Economics and Justice
Need Versus Greed
Jeffrey D. Sachs
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NEW YORK – India’s great moral leader Mohandas Gandhi famously said that there is enough on Earth for everybody’s need, but not enough for everybody’s greed. Today, Gandhi’s insight is being put to the test as never before.
The world is hitting global limits in its use of resources. We are feeling the shocks each day in catastrophic floods, droughts, and storms – and in the resulting surge in prices in the marketplace. Our fate now depends on whether we cooperate or fall victim to self-defeating greed.
The limits to the global economy are new, resulting from the unprecedented size of the world’s population and the unprecedented spread of economic growth to nearly the entire world. There are now seven billion people on the planet, compared to just three billion a half-century ago. Today, average per capita income is $10,000, with the rich world averaging around $40,000 and the developing world around $4,000. That means that the world economy is now producing around $70 trillion in total annual output, compared to around $10 trillion in 1960.
China’s economy is growing at around 10% annually. India’s is growing at nearly the same rate. Africa, long the world’s slowest-growing region, is now averaging roughly 5% annual GDP growth. Overall, the developing countries are growing at around 7% per year, and the developed economies at around 2%, yielding a global average of around 4.5%.
This is very good news in many ways. Rapid economic growth in developing countries is helping to alleviate poverty. In China, for example, extreme poverty has been cut from well over half of the population 30 years ago to around 10% or less today.
Yet there is another side to the global growth story that we must understand clearly. With the world economy growing at 4-5% per year, it will be on a path to double in size in less than 20 years. Today’s $70 trillion world economy will be at $140 trillion before 2030, and $280 trillion before 2050 if we extrapolate from today’s growth rate.
Our planet will not physically support this exponential economic growth if we let greed take the upper hand. Even today, the weight of the world economy is already crushing nature, rapidly depleting the supplies of fossil-fuel energy resources that nature created over millions of years, while the resulting climate change has led to massive instabilities in terms of rainfall, temperature, and extreme storms.
We see these pressures every day in the marketplace. Oil prices have surged to more than $100 per barrel, as China, India, and other oil-importing countries join the United States in a massive scramble to buy up supplies, especially from the Middle East. Food prices, too, are at historical highs, contributing to poverty and political unrest.
On the one hand, there are more mouths to feed, and with greater purchasing power on average. On the other hand, heat waves, droughts, floods, and other disasters induced by climate change are destroying crops and reducing the supplies of grains on world markets. In recent months, massive droughts have struck the grain-producing regions of Russia and Ukraine, and enormous floods have hit Brazil and Australia; now, another drought is menacing northern China’s grain belt.
There is something else hidden from view that is very dangerous. In many populous parts of the world, including the grain-growing regions of northern India, northern China, and the American Midwest, farmers are tapping into groundwater to irrigate their crops. The great aquifers that supply water for irrigation are being depleted. In some places in India, the water table has been falling by several meters annually in recent years. Some deep wells are approaching the point of exhaustion, with salinity set to rise as ocean water infiltrates the aquifer.
A calamity is inevitable unless we change. And here is where Gandhi comes in. If our societies are run according to the greed principle, with the rich doing everything to get richer, the growing resource crisis will lead to a widening divide between the rich and the poor – and quite possibly to an increasingly violent struggle for survival.
The rich will try to use their power to commandeer more land, more water, and more energy for themselves, and many will support violent means to do so, if necessary. The US has already followed a strategy of militarization in the Middle East in the naïve hope that such an approach can ensure secure energy supplies. Now competition for those supplies is intensifying, as China, India, and others bid for the same (depleting) resources.
An analogous power grab is being attempted in Africa. The rise in food prices is leading to a land grab, as powerful politicians sell foreign investors massive tracts of farmland, brushing aside the traditional land rights of poor smallholders. Foreign investors hope to use large mechanized farms to produce output for export, leaving little or nothing for the local populations.
Everywhere in the leading countries – the US, the United Kingdom, China, India, and elsewhere – the rich have enjoyed soaring incomes and growing political power. The US economy has been taken over by billionaires, the oil industry, and other key sectors. The same trends threaten the emerging economies, where wealth and corruption are on the rise.
If greed dominates, the engine of economic growth will deplete our resources, push the poor aside, and drive us into a deep social, political, and economic crisis. The alternative is a path of political and social cooperation, both within countries and internationally. There will be enough resources and prosperity to go around if we convert our economies to renewable energy sources, sustainable agricultural practices, and reasonable taxation of the rich. This is the path to shared prosperity through improved technologies, political fairness, and ethical awareness.
Jeffrey D. Sachs is Professor of Economics and Director of the Earth Institute at Columbia University. He is also Special Adviser to United Nations Secretary-General on the Millennium Development Goals.
