Two Podcastic Perspectives on Wealth

[peristaltor.livejournal.com]

Last February, NPR's Planet Money examined a unique strategy by Ecuador's government to preserve its Yasuni National Park, an isolated and wild place reached best by hours in a canoe. This is one of those places with amazing biodiversity, with more tree species in a hectare than most more northern countries have within their borders.

The problem threatening the Yasuni? It has oil, and President Correa, seeing the destruction other Latin American countries have suffered for oil exploration/extraction, wanted to avoid a similar fate for his most wild of national places. His solution: ask for money to preserve the park as is.

Seriously. Planet Money interviews those seeking to preserve the park by asking for money:

As payment for preserving the wilderness and preventing an estimated 410 million metric tons of fossil fuel-generated carbon emissions from entering the atmosphere, Correa has asked the world to ante up in the fight against global warming. He is seeking $3.6 billion in compensation, roughly half of what Ecuador would have realized in revenues from exploiting the resource at 2007 prices. The money would be used, he says, to finance alternative energy and community development projects.

Sadly, the podcast to which I linked is an update. That $3.6 billion wasn't forthcoming, so Correa has no choice but to allow for some extraction. The park will undoubtedly suffer as a result.

The same week I heard that PM podcast, though, I also heard Seth and Justin over at the Extraenvironmentalist interview filmmaker John Dennis Liu in Episode #65: Restoring Function.

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This Plateau sounds fascinating. Essentially, this is glacial dust (loess) from Himalaya erosion over thousands of years. It is also the seat of the Han Chinese civilization that spread out to become the most common ethnicity in that country today.

Why, then, was it a barren wasteland? Liu notes that, while the area has been farmed for millennia, the agricultural practices used slowly eroded the ecosystem to the point where the hydrological cycle was broken. The constant tilling had killed the soil biota to the point where the soil would not retain any water, so farmers were starving and the soil was blowing in sometimes massive storms that affected everyone downwind. Once it fell, it settled where it was not appreciated, such as in the Yellow River.


Visitors watch water gushing from the section of the Xiaolangdi Reservoir on the Yellow River, during a sand-washing operation

The Chinese government took an unusual step. They calculated these downwind and downstream costs, then added up the economic benefit the farmers on the Plateau contributed to the Chinese economy. The answer was extremely negative; the agricultural output was dwarfed by the impact the degraded ecology had on other parts of the country.

Here's the situation in a nutshell, according to Mr. Liu's article "Restoring Land and Hope in China" in New Agriculturalist magazine:

We have been documenting China's Loess Plateau since 1995. When we got there we found a fundamentally degraded ecosystem. . . .

Work began initially in the Loess Plateau due to a silt problem. Erosion of the deep Loess soils was clogging the Yellow River with 600 million tons of soil every year. This had such downstream implications that it was decided that rehabilitation upstream, to lower erosion rates, would be less expensive. We had to control soil erosion from the slopes and this was coupled with action against desert encroachment in the north. If you don't fight it on every side it will overwhelm everything. You cannot just garden around the edges.

The Chinese government shut down the meager sorgum and corn crop farming. They gave the citizen food and jobs, first teaching them the basic goals the government ecologists had in mind. Those that were degrading the system the most were, well, prevented from continuing the degradation and given the job of policing the area to prevent others from engaging in this same activity.

The result? Judge for yourself.


Loess Plateau before restoration.


Loess Plateau after restoration.

