It is time for Asia to rewrite the rules of capitalism

By Chandran Nair

Click here to read the original article as published in Financial Times.

The 20th century's triumph of consumption-based capitalism has created the crisis of the 21st century: looming catastrophic climate change, massive environmental damage and significant depletion of natural resources. Asia is now at the heart of it.

The western economic model, which defines success as consumption-driven growth, must be challenged. Asia, while apparently promising most for this model's continuation because of its large population, is paradoxically the region best placed to do this.

Advocates of the western model tend to play down its dramatic effects on natural resources and the environment. They refuse to acknowledge that their advice runs counter to scientific consensus about limits and the need for stringent rules on resource management.

Instead, they argue that human ingenuity aided by innovations in the markets will find solutions. This is rooted in an irrational belief that we can have everything: ever-growing material wealth and a healthy natural environment. The stark evidence in Asia, where the majority has not even begun to consume to its potential, should be proof enough that this is not possible. Yet denial continues.

Imagine a world in which, by 2050, four to five billion Asians are consuming like Americans. The result would be catastrophic, yet this is what Asians are being told to aspire to. As Asia rises, the two billion now at the margins of the consumption economy will radically transform global demand and supply, not only for non-renewable commodities such as oil and coal, but also for renewables such as food. This is no Malthusian rehash.

Asian political leaders must demonstrate leadership. The western emph-asis on markets, technology and finance cannot deliver. Do Asian leaders allow western-style economic freedoms to flourish and witness the destruction of the world, or demand stronger action by governments to ensure these mechanisms deliver a sustainable - and fairer - future?

Many experts offer answers that do not confront the reality of resource constraints. Typically, they prescribe market solutions combined with technology and financial tools such as emission trading schemes.

Yet politicians must recognise that technology cannot provide all the answers. Blue fin tuna, if fished to extinction, cannot be recreated in a petri dish. Nor can business be expected to lead the way in this area. The new rules needed to change the way people consume may spell the end for some companies, and they will fight to prevent change.

This is why Asian governments must intervene. Limits must be placed on various forms of consumption, with policies put in place to enforce them. This starts with access to resources and the rights to various forms of consumption. Their core task is to rewrite the rules of capitalism - by putting resource constraints at the centre of policymaking.

Governments have two key mechanisms at their disposal. First, negative environmental externalities, currently excluded from the cost of many goods and services, must be priced in through the imposition of taxes and fees and the removal of subsidies. Second, caps must be put on the use of resources that are being overexploited, including, where appropriate, outright bans on use. With these tools, consumption can be controlled and where necessary reduced.

Policymakers need to challenge the vested interests arguing that consumption-driven capitalism is the only course and that any alternative will lead to poverty and unemployment. As they do so, they should make clear that this does not mean people can no longer aspire to be prosperous. It means rather that expectations must be aligned with the constraints under which all societies operate - but Asian ones above all.

Asian governments must take responsibility for current and future generations. They must demonstrate that what they are doing is not only necessary but equitable - and therefore legitimate.

Suggesting a future in which economic policy is framed around limits, restraint and restrictions is to invite controversy, but Asian governments must start down this road. They have no choice. They will be held account-able not just by their own citizens but by the world at large.

The author is chief executive of the Global Institute For Tomorrow. His book 'Consumptionomics: Asia's Role in Reshaping Capitalism and Saving the Planet' is due out in October