Category: Ecological Economics

Structural Transformation: Then and Now

yadu chandranLeave a comment

by C.R.Yadu and Sahil Mehra

A major theme that dominates the literature on development economics is the narrative of ‘Structural Transformation’, which, based on the experience of developed economies, envisages a gradual ‘modernisation’ of the economy. This process is expected to unfold in a similar way across the economies of global South, where the importance of non-agriculture/high-productivity/capitalist sectors in terms of both contribution to national income and labour employment would increase and that of agriculture/low-productivity/pre-capitalist sectors would fall, ultimately leading to dissolution of this dualist structure of the economy (Lewis, 1954; Kaldor, 1967; Kuznets, 1968). This transformation is expected to bring productivity gains across all sectors, reduce poverty, and lead to high levels of economic prosperity. According to Monga and Yifu Lin (2019), structural transformation is “arguably the single most significant concept and social goal in the global quest for prosperity and world peace.”

However, many of the economies of the global South have not been able to undergo this expected path of structural transformation. For example, in 2019, for sub-Saharan Africa, the average contribution of agriculture to GDP has been around 14% while the proportion of population employed in agriculture is 53%. The GDP contribution and employment figures range from 8% and 27% for East Asian and Pacific economies to 17% and 42% for South Asia respectively (World Development Indicators, 2021).

The dominant narrative, largely propagated by international agencies like the World Bank, still advocates the validity of the process of structural transformation, continues to use this framework to understand the labour and employment transition in the global South, and advocates policies to achieve the same. In contrast, within various critical strands of literature, there is an increasing realization that the nature and pattern of structural transformation that unfolded in the global North might not be replicable in the global South (Dorin, 2017; Scherrer, 2018; Breman, 2019). Building on some of these criticisms, we argue that the possibilities of attainment of a North-style structural transformation remains bleak in the contemporary global South. This is majorly because the socio-economic and political context which facilitated the process of structural transformation of the economies in the global North is no longer available to the global South. The process in the North was, to a large extent, fostered by colonialism which allowed these economies to undertake expropriation and extraction of resources, without much concern for ecological limits, as well as to transfer a proportion of their population to the newly found lands in the temperate regions. Given the significant changes in the structure of capitalism now as compared to the earlier phase, it is worthwhile to investigate the possibilities of the global South experiencing the envisaged path of structural transformation.

In the following sections, we elaborate on why the received wisdom in development economics no longer provides an adequate framework to understand capitalist development in the global South.

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Dependence and ecology in contemporary Latin America, part 2: Limits to sub-imperial autonomy

georgeshepherd1867Leave a comment

Brazilian agribusiness’s fervour for Soybean cultivation has manifested itself domestically as much, if not more so, than externally, with deforestation accelerating as plantations abound with similar velocity in both the Brazilian Amazon and the Paraguayan Chaco. The domestic intensification of Soybean cultivation can, in large part, be attributed to growing demand from China, the world’s primary soybean consumer (Song et al, 2009). China is the largest market for both Paraguayan and Brazilian soy, with both nations essentially relying on continued Chinese imports to balance their trade deficits (Giraudo, 2020). Accordingly, the impact of Chinese demand on Brazilian agriculture, and on other resource sectors across the region (Ganchev, 2020; Oviedo, 2015), replicates many of the dynamics previously mentioned with regards to Brazilian ‘Subimperialism’ in Paraguay.

As soybeans are typically exported with minimal processing, and monocrop agriculture generates comparatively little employment (Giraudo, 2020), few of the benefits of the soybean supply-chain are appropriated within Brazil. Meanwhile, cheap Brazilian soybeans indirectly support the Chinese labour system by lowering the price of staple foods, especially pork, allowing Chinese manufacturers to keep wages low, thereby maintaining the competitiveness of Chinese exports (Wise & Veltmeyer, 2018). With Chinese demand likely to remain high, it seems inconceivable that either the Brazilian or the Paraguayan economies will wean themselves off of soy and will instead remain conditioned by, and dependent on, the whims of the Chinese industrial system

Furthermore, this integration of soybeans into the Chinese industrial economy exacerbates the existing China-Brazil trade imbalance. 98.4% of Chinese exports to Brazil are manufactures, whilst the majority of Brazilian exports to China are primary-resources, with soybeans representing the single most valuable export-commodity (Jenkins, 2012). Low-price Brazilian commodities thereby fuel an industrial system which exports value-added goods back to Brazil, creating a trade-deficit which entrenches the nation’s dependence on the industrialised core, reproducing the fundamental dynamics observed by dependency theorists in the mid-twentieth century (Frank; 1966; Prebisch, 1962).

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The Nobel Prize winner that predicted a crisis between nature and capital

Erik ReinertLeave a comment

Since 1901, December has been a time for Nobel Prizes. Only in 1969, as an afterthought, the Swedish Central Bank established the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel — a decision that was met with protests by some members of the Nobel family.

Nevertheless, a scientist who used much of his time on economics was rewarded a Nobel Prize in 1921. Admittedly, Frederick Soddy (1877–1956) received the prize in chemistry, for his work on radioactivity. But in the period from 1921 to 1934 Soddy wrote four books campaigning for a radical restructuring of the global monetary system.

