All consumed out

By Chandran Nair
South China Morning Post

Ever since the world has been plunged into financial crisis, developing Asia has only heard one mantra from developed-country economists: boost consumption to restart the world's economic engine. To follow their advice would set the stage for a far greater crisis that no amount of stimulus would be able to contain. On the contrary, this is an opportunity for Asian leaders to call a halt to consumption-driven economic models and show the path of escape from environmental catastrophe that the model would ensure.

If the calls of some of the western economists are taken to heart, and Asia comes even half way to approaching western consumption rates, all efforts to counter climate change and tackle the world's other pressing environmental and social challenges are doomed.

Quite simply, in our resource-constrained world, there isn't enough to go round for everyone to aspire to such levels of wealth and consumption. If, say, just half the population of China get rich enough to start eating seafood - hardly an outlandish aspiration - then the oceans will soon be emptied. Neither technology nor money can address this problem though there are those who will try to convince us that even the mighty blue fin tuna can be farmed to sate our appetite for sashimi. But who is to say to the Chinese that they should be denied their swordfish and tuna?

At the same time, if Indians aspire to own cars like westerners (currently less than 10 out of every 1,000 people compared to about 700 out of 1,000 in the west), then the consequences for oil supply and prices, as well as the environment, could be very serious. If Chinese and Indians reach western car-ownership levels over the next 20-30 years, there could be anything from 1.5 billion to 2 billion cars just in these two countries. Some estimates suggest it would take the entire Opec oil supply to fuel them. As for the price of oil, ask the scenario planners at the oil majors. But who is to deprive Indians of their Tata Nano?

And if Asians eat meat like Americans (Chinese today consume about 50kg per capita compared with Americans' 220kg) and own houses like Australians (who have the largest ecological footprint in the world) then the consequences will be catastrophic not just within their borders but for the biosphere, too. Thus it should be clear that Asia, as a latecomer to the model of development that puts a premium on wealth creation at any price, will never be able to attain the standards of living taken for granted by most in the west. Nor should they aspire to it.

Conventional wisdom - of the kind adhered to by mainstream western economic thinking - maintains that technology, trade and smart financial tools, combined with a better pricing of externalities, will somehow both end poverty and save the world. But anyone who thinks technology will solve such problems is deluded. It's just plausible - as British scientist James Lovelock advocates - that the mass construction of nuclear power stations could generate the energy needed, though some major public concerns over safety and proliferation have to be overcome first. What this means is that the decisions that determine the world's fate will take place in Beijing, New Delhi and Jakarta - not Washington, New York or the capitals of Europe.

In the wake of the financial crisis, Asia's leaders must present a different message: that measures to deal with global warming and other ecological concerns - far from being "noble objectives" that can be postponed until the global economy is fixed, as Morgan Stanley Asia chairman Stephen Roach has said - must be the priority.

The good news is that few of these leaders really believe that pursuing the western model of consumption-driven capitalism is the answer to their countries' development needs.

Premier Wen Jiabao articulated this sentiment at Davos when he said the current crisis was rooted in "inappropriate macroeconomic policies"; an "unsustainable model of development characterised by prolonged low savings and high consumption"; and "blind pursuit of profits".

Unfortunately, most Asian leaders are unwilling or unsure how to articulate the dilemma they face, leading to a conspiracy of silence, or at best a hope that solutions can be found later. Even state-run China will be challenged to shape polices that reverse the globally interlocked development path of the last 30 years.

Of course, for Asians, it will be harsh to be told that, as latecomers to the capitalist party, they will never be able to attain the standards of living taken for granted by most in the developed countries.

But it's a message their leaders have to deliver: that a new economic order is needed - one that stresses providing the basics of life; appreciating that there are limits to resource exploitation and growth which, in turn, have security implications; and allowing more to share in the wealth that nations generate. They have to accept that, in today's world, growth is redefined by quality, not quantity. This may call for strong, even draconian, regulations.

But not all consumption is destructive and, in shaping polices, Asian governments should be stimulating their economies and linking it to moving away from export-led growth by investing in education, clean water, sanitation and health care.

Can Asian leaders tell their populations that their aspirations rooted in more material consumption can't be reached? Yes - if they can stand up to economists like Henry Paulson, Dr Roach and others by saying Asians can't be expected to help the developed world regain its economic footing if they can never realise the lifestyles of those they are aiding.

And yes - if they can refuse western entreaties demanding far greater support with environmental technology for their energy and other needs. If they don't, the world will only be storing up bigger trouble for the decades ahead.

Notions that the world's destiny rests with the west must be put aside. The decisions, smart or otherwise, that will decide the future of capitalism and the fate of the Earth's climate will be taking place in Asia. Welcome to the 21st century.

Chandran Nair is the founder and CEO of the Global Institute For Tomorrow.