Can Asia Reverse Global Climate Change?

Calling on Asia to boost its consumption to pull the rest of the world out of the financial crisis is wrongheaded and could lead to an environmental disaster, according to Chandran Nair, CEO of the Global Institute for Tomorrow. If Asia were to approach the consumption levels of the West in just about any commodity – fish, meat, automobiles, or housing, for example – the environmental damage would be incredible and commodity price inflation would be rampant. The usual reply to this forecast is that technology and the laws of supply and demand will save the world. But such an answer implicitly shifts the center of decision-making to Asia, which does not follow the same consumption-driven economic model as the West. An Asia-centric world still leaves challenges for the region’s leaders: telling their constituents that though they have arrived on the world stage, they will never be able to achieve the same level of consumption as their Western counterparts. A bitter pill, indeed. Yet, this does not mean Asian countries must forego growth; rather, de-emphasizing the export-driven model in favor of investing in domestic infrastructure, among others, should promote growth and welfare while lessening the blow of dashed dreams. In the end, as Nair argues, the West’s influence on the world’s economy will dissipate as the future of capitalism and the environment will center on decisions made in Asia. – YaleGlobal

Can Asia Reverse Global Climate Change?

Asia can lead on reversing climate change by ignoring calls for ramping up Western-style consumption
Chandran Nair
Tuesday, May 19, 2009
Choked by growth: India's congested streets will soon be filled with Tata's low cost car, the Nano

HONG KONG: Ever since the world has been plunged into financial crisis, developing Asia has only heard one mantra from developed country economists: Boost consumption to restart the world’s economic engine. To follow their advice would set the stage for a far greater crisis that no amount of stimulus would be able to contain. On the contrary this is an opportunity for Asian leaders to call a halt to consumption-driven economic model and show the path of escape from environmental catastrophe that the model would ensure.

If the calls of some of the Western economists are taken to heart, and Asia comes even half-way to approaching Western consumption rates, all efforts to counter climate change and tackle other of the world’s pressing environmental and social challenges are doomed.

Quite simply, in our resource constrained world, there isn’t enough to go round for everyone to aspire to such levels of wealth and the associated levels of consumption.

If the majority of Chinese, say just half the population, get rich enough to start eating seafood – hardly an outlandish aspiration – then the oceans will soon be emptied. Neither technology nor money can address this problem though there are those who will try to convince us that even the mighty blue fin tuna can be farmed to sate our appetite for sashimi. But who is to say to the Chinese that they should be denied their swordfish and tuna.

At the same time if Indians aspire to own cars like westerners (currently less than 10/1000 people compared to about 700/1000 in the West) then the consequences for oil supply and prices, as well as the environment could be very serious. If Chinese and Indians reach western car ownership levels over the next 20-30 years, there could be anything from 1.5 to 2 billion cars just in these two countries. Some estimates suggest it would take the entire OPEC oil supply to fuel them. As for the price of oil, ask the scenario planners at the oil majors? But who is to deprive middle class Indians of their Tata Nano?

And if Asians eat meat like Americans ( Chinese today consume about 50kg/capita, Americans 220kg/capita), and own houses like Australians (largest ecological footprint in the world) then the consequences will be catastrophic not just within their borders but for the biosphere too.

Thus it should be clear that Asia, as a latecomer to the model of development which puts a premium on wealth creation at any price, will never be able to attain the standards of living taken for granted by most in the West. Nor should they aspire to it even if they are able to ape the slightly more abstemious Japanese.

Conventional wisdom – of the kind still adhered to by mainstream Western economic thinking – maintains that technology, trade and smart financial tools, combined with a better pricing of externalities, will somehow both end poverty and save the world.

But anyone who thinks that technology will solve such problems is utterly deluded. It’s just plausible – as James Lovelock advocates – that the mass construction of nuclear power stations could generate the energy needed, though some major public concerns over safety and proliferation have to be overcome first.

What this means is that the decisions that determine the world’s fate will take place in Beijing, New Delhi and Jakarta – not Washington, New York or the capitals of Europe.

In the wake of the global financial crisis, Asia’s leaders have an opportunity and obligation to send out a different message – that measures to halt global warming and other pressing ecological concerns, far from being “noble objectives” that can be postponed until the global economy is fixed, as Stephen Roach has said, have to be the priority.

The good news is that few of these leaders really believe that pursuing the Western model of consumption-driven capitalism is the answer to their countries’ development needs. Chinese Premier Wen Jiabao articulated this sentiment at Davos this year when he said that the current crisis had its roots in ‘inappropriate macroeconomic policies”; “unsustainable model of development characterized by prolonged low savings and high consumption”; and “blind pursuit of profits”.

But unfortunately most of the Asian leaders remain either unwilling or unsure how to articulate the dilemma they face, leading to a conspiracy of silence, or at best a hope that that solutions can be found later. Even in state run China it will be a challenge to shape polices that reverse the globally interlocked economic development path of the last thirty years. This could well be one of the big internal struggles of the next decade in China as expectations are modified out of sheer necessity.

Of course, for Asians, it will be harsh to be told that as latecomers to the capitalist party they will never be able to attain the standards of living taken for granted by most in the developed countries. The roots of the new consumerism are to be found everywhere in Asia even where people are clinging on to other aspects of their culture. The role of information technology coupled with advertising and its relentless march in making this happen is a reality that governments have to acknowledge.

But it’s a message their leaders have to deliver: that a new economic order is needed – one that stresses providing the basics of life, appreciating that there are limits to resource exploitation and growth which in turn have security implications, allowing more to share in the wealth that nations generate. They have to accept that the world is living in times where growth is redefined by quality and not quantity. To do this, strong and even draconian regulations may be needed.

However not all consumption is destructive and in shaping polices Asian governments should be stimulating their economies and linking it to moving away from export led growth by investing in education, clean water, sanitation and healthcare. In China this is already part of policy especially the recent polices to build a national health care system even if some of the rationale is to get people to save less and spend more.

Can Asian leaders tell their populations that their aspirations rooted in more material consumption can’t be reached? Yes – if they can stand up to economists like Hank Paulson, Roach and others by saying Asians can’t be expected to help the developed world regain its economic footing if they can never realize the lifestyles of those they are aiding.

And yes – if they can they refuse Western entreaties demanding far greater support with environmental technology for energy and other of their needs.

If they don’t, and the arguments for greater consumption win out, the world will only be storing up bigger trouble for the decades ahead – of a magnitude that no stimulus package will be able to overcome.

Notions that the world’s destiny rests with the West must be put aside. The decisions, smart or otherwise, that will decide the future of capitalism and the fate of the earth’s climate will be taking place in Asia. Welcome to the 21st century.

Chandran Nair is founder and CEO of the Global Institute for Tomorrow.

© Copyright 2009 Yale Center for the Study of Globalization