Author : Rajendra Kumar Pachauri
Date : May 4, 2009
The recent economic downturn has led to several voices round the world questioning the merits and effectiveness of capitalism as an economic system to promote the general welfare of human society.
What a number of people find troublesome is the fact that chief executives and senior functionaries of corporate organizations, particularly in the bastion of capitalism, the U.S., have apparently been helping themselves with large payments from their organizations that were actually going down and several of which have actually become bankrupt. There is also the sad experience of thousands of homeowners whose dreams of owning their own shelter have been destroyed by unregulated mortgage activity run by unscrupulous and incompetent operators. Several voices are asking questions about the root of the current economic crisis which has gripped the entire world and has clearly left so many people vulnerable to great distress and dislocation.
Indeed a number of these questions are valid and justified, but in my view a much greater flaw with the manner in which economic growth and policies to promote it have been functioning relates to a far more fundamental issue. Markets on their own cannot bridge the gap between private costs and benefits on the one hand and social costs and benefits on the other, given that the system of capitalism has been built on maximization of profits and private benefits for the owners of capital. As a result externalities like environmental damage and degradation have remained stranded and unaccounted for in our system of costs and prices. The cumulative effect of this failure can be seen in the problem of human induced climate change which is the progressive result of this form of market failure.
At this stage while, we are looking at various means to bring about adaptation to the impacts of climate change and the implementation of effective mitigation measures by which we can stabilize the earth's climate, a more fundamental discussion needs to be undertaken essentially in the arena of economic analysis and policies by which governments are motivated or even compelled to adopt policies by which this gap can be closed and the problem of market failure addressed effectively. However, this would only happen if in democratic societies the public demands policies which close the gap between private and social benefits with due regard to costs associated with both. This is where I believe civil society needs to be transformed from actually being and seen to be mere whistle blowers on economic violations that affect the lives of those without power or influence. Civil society and the media have to focus on solutions that address the very basic flaws which have defined the functioning of capitalism in the past. In other words it would not help to throw the baby out with the bath water but certainly to clean the bath water completely. I regret, however, that the economics profession has not really launched a major debate or discussion on this issue which in my view is essential and long overdue.
RK Pachauri
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Date : June 4, 2010 05:54
Dear participants
I think the idea STOP use the car for one day is not possible in our society .
We only call them use bycycle when they can .
Increasing price for Petrol , but it badly impact to the price of goods ?? So we don't know what is right .
In my living place the lady made standing garden : her house is near alley .The land is limited .She made the standing treliss by iron follow the wall from 1 floor to 5 floor.The climber growth in this treliss .Instead of sunshine all day : she have standing garden 4x10 m2 . It give good air, the water after rain going quickly .Less use air - coordinator . I think this is good idea .
We can produce the standing treliss for selling .We can selling climber .Made the city more and more green .
I suggest to put small tree and big tree in every empty place around.
I whish in the land for project, people can plant short - time tree or moving garden. During they waite project expanding. It mind people plant tree in vases .When the projects came ,they can move the garden ,give land back to the owner .
Thank you
Date : June 2, 2010 08:45
Dear All,
Good Day!
Through this I4D blog post, I would like to appeal for the following:
We all know about the havoc already been done by us towards environment. Here is a chance to do our bid today, on the Environment Day. May I request you not to drive your car 5th June unless you have medical reason for the same? If your workplace is far off, you may try to use a public transport system rather than your own car; if it is nearer, go for cycling or walking. By doing so we may register our contribution towards a low carbon economy and a cleaner environment.
Kindly forward the request to all your acquaintances since contribution of
everyone counts.
I am sure you will feel good for doing something rather than only discussing on
carbon emission.
With best regards,
Yours truly,
Pradip Dey (A Feeler for Mother Earth)
Date : April 15, 2010 10:56
Dear Mr Rajendra Kurmar Pachauri
I think capitalizm or sosiclist , this thing can't do . We do no allow investors destroy our health and environment .
It happen in our country .
Tung Kuang factory let out water without cleaning to River
(Tien phong online date 14-4 ) –The department against Criminals and environment (C36) find the Tung Kuang factory let out water without cleaning to River
Tung Kuang factory in Cam Phuc –Cam Giang –Hai duong –Vietnam
Tung Kuang is Taiwan company produce the Alumni Stick in construction. In the Scheme the water should be clean before let out the river .But they use illegal system and let out to the river without cleaning
Dangerous that this happen some years .The this is near the cleaning- water factory Cam Giang and near one food processing factory (Taiwan) some hundreds m
S & T by CThN
Thank you for attention .
Date : October 22, 2009 23:15
I take the opportunity to submit my idea on shorter work-journeys as one important solution to a better climate.
