Is money real?

Introduction to green valuation system:

by Patali Champika RANAWAKA

A few weeks ago, Kante the Deputy Director of the United Nations Environment Program (UNEP) was addressing Sri Lankan Environmental Law enforcement officials at a seminar organized by the Central Environmental Authority. Our Attorney General Mohan Peiris, eminent judge C.G. Weeramanthri and I were some of the key speakers at the seminar. Kante a Kenyan is from Senegal and has been born in a small rural village far away from Nairobi, recalled his childhood days with his thirteen family members and other extended families. There he posed a question, "How could we define wealthiness or poverty using money as a yard stick? Nowadays absolute poverty is defined as earning of an individual who earns less than one Dollar per day. Kante told that august audience that his father earns nothing, not a cent. Even their extended families did not know how to use money. But they had property and lived happily, they were not poor people either. The environment provided them with what they needed and in turn they did not harm the environment. So he told us that less than one dollar per day has no meaning. Therefore poverty could not be defined in that way. At the tea break I told Kante that in Sri Lanka the same phenomena could be identified. Unpaid voluntary work by mothers, Bhikkus and other social workers and labour workers and environmental services are the biggest components of our economy. These services are not represented in the central bank reports. Money is not everything.

A few months ago I met one of the most successful Sri Lankan businessmen who knows how the global money crisis are revolving.

Investing, divesting and profiting from this money circuits are his favourite game and life course. We were talking about the global recession and how China has been able to create their own markets and how they bailed out the USA and other western markets. His opinion was that after this recession serious divisions which exists in global labour market (low and high labour cost) would decipher and homogenous labour and financial market will emerge. When we talked about bailout packages, I pointed to him that global high polluters (so-called developed countries) only contributed 16 million US$ for the climate adaptation fund whereas now the global need is at least 250 billion US$ per year to restore and rehabilitate the environmental damages caused by climate change which is directly a result of burning of fossil fuels by these so-called developed countries. But when their banks collapsed they came up with trillions to bail them out. He agreed with me about the hypocrite, selfish, inhumane principles of the so-called developed countries but he emphasized on government sponsored bailout packages. He told me an interesting story to explain how important is the bailout money when the money circuit is jammed and crashed. The story is this. One motel owed 100 bucks to its food supplier and asked for a loan from a bank. The Bank is unable to lend money because they too were undergoing credit problems. The food supplier indebted to the meat supplier 100 bucks and the meat supplier indebted to 100 bucks to farm worker. That farm worker owed 100 bucks to a prostitute and she inturn is indebted to that motel 100 bucks.

All are in a debt trap and money circuit is not working. So if the government gives 100 bucks as the bailout package to the bank they can lend it to the motel. The motel can pay the food supplier and the food supplier can pay the meat supplier and he can pay the farm worker and farm worker can pay his dues to the prostitute and the prostitute in turn can pay her bills to the motel. 100 buck note is circulating and coming back to the motel and the motel can pay their draft. All the debts are cleared and the money circuit is activated! I partly accepted his argument because sometimes pseudo money can create value and I told him that in the bank or the motel were able to know about the stakeholders if their debt circle, they would be able to convince these people over some tea and a round table discussion may solve the debt credit problem without money.

Sixteen businessmen met in Zurich, Switzerland, 75 years ago (in the 1934). Then the entire western world had undergone a severe recession which later led to World War II. Banks have collapsed and money was not creating any value. So these businessmen got together to decide what they could do during this financial crisis. After discussing the economic situation they got to realize that one business was simply related to the other. One needed the bank loan to buy goods from the other. So why could not they form a sort of bartering organization among themselves avoiding banks and money altogether. They formed the co-operative type business to business (B2B) model and it has been still functioning! They call it WIP system and still creating annual volume of 2 billion US$. Money is not everything. There are many other forms of exchange to do business.

The problem of money and using it as a yardstick to measure prosperity had been exposed last year (2008). According to the human development index, Finland ranked No.1, as the most developed country in the world (UNDP report 2004-05). Its percapita income was about 54,000 US$. But after the global recession started, Finland was the first country to declare national bankruptcy! Why? Although their income level is high, their banks and government owed debts over 700 percent of their national GDP. Russia and IMF gave them bailout money and they have been recovering. The same thing happened in the USA. If we take their public debt (70 percent of GDP), their household debt (300 percent of GDP) and various other obligations and credits including Government budget deficits, trade deficits, bankrupts etc, into account, we would see that USA people do possess negative per-capita income and negative growth cum GDP value. So it is interesting to note that although money is not representing the whole value if we use it to show all the parameters (production, consumption, debts, credits etc,) we would be able to measure the true economic prosperity at least.

In year 1990, almost 20 years ago I penned a thesis with the help of a few others, called "11th hour of the modern development". In this thesis I was able to show the limitation of money, money circuit and of course the market place. My argument was that money only represent goods and services that are being exchanged in market. The exchanges forced or voluntary activities could not be represented in market.

