Human security - from the economic notion of scarcity viewpoint

Shahab Sabahi

Energy and Environment for Development – Policy Analysis Research Group

The economic notion of resource scarcity differs from what scientists consider for physical abundance of resources. For economists, the net value of resources over the course of time is a measure for making judgment for resource scarcity. From an economic point of view, if marginal costs increase as remaining reserves decline, but market price does not increase as fast as the costs, then the net value is declining and it indicates NON growing scarcity. The fact that remaining reserves are declining would indicate geologic scarcity, but unless market price increases fast enough than marginal cost, the resource is not becoming economically scarce.

Indeed from an economic perspective market forces; technology costs, future demands, substitute commodities prices and their availability will determine the level of scarcity for resources rather than geologic and physical availability of resources.

What about environmental quality; fresh water and clean air? What about species face the danger of extinction? Could we apply this commodity-based and private goods notion of economic scarcity to public and environmental goods? Can this notion guarantee the irreversible exploitation of the life-support resources?

Scarcity is an economic fact of life and can be manageable for commodities that flow through organized institutions such as markets. However where the case is about the scarcity of life support resources and human security may another institution should be in play. In the latter case, interchangeability, market price and demand fluctuation are not applicable.

Having the reality of limited capital and human resources and necessity of their optimal allocations, we need a framework to help us to effectively prioritize our environmental objectives. The more non-market the environmental service, the harder it will be to adapt this economic notion of scarcity. It is suited to private commodities that exchanged in markets.

The existing value system cannot appropriately calculate the real value of environmental goods. Furthermore the prevailing and dominated development model for societies cannot accommodate all aspects of human security.

These all may require the development of new economic value system within new global governance, with focus on effective regional cooperation and conservation efforts, to fulfill the human security needs.        

Powerful state capitalism - Chinese version of capitlism

Shahab Sabahi

Energy and Environment for Development – Policy Analysis Research Group

Economic redistribution, tax preference regime and austerity are new socioeconomic measures that politicians and people are circulating these days. They, with ideological bias, favour one these measures and claim that they get the fittest strategy to solve today’s crises. Some says “it is not rocket science”. Other put its blame on lack of political wills. One views Wall Street as the source of the crises.

Indeed. it is not easy as it may seem. I wish it would have been a rocket science, and then human being could quickly come up with a solution. The problem falls in the realm of social science and it should deal with a big variety of individuals’ interests and behaviours. It enormously contributes in the complexity of the problem.

It is a general consensus that Liberal democracy is the default ideology around much of the world today. In part because it is facilitated by certain socioeconomic structures. From liberalism perspective, one can formulate an abstract framework and prescribe based upon a straightforward solution such as tax cut. Or one with more sympathy to democracy may prefer taxing riches the most and one from the far-left advocates economic redistribution. Despite liberalism offers a well-built socioeconomic structure which has well performed in national and regional levels in developed countries, in our day’s challenges liberalism faces difficulties particularly when its socioeconomic structure is implemented in global scale.

Let me add the liberal foreign policy dimension to the standard assumption which is made by liberalism in regional level. The mobility of money and workforce has lubricated international investments and trade. It has contributed significantly in improving standard of life globally!! This move has generated enormous profits for investors and also increased the number of world-class milliners. It has generated middle class in developing countries while new classes in developed nations emerged in the vacancy of the past middle class. It draws new division lines in labour market.

They are all the fantastic side of a liberal foreign policy.

To analyse some implications of what liberals or liberal democrats prescribe, I take a global perspective and look into the issue in the context of globalization.

Liberals with far-right tendency prescribe tax cut. Giving the above mentioned context, when investors and riches can easily invest WHERVER they wish, at any points of the world (quite literally) where tax level is as low as zero, and can reside wherever they love,

§               HOW can an old fashion tax code in national level which does not accommodate the realities of our days, be effective?

