035. A mind boggling 97.3 million cars were manufactured in 2017. India had 230 million registered motor vehicles as on 31.3.2018, Delhi had 10.98 million- one for every two of its citizens, including presumably Bangladeshis, Afghans and Rohingyas.
Motor vehicles are responsible for 30% of total global CO2 emissions. They also cause 150,000 deaths in accidents every year in India. They have taken away our walking spaces, our parks; destroyed our pristine natural assets ( Rohtang pass). People now drive ten kilometers to Lodhi gardens in order to walk for two kms!
It's time to trim these numbers, and my suggestions are: ban SUVs, allow only income tax payees to buy cars, ration one car per family, fix a monthly fuel ration/ allowance. There is a question of equity involved here too: just because you have the money why should you be able to corner/ pollute all the world's natural public goods- air, water, space, rivers, forests, mountains?
Civil aviation is another major culprit, though most people don't recognise it. It adds 1.250 billion tonnes of green house gases to our atmosphere every year and is metastatizing like a cancer. There were 4.1 billion flyers in 2017, expected to reach 7.8 billion by 2038: the vast majority of these don't NEED to fly, they do it for R+R or because their status will not permit them to adopt humbler but more eco-friendly modes of transport.
There are approx 150,000 commercial flights every day. The sector clocked 7.64 trillion kms flown in 2017, which will reach 18.97 trillion kms in 2038! Boeing estimates that 39600 more planes will be needed by 2038 to cater to the increasing traffic. Where does this curve end?
It's not just the skies we are losing; planes need airports, and airports need land, causing more deforestation and displacement of the poor. Our own Civil Aviation Ministry has just announced the construction of twenty new airports, for which 100,000 hectares of land will be needed. For the new Mumbai airport thousands of mangroves are being cut, wetlands filled in and a whole river being diverted.
For how long can this go on? Why should one take a flight to go from Delhi to Chandigarh, or from Mumbai to Pune or from Bangalore to Chennai, when perfectly good train connections are available?
It has been calculated that one train can carry the passenger load of six wide bodied aircraft.
Governments should incentivise train travel and discourage flying by imposing a heavy carbon tax on flight tickets, not permit short-haul flights, stop building new airports, add more super fast trains like the Tejas and Vande Bharat, ban private or chartered jets ( which do not pass the equity test either).