[R-G] [BillTottenWeblog] The Wealth of Nature

[Bill Totten]

by John Michael Greer

The Archdruid Report (July 08 2009)

Druid perspectives on nature, culture, and the future of industrial society


Last week's Archdruid Report pointed out that modern economic thought,
through its lasting difficulties in coming to terms with the dependence of
human economic activity on the world of nature, has played a very large
role in backing industrial civilization into its present difficulties. It
probably would have been wise, though, to point out that the word "modern"
here is being used in a historical sense, for these difficulties date
straight back to the beginning of economics as a distinct field of study.

Adam Smith, who set the whole ball rolling with his The Wealth of Nations
(1776), started that book with the following sentence: "The annual labor
of every nation is the fund which originally supplies it with all the
necessities and conveniences of life". It does not seem to have occurred
to Smith that the annual labor of a nation would be utterly useless
without the natural raw materials, goods, and services - in the language
suggested in last week's post, the primary goods - that enable labor to be
done at all, by making human life possible in the first place and by
providing all that labor with something to labor on. Certainly it has
occurred to very few of his successors.

The classic example is David Ricardo, who remains an influential figure in
economics, not least because his theories - he was a vocal proponent of
free trade, and provided what are still the standard arguments in its
favor - proved to be highly useful to the British Empire in its time, and
of course to the American empire in ours. Ricardo is famous for, among
other things, building a significant part of his economic theories on the
claim that land retains its "original and indestructible" economic value
no matter what economic use is made of it.

This is an odd claim. Even in the early 19th century, when Ricardo
originally made it, plenty of people could have set him straight. Bad
farming practices that led to soil sterility were known in Ricardo's time,
and so was the impact of industrial pollution - though of course we have
gotten much better at both since then. It may be relevant that Ricardo was
born and raised in London, as far from the realities of agricultural life
as you could get in his time; it is at least as relevant that his theories
show the habit of dodging inconvenient facts for what look uncomfortably
like ideological reasons - his arguments in favor of free trade, for
example, only work if you grant the unstated assumption that international
trade and its supporting infrastructure cost nothing in terms of labor,
materials, or money, and also dodge the extent to which control of the
transport routes and exchange processes determine who profits from the
trade.

What is far more interesting, though, is that his definition of land
prefigured the way that natural resources have been treated by most
economists ever since. This is as true of radical economists as of their
capitalist rivals; recent proponents of "green socialism", for example,
might want to reread Marx, who explicitly rejected the idea that the "free
gifts of nature" could have any value at all. (The disastrous mistreatment
of the environment common under Marxist regimes in the 20th century was
not accidental, but a natural outgrowth of Marxist theory.) Nearly the
only concession made to the ecological dimensions of economics in the
mainstream, and it's a fairly recent one, is the concept of
"externalities" - the recognition that if somebody does something that
fouls the environment, other people may suffer a loss of economic value as
a result, and might deserve compensation for that.

Now of course this is true, and Garrett Hardin's famous essay "The Tragedy
of the Commons" (Science, 1968) built on that insight to remind us that a
society that permits the advantages of ecological abuse to go to
individuals, while the costs are shared by the whole society, is
effectively subsidizing the destruction of its environment. Still, both
the "externalities" argument and the structure Hardin built on it miss the
central issues raised by the interface between environment and economics.
Both tacitly accept Ricardo's fantasy of invulnerable land as the normal
state of affairs, apply it to the entire environment, and then focus
attention on the exceptional situation when somebody does manage to make
land (or some other environmental resource) less valuable.

Let's take a closer look at the land whose value Ricardo considered
"indestructible". He was talking primarily about land as an economic
factor in agriculture, and so shall we. What he apparently did not
realize, but ecologists have shown in exact detail since his time, is that
fertile land suitable for growing crops does not simply happen. Like
anything else of value, it must be made, and once made, it must be
maintained; the only difference is that the laborers that make and
maintain it do not happen to be human beings.

Soil suitable for crops, after all, is not simply rock dust. A large part
of it - sometimes more than half - is organic matter, some living, some
dead but not yet wholly decayed, some dissolved into organic colloids
complex enough to give analytical chemists sleepless nights, and all of it
is put there by the activity of living things over long periods of time.
Energy and raw materials flow through soil, uniting bacteria, fungi,
algae, worms, insects, and many other living things into one of the most
intricate ecosystems on Earth. Plants participate in and depend on this
bewilderingly complex world; they draw water and mineral nutrients from
it, and cycle leaves and a wide range of chemical compounds back into it.

The farmer who wants to grow crops is attempting to extract wealth from
the underground ecosystem of the soil. She can ignore that, and simply
plant and harvest with no attention to the needs of the soil, but the soil
will be depleted of nutrients in a few years and her crops will fail.
Alternatively, she can replace nutrients with chemical fertilizers,
predators with pesticides, and so on; if she does this she will have to
use steadily larger doses of chemicals to get the same yields, and when
the chemical feedstocks run out - as they eventually will - she will be
left with soil too sterile and pest-ridden to grow much of anything. If
she wants to fulfill Ricardo's promise and hand the land on to her
grandchildren in the same condition that it came from her grandparents,
she will have to provide the things the soil needs for its long-term
health. Put another way, she will have to barter with the soil, giving it
the things it will accept in exchange for crops.

