Let’s Consume More But Damage Less

It is now so apparent that the more we consume, the more environmental damage we cause.?This holds true across most value chains; significant damage is being done in agriculture, mining, transport, storage and logistics, energy consumption, and even in the use of many products.?However, it does not end there, while product disposal is damaging to the environment, reprocessing, salvaging and recycling are as well.?

We are only just becoming aware of the scale of the problem, though experts have been warning us for some time now, and it will become worse. ?No doubt there is increased action, but it is mostly a shift from one process or product to another that is less environmentally damaging.?While that will help to some extent, that cannot solve the problem.?Why??

Because all of our growth-oriented economics is built upon getting the world to consume to levels that the west does now and even more.?We don’t need to crunch many numbers to know that if we all consumed the way the west does, no amount of Net Zero promises, stopping coal consumption, etc. can save this planet from disaster.

Perversely, therefore, what is saving us is the poverty that keeps billions away from western lifestyles.?Keeping people poor, of course, cannot be the objective.?We do need to have equity as a core objective of economic policy.?So that gets us back to the most important question of all:

How can we improve the lifestyles of the masses without harming the environment?

Unfortunately few have been asking this question, and as a result, the only solutions that governments have been thinking of are low-cost housing (with less use of concrete if environmentally sensitive), LPG gas provision (subsidized to some level), mechanized agriculture, and high productivity agriculture (for cheap food), and more transport infrastructure for a better integrated and efficient economy.?This is all western-style economics, and this will necessarily lead us to the west level of consumption, and whatever comes with that.

Image: ethify.org

There can be no doubt that mass manufacturing, industrial-scale agriculture, large volume retail, e-commerce, and all methods that generate economies of scale in any production process, have delivered high economic growth globally.?However, they have not been so successful with equity and have massively damaged the environment.

As much as we like to believe otherwise, simply using better technologies on the same underlying economic structure will not solve the environmental problems, at best it will delay the damage.?I do not believe that consuming less is a good solution.?Consumption reduction cannot be politically or economically sustainable even though it may be environmentally so.?Most economists instinctively understand this, but in case you don’t, just bear with me.?Reducing consumption implies lower incomes, negative growth, fewer jobs, and fewer surpluses to invest in the future.?A world like this will be economically unstable and by extension politically unstable as well.?There can be no sustainable environmental action with economic or political instability.

What we therefore require is a path that allows for ever-increasing consumption, but without increasing resource use.?Imagine a world where we all can keep consuming more, but not in the conventional sense.?In such a world greater consumption will simply mean improved quality without greater resource use.?The question that needs to be asked is - ?without explicitly banning industrial-scale production, cultivation, and trade,

How can we design an economy that

(a) enables the freedom to create and produce for all and (b) improves the quality of choices available for consumers and (b) damages the environment less??

There will of course be manufacturing at the core, but much of the value-added will come not from building on top of mined materials or agricultural production, but the services that go on top of those. Moreover, reducing the distance between the point of production and the point of consumption will also lead to a whole range of environmentally efficient possibilities.?All of this can only be possible if the prices favour environmentally less damaging output.?In line with this consider the following three broad principles for a new resource-efficient economy:

(a)???Service focused economy, not a manufacturing-oriented one

(b)???Extensive hyper-localization, and limited globalization and localization

(c)????Polluter pays principle applied to government, private sector, and individuals

Service Sector Orientation

The manufacturing and service sector don’t only complement each other, in many ways they are also substitutes.?At the risk of generalization

the more we consume services, the lesser is the need for physical materials and consequently less mining, fewer logistics, less energy use...

less need for the globalized value chain, etc.?All of this leads to a significantly lower need for resources of all types.?

We are now for instance far more dependent on digital communications, financial services, telecom services, and even personal services as consumers, than we were in the past.?All of that is good and needs to be encouraged, for it means greater consumption of a commodity that requires lower resources per unit value-added.?Even digital communications whether for entertainment or education or even healthcare, now account for a substantial proportion of our consumption expenditures, these are the new opportunities that need to be encouraged.?It is not just high-tech space, cities will need to be designed to facilitate service provision physically closer to buyers; for instance, in fifteen-minute cities health, education, entertainment, and commerce are allocated space closer to residential areas (see section on hyper-localization below.)

Should we then get rid of the Production Linked Incentives scheme, or Make in India, and suchlike??Retain them if we must, but the point is on the focus.?I argue that it is time for India to focus primarily on more and more value-added services than we did in the past.?Moreover, India has historically been better at services than it is in manufacturing, they tend to use lower energy and materials per unit value-added.?

Focus on hyper-localization

We now know that globalization and all that it represents is harmful to the planet and is causing much irreversible damage.?If we want to continue improving our own lives and that of the planet, we need to reduce globalization in the movement of physical material (but not information that does not require as many resources.) ?

Hyper-local production and hyper-global communications may very well become the new mantra for economic growth.

Some people mistook localization to imply a national orientation but environmentally that does not help as much.?If concrete used in Chennai comes from Rajasthan and roads in the Northeast use stones from the Western Ghats, it is as harmful as importing these from (say) China.?If we get rid of globalization, we must embrace hyper-localization, meaning as much as is possible from the vicinity of the consumer.?

