greencapitalism how it can save our planet ppt

How it can save our planet.By Keith Mcilroy Copyright 2011 Keith McilroySmashwords Edition http://thejollygreencapitalist.blogspot.commailto:keith@keithmcilroy.com This free ebook has be

How it can save our planet.

By Keith Mcilroy

Copyright 2011 Keith McilroySmashwords Edition

http://thejollygreencapitalist.blogspot.commailto:keith@keithmcilroy.com

This free ebook has been designed to help you get the message out that we need to change our economic model to one that is truly sustainable It is available free from every ebook retailer Although this is a free book, it remains the copyrighted property of the author, and may not be reproduced, copied or distributed for commercial or non-commercial purposes If you enjoyed this book, please encourage your friends to download their own copy at Smashwords.com, where they can also discover other works

by this author Thank you for your support

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Chapter 1: Introduction

“We CAN live a life of limitless economic growth on a planet of limited resources”

In the last 12 years the global economy has doubled to US $70 Trillion

During that same time oil is close to peaking, fresh water demand has ballooned, waste mountains have piled up and greenhouse gases have driven changes to our climate If we continue at that growth rate the

global economy will be US $700 Trillion per annum by 2050 and over US $11,000 Trillion by the end

of this century

Can we have a global economy 160 times bigger than today?

•The pessimists' view is that we cannot We will consume and pollute ourselves to a life of meagre subsistence - "Living in caves and eating moss"

•The optimists' view is that new forms of energy and new technologies will enable us to

continue to grow for ever without limit "Technology will solve the problem"

The reality is, of course, somewhere between the two

That 'somewhere' I call ‘GreenCapitalism’ 'Capitalism' because that really is the only economic game in town 'Green' because that is the only long term future for us

This book will help you understand why, when and how GreenCapitalism will impact on you It will explain the good and the bad of our current economic model, what impact future economic growth will have on our planet and what we need to put in place for our economy to become truly sustainable

The focus of this book is the Australian economy I have chosen the Australian economy because

Australia is going to find the transition to a sustainable economy more difficult than most other

economies It is highly dependent upon fossil fuels for its energy usage, giving individual Australians the biggest carbon footprint of any developed country Australia is the world’s quarry for so many of those natural resources that are going to become scarce over the rest of this century Australia also has a lot to lose from the destruction of our environment, from the rugged wilderness of Tasmania’s native forests to the beauty of the Great Barrier Reef

This ebook explains how (relatively!) easy it would be for Australia to transition to a truly sustainable economy If Australia can do it, every other country can do it as well

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Chapter 2: My journey to GreenCapitalism

"there is no need for there to be a 'loser' between economic growth and environmental protection"

I have spent most of my professional life identifying the need for change in organisations then helping those organisations to make those changes From turning around insolvent companies and integrating corporate acquisitions through to culture change programs on factory floors and in sales teams Like most people deeply involved in business, my focus was on this quarter's profit, this month's sales, this week's cash flow I paid scant regard to what was happening in the rest of the world, especially anything vaguely environmental

This started to change when my family flew into Manchester airport in 2000 to join me in the UK It was raining Hardly surprising for Manchester Over the next few months it continued to rain and there was more and more discussion on climate change At the time I dismissed this, along with 'peak oil' and 'global warming', as fear mongering from people who should get a 'proper job' Then in April 2001, it was announced that the previous 12 months had been the wettest in the UK since records began And records began in the 17th Century That caused me to wonder a wee bit But only for a bit as I soon went back to my insular business world and stayed there, even when we returned to Australia to find ourselves

in the middle of the 'hundred year drought'

Then, in 2003 The Business Council of Australia invited me to join their working group that was

preparing a range of scenarios for Australia in 20 years time 'Aspire Australia 2025' was put together over 12 months by running workshops with seventy of the leading thinkers in Australia We looked at every aspect of life in Australia It’s competitiveness, strategic defence, values and norms, it’s

governance and it’s sustainability

That experience triggered the start of my journey A journey that was initially focussed on climate change, for the more that I researched the arguments for and against, the more I came to the conclusion that this was a 'clear and present threat' to our quality of life It also quickly became clear that, until the business community took the risk seriously, then we would always struggle to make the changes needed

to reduce our greenhouse gas emissions And here was where the nub of the problem was

Business had great difficulty seeing how they could both, reduce their dependence on fossil fuels and also maintain the economic growth that is so fundamental to their business success In the same way that business saw the 20th Century as a battle between labour and capital, many now saw the 21st Century as being a battle between economic growth and environmental protection Yet, there was no real 'loser' in the battle between labour and capital, so there is no need for there to be a 'loser' between economic growth and environmental protection

Hence my promotion of GreenCapitalism I write, I speak and I present on how we can have our cake and eat it too

For those promoters of environmental protection who are cynical of capitalism, I would ask you to remember that capitalism has dragged millions of people around the world out of the miserable existence

so well documented by Charles Dickens and that capitalism, properly motivated, can achieve rapid change in society

For the promoters of economic growth who see environmentalists as a threat to our prosperity, I would ask you recognise we live on a planet of finite resources with a delicate ecosystem The sooner we modify our business practices to use renewable resources without unnecessarily damaging our

ecosystem, the more confident we can be that our prosperity can continue for our kids and grandkids

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Chapter 3: Why do we have an economy?