Car-queues are increasing and the traffic jams are huge. Long journeys to the workplace by car cause a negative impact on the climate.
How is this problem going to be solved? There is an easy way, which is economical and advantageous that can to a large extent solve this problem.
Namely to ask people to take a personal responsibility for the situation and to plan their place of living and choice of workplace considering best personal as well as society benefit and reduce the length of the daily journeys. This idea is so easy that it has been overlooked since the development in the society is to a large extent technically driven. The idea also points on a possibility for the individual to do something to contribute to a better climate.
Every year there are hundred of millions of changes of living as well as workplaces. In the western world we move as many as ten to fifteen times in a lifetime.
If more of these changes seriously to a larger extent took into consideration possible personal as well as climate-related impacts much would be won.
Shorter journeys to the workplace will also mean more free time for everyone. This idea is therefore implying a unique win-win situation for the individual as well as for the society and the climate.
There is also a responsibility to employers to consider the length of the journeys for the employees. Already today some companies do not employ workforce living to long from the job. Shorter journeys to work means more possible achievements on the job and thereby increased productivity.
A new way of thinking in this area will lead to reduced contamination and contribute to reduce the global warming. Today the western lifestyle is seen as attractive and is copied in new economies. The globe can not bear this today and even less in the future. Therefore there it is in our own interest to forego as a positive example for other parts of the world.
Changes of habits in this area can be accomplished by traditional formation of public opinion. Since the problem is urgent it might even be a good idea to use a considerable amount of funds on information about this possibility.
It is feasible to calculate that people in the most polluting parts of the world let us assume move ten times in a lifetime. If they when doing so seriously considered the impact of the climate, as well as the personal benefit of a shorter journey to the workplace and thereby reduced the lengths of the journeys by half it would result in a decrease in negative climate influence that would be most important.
Date : September 10, 2009 08:41
Monsieur Rajendra Kumar Pachauri,
Je reste sur le titre qui me semblait intéressant.
Vous parlez bien des externalités du capitalisme comme des éffets secondaires de traitements médicaux indésirables et graves.
La question que vous semblez, vous posez c'est finalement doit t'on réadapté légérement les traitements du capitalisme pour soigner la pauvreté, la pollution et les nons respects des droits humains fondamentaux.
Alors ma réponse, est forcément non, comme pour un cancer en phase terminal du à une consomation cancérigéne, proposer de changer le traitement de la chimio par la radiothératie ne changerait pas grand chose sur notre plannette détruite que l'on montre encore comme magnifique en occident par des films comme Home aux images bien cadrées.
Mais c'est la carte postale des seules restes infimines de la nature sauvage.
Alors le capitalisme n'est pas à réinventer, pas plus que le communisme ou le christianisme ou tout ce qui échoué avant.
Il est pour moi nésséssaire de réinventer un autre mode de démocratie ou l'homme et la nature aurait une valeur plus grande que l'argent et en utilisant ce qui à le mieux fonctionné dans chaque systéme et non pas seulement dans le capitalisme.
C'est une voie qui me semble impérative pour sauver l'humanité de la barabarie et du désastre d'une troisiéme guerre mondiale de l'eau et des ressources.
naturelles.
Alors, je ne suis qu'un ancien travailleur du monde de l'industrie et des usines à déchets en tout genre et qui n'a parfois méme pas de quoi achetter un pain dans une société ou des compagnies jettent des tonnes de nourriture.
Ce n'est pas le commerce qui est en cause, ni l'argent c'est la virtualité de la finance mondiale qui a perdu le sens du don que les créateurs du dollars avaient imaginés pour un systéme ou l'argent serait qu'un moyen pour donner du bonheur aux hommes et protéger l'amour et l'innocence.
Si ils étaient à notre époque, leurs amertumes seraient grandes de voir comment l'idéal du captitalisme, c'est transformé en un cauchemar pour des millions et des millions d'êtres humains depuis son expenssion et sa dénaturation comme la premiere bourse de Brugges.
Alors, il serait sage d'imaginer un nouveau systéme économique et social modéré et humaniste pour l'avenir de l'homme dans un monde pour une vie de chacun plus correcte.
EL'.Técopoétise
Date : August 28, 2009 15:39
This was a thought-provoking post. I may be wrong, but as I understand it capitalism is just the right system to fix externalities, since markets are the most efficient way for economic agents to reveal costs and risks, and trade in them.
Climate change and environmental degradation are currently externalities because they're unquantified risks, that is we don't have a clear idea of their cost or impact, besides knowing that they will (probably) be very significant.
