The politics of the sustainable state

Dieter Helm, centre right economist and newly appointed Chair of the Natural Capital Committee has just produced an interesting new essay (hat tip to Matthew Spencer). His approach draws a lot on the work of people like Kenneth Arrow and Partha Dasgupta who have argued for the need to measure the “assets” of the natural world (including a safe atmosphere and biodiversity). What is new is his argument that maintaining these assets should be the primary aim of the state in the 21st century.

In the first three decades of the post-war world, the (mainly Keynesian) state was concerned with managing the business cycle, organising transfers from rich to poor and providing public services. Following the crisis of the 1970s, a shift of focus to efficiency and mass privatisation, the nature of the state changed to a mainly regulatory role. But, argues Helm:

“In the second decade of the twenty-first century…the key challenge is not only to deal with the immediate issues of debt and the deficits, but also the wider issues, from pensions and care for ageing populations, through to the environment. Not only is it widely agreed (at least politically) that current debt levels and deficits are unsustainable, but the provisions for future pensions and health, and the protection of the atmosphere and biodiversity have moved from being specialist interests into the mainstream… They share one key feature: they are all long term and intergenerational in character. The economic borders of the state….are currently not designed with this intergenerational perspective to the fore.”

Helm goes on to argue that the main aim of the 21st century state should be to maintain a range of assets that we are currently running down.  These include conventional assets such as infrastructure (one of his favourite hobbyhorses) but also environmental, financial and even social assets. Where we do run down a natural asset, we should offset it by new investment, not consumption – Norway has done this with its sovereign wealth fund based on oil extraction; the UK spent its oil and gas money on a 25 year consumption splurge. What is needed to make this new 21st century state operational, is a public balance sheet – an account of all the public (i.e. social) assets (including environmental ones) and liabilities. This in turn would require us to develop better measures of them. Our current measure of progress, GDP, is a flow measure, not a stock measure, and also a gross measure, not taking into account depreciation of capital.

Helm’s argument is interesting, partly because it contextualises climate change as one of several long term intergenerational problems that the UK and the wider world is going to have to solve, and partly because it is an argument for fundamental institutional change of a concrete type that is not often heard in the climate change echo-chamber.

However, for me, the analysis immediately raises a question, but also a potential answer to that question. The question is how the 21st century state is supposed to emerge politically. As I’ve argued elsewhere, for this kind of major institutional change, you need an organised political constituency that will press for change, and by definition, future generations can’t do that.

It might just be possible for an enlightened political elite to create such a shift of focus for the state, but I would also argue for that to happen, we will have to first live in a more equal society. Helm’s asset based society is one in which there has to be (at least for the forseeable future), lower consumption and higher savings, to fund the necessary investment. This may be fine for well-off university professors, but as has been well documented, income inequality in countries like the UK has increased sharply, and even in the booming 2000s, real incomes in the lower-middle part of the income distribution were stagnating. Putting oil money aside for investment in the future, Norwegian style, imposing regressive carbon taxes or requiring higher pension contributions are all politically easier if everyone really is comfortable and doesn’t feel left behind, but it will be a lot harder in highly unequal Britain, where large parts of the population already feel financially squeezed.

Helm largely ignores distributional issues, and he doesn’t broach the politics of the 21st century state, but I suspect that they will be central to its construction.


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One response to “The politics of the sustainable state

  1. John Magrath

    The Norway case is fascinating and hopeful, but how far it can carry on – or evolve further – to be a 21st century state of the kind that’s needed, and how far that relates in any way to climate change, are uncertain given trends in fossil fuel extraction globally. Norway retains considerable domestic oil resources that it can continue to use progressively, but in doing so it has created in Statoil a multinational company keen to exploit oil elsewhere around the world, and like the UK, the Norwegian government does not “appear to be inclined to develop oil policies that might address concerns about climate change”. Those are issues raised by Andrew Cumbers in an esay “North Sea Oil, the State and development in the UK and Norway” in a new book “Flammable Societies, studies in the socio-economics of oil and gas” (McNeish and Logan, Pluto Press). Cumbers points out that Norway had an historical concept of the state that is (was?) more akin to the Asian developmental state than to a neoliberal one like the UK, and how it managed its oil revenues reflects the relative power of its trades unions asnd other social forces. But he says that even in Norway “a business-as-usual attitude of extracting oil and gas when and wherever possible, to contribute to state and corporate revenues, seems to be prevalent, with climate change policy happening somewhere else in the government jurisdiction”. He also says that the Norwegian model is “coming under increasing pressure from the very business interests that it has stimulated in the past”. Elsewhere in the book McNeish and Logan point out more explicitly how Staoil has become almost “a state within a state” and “is increasingly involved in questionable investments and dealings abroad”. All states, says Cumber, “face increasingly hard choices between prosecuting the interests of capital internationally and maintaining social cohesion and spatially balanced growth at home”.

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