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Liu points out that China took an unusual step. It could. China is one of the few nations large enough to have an ecological disaster affect so many others within its borders. While economists call the negative effects of economic production "externalities", for China—a central government responsible for the whole of its economy—there are no such externalities, just cost shifts from one area to the other. Liu goes further, stating in the Extraenvironmental podcast that there are no such things as externalities at all. It's just a phrase economists coined to at least acknowledge the damage some activities had on other parts of the economy. It is a fiction, though, since really one cannot ignore the economic damage of any given activity without considering the negative impact it has elsewhere. One author quoted Liu from his movie:

The products and services that we derive from [functional ecosystems] are derivatives. It's impossible for the derivatives to be more valuable than the source. And yet in our economy now, as it stands, the products and services have monetary values, but the source—the functional ecosystems—are zero. So this cannot be true. It, it's false. So we've created a global institution . . . economic institutions and economic theory based on a flaw in logic. So if we carry that flaw in logic from generation to generation we compound the mistake. -John D. Liu [38:44]

(I underlined and edited.)

In his EE interview, Liu suggested we have to "Naturalize the Economy" rather than exploit the ecology for economic gain. We have to return to what author John Michael Greer called The Wealth of Nature: Economics as If Survival Mattered. And nature cares not one whit for money. Money is, in fact, just an artifact, valued only by people. Money is not a measure of anything other than what people who issue and most widely use it value. If the people who issue money don't value functional ecosystems, they can put a price on destruction. Which is, as Liu points out, what happened on the Plateau.

Sadly, as David Graeber points out in his book Debt, money is just a way to move wealth from one place to another, to de-localize an economy. As long as the near-sustenance farmers on the Loess could sell even a meager portion of their crops for money to buy other things, they would continue and even accelerate the soil's degradation. China was big enough to realize this could not continue.

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Which brings us back to Ecuador. Rafael Correa could not convince the international community to preserve the oxygen generator, the carbon sequester that is the Yasuni National Park. Why? Unlike most of Ecuador, the international community is addicted to oil, and has priced that precious goo beyond all efforts aimed at ecology preservation. If the US gives Ecuador money (which it didn't), it removes future reserves from extraction and thus raises the price of future oil. The US cannot put a price on losing such reserves from the market, since doing so would be to admit that they were addicted to the stuff.

And thus, the market works. Back to Graeber: "Money always has the potential to become a moral imperative unto itself. Allow it to expand, and it can quickly become a morality so imperative that all others seem frivolous in comparison. For the debtor, the world is reduced to a collection of potential dangers, potential tools, and potential merchandise." (David Graeber, Debt: The First 5,000 Years, Melville House Printing, 2011, p. 319.) Since Ecuador is poor, they are reduced to the status of debtor, and forced to sell their most valuable assets to raise themselves and their people out of poverty.

The perversion of this logic can be found in the Loess Plateau. As Herbert Stein put it in the economic law that bears his name, "Any system that can't go on forever, won't." China recognized this, and is taking steps to avoid future dust storms and clogged rivers, as well as increasing the agricultural production of the Plateau itself.

Our own US and western world's addiction to petroleum (and other ancient carbon fuels) can't go on forever either; every drive miles to the next frivolous destination has exactly the same effect as tilling barren soil. Without facing this hard fact, though, places like the Yasuni will continue to fall.

That hard truth, though, is impossible to relate to economists who dismiss any symptom of unsustainable practices with words like "externality."

Comments

[telemann.livejournal.com]

Great, great post. And seeing those before and after photographs was so heart-warming.

[peristaltor.livejournal.com]

Thanks, dude!

[airiefairie.livejournal.com]

Seconded.

[badlydrawnjeff.livejournal.com]

Our own US and western world's addiction to petroleum (and other ancient carbon fuels) can't go on forever either; every drive miles to the next frivolous destination has exactly the same effect as tilling barren soil. Without facing this hard fact, though, places like the Yasuni will continue to fall.

That hard truth, though, is impossible to relate to economists who dismiss any symptom of unsustainable practices with words like "externality."

I admit to being confused/amused by the lessons you took from this. On one hand was an area that has resources we need - this is not a question of "addiction" or anything like it, but a simple fact of the real world around us. While we can applaud the Ecuadorian President for at least thinking outside of the box in terms of how to handle what he feels is a delicate situation, I think it's probably more worth criticism that he's trying so desperately to keep wealth from his country and keep a necessary resource out of the hands of those who need it. The damage to the lands would be much less than the benefit in getting the oil out, and the continued fantasy of alternative fuels being able to take care of our needs in 2013 is shameful for a world leader to be pushing.