They will cease to be externalities, and become tradable products, because the more we understand climate change, the more apparent the long-term impact will become to economic agents. This will mean firstly that firms will have a wish to minimise their pollutants, to maximise their long-term profits.
The problem is that a prisoners' dilemma-type situation might arise, whereby it is more profitable for individual firms (or countries, since so far only the EU seems to have a functioning cap and trade system) to cheat and gain greater profits than their rivals; thus everyone does and we have a sub-optimal equilibrium - this is the big market failure risk, and where capping and regulation are vital.
In this scheme of things the work of civil society and advocacy groups would be to raise awareness, and impress upon economic agents the potential risk to long-term profits, incentivising the funding of research into the impact, thus accelerating the ability to efficiently price, trade and reduce environmental degradation.
This is exactly the same mechanism that has produced such markets as futures markets; the future price of commodities (or currencies, etc.) was an unpriced risk to long-term profitability. Techniques were developed for pricing and trading this risk and thus minimising it. Naturally markets have flaws - we can only expect them to be as good as our knowledge and ability to price risks, but crises help us find these flaws.
Maybe I have too much faith in markets, but the more effective they are, the wealthier people tend to be and the higher their standard of living; I struggle to think of any examples where this is not the case.
Date : August 25, 2009 00:04
One of the flaws of the capitalism is the accumulation irrational of resources, the capital need flow for produce resources, some times the capitalist states makes big pink money pigs or "national reserves" and don't use this resources for renew the capital flow in her countries, the world now need use the capitalist formula for the abundance, use the money for produce money, and in this time is necessary use the money for make employs for the unemployed people for reduce the insecurity, reduce the poverty and make a better nations in each point of the world. The capitalism now need refresh to the people the Utopia image of the leak cup of gold, need make new flows of capital. Is time to renew or change, to make new structures for produce new jobs for the poor people to make new consumers for the big capitals (now in crisis for absence of consumers). Is the time for confirm the function of the national reserves.
Date : July 12, 2009 21:56
The home loan issues(unregulated mortgage activity) is just the last blow that bashed out the downturn. The economic system was rather growing hapazardly uncontrolled and unregulated, just like how the cities of third world countries grow.A complete of planning. The basic institutions which are required to regulate the same were either non existent or miserably failed totally . When given free hand for capitalists, what all they do is make money and compete for more money . They will be running for that only. For them men,machine, money are the important factors. And it's the duty of the government institutions to see the health of economic is going fine and impose rules, regulations to bring it on track.
Rather there was a rampant pace of development, which imparted over confidence... it's just cars and buses with neither speed regulations nor Signal lights.. and ofcourse this lead to the economic accident.
As the author rightly siad, environment was never paid the attention it required. Because the cost of natural resources was just measured in terms of money and was plundered left and right. Now when it comes to dressing the wounds, no one is ready to take a bold step.
But on the other hand , a socialist economy was also a rejected concept.
There is a big need to evolve the basic economic concepts. As in schools we were taught macro and micro econmics.. the relation between them is the most important. Long term planning should be the prime focus .
The flow of capital should be regulated. Environment cost , social cost should be the most important parts . All capitalists should be shouldered with environmental and social obligations.
There is definetly a more active role required from civil citizens.Paying mere taxes, and voting for representatives will not suffice the requirement. Time has now come to voice out and work out. People should start demanding the elected representatives, this will set the real drive force into action.
Date : June 15, 2009 14:22
I think this is an incredibly positive discussion and one that I've been thinking a lot about. I think it would be helpful to isolate the 10 most pressing issues in capitalism that it fails to provide (wage equity, poverty, health, water, education, food, sustainable ag development, and the environment....perhaps sex slavery and corruption and greed/excess and transportation and communications as well) I think its helpful to separate the environment, water, and sustainable ag development because each might have
And then thinking about the models in each area that have worked. Creating such an aggregated source might help as people brainstorm solutions to these pressing social issues.
The Next Billion report did a great job....but it would be interesting to see how those businesses could be rolled out on 10k, 5k, or less.
Date : June 4, 2009 05:22
It is a pertinent question. Unfortunately I believe the answer is "no". Of course we all know that we can deal with one "externality" in some way, e.g. with cap and trade. However the sheer volume and variation in externalities makes it a mind-boggling venture to try to internalise all those costs into the price of products. Just look at agriculture, which has perhaps hundred externalities of which perhaps ten are of major importance (e.g. soil erosion, pesticide poisoning, loss of bio-diversity, eutrophication etc.). To try to factor into the price or create incentives will require a bueaucratic system worse than the Soviet Union. I don't have the answer for solving the problem though....