Copyright: Project Syndicate, 2011.
www.project-syndicate.org
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dpato91105 06:48 01 Mar 11
"The alternative is a path of political and social cooperation, both within countries and internationally." This is a pipedream under capitalism. Only international socialism under the democratic governance of the working class--excluding the wealthy and their minions--can accomplish this.
rginnh 01:40 03 Mar 11
Where is that "Shining City on a Hill"? Well it still exists Mr Sachs, it still exists.
Your ilk insists on installing a Dimmer Switch so that none can find or see it just to prove your particular thesis of the moment.
It is all a matter of point of view, attitude, approach and style and in your case peer group.
Well maybe you do not see that city nor its lights, I do and so do many others.
janelasdedeus 05:21 04 Mar 11
Am I to understand that the solution to the world's problems is a centralized government run by an enlightened intelligencia, whose real interests are for the collective good? This pipe dream ignores human psychology, not to mention human history, in several aspects. From birth, we all have an innate drive toward individuation... not collectivisation. The only way a centralized governement can manage a collectivist society is by severe repression. I am confidant that we all have sufficient awareness of the living hell that persisted in the Communist world for much of the last century not to yearn to go down that path again.
REMant 03:48 05 Mar 11
It's not greed; it's the easy credit and fractional reserve policies of the the banking system. This was noticed immediately when banking began in different countries. If banks were required to lend only what was first saved, it would not be possible to either grow beyond the ability of people to sustain it, thus limiting population growth, or for the rich to get disproportionately richer through the inflation of commodity values. This tends to price things out of laboring ppl's reach and can be seen worldwide causing the problems being talked about today in China, as well as, the riots in North Africa and the Middle East. And we know that as the poor become poorer they have more, not fewer children.
Luis 03:55 06 Mar 11
While this conventional argument is well known and hardly debatable, Mr. Sachs fails to include the greatest cause for rising food prices especially significant for the world's poorest - the depreciation of the US dollar, an onerous, society threatening tax that not even the most compassionate US progressives appear to be concerned with.
The falling dollar pushes commodity prices higher, increasing the wealth of emerging countries that possess vast reserves of raw materials. At the same time, the rising cost of food is a threat to the political stability of poor countries that import food on a large scale (as Egypt) and whose regimes (dictatorial or democratic) are brittle.
Among others, macroeconomist, David Ranson has written and warned about this for years, and unfortunately, the trend and consequences of the sliding US currency continues. It's a troubling issue, tragic for many parts of the world, bringing unmitigated suffering. One just hopes that whoever is going to realize profit on this, will do so from relief of scarcity and abatement in the pricing of essential commodities' prices.
Dr. Ranson cites massive evidence that the most important factor for the sensitivity of food prices is the colossal depreciation in the dollar these past 10-years. Current dollar policy continuing in place, it's terrible to think what's ahead for the belly of much of humanity.
Luis de Agustin
mg 03:08 16 Mar 11
Always a pleasure to read an economist who understands the politics of wealth and the physics of natural limits.
@ janelasdedeus
"From birth, we all have an innate drive toward individuation... not collectivisation."
You're confusing contemporary consumer culture with biological fact. If you want to talk about lessons from psychology and history, why not discuss how the most individualist societies (ie the 'Anglo-Saxon' US/UK ones) have lower rates of wellbeing (measured by rates of depression etc) than more 'collectivist' European societies?
janelasdedeus 04:23 16 Mar 11
@mg Separation and individuation are psychological processes, not biological ones. I have no data on the relative mental health statuses of various societies in Europe, but, regardless, this is more a function of early life parenting than economic systems. On can have wondeful parents and never suffer a depression even living in the most repressive society on earth and one can have had horrible parents and suffer a terrible depression even living in a fabulously wealthy society. The point is that our innate psychological drives are toward individuation and collectivist societies can only achieve their goals by repressing these drives.
mg 05:50 16 Mar 11
@ janelasdedeus
What I was criticising as 'biological fact' is no different from what you meant by 'Innate psychological drives': some fundamental process that sits above environmental factors.
I'd love to see your data on how comparitive wellbeing is simply a function of parenting. So US/UK parents are worse than European parents? I wasn't aware that that had been proven (or argued for that matter).
There is no innate psychological drive towards individuation, at least no more than there is an innate drive towards collectivism. Humans are social animals, that is a biological fact. How is it that a social animal that operates in groups of millions or more, has an overriding drive towards individuation? Maybe you are confusing us with cats?
