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‘You need a command economy, and this goes against conventional wisdom’

‘You need a command economy, and this goes against conventional wisdom’

11-11-2019 | Interview
Chandran Nair is not one to pull his punches when it comes to dealing with the world’s problems. One of the leading global figures in framing sustainable development, he is the founder and CEO of the Global Institute For Tomorrow (GIFT), an independent think tank which aims to promote greater understanding of how Asia is changing. He is the author of ‘Consumptionomics: Asia's Role in Reshaping Capitalism and Saving the Planet’.
  • John Coppock
    John
    Coppock
    Investment writer
We talked with him about sustainability issues run into political dogma, why not everyone can have middle-class lifestyles, and how consumption lies at the root of the resources problem.

Does Asian consumption present a major problem for sustainability?

“You don’t have to be a rocket scientist to understand that six billion Asians in 2050 consuming like the average American or European is not possible. It would defy all of the laws of science, physics and thermodynamics. That is the crux of the debate for the 21st century: how do we deliver on prosperity, and there’s a big question about how do we define prosperity. What are the limits to our prosperity? If you accept the scientific evidence, then unbridled consumption is not an option.

So that's really where I'm coming from. For Europe and the United States, much of the discussion on sustainability has essentially always deliberately avoided this difficult issue, because it's politically unacceptable to talk about reducing consumption.”

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But aren’t India or China entitled to have to have the living standards of the West?

“The solution is to think about what people are entitled to, and to look at the problem as an existential threat, whether it's climate or other resources. Then you ask what a solution entails, and it entails defining what people can have, rather than saying people can have everything. That's where I think the ideological obsessions of having free markets and unfettered rights get in the way of logical thinking.

The narrative is currently described by so-called experts who see it all through a lens which avoids the discussion about what can Indians actually have. My point is that all Indians can't have what is defined as a middle-class lifestyle. These are economic definitions which do not reflect anything about the constraints on India. You really need a command economy, and all of this as you know goes against the grain of current conventional wisdom.”

What about moving to a circular economy?

“It’s easy to talk about a circular economy for small, rich economies that are well governed. But for large economies it is very difficult. China can do it but India can’t, and this is the thing that makes people really uncomfortable, because China has such a strong state. The Chinese government can dictate certain things. In my view its ability to dig deep under these conditions is a positive outcome for the nation going forward. In India, where democracy is seen as essentially the way it's organized, it's a mess. India can't do anything – it can’t even build toilets.”

So, do we dump democracy?

“The problem we have – and this is also very controversial – is that we have this world view that somehow democracy is the sacrosanct thing that we have to protect. But democracy doesn't sit comfortably with the notion of individual restraint or collective welfare. So, we can use these terms, but the reality of large-scale societies is essentially one of how do you manage a shared economy where the base is so low. Even in richer societies such as Hong Kong, where we have a free market capitalist economy, there are people who are much poorer than others.”

Is the solution then to move to command economy and do what China does?

“I think the words ‘democracy’ and all of that are emotive words. I would argue that China is more democratic than India, because if the purpose of a government is to work for the public good and therefore improve their quality of life, then China has delivered that while India hasn’t. Words such as ‘democracy’ are inappropriate because they come with emotion and definitions which in my view do not suit the 21st century and the existential threats that we have.

The solution in my view is models where essentially collective welfare overrides individual rights, and resource constraints essentially dictate how the economy is shaped.”

What about population control, which was practiced by China?

“Population is an interesting one, as only China could do a one-child policy; no other country could do that. India dabbled with it but failed, and it resulted in a whole lot of chaos. My working assumption is that the global population will peak at between 9.5 and 10 billion people, or some say even 11 billion people. The world can support 11 billion people, but it can't support 11 billion people in which 3 billion consume 80% of the world's resources. That is the problem.

And that’s the same at country levels too – in India,10% of the population consumes 80% of the resources. It's an extraordinary amount of concentration of consumption in the hands of a minority, and you can't have this.”

Is properly pricing resources part of the solution?

“Pricing resources means pricing consumption. My fundamental view is that you have to price consumption. If you're pricing palm oil, then you are pricing rainforests, which has an impact on carbon. We have to start pricing water, as it is totally underpriced. In India, in most places, water is free. So, you can see what's happened – you have the illegal use of fresh water all over the world.

Pricing is central to stopping this. To control the resources used, you would have to price them, and therefore challenge the current economic model, which as I often say allows you to buy one and get one free. That is voodoo economics.”

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