I have been leafing through Soddy’s book entitled, ‘Money versus Man’, published in 1931.[i] The book opens with a full-page quote from another English polymath, John Ruskin (1819–1900).[ii] The social problems of England in the 1840s — ‘The Hungry 40s’ — and the financial crises that followed in 1847 inspired Ruskin. The mass deaths in World War I and the crisis that started in 1929 provided new inspiration to Soddy.

For Ruskin, and later Soddy, consumption was the only purpose of the economy. ‘There is no wealth but life’ is the basic message in Soddy’s long quote from Ruskin. It is on this basis we should read the title of Soddy’s book, placing money as a kind of enemy for humankind. Here is a new type of economics: we have standard neoclassical economics, based on the metaphor of equilibrium between supply and demand, and we have evolutionary (Schumpeterian) economics based on a metaphor from biology (innovations as mutations). Soddy offered us a third angle: economics rooted in physics, in the laws of thermodynamics.

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 A People’s Green New Deal: A Symposium

Developing Economics1 Comment

Max Ajl’s A People’s Green New Deal intervenes in current debates regarding green planning, green future, green stimuli, and eco-socialism. It surveys a wide range of existing literature on the ecological and social crisis, ranging from ruling-class “great transitions,” to eco-modernist elixirs of the right and the left which bank on technological solutions to today’s social and ecological problems. It then considers and critiques an array of liberal, left-liberal, and social democratic proposals, some of them going under the eco-socialist moniker, and shows how they rest on continued exploitation and primitive accumulation of the periphery. 

A People’s Green New Deal contributions lie in, first, using frameworks of dependency theory, accumulation on a world scale, and ecologically uneven exchange to illuminate the costs and consequences of distinct approaches to the climate crisis, left and right. Second, the book’s emphasis on agriculture, land use, and agro-ecology makes it unique amongst books on the Green New Deal and parallel debates. Its emphasis on decolonization, national sovereignty, anti-imperialism, and climate debt repayments from the North to the South is a third contribution. A fourth is how it deals with technology. 

This review forum assesses the contribution of A People’s Green New Deal. Sakshi situates APGND in terms of a counter-epistemology to Eurocentric and empire-blind resolutions, if not really solutions, to the social and ecological crises to which mainstream Green New Deals are addressed. Sheetal Chhabria assesses APGND’s contribution to thinking on a planetary scale about appropriate planning for a just transition, while criticizing the book’s uncritical embrace of certain Indian nationalist tropes. Güney Işıkara raises questions regarding political agency and organization, the role of national-level planning in any form of national-level green transition, and how to approach anti-imperialism on a world scale.  

Read the contributions:

Ecological breakdown: What are externalities external to?

Güney Işıkara1 Comment

The 2018 Bank of Sweden Prize (falsely known as the Economics Nobel Prize) winner William Nordhaus opens the revised version of his Prize lecture as follows: “I begin with the fundamental problem posed by climate change – that is a public good or externality. Such activities are ones whose costs or benefits will spill outside the market and are not captured in market prices.”

The concept of externalities is a catch-all term, or, an empty box to capture the so-called spillover effects. Under the presumption that the market mechanism brings about the efficient allocation of resources, mainstream economic theory as well as many of its heterodox critiques argue for internalizing these spillovers by determining their costs (or benefits) and including it in the price of the commodity. In other words, the spillover effect itself must be turned into a commodity so that the market can efficiently handle it through the price mechanism.

Insofar as human-induced global warming has not been priced, so the story goes, it is an externality. In fact, it is today “the most significant of all environmental externalities” even in Nordhaus’ wisdom. Make no mistake – Nordhaus fiercely advocated inaction for over three decades, and portrayed projected levels of global warming, which are defined as devastating, or even catastrophic by scientists, as optimal.

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A room full of elephants? Population, consumption and sustainability

Arve HansenLeave a comment

Shopping street.

The SDGs are are a good example of our inability or unwillingness to deal with consumption, writes the author. Photo: Arthur Kraft/Unsplash

Consumption, not population, is the elephant in the room of the sustainable development agenda.

The population question seems to be experiencing yet another resurgence in discussions on climate change and sustainable development. This is perhaps unsurprising. What is surprising is the extent to which population is presented as a ‘forgotten’ or ‘taboo’ topic, or as an ‘elephant in the room’ (just google population in combination with any of the terms).

Population has always been part of sustainability agendas and still is. As David Johnson from the Margaret Pyke Trust puts it in a recent blogpost, ‘the elephant left the room quite some time ago’. Furthermore, I would add, while addressing population growth is obviously important, and while we should continue placing reproductive rights at the core of development efforts, population growth is not our main sustainability challenge.

If we are to make development sustainable, we should rather be dealing with questions of distribution of resources and with the consumption patterns of the rich.

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Consuming development: Capitalism, economic growth and everyday life

Arve Hansen2 Comments

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With the consumption patterns in rich countries being more unsustainable than ever and the consumption of the ‘emerging middle classes’ increasing rapidly, it is about time ‘consumption and development’ becomes a field of study. Such a field would necessarily be interdisciplinary and combine analyses of everyday life and the structures of capitalist development. A useful starting point could be found at the intersection of theories of practice and systems of provision.Read More »