Soil not Oil

Some people inspire with their wisdom, some with their accomplishments and commitment. The Indian environmental and human rights activist Vandana Shiva, who came to Berlin on the 3rd of November 2009, is a woman of erudition and integrity. She presented her new book "Soil not Oil" to the German readership in a confident and persuasive manner.

The book speaks of a triple crisis: one that affects climate, energy and food. She highlights the food crisis as the most dire and urgent problem, since it poses an immediate treat to the survival of the poor. The industrial system based on fossil fuels affects the poor in three ways:

i) they suffer work displacement in consequence of changed food production structures,

ii) they experience disproportionately the consequences of climate change,

iii) they are victims of pseudo-solutions like biofuels, which divert their land and food.

Vandana Shiva uses a simple language that wants to inspire and provoke action. The encounter with her raises two questions of economic concern: the social costs of climate change and the unsustainable industrial food system.

1) Is cost-benefit analysis possible?

Environmental economists are inevitably faced with the familiar cost/benefit and quantity diagram. It determines the efficient quantity of production at the intersection of the marginal social benefit and marginal social cost. The idea is then to implement different measures in order to reach this efficient point (price and quantity tools). All this as if the marginal social costs could be objectively measured. The economists then embark on a cost-benefit analysis that, measuring willingness to pay and willingness to accept (e.g. Perman et. al, 2003) approximating the value of environmental quality. Yet willingness to pay clearly doesn't equal ability to pay and this is how low-income countries are at a disadvantage.

Climate change affects disproportionately poor people. A number of examples from Shiva's book include cyclones in Bangladesh and Burma, unprecedented snowfalls in China, extreme rain and floods in India as well as droughts in many other regions. The people's livelihoods in less-developed countries depend heavily on agriculture and a rapid change in climate conditions leaves them threatened and unprepared for the consequences.

Nordhaus and Stern have been encouraged to express the damage of climate change in terms of percentage loss from GDP. The most dramatic loss predictions are for the countries around the Equator: predominantly low-income countries (Nordhaus, 1999). If the high income countries are not going to suffer as much as poorer countries, then how will they internalize the negative effects on those with lower income?

2) Economies of scale - optimal degree?

Shiva criticizes the "pseudo-solutions" of the Western countries including emission trading and biofuels. She claims that 40% of the climate problem is rooted in the unsustainable way of industrial and factory farming: processing, transport, packaging, food waste. In the globalized food system 1 kilogram of food causes 10 kilograms of CO2 emissions. At the same time the same system of ecological farming that would allow more food production will also allow reductions in CO2 emissions.

Clearly ecological farming contradicts the simple economies of scale idea, which persists that expansion of production has cost advantages. What could be though the aspects that economies of scale ignore? Industrial farming not only leads to lower quality food, but causes carbon emissions the costs of which are not on the industry's balance sheet. Moreover the economies of scale are distribution-blind and those cost advantages and higher profits, as economically efficient as they might be, will never be seen by small scale farmers. No wonder transnational companies got so rich in the last decades.

As confident and wise as Vandana Shiva may be, would her ideas be more than wishful thinking? The change that she stands for requires a global structural change, which would hardly result from less than a massive-scale revolution. Her speech in Berlin could be also seen as "preaching to the converted", since the great majority of listeners belonged to an environmentally conscious social group, which applauded all of her statements with little criticism. The people in the industrialized countries are still too comfortable with their lifestyles to be environmental revolutionaries and the gap in standard of living might be a serious obstacle in people's perception of how urgent action on climate change is.