“It is innovation that improves our quality of life, not economic growth per se”

We have an economy for the simple reason that we do not have any choice Where there is trade there is

an economy Economic activity by itself keeps people busy but does not achieve that much What makes a real difference to our quality of life are the inventions and innovations that economic activity encourages

Think back to the first Neanderthal that took a sharpened stone, jammed it into a forked stick and

invented the axe That bit of innovation was an amazing step forward for them It would have made their life a lot easier That first axe design would have been very popular and we could imagine that, within a few years, everyone had an axe People would have been kept very busy making those axes but

no matter how many axes they made, their quality of life would not have improved much beyond that - until someone came up with a better axe

The same applies today The innovation of the pre paid postage stamp made communicating easier and improved our quality of life For the next century and a half many millions of stamps were printed, licked, stuck on envelopes and posted Many people were kept busy but, once it was in regular use,

there was little improvement to our ability to communicate until the electric telegraph arrived, followed

by the telex machine, fax and then email

So it is innovation that improves our quality of life What economic activity does though is promote competition The better axe and the fax machine came about because of competition The more

economic activity there is, the more competition there is and that then promotes the inventions and innovations to make our life easier That is the basic argument in support of globalisation

Globalisation is simply the relaxing of trade and currency barriers between countries That maximises competition which helps to improve the quality of life for everyone

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Chapter 4: How is an economy measured?

“GDP makes no distinction between good or bad economic activity”

GDP, or Gross Domestic Product, is the most common figure that is used to measure an economy GDP

is simply the sum total of all trades for a particular period The GDP for the whole world for 2009 was seventy trillion US dollars That is a 70 with 12 noughts behind it It is made up of

•Private consumption - eg groceries, fuel, cars, gambling, cigarettes, drugs

•Government expenditure - health, education, traffic accidents, natural disasters

•Private and government investment - houses, factories, roads, power stations, mines

As you can see, it includes ‘good’ economic activity – housing, health, education – and ‘not so good’ economic activity – traffic accidents, drugs, natural disasters For that reason it is not a particularly good indicator of the quality of our life but it does give us a fair assessment of the ‘quantity of life’

It also does not include any area of activity that does not have a dollar value attached to it So, the activity carried out by volunteers is not included All those people delivering meals on wheels, helping

on clean up Australia day, fighting bush fires, are excluded Because GDP includes activities that

worsen our quality of life (drugs, traffic accidents, wars, natural disasters) and excludes many activities that improve our quality of life, many people have been critical of it, but, whether we like it or not, we are stuck with GDP for the time being as the main indicator of our prosperity

The figure of US$70 Trillion that I quoted before comes from the International Monetary Fund There are many organisations that calculate GDP at country, regional and global levels All of them use

slightly different criteria and arrive at slightly different figures to one another It does not really matter which we look at as long as we remain consistent and use the same one every time

What you do need to understand though is that, when calculating the figure for the world as a whole, there are two adjustments made to the raw data provided by each country

The first is an adjustment for inflation It is important to understand that GDP has nothing to do with increases in the Consumer Price Index or any other measure of inflation GDP is calculated having taken out any element of inflation

If we did not adjust for inflation when calculating GDP numbers,

Zimbabwe would have had the biggest economy in the world!

The way that they account for inflation is a little confusing though Rather then reduce the current period’s figure for the inflation for that period, they actually go back to all the previous GDP numbers and increase them by the inflation amount

For example, if global economic activity, including inflation comes

to US$76 Trillion for 2010, that is the figure that the INTERNATIONAL MONETARY FUND will publish as being the

GDP for that year But they will then increase the GDP for all prior

years by the inflation rate for 2010 If, say, the global inflation

rate for that year is 5%, they will increase the GDP for 2009 up to

US$ 73.5 Trillion – US$ 70 Trillion plus 5% They would do the

same adjustment for all previous years.

The second adjustment they make is to account for distortions in exchange rates All global GDP figures are quoted in US dollars, but the exchange rate between each individual country and the US dollar is often distorted To allow for this they make a further adjustment called Purchasing Power Parity, or PPP This is rather like the ‘shopping basket’ price comparison between supermarkets They take a selection of items that make up GDP and compare their prices between countries to identify distortions

in exchange rates

The Economist magazine runs a very simple PPP exercise every

few months They call it the Big Mac index They look at the price

of a Big Mac in every country and price that in US$ based on the

exchange rate at the time It is surprisingly accurate in identifying

distortions in exchange rates.

