Comment on Jutta Kill’s “Economic Valuation and Payment for Environmental Services”

This report is an excellent overview of the pitiful state of environmentalism and its neoliberalisation.  The issues raised are important and should be taken seriously.  However, I would like to suggest a few areas in which the argument could benefit from some further reflection.

In opening the paper the introduction emphasises the idea of a “paradigmatic change” (p.2) in terms of what is happening with economic valuation of the environment.  There is no further definition of this concept or its relevance, and I think this suggestion of substantive novelty is in fact misleading.  The ongoing push for incorporating aspects of the social and environmental world into an financial and economic one has been ongoing for at least 200 years.  Some seventy years ago, Karl Polanyi (1944), who is mentioned (p.16), identified the creation of the fictitious commodity as being a necessary part of the industrialisation starting in the early 1800s.  He also recognised the extension of this from labour and land to the environment.  The more recent push of the economics profession, for extensive valuation allied to financial regulatory instruments, goes back to the 1960s.  The role of economic valuation in its modern form had already been successful promoted politically under the Reagan administration, which in 1981 institutionalised the use of cost-benefit analysis for evaluating proposed environmental legislation (Presidential Executive Order 12291).  What is new is only the extent to which economic valuation of the environment, and fictitious commodity creation, have since been pushed, and the readiness of various actors to keep pushing ever further.

For the financiers, bankers and corporate capitalists the drive is the necessity of finding new means of exploitation to capture surplus value, as the old ones become exhausted and/or regulated (hence the need to also roll back regulation as Jutta Kill rightly notes as part of the valuation/market instrument game).  However, what about the environmentalists?  Why do the big environmental non-governmental organisations, such as the Nature Conservancy, back this?  Why do so many ecologists back Natural capital, ecosystems services valuation and biodiversity offsets?  Some notably examples are the likes of Gretchen Daily, systems ecologist Bob Costanza (who many now think is an economist!), and the Nature Conservancy’s chief scientist Peter Kareiva.  What about ecological economist Herman Daly who advocates Natural Capital and tradable permits markets, another financial instrument of exploitation?  (For a critique of emissions trading see Spash, 2010.)  One answer is that all the aforementioned are from the USA and all apparently support the existing corporate model of market capitalism, including prices as efficient means of resource allocation.  Of course they demand some side constraints on the existing systems, but they do not advocate any systemic change or conduct any analysis of the political economy.  Their politics appears to be classic American liberal and, despite the contradictions, their economics maintains core tenets of orthodox belief (e.g. prices allocate resources and do so efficiently).

Yet, there is, in addition to this American camp, another group, of what I term new environmental pragmatists (Spash, 2013), that is more broadly based and geographically widespread.  These are the ones Jutta Kill rightly recognises as advocating instrumental valuation of species, such as bees.  They are often also ecologists, but not necessarily in favour of the American way of life or its inherent political liberalism.  Their concern is to be pragmatic because the desire for material wealth and financial affluence now seems to dominate all systems of political economy, and so they believe the expression of value must be as instrumental to those ends.  Their training in an instrumental natural science may be in part to blame, but their political and economic naivety also plays a key role in their belief that they can win the numbers game in a battle with bankers, financiers and big corporations.  Still, once again, I would emphasise that core aspects of this monetary valuation game, for ‘saving’ the environment, are quite old in content.  In the period from 1880 to 1920 over 1000 studies calculated the monetary value of services provided by birds as a means to show their value and aid their conservation, but the new insecticides made the birds’ services (and the valuation exercises) redundant.  The positive “externalities” of birds had evaporated due to technological innovation.

In the report, the term “externalities” is used repeatedly and highlighted as a key aspect of the economic approach.  This is a highly problematic concept (as the report notes), but also one that is totally misleading as to the issues involved.  There is nothing about pushing costs on to others that is external to the modern economic system of capital accumulation (whether based in Europe, USA, China, Russia, India, Brazil, Australia or anywhere else).  Indeed this is an essential aspect of how the modern economy operates and maximises the surplus that accrues to the minority.  The powerless, women, poor and the environment are there to be exploited as an internal operation of the political and economic system.  There are no errors or need for systems correction.  This is why Karl W. Kapp (1950) called such activities cost shifting exercises, not externalities.  In our critiques, improving the accuracy and meaningfulness of terminology and conceptualisation would help.  So let’s stop using the neoclassical economists’ term “externalities” for something that is internal to the capital accumulating economic system.

Indeed in other places this accuracy of conceptualisation is exactly what is argued for, e.g. with respect to the need to stop calling Nature “capital” and ecosystems functions “goods and services”.  Jutta Kill correctly identifies the capture of the environmental movement by corporate interests and how this has been matched by the conversion of language and concepts in key areas of the natural sciences informing that movement.  Thus ecology and conservation biology have lost their own scientific terminology (Spash and Aslaksen, 2015).

Along the way I would like to note the importance of the point about the impossibility of ever “internalising externalities”.  As the Laws of Thermodynamics make clear, the materials and energy that we put into our economic systems will come out the other side as waste in equal amounts (but different form).  In short all our production and consumption of energy and materials creates problems for the model of perfect resource pricing so beloved by economic textbooks and neoliberal politics.  If we take the economists at their word, then they must admit that all the prices in the economy are wrong and need to be changed, i.e., price ‘correction’ to account for “externalities” would result in full scale technocratic economic intervention, or what used to be called a planned economy.

The links between offsetting pollution and biodiversity loss through markets, or market like mechanisms, also needs to be linked to the model of development that is now prevalent.  That is a model of resource extractivism come hell or high water.  The backing for the extractivist regime, that maintains the resource supply chains for the consumerist society, is the military.  Fear is a key tool of control now widely deployed in our supposed democracies of the West.  Ours is a world of military intervention and domination in which violent destruction of the ‘other’ is totally legitimised daily in the news, media and entertainment.  Nature is no different, if it gets in the way, just wipe it out and explain to those who benefit the necessity of this for maintaining the political and economic system.  As long as the imperial mode of living (Brand and Wissen, 2013) is enjoyed by enough key people, in the right power structure and sections of the segmented society, nothing needs to change.

After having made these provisos, I would like to note that the report hits many nails squarely on the head.  Not least of these is the fallacious concept of Green Growth and its associated Green Economy.  In the end, selling monetary valuation as saving the planet goes along with the current advocacy of economic growth as the solution to human induced climate change (Spash, 2014).  Both are clearly just, a new improved formulae of that good old favourite corporate product, Greenwash.

References Cited
Brand, U., Wissen, M., 2013. Crisis and continuity of capitalist society-nature relationships: The imperial mode of living and the limits to environmental governance. Review of International Political Economy 20, 687-711.
Kapp, K.W., 1950. The Social Costs of Private Enterprise. Shocken, New York.
Polanyi, K., 1944. The Great Transformation, 1st edition ed. Rinehart & Company Inc., New York/Toronto.
Spash, C.L., 2010. The brave new world of carbon trading. New Political Economy 15, 169-195.
Spash, C.L., 2013. The shallow or the deep ecological economics movement? Ecological Economics 93, 351-362.
Spash, C.L., 2014. Better Growth, Helping the Paris COP-out?: Fallacies and Omissions of the New Climate Economy Report. Institute for Environment and Regional Development, Vienna.
Spash, C.L., Aslaksen, I., 2015. Re-establishing an ecological discourse in the policy debate over how to value ecosystems and biodiversity. Journal of Environmental Management 159, 245-253.