More seriously those who could supply or demand from present market place like other species and future generations are not being represented in a market and their money could not value them.

When I used to visit districts like Kalutara or Galle, serious allegations on environmental degradations are forwarded to me. Huge amounts of earth expiration, earth filling, mega metal quarries have caused serious problems there. Because Southern express way and Colombo port projects need huge amount of earth, gravel and metal. I asked our CEA officials that when they approved environmental impact assessment reports (EIA), were they of the opinion about the cost benefit valuation of these mega projects. They answered negatively. It was a shame for any mega projects. We should have a cost including environmental cost and benefit analysis and should have a positive value or a net benefit, before these projects are launched. To date accelerate Mahaweli Project cost has not been repaid, economically it has been a debt trap. Its environmental damages are not yet considered. I once requested our Central Bank Governor Ajith Cabral to have a separate chapter in his Central Bank report to represent environmental damages (at least air pollution, water pollution and soil degradation) and environmental services in separate columns. Last year we use 17 parameters (soil preservation, water filtration and conservation, conserving bio-diversity, wood and timber value, other forest services etc.,) to evaluate environmental services of the Sinharaja Forest and Mangroves of the island. It showed us that although our national budget showed our Government spent over 10 million US$ for Forest Department to conserve these sensitive areas, its environmental services worth 60 million US$ annually.

Although, many goods and services which are produced from the resources extracted from environment have prices which has been determined by the exchange value of the market, environmental goods and services are not bought and sold in the market place. Thus if we allow extraction of environmental resource to the unfettered market, it would tend to over use the natural environments. Now we are using natural resources at a rate of 25 percent more than what it is being replenished. We are running at an environmental credit. So it is the lending that led to credit crunch and bailouts may cause more consumption and may drive towards environmental credit crunch or planet crunch!

However, there are various techniques to evaluate environmental servicing and regulate market. The market based instruments (MBI) are used to impose tax to discourage environmental unfriendly products and incentives are given to environmental friendly products. We introduced a environmental conservation levy as a tool to regulate the market.

Cost on polythene used to upgrade the recycling business and 1 percent tax on mobile phones are now used to initiate electronic waste management program. India implemented a new Act which has forced entrepreneurs to buy renewable energy and France introduced Carbon Tax (25 US$ on 1 carbon ton) on fossil fuels. But MBIs alone could not solve the problem.

Generally there are three concentric economic spheres, one is environmental resources, then goods and services as the middle sphere. The outer one is the financial sphere. Sometimes ripples in the finance sphere could simply be managed by using regulations, bailouts and other means. But if these monetary ripples hit the goods and services sphere it would result in an economic crisis. So, you have to take economic and political measures to solve these crises. But if the crisis is so deep so that it effects the environmental sphere it would change the whole value system. Planet crunch could not be simply bailed out. You need to change the whole values system, world view and finally the development mode.

In addition to the measures taken to extend the functions of market place by way of introducing MBIs, we need to introduce other instruments as well. Legal and cultural instruments, environmental conservations acts, Rigorous implementation of the legal framework both locally and internationally are of paramount importance. Law and punishment could not deliver the destined results. So we should use the cultural instruments for inner discipline and controlling of our environmentally harmful habits more simple, environmentally friendly life patterns and new concept on happiness and material pleasure.

We should introduce a new value system. Generally there are two kinds of values, namely. USE VALUE and EXCHANGE VALUE which determine by the supply and demand.

We all have one vote. Other animals and species and more importantly future generations could not be able to muster their votes. So we should cast our votes in a more responsible way, thinking about the future generations. Likewise we should introduce new value systems including future generations and other species.

So, we could identify three economic values. ACTUAL USE VALUE, OPTION VALUE, and EXISTENCE VALUE.

Actual use value generally represent the present use value of the goods and services. Option value is some what different. It represents the values expressed through option to use the environment that is value of the environment as potential benefit as oppose to actual present use value. It includes future generations, others living in the society etc. it should be a positive value. Existence is related to intrinsic values. It is unrelated to human beings. The argument is that animals, eco systems would still have value if there were no humans.

With these three types of values in mind we should use three instruments economic or market, legal and cultural instruments to implement this value systems.

Accordingly, we need to change the principals of accounting, taxes, auditing and customs. Green accounting and auditing techniques, Green custom techniques should be introduce as a part of the old new paradigm.

Green banking, investment and insurance schemes should be introduced.

In order to preserve our wetlands I suggested a wetland mitigation bank, so that lending rates and new insurance schemes could be evolved within green economic policies.

Finally I would like to reiterate that money is not real. It is our own creation. We should not worship it as the only creator, the almighty God. We could change it and not only the money with it the entire value system should be changed if we were to serve our planet.

Writer is the Minister of Environment and Natural Resources