Date : May 28, 2009 12:18
Pachauriji is raising very relevant point, and I hope the IPCC will be one of the institutions that will help new, environmentally conscious economics to emerge.
The urgent thing to do would be to discontinue with the GDP growth imperative, and work out a more balanced societal one-line objective.
In France the debates are most advanced, where the decroicanse (degrowth) school of thought is vivid. The bottom line is that what we currently count as economic activity (GDP) has to contract, starting from the wealthy classes, if any kind of sustainability is to be attained.
My colleague and I have echoed these ideas in our study on Sustainble Futures, that can be downladed from http://www.sustainablefutures.fi
Date : May 23, 2009 20:20
We may get a vivid example around the middle of this century of an externality, Himalayan freshwater supply, getting costed. But floods should occur before runout, so maybe some targetted ASEAN-India-Russia funding of long-term storage engineering technologies; underground storage or dams, could avert some of the worst effects.
Date : May 14, 2009 17:42
Very interesting piece. One point it flags is that many public goods - water, air, basic biomass (energy), carbon storage - are valued in economic systems at 0 (zero). If they are damaged, we have damaged something that has no value - thus are externalities - and responsibilities - rationalized at present. What is odd is that what we include in valuation are the infrastructure or mechanisms that distribute these 'valueless' goods (commodities). We should work on mainstreaming the idea of vauling 'pre-infrastucture' in economics, which is to say these basic goods themselves, not just what we create to distribute the goods (infrastructure). And the benefits of 'pre-infrastructure' should accrue to the stewards of these goods, not just the governments. That might help create a new world economic order, give a greater influence and voice to many rural people and communities who are the stewards of these goods, and help refocus the urban - rural dialogues.
Date : May 13, 2009 14:29
CFCs are Chloroflourocarbons. They are ozone layer depleting substances usally from elctrical appliances like refrigerators.
Date : May 13, 2009 14:21
Rajendra your article is superb. I wish several more people could read beause most of the time the rich and influencial minority thrive over the moderate and poor masses. Talking about externalities is also very important because in Africa people do not see the need to worry about climate change let alone deriving ways of curbing the situation. It is something that affects the entire world and if we are supporting capitalism then the richer nations should help support the poorer nations.
Date : May 10, 2009 05:39
I understand from your's article that : the economists have not see all side of capital for development ?
- In our country economists taking part in every development activities .Every decison they count the benefit first -But they are not trained in environment protection .After hot flow Investment : all rivers are polluted, fishs , shrimps died.People suffer from diseases and cancers.Forests are destroy for taking woods .
In green trees in city replaces for high building.
We call foreign Investors show the bad impacts of Investment to very high levels staff in Vietnamse Government , put it in open discussions, and write all this process in negociation and project's documents . Let them know and choice : receive or not receive investment before final decision .
They really don't know about bad impact to environment . This is not equaly knowledge in communication .
Thank you .
Date : May 6, 2009 22:36
I wholly support the questions raised by Rajendra. But I want to be more direct.
The systems of capitalism [private or state] have led to 80+% of global wealth being controlled/owned by 0.15% of the world's population. In 2008, out of a world GDP of $56 trillion, $42trillion were owned by 10.1 million people. Although the financial/economic crisis of 2008-09 may have resulted in losses, the wealth balance remains the same. The world's population is 6.8 billion, most of whom are absolutely poor, some of whom are relatively poor.
A system that denies the majority of people the means to survive and thrive is unjust, immoral,unsustainable.
A system that depends upon the enslavement of people in poverty and disease so that the few can live in luxury is unacceptable..................and yet we seem to accept it . A significant change of mind and practice is essential. It is necessary for us to accept that all individuals are worthy and equal; that we are interdependent. Our work is to provide for all others, and for the environment.
There is a more detailed discussion on my web site
www.kelvynrichards.com
Date : May 5, 2009 15:15
Je trouve cet article très intéressant et quand je vois la léthargie ambiante je désespère que cette fameuse "société civile" ne réagisse jamais ! Les gens s'habituent à tous, y compris à penser qu'il n'y a pas d'alternative à la société dans laquelle nous vivons.
En écho à un fameux poème de Martin Niemöller "Quand ils sont venus me chercher ..." nous pourrions écrire :
Quand ils ont laissé l'Afrique mourir de faim, je n'ai rien dit : je n'étais pas africain
Quand ils ont laissé fondre les pôles, je n'ai rien dit : je n'habitais pas sur la côte
Quand ils ont laissé tomber les pauvres, je n'ai rien dit : je n'étais pas pauvre
Puis ils sont venus me chercher et il ne restait plus personne pour protester.
And, by the way, Joseph Caruana, what is CFC?
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