Take the example of frozen momos available in a supermarket and compare it with the momo-wala in your neighborhood.?Both these products reduce the need for home cooking.?However, the neighborhood momo vendor does not require trucking or refrigeration and is more likely to use inputs from surrounding areas. The frozen momos on the other hand may use plastic packaging whose chemical inputs were produced in Gujarat from petroleum mined in the Gulf, whose paper was printed in Chennai, the refrigerated equipment made in Germany, the vehicles used to transport made elsewhere, etc.?Freshly made momos sold in the neighborhood are all in the hyperlocal production process, the supermarket momos are from a global/nationally-local value chain.?

However, and this is the amazing flaw in policy – neighborhood vendors receive no support from the government (to illustrate: cooked and fresh food vendors, tailors, barbers, presswalas, chaiwalas, paanwalas, mechanics, streetside performers, it is a long list).?Urban planners don’t allocate any space from them.?Municipal agents and local police are well known to extract side payments from them.?Government policy does not even know how to recognize them as legitimate businesses.?Rarely are electricity or water connections provided to them legally, and the business schools or the IITs rarely study or suggest innovations for their growth. As a consequence, the food vendor is not a restaurant, the barber isn't a parlour, the presswala a launderer, the chaiwala a coffee-tea shop, etc.?They just don’t go up the value-added chain. Now compare this with extensive support to the large, medium, and small industry that has a national market.

The hyperlocal business will by its very nature tend to be a micro-scaled operation. All of conventional economics rests on an underlying assumption that large is cheaper and better.?Therefore perhaps, all of the policy tends to be blindly oriented at larger scales.?

So much so that, almost all hyperlocal businesses I know are in the informal sector, we have made their entry into the formal space impossible.?Once we add environment into the economic equation, then the economic benefits of larger scaled operations fall dramatically.?

You may argue that small-scale production typically uses more resources than large-scale production, and it is inherently inefficient.?That may or may not be true.?The point I am making is that a different menu of products and services will emerge if we remove the tacit (or invisible) hyperlocal tax we have imposed on this sector.?We don’t necessarily need to tax or ban the national or global scale production but simply need to provide the same support to the hyperlocal.?

From polluter pays towards damager pays

The National Thermal Power Corporation (NTPC) keeps on delaying improving the emissions from its chimneys in coal power plants, yet it does not pay anyone for all that damage. ?The lack of capacity has made the Central Pollution Control Board (CPCB) a weak regulator, and its failure encourages many to pollute as they can get away.?However, the CPCB pays no one for the damage its inaction causes.?Bad infrastructure creation, bad mining practices, bad policies of the past, all cause immense environmental damage.?Governments very rarely pay for this.?

At the same time, packaged food makers, cosmetic producers, cigarette companies, plastics, and chemical manufacturers, are responsible for a significant proportion of plastic and pollution generated.?Moreover, a lot of the ambient air pollution is caused by gases and particles released by the output of fertilizer and other agrochemical producers. Yet they pay nothing for its disposal or management.?Of course, there are others as well, I simply named these to illustrate a larger point.?Soon electric vehicles will require a large number of batteries whose manufacturing and disposal is highly polluting, yet it is not clear who will pay for the disposal.?Even solar panels will need to be recycled or disposed at some point, but their prices do not reflect these costs.

Someone has to pay not just for pollution but for any environmental damage that the production and consumption of a product causes. If they don’t pay now the environment will pay and it will make our future generations pay.?

This damage may be one-time or ongoing, it may be foreseen or unforeseen, and its negative impact may be direct or indirect, instantaneous or delayed.??The responsibility needs to be assigned to either the producer or the consumer, it may be the government, the regulator, its agencies, or a large global conglomerate.?Whomever this responsibility is assigned to, will need to pay a significant amount for the damage caused to the environment.?This principle needs to be imposed ruthlessly and uniformly, but it currently is not.?The closest we have come to this is (a) carbon pricing and (b) fines for not meeting the norms now being imposed sporadically in India.?Carbon pricing (of fossil fuels) is in fashion these days, it is being driven predominantly by western governments and their agencies, who care mostly about global warming and not the environment in general.?Pollution, plastic disposal, garbage management, recycling, sewage, liquid effluents are important considerations and someone needs to pay for all these damages.

Finally, it will be impossible to impose bans and other controls on either production or consumption, or trade of such a large range of products.?Sri Lanka's well-meaning reform towards organic agriculture did not work and caused havoc.?These will need to occur slowly and steadily, giving time for consumers, producers, vendors, and the whole economic ecosystem to adjust to this new regime that punishes and taxes environmental damage.

Image: Ugent.be

To sum up, rather than give in to the notion that lower consumption is good for the environment, we need to change the character of consumption.?As we do that, we will also change the character of the Indian economy.?To put it in other words, India and other developing countries need to continue on the path of high economic growth; but for greater sustainability both consumption and policy need to change and be supportive of that shift.?Services orientation, hyperlocal production, and damager pay principles are key to this regime change.