In summary, looking at global GDP numbers can be confusing but as long as you use data from the same source and using the same criteria then it can give you a very good idea of global economic growth For your information, the GDP numbers that I use are those prepared by the International Monetary Fund, adjusted for Purchasing Power Parity

Those are the two adjustments that are made when producing global GDP numbers

For an individual country, their GDP is also adjusted for their imports and exports The value of

products imported is deducted from the country’s GDP and the value of exports is added to that number For example, the price you pay for a plasma TV at the local store will be included in GDP but the import cost of that TV will be deducted That way we arrive at a true figure for Gross Domestic Product

You will also see Gross National Product (GNP) figures being mentioned This is GDP plus the income

of residents of that country working overseas, less the income earned by foreigners in that country For countries such as Australia there is little difference but for many developing countries it can be quite significant as they often have many residents working overseas and remitting money back to the country

So GDP gives us an idea of how much economic activity there is in a country or in the world, but, as we said in the previous chapter, economic activity by itself does not really achieve much What we need is ingenuity So how is that measured?

In economists jargon, ingenuity and innovation is referred to as ‘productivity’ Much as we hear

politicians and the media going on about economic growth every day, it is rare that you hear much talk about productivity That is mainly because improving productivity is very difficult to do and so

politicians try to stay clear of it We will talk more about that in the next chapter But it is measured The measure that is often used to compare the productivity of different countries is the simplest of all economic calculations It is total GDP of a country divided by its population, otherwise known as GDP per Capita or GDP per person.

Because GDP and GDP per person have a number of question marks about their effectiveness in

assessing the quality of life for the citizens of a country, the United Nations have come up with an alternate measure called the Human Development Index, which, of course, has been reduced to the acronym HDI

The HDI index is calculated by taking the GDP per person (productivity) of a country together with life expectancy at birth and literacy levels This is an extract comparing GDP per capita with the HDI

ranking for some of the richest and poorest countries from 2008

The HDI is also a rough and ready calculation on ‘quality of life’ as compared to our ‘standard of

living’ Economists are slowly developing different criteria for assessing a country’s performance on other than financial returns However, in a world driven by capitalism, it will be a long time before GDP

is superseded as the main criteria for economic and therefore political success

Chapter 5: How does an economy grow?

“Without population growth and natural resources, Australia’s economy would be stagnant”

There are four principle ways to grow an economy

The first way is to simply increase population The more people in a country, the more economic

activity there will be, therefore, GDP will increase These are Australia’s GDP and Population figures for the last 5 years:

As you can see, although Australia achieved regular growth in it’s economy, most of that growth has come courtesy of population increase through immigration Without those immigrants, Australia’s growth would have been much lower That is why most governments love immigration, despite the political protestations over asylum seekers It is the best way to avoid recession as Australia did (just!) following the global financial crisis of 2008

The second way to grow an economy is to use up its natural resources Every time Australia digs a new mine or discovers a new gas field, their economy will grow They can also cause the economy to grow

by introducing charges where there were no charges before E.g if the local council decide to charge people to use Bondi Beach, that will increase GDP

The third way is increased investment If Warren Buffet decides to invest $3 billion into Australia by, say, building a new hotel, that will increase our GDP Similarly if Australians stop saving money (or paying off their mortgage which is effectively the same) and instead, treat themselves to a holiday on the Gold Coast or buy a new car, that will increase their GDP

The fourth way of increasing GDP is improving productivity This takes us back to the need for

ingenuity and innovation to improve our quality of life This is the most important and the most difficult for a government to manage That is why they don’t like talking about it very much The broadest measure of productivity is GDP per person These are the figures for Australia for the last 10 years:

However these are very broad numbers and are influenced by demographics (ratio of the working

population to non working population) average weekly hours worked, how much we sell off our natural resources, etc

The Australian Bureau of Statistics uses a more tightly focussed calculation - ‘Multi factor productivity’

As they say on their

website:-The most comprehensive Australian measure of productivity available is multifactor productivity It gauges the efficiency with which inputs are transformed into outputs In the short term, this reflects the impact of an array of factors, such as the utilisation of available labour and capital, economies of scale, and resource reallocation In the long-term, it represents improvements in ways of doing things

(technical progress), which is the ultimate source of economic growth and higher living standards.

And these are the figures for Australian industry for the ten years to June 2009:

Not a very good set of numbers!

In summary, Australia’s economy has grown over the last decade primarily through increased

immigration and the global demand for the resources that they dig out of the ground So much for being

a ‘smart country’!

