Review by The Edge Financial Daily: Revaluing resources

Jun 10, 2011

Written by Raina Ng. This article appeared on the Management page, The Edge Financial Daily, Jun 10, 2011


How much should a burger actually cost? In the view of author Chandran Nair, RM200.

The answer would shock most people. But this is how Nair explains it.

“The current price of the burger does not reflect the value of the resources, mainly land and water, involved in its manufacturing processes. Wear and tear of the land, water wastage, and not to mention water pollution, are costs that should be taken into account. Looking at all these factors, the burger is currently under-priced,” he told The Edge Financial Daily at an interview in early May.

“Say instead of dumping they built a water treatment facility and treated and recycled the water instead. The price of this would be channelled and the burger would be more expensive but it will more clearly reflect the true cost of the meat and promote a more sustainable environment.”

What Nair is effectively saying is that under our current economic model, rapid growth is encouraged by rapid consumption. Goods are valued at a price that overlooks the actual costs of our limited resources. What will result, at the continual rapid consumption, on top of a rising population, is a depletion of resources. According to him, this economic model, therefore, is not a sustainable one.

Nair, the founder and chief executive of the Global Institute for Tomorrow, was previously chairman of leading global environmental consultancy Environmental Resources Management, and is an advocate of sustainable development in Asia. In his book Consumptionomics published early this year, he sets out the reasons why our current economic models are unsustainable and urged governments to rethink these models.

Nair’s theories are not new. In 2008, Jeffrey Sachs, director of the Earth Institute at Columbia University, published similar viewpoints in his book Common Wealth. He wrote that rapid economic growth will worsen ecological conditions if it is not channelled by active public policies into sustainable technologies.

“The world’s current ecological, demographic and economic trajectory is unsustainable, meaning that if we continue with business as usual we will hit social and ecological crises with calamitous results,” wrote Sachs.

Sachs highlighted four points. First, human pressures on the earth’s ecosystems and climate will cause destruction. Second, the world’s population will continue to rise at a rapid pace especially in regions least able to absorb this increase. Third, while some benefit from economic growth, one sixth of the world remains trapped in extreme poverty and lastly, these problems continue to remain unsolved.

In the introduction to his book, Nair wrote: “As the global financial crisis played out through 2008 and 2009, I was repeatedly struck by the bizarre disconnect of economists and policymakers. Amidst collapsing markets and talk of another great depression, there were repeated calls for consumers, especially in Asia, and above all China — to drive global growth by consuming more.”

The book aims to establish the impact of an unsustainable economic model on Asia. He wrote that with a population that is expected to reach five billion in 2050 making up about 55% of the world population, if Asia continues supporting the current model by consuming even more, the world’s resources will be depleted.

“Take poultry. This year, Americans will eat nine billion birds. As of today, the whole of Asia, 13 times as many people as in the US eat 16 billion birds annually. But if by 2050, each Asian is eating the same amount of poultry as each American does now, the region would eat its way through more than 120 billion birds...

“... This does not mean that the world stands on the brink of collapse. It has enormous reserves that humanity can tap into for decades to come at current rates of extraction. But if we push the world’s economy towards being six or seven times bigger than now, we can be sure that more and more of those resources will be driven to the point of collapse. The region where these collapses will have the more immediate and greatest impact will be Asia” he wrote.

It is Nair’s proposal that this can be curbed by adequate pricing of goods. Take the earlier example of the burger. According to Nair, the affordability of the burger continues to encourage its consumption at the price or our natural resources. Instead of encouraging consumption and continually devaluing and abusing our resources, Nair suggested that we should include the true value of our resources in prices.

Amid inflation and rising food prices, this may seem unreasonable but as Nair pointed out, if we evaluate the impact of rapid consumption on the economy, we will realise it has contributed to the continuous hiking of prices, accelerated demand and a depletion in supply. The gentle persuasion through his book is then the simple persuasion to prioritise sustainability over growth.

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