This mirrors the ANWR situation quite well, not to mention many anti-fracking activists.

Meanwhile, here's China, a nation that actually did the math and figured out that the benefits didn't outweigh the costs and acted accordingly. Instead of shaming the world for their need (not addiction, not desire) for oil, we should be shaming them for not doing the math and figuring out that the oil is worth retrieving in places like Alaska and Ecuador.

[foolsguinea.livejournal.com]

Suddenly a right-winger drops talk of rights and ownership (or lack thereof) in favor of the entitlement of "need"--indeed, the insatiable, bottomless, unsustainable "need" of the mob.

Conservatism and respect for others' property goes out the window when you want someone else's stuff.

[badlydrawnjeff.livejournal.com]

I don't see where I'm doing that. It's frankly unjust for the government to control large swathes of land and resources.

[allhatnocattle.livejournal.com]

why? Where is it that gov't doesn't control large areas of lands and resource?

[fizzyland.livejournal.com]

How is it unjust?

[brother-dour.livejournal.com]

After that comment, I can't help but wonder what your thoughts are on the police power of government.

I'm also wondering what you think of Garrett Hardin.

[peristaltor.livejournal.com]

. . . resources we need - this is not a question of "addiction" or anything like it, but a simple fact of the real world around us.

It's both. We have built a mechanized economy that will stop if it runs out of fuel. Yes, we need fuel for our machines. We didn't have to build that kind of economy, though; that was by choice. Look at European countries who chose to tax fuels quite a bit more; their fuel economy is better, and therefore more resilient to supply shocks.

By contrast, we gave tax breaks to exploration/exploitation companies in the hopes of getting the stuff cheaper. Many states (like my own) have mandates to exclude gas sales from normal retail tax revenue. Just as an addict has a choice on whether or not to try the hard stuff, we chose to rely on the gooey stuff.

The difference between ANWR and Ecuador might be the sheer diversity of species, if not the sequestration the natural forest provides. Not much solescence up north.

I think it's probably more worth criticism that he's trying so desperately to keep wealth from his country. . . .

"From?" No, at first he was trying desperately to keep wealth in his country, in the ground where it belongs. The fact that he couldn't reveals the pressures the addicts can exert in tapping new supply. If he could have kept that wealth below the forest for even a decade, I predict supply would be so low that his country could demand a premium for the reserves, forcing the extractors to take what today would be considered outrageous steps to protect the environment around it.

With crude prices so low, it just wouldn't pencil out to provide those protections now, as it was demonstrated just about everywhere oil has been extracted in Latin America.

[badlydrawnjeff.livejournal.com]

It's both. We have built a mechanized economy that will stop if it runs out of fuel. Yes, we need fuel for our machines. We didn't have to build that kind of economy, though; that was by choice. Look at European countries who chose to tax fuels quite a bit more; their fuel economy is better, and therefore more resilient to supply shocks.

I don't know why you'd look to Europe as a positive model in that regard. Punitive taxes on things they don't like don't help their fuel economy, it just weakens the position of the citizenry.

"From?" No, at first he was trying desperately to keep wealth in his country, in the ground where it belongs.

It doesn't belong in the dirt, it belongs in cars and planes and plastics. Technological progress is a good thing.

[airiefairie.livejournal.com]

and the continued fantasy of alternative fuels being able to take care of our needs in 2013 is shameful for a world leader to be pushing.

And the continuous reliance on fossil fuels is not?

I do not know about shameful, but what about being a necessity?

[badlydrawnjeff.livejournal.com]

And the continuous reliance on fossil fuels is not?

I don't know of a single person who thinks fossil fuels are a long term option. We all know we're going to have to switch out eventually. The time is not now, however - the alternatives aren't ready, aren't reliable, and aren't affordable yet.