Developed nations have long restructured their economies. New social classes have emerged and political parties are overwhelmingly polarized

§               How can an old fashion tax system guarantee distribution of wealth? Or in fact which wealth? (Liberal democracy advocators’ prescribe falls short)

One of the credits, in the idea of liberalism, is Strong State. It, side by side with the rule of law and accountability, has long proven the sustainability of states. No matter the size of government, strong state is needed to guarantee tax collection, existence of social benefits and services, and the solidarity of nation.

England’s Glorious Revolution was the starting point for modern liberalism. It created a strong state and the constitutional principle that state could not legitimately tax its citizens without their consent. And citizens without paying tax, were not included in.    

Given globalization and mobility of money, lack of a strong global governance and institution, political polarity (and all facts counted above),

§               Does one expect imposing/cutting tax would help to sustain economic growth in developed world?

§               Can one hope a strong state emerge with sufficient authority to collect tax?

§               Can one see a day when states would not owe any penny to private creditors?

Liberalism has always been the finest ideology that has provided a suitable platform for human beings to live up their needs and realize their dreams. It explains why liberalism has been and will remain the default ideology. HOWEVER there is a chronic problem with liberalism as the conservative economist Joseph Schumpeter wrote in his 1942 book Capitalism, Socialism and Democracy, that capitalist society was culturally self-undermining.  

So it won’t be easy to solve financial crisis with the means of tax in the context of globalization, unless capitalism can adapt with external forces…..It would be critical moment to chose, being Whig, China-like capitalism, adapt realism and…..or….. 

Where policy matters - Today’s troubles root in policy not principles

Shahab Sabahi

Energy and Environment for Development – Policy Analysis Research Group

In political and social science journals, a general consensus is advertised that human beings have reached to best fitted and an effective ideology and need not any longer to develop new ones to model a better life. They also provide further explanations that this matured ideology, however, is dynamics and in progress while its framework remains intact.

They conclude that today’s troubles relate more to policies than principles. It holds true for energy, environment and development policies.

Despite the disagreement between scholars in science and economics in HOWs, the necessity of preservation of environment and economic growth are generally conceded by both. Yet there are no common principles to agree upon for policies development. It leads, as evidence shown up to this date, to confusion and therefore introduces ineffective policies in the realm of energy, environment and development.      

Scientists often view resource depletion and pollution as irreversible and inevitable results of growth in economic output as measured by gross domestic product (GDP). In contrast economists, based on some evidence which indicate economic growth might be necessary before a modern society, generally hold optimism about human’s ability to protect environmental quality and to keep the preservation of natural. They put their faith in ingenuity and adaptability of homo economicus and its ability to extend that ingenuity to the protection of its environment.

With a sole scientist’s perspective, environmental policies should be devised with regulating tools which could implicitly fine tune the economic growth policies. Economies should pay off externalities and clean up their mess by expending at environmental friendly programs. Also the natural resources should moderately be exploited.

Economists believe incentives in markets are the key focus. Technology policy and price instruments in policies can be designed in ways to protect the natural resources, and environments in minimum costs and at least distortion in the market decisions. They view the economic growth along with optimum paths. In this sense one may tag economists, “idealist” rather than “realist”.

Neither scientists could bring global collective actions, nor has the economist’s practice shown any improvement in the environment protection in the global scale      

The fact is, as long as a society is free from the threat of starvation and war, resources can be devoted to protecting and improving environmental quality and preserving remaining wilderness. In a volatile and vulnerable context, when nations compete each others to secure their resources and assure the availability of their supply in future, even with the means of trade-investment policy or aggression to extend beyond their states’ boundary, an economic incentive and scientific consensus and morality seems working less effective.

We should posit SECURITY and STABILITY as the most chief elements that influence the behaviour of human beings in today’s context. The existing international environmental policy has failed to live up the requirements of security and stability through a genuine collective action in the global scale.

Perhaps policies with focus on security, stability, and an effective distribution of wealth doctrine (downgrade from the global level to regional level) would be promising and push our growth toward the quality of life within an environmental friendly atmosphere.