Incidentally, the reason that productivity is seen as being so hard for politicians is that it needs long term investment in education, industry policy and infrastructure And we all know how politicians have no time these days for long term policies They would rather rely on more immigration and encouraging the plundering of the planet

Now we have an understanding of an economy, let us now see how economic activity impacts on our environment

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Chapter 6: What impact does economic growth have on our environment?

“The global economy has doubled over the last 12 years Is it surprising that the planet is warming

up, the oil is drying up and the waste is piling up?”

For this chapter I have to thank Barney Foran (ex CSIRO Sustainable Ecosystems), Manfred Lenzen and Christopher Dey (Sydney University) for the work they did for the Australian Commonwealth Scientific and Research Organisation (CSIRO)

In 2005 Barney and his team produced “Balancing Act: A triple-bottom-line analysis of the Australian

economy” It examined over 130 industry sectors and looked at their impacts on 10 social,

environmental, and financial indicators

It determined that every $1 of Australian GDP:

•Produces 38c of Gross Operating Surplus

•Generates 16c of export revenue

•Requires 19c of import value

•Requires 1 min, 45 secs of employment

•Pays 34c income to employees

•Produces 21c of government revenue

•Produces 1.02kg of greenhouse gases

•Requires 41.32 litres of fresh water

•Disturbs 3.21 square meters of land and

•Uses 7.65 megajoules of primary energy (that is the equivalent of 2 kilowatt hours of electricity

or half a litre of crude oil)

This excellent report (all 700 pages of it!) demonstrates the connection between economic activity and our society at large In particular, it demonstrates the clear link between economic activity and our environment Looking at the industry segments individually we see that:

•Forestry and Brown Coal are the biggest producers of greenhouse gases Forestry producing 97 kgs of greenhouse gases for every $1 of production and brown coal (brown coal is poorer

quality than black coal) producing 27 kgs per dollar The forestry figure is primary driven by the destruction of Australia’s native forests.

•Although the average dollars worth of Australian production requires 41 litres of fresh water, sugar cane requires 1,246 litres, cotton 1,613 and rice requires 8407 litres!

•The greatest disturbers of Australia’s land are, not surprisingly, livestock with beef cattle at 187 square meters and sheep (including wool) at 144 sq meters

•Energy hungry industries include Alumina and Aluminium at 61 and 45 megajoules per dollar, respectively and electricity supply at 40 megajoules

But what of the world? Sadly, Barney has not been given the resources to complete this analysis for the planet, so we have to look at other data

First of all, let’s see what global economic growth has been over the last few years

This is a graph showing global GDP for the last 12 years Courtesy of the International Monetary Fund

in October 2010 This is calculated in US dollars adjusted for Purchasing Power Parity which, I hope, you remember from previous chapters

Global GDP (PPP) - IMF October 2010

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000

•The number of cars on the road doubled

•Loaves of bread made doubled

•Cigarettes sold doubled

•Expenditure on children’s education doubled

•Plasma TVs sold, doubled

impact on our waste mountains? What has been the impact on, arguably, our most valuable resource – oil?

For answers to these questions, let us go to industry leaders themselves:

First of all, peak oil –

“…world will never be able to increase its output of oil from the

current level” - Christophe de Margerie, Total CEO

“after 2015 supplies of easy-to-access oil and gas will no longer

keep up with demand.” Jeroen van der Veer, Royal Dutch Shell

CEO

"The next five years will see us face another crunch – the oil

crunch.” Richard Branson, Virgin CEO

“the world's production of conventional crude oil may have already

peaked as long ago as 2006” Dr Fatih Birol, Chief Economist,

International Energy Agency

Then fresh water:-

“Water is the oil of the 21st century” – Andrew Liveris, DOW

Chemicals CEO

“Water consumption doubling every 20 years…and is

unsustainable” – Goldman Sachs

How about waste?

“One half to three quarters of annual resource inputs to industrial

economies are returned to the environment as wastes within a

year.” – World Resources Institute

Finally, what about greenhouse gases? They increased by 20% over that 12 years –

“Climate change poses clear, catastrophic threats We may not

agree on the extent, but we certainly can't afford the risk of

inaction” Rupert Murdoch, Newscorp CEO,

So we have had a booming global economy that has doubled over the last 12 years and that has led us ever closer to resource shortages, the ballooning of waste and the continued pollution of our atmosphere.But what of the future? We have doubled over the last 12 years How quickly will we double again?This is the International Monetary Funds projection for global GDP to 2015 by which time the global economy will by US$99 Trillion or some 40% higher than 2009 That growth will add the equivalent of the resource demands, waste and pollution of 10 Chinese economies over just 5 years

Projected Global GDP (PPP) - IMF October 2010

0 20,000 40,000 60,000 80,000 100,000 120,000

Projected Global GDP @ 5.75% Growth Rate

0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000

And what happens if we project this through to the end of the century?