This is the premise of organic agriculture, of course. It's a premise that
has proven itself over millennia, in the Asian farming regions that
inspired the organic pioneers of the early 20th century to devise a more
general way of doing the same thing, and over decades, in the farms now
using organic methods to get yields roughly comparable to those of
chemical agriculture. The organic approach has many dimensions, but one
may not have received the importance it deserves. To an organic farmer,
land is not a commodity that can be owned but a community with which she
interacts, and that community has its own economy on which the farmer's
own economy depends.

Imagine, to develop this concept into a metaphor, that our farmer got
crops, not from the fields, but from a village of some indigenous tribe
near her home. The inhabitants of the village are deeply conservative, and
their own economy follows traditional patterns not subject to change. If
the farmer wants crops, she must find out what the villagers are willing
to take in exchange for them, and that will be determined by the internal
dynamics of the village economy: what is already produced in surplus
amounts, what is scarce, what is desired and what is detested by the
villagers. Her relations with the village, in other words, would be
exactly the same in outline as those of an organic farmer with her land.

The same thing is true of every other form of economic activity, though
the dependence on nature may be less obvious in some cases than in others.
Behind the human activities that produce secondary goods lie nonhuman
activities that produce primary goods - the biological cycles that yield
soil fertility, crop pollination, and countless other things; the
hydrological cycles that put fresh water into reservoirs and taps; the
tectonic processes in the crust that put economically useful metals and
minerals into veins in the rocks; and, of central importance just now, the
extraordinarily complex interplay of biological and geological processes
that stored away countless billions of tons of carbon under the earth's
surface in the form of fossil fuels.

Conventional economics assumes that these things get there by some
materialist equivalent of divine fiat. This misstates the situation
disastrously. Primary goods are produced by an exact analogue of the way
that secondary goods are produced: raw materials are transformed, through
labor, using existing capital and energy, to produce goods and services of
value. The difference is simply that all this takes place in the nonhuman
world. Human beings do not manage the production of primary goods, and the
disastrous results of trying to do so suggest that we probably never will;
on the other hand, in at least some cases - maltreated farmland is a good
example - we can interfere with the production of primary goods, and
suffer the consequences.

E F Schumacher's insight, that goods produced by nature are the primary
goods in any economy, and those produced by human labor are secondary
goods, thus needs to be extended further. There is also a primary and
secondary economy. The cycles of nature that produce goods needed by human
beings constitute the primary economy, while the process by which human
beings produce goods is the secondary economy. The secondary economy
depends utterly on the primary in at least two ways. First, as discussed
last week, something like three-quarters of all economic value in today's
world is produced by nature - that is, by the primary economy - and only
around a quarter is produced by human labor. Second, even that quarter is
made directly or indirectly from primary goods, and cannot be made at all
if the necessary primary goods aren't there. This is why the attempt to
replace a depleted natural resource with something else always involves
substitution costs: human labor must be brought in to replace some part of
the work previously done by nature, and the costs of that part of the work
thus end up having to be paid out of the secondary economy.

We have become so used to thinking of economics as a matter of human labor
that it's probably best to point out that what are sometimes called
"primary industries" - farming, mining, and the like - belong to the
secondary economy, not the primary one. The primary economy consists
wholly of those nonhuman processes that yield economic goods to human
beings. Thus a farm and the crops grown on it are part of the secondary
economy, while the soil, water, sun, and genetic potential in the seed
stock that make the farm and its crops possible are part of the primary
economy. In the same way, a mine is part of the secondary economy, while
the slow geological processes that put ore in the ground where it can be
mined are part of the primary economy. If you examine any human economic
activity, you'll find behind it natural processes that make that activity
possible; those processes are the inputs from the primary economy that
make the secondary economy possible.

Thus Adam Smith's dictum cited earlier badly needs reformulation. The
product of the natural environment of every nation is the fund which
originally supplies it with all the necessities and conveniences of life;
the annual human labor is simply the energy input required to turn some of
that product into forms useful for human beings. The wealth of nations, it
turns out, is ultimately the wealth of nature, and the sooner the value of
natural cycles and primary goods is taken into account, the better chance
our descendants will have of avoiding the self-defeating habits that are
pushing modern industrial system down the long road to collapse. To do so,
however, will require a clear sense of the difference between value and
price, or to put matters another way, between wealth and money - the theme
of next week's post. _____

John Michael Greer has been active in the alternative spirituality
movement for more than 25 years, and is the author of a dozen books,
including The Druidry Handbook (2006) and The Long Descent (2008). He
lives in Ashland, Oregon.

http://thearchdruidreport.blogspot.com/2009/07/wealth-of-nature.html


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