To pretend those last three things aren't true as a leader of a nation? Shameful might be kind.

[allhatnocattle.livejournal.com]

Loess Plateau. I was there in Xi'an about 2months ago. Xi'an, Langzou and Xinning on our way to Tibet. Not that this makes me in any way an expert on anything. While I think there is some hopeful things happening in China to protect the environment, I don't think your example is very good.

There are parts of China where it is extremely smoggy (Beijing) and dirty (Xi'an), yet parts where it was very clean (Zhangjiajie). Each Chinese province is unique from the next. But as a country as a whole they are currently undergoing an effort to clean up their environment. There were signs not just telling people not to litter, but explaining that the environment is everyone's responsibility. In Xinning there was a huge international green environmental investment/development convention going on in Xining. I saw many billboards and newspaper articles talking about it. I think this is the direction that China seems to be heading in.

Have to remember that the Loess plateau is along the old Silk Road trade route along the southern border of the Gobi desert. They have camels still. It is the fringe of the desert although aproximately 1000m higher in elevation. When we were there Xi'an was very dry and holy shit hot at 45cel (115 American). A few days later Xining was rainy and a refreshing 35cel ( 95 American).

What I'm seeing in your pics look like stepped crops to me. Which suggests it is irrigated. Just like in USA one of the most popular crops is corn, but unlike USA the asian stocks have one ear each. (I thought it was quite unusual to see only one ear on a corn stock but I never saw more then one ear per)

Higher up in the Himalayas we saw the glacial remains and very few actual glaciers. I understand this isn't recent occurrence, at least not in memory of Tibetans we met. But the lake levels are getting shallower. The Chinese are draining lakes for the many mining operations in the area.

[peristaltor.livejournal.com]

I don't have the benefit of your personal visit, so I was going only on the texts suggested by Liu.

Yes, the loess were stepped in that picture. I believe that was historic, though, back when everyone planted rice. This area has been inhabited for thousands of years, meaning the degradation is nothing new, just accelerated.

(I thought it was quite unusual to see only one ear on a corn stock but I never saw more then one ear per).

Which is part of the problem. Without access to expensive fertilizers, corn doesn't produce much more than what it can extract from the soil. We Canadians and US farmers fertilize the crap out of our soil.

The irony here is that we might be doing to our soil slowly what the folks on the Loess did. Reports (not included in the OP) from restored areas indicate that the crop yields are up 10-fold, and that on only organic, in-place fertilizing. If the soil is not tilled and allowed to grow, there's no telling how fertile it can become.

[allhatnocattle.livejournal.com]

I think the corn are of a different variety then from North American, but I don't know. The corn we ate in China was not nearly as sweet as we have here. Peasant farmers were drying husks for storage. My gf is a farm girl and knows about these things more then I do.

For sure they use pesticides as we saw ample evidence of that. Since pesticides are not cheap I assume they use fertilizers as well. After all the gov`t supports agriculture just like they throw crazy money at all kinds of infrastructure.

We are for sure loosing our soil here. We know the winds blow our soil away just as irrigation washes the nutrients away. If not watered it soon dries out here on the prairie. Our rains are insufficient.

The elevation on the Loess Plateau can be extremely high (2000-4000m), thereby thin air and intense sun. Combine that with high summer heat explains why water that doesn't soak in soon evaporates. Loose silty soil allows underground flow. Did not see the water cannons that are so common here. Where they can they divert some river water and on the steppes it descends from each level.

Trouble is there isn`t always water at the top to flow down. Being so high up on the edge of the Gobi it can be extremely dry,and only rainy in June/July (when we were there) with short but huge downpours. The plateau blooms after the rains much like any other arid region does. To say it's fertile is to suggest there is a water source that ever present when it's really only seasonal at best. Just as the Yellow River's flow is inconsistent both seasonally and annually. Even it's course is quite inconsistent.