If you don't believe that individuals can favour their collective drives over their individualist drives, in order to conquer existential threats, then maybe you should read up on US and UK WWII history.
janelasdedeus 07:54 16 Mar 11
@mg We all begin life as nothing more than psychological extensions of our mother... and thereafter struggle to separate and individuate throuout our lives. No other species undergoes this process even remotely to the degree that humans beings do. This struggle was best described by Margaret Mahler: http://www.childdevelopmentmedia.com/margaret-mahler-and-the-separation-individuation-theory.html
This is actually programing (ie., psychological), not hardware (ie., biological). It is illustrated by the fact that the infant's first step is away from his or her mother... after which the child immediately pivots back for nurturence. As we develop, and if we do not experience traumas involving parnetal losses or abuses, we step further and further away from our mothers... throughout our lives. Our fathers also play key roles in encouraging this process, but they can also severely distort things by being absent, or worse abusive. Hitler, Stalin and Mao were all horribly abused by their fathers. They repressed the resultant anxieties as a defense... but then acted them out horribly at the expense of millions. Their impostion of collectivist societies on others was a mere consequence of their adverse developmental experiences. I would attribute the WWII resistence to these regimes as expressions of individualtion... ie., we shall not submit to the dominance of the state, just as we once overcame the dominance of the mother.
garp58 10:47 28 Mar 11
As a reasonable Economist, knowing the limits of the world resource base, why don't you recommend that the most developed countries take a break on growth on per capita incomes for a period of time? People in these countries who make, on average four times the income in the average pooor country (I am not even talking of the poorest ones), can wait a fgew years can't they for the others to ctacht up? Can't they wait a few extra years to buy that extra car, or an upgraded Ipad, a new porch and so on until the poorer people on earth can at least have three square meals, basic housing, clothing and health care? Why do the richest countries on earth have to gorw GDP perpetually, or their corporations keep increasing their size and profits perpetually? It is not all about the environment and the pollution and stuff that you mention here. It is more about income and wealth and consumption inequality.
iceman 05:32 29 Mar 11
But "Greed Is Good" - g.gekko
Kidding aside....is there a better alternative than what capitalism provides in the way of efficient use of capital and resources? And the solution of political and social cooperation is a utopian concept. The pandora's box was opened with the advent of capitalism a long time ago.
With our increasing world population and resources being explored to meet this demand, there is no way that this paradigm can be maintained as the author suggests. In the natural world, the equilibrium between the prey and predator is maintained by the weak being able to survive and thus perish. For mankind, there is less and less of such processes because modern medicine prevents "Darwinism" whereby the weak is eliminated (and not to mention prevention major outbreak of diseases by medicine).
The solution? Star Trek. Rather the idea in Star Treak. Recall one episode where two warring planets do not actually physically confront each other with spacecrafts and futuristic war-machines. Cpt Kirk and Spock witness, the systematic elimination of a large population of each other's planet.
mg 08:07 29 Mar 11
@ janelasdedeus
What on earth does the quite possibly disfunctional mother-son relationship of several prominant historical baddies tell us about this article's subject? What does it even tell us about the subjects you're applying it to? What does it tell us about how Hitler came to power thanks to the Treaty of Versailles and the Great Depression, or how Russia was communist before Stalin took the helm, or why it ultimately collapsed in Russia decades after his death...? What does it tell us about the original reference I made to collective action in the UK in the face of Hitler's threat? The UK public accepted rationing, curfews, conscription - all collective measures in response to an existential threat. I'm really not clear how your mother-son psychology theory challenges these documented empirical examples.
@ iceman
This is satire right? You're advocating a 'Final Solution', based on an episode of Star Trek? Tell you what, you drink the Kool Aid first, I'll be right after you, promise.
janelasdedeus 10:24 29 Mar 11
@mg
Everything we think, feel and do, economically and otherwise, is driven by the unconscious programming that runs on the hardware of our brains as a result of our experiences in the earliest years of our lives. Our consciousness is little more that a monitor for the vast universe of psychological processing that is going on outside of our awareness. Untill we understand ourselves a whole lot better, we don't have a remote chance to figure out what we are doing and why.
mg 02:36 30 Mar 11
@ janelasdedeus
I agree with a watered-down form of your argument, certainly a lot of what we do isn't primarily shaped by concious, rational thought, but clearly some of it is (for example the process of inventing this machine I'm typing on).
If you do believe the world is how you describe it - "we don't have a remote chance to figure out what we are doing and why" - you've argued yourself out of being able to challenge this article. Besides, we dont actually have to understand why we did something (eg collective response to threat) to know that we did do something (accepted rationing during WWII).
janelasdedeus 03:56 30 Mar 11
@mg
I admit that for the most part our thoughts, feelings and actions are blind... that is the significance of the fate of Oedipus. We do possess some capacity, however, to understand ourselves... if we are courageous enough to honestly look within. What is always there is an infintely complex system of conflicts, anxieties and, principally, defenses. These are what drive everthing about us... including the impetus for the creation of the machine on which I am typing. In my opinion, those who wish to impose collectivism on others are actually acting out a need to control their own undesireable impulses... which they defensively project onto others.
BartekBartek 11:30 01 Mar 11
A very good article.