People and Other Commodities 4: Living Beyond the Earth's Means

The World Wildlife Fund has just released a report (“Living Planet Report 2006”) according to which humanity is using natural resources at a rate that ‘s 25% faster than the rate of replenishment of those resources. (Canada is listed among the worst offenders). If true, this means that our current lifestyle is not only ecologically but economically unsustainable. After all, if we chop down all the forests, at a certain point they will be gone, and then whatever economic benefits we may have gotten from the forests will be gone. When you add the fact that deforestation tends to lead to either chronic flooding or desertification, there are further economic impacts- and by that I mean impacts on people’s ability to make any kind of living at all.

Unfortunately, capitalist markets as classically understood (remember “supply and demand”?) are not going to help. You would think that the sensible solution to the fact that a resource is dwindling would be to reduce use of that resource. But “supply and demand” doesn’t work like that. Remember how it’s supposed to work: as the supply of good or service x goes down, the price of x goes up. Selling x becomes more profitable, so more people go into selling x, the supply of x goes up, and the price starts going down again. The market achieves equilibrium- in theory anyway.

But what happens when x is a non-renewable resource like oil? The price goes up, so more people go into the business of extracting and selling oil. The Alberta tar sands, for instance, suddenly become attractive to investors. Since it costs a lot of money to extract oil from the tar sands, it only makes economic sense to do so when the price of oil is high.

So the market reaction to the scarcity of oil is not to cut back on oil use, but to hone in on whatever oil resources are left, and so we continue with our oil fix until the wells are so close to running dry that the price of oil soars beyond the reach of just about everyone.

Clearly, then, we can’t rely on the “free market” to rein in our ecological profligacy, even if we take its claims at face value.