The plateau was an ancient forest that was harvested for it's timber way back before Xi'an was the capital of China. Not sure when the plateau was de-forested, but it hasn't had a forest for many centuries. It's had centuries of history as pasture land for livestock and agriculture. But as the area is so arid I'm not sure that it was ever seasonally successful. I deduce that because the Yellow River has been named the Yellow River for 2000yrs because of the Loess soil erosion discolouring the river.

The Chinese deserve praise for what they have done just as they are rightfully proud of their achievements so far. Because the greening of the plateau is economically more viable then other technologically advanced solutions (such as berming with walls, solidifying the plateau with concrete or plastic, filtering the silt out of the water, dredging the river, etc.) While more economically viable, these greening efforts are probably still not cheap.

Not sure what the Chinese goal for the area is. Crops retain soil erosion better then nothing. But re-foresting would retain the landscape even more. Will a forest ever take again without aid of screwjacks mechanically irrigating? It would be the largest artificially supported forest in the world otherwise. If anyone can do it the Chinese can because they lack the politics under communism that hinders democracies.

[airiefairie.livejournal.com]

I encountered a similar situation around Darchen (lake Manasarovar), etc.

[allhatnocattle.livejournal.com]

Yak, yeti, yak, yak, yak!

The experience was a perfect balance of extreme emotions. Hate it and loved it from one moment to the next.
Slept at EBC 5050m and then trekked up to 5200m (as close as military would allow), but there she was in her perfectly unveiled majestic beauty.

[gunslnger.livejournal.com]

It's impossible for the derivatives to be more valuable than the source

This is contrary to a fundamental principle of economics though. Economic growth only happens because value is being added to the system by people. Gold in the ground is worthless. It only gains value because someone digs it up and separates it from the dirt around it, pretties it up, converts it into something "useful". At best, you might be able to say that the resource has potential value, but there's no real way to estimate that because of the nature of the variables involved.

Certainly, there is a value to the ecology and that value is often overlooked, mainly because it's difficult to put a price on it.

[peristaltor.livejournal.com]

This is contrary to a fundamental principle of economics though.

Exactly! Which is why (as I mentioned earlier many, many times) many principals of economics are wrong.

As Liu put it, we need to "naturalize our economy" to adjust our expectations. If the gold mining screws up the water supply (which destroys active fisheries, pollutes nearby wells) to such an extent that remediation costs more than the extracted gold, the miners should pay that price. They will then realize it was cheaper to leave in the ground.

[allhatnocattle.livejournal.com]

The remediation costs are not necessarily in the red (or black) in the equation. Think BP, Exxon, etc

[gunslnger.livejournal.com]

You haven't shown how it's wrong though, you've only asserted it.

Observing that price/value doesn't take into account all the variables (externalities) is a separate point from the one I quoted.

[harry-beast.livejournal.com]

economists ... dismiss any symptom of unsustainable practices with words like "externality"
Categorizing something as an externality is not a dismissal, but an admission that the item in question cannot be adequately described or measured within a particular model. Regardless of what economists endorse or dismiss, politicians always have the option of taking action to address a known problem. If a problem is being ignored, blame the politicians, not the economists.

[peristaltor.livejournal.com]

While I technically agree this to be true, if the economist's categorization of "externality" does not lead to its serious examination, I fail to see the distinction between it and dismissal. Given the seriousness of many such externalities, this dismissal can be fatal.

If a problem is being ignored, blame the politicians, not the economists.

If the politician follows the economists' advice, who is to blame?

[harry-beast.livejournal.com]

If the politician follows the economists' advice, who is to blame?
The person who sits in the big chair gets to make the big decisions and take the credit or the blame. So, the politician (and the politicians supporters and accomplices).

Of course, politicians routinely ignore the advice of economists and other experts, or distort and misrepresent expert advice to rationalize politically motivated decisions. And naturally, when their bad decisions come back to haunt them, politicians pass the buck to the very people whose advice they ignored.