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Extrapolation or disruption?

Published at: 23-06-2019

Posted on: June 23rd, 2019 by RaduC No Comments

I recently had the chance to participate in the INSEAD Alumni Forum Europe 2019 reunion along with 600 participants, first-class panelists on topical subjects. A wonderful occasion to catch up on how the members of the economic elite in Europe and elsewhere are thinking.

The main recurring idea of the debates, including the INSEAD dean`s final address, was “environmentally-sustainable economic development”. The arguments were, however, realistic only to some extent because I thought that they lacked the deep disruption meant to take us to a new economic model, other than the one already in use for centuries.

A telling example in this respect was the “Business and Government in an Age of Disruption” panel debate. Based on the idea that 800 million Chinese have been moved out of poverty by a globalized economy, the conclusion of one of the participants (of Chinese descent) was to also apply the model to Africa for similar outcomes. Such an approach would be a terrible error of judgment and these extrapolations should be deeply worrying.

The economic models used since the dawn of civilization have been consistently resulting in environmental destruction: by mining for mineral resources, by decimating wildlife, by overpopulating the globe, by polluting. Stepping up the pace of economic growth has only been accompanied by more environmental degradation: cleared lands, extinct animal and plant species, polluted and acid oceans and it goes on without knowing how it will end up.

Undoubtedly, people all over the world have been taking a real interest in actions aimed at mitigating and even stopping the destruction of the planet`s biodiversity. But it comes with a major problem. As long as the world`s economic growth model continues to be the scaled-up image of the old one, preventing the planet`s destruction by corporate social responsibility measures alone does not stand a chance. The fight is disproportionate and doomed to failure.

This is why replicating in Africa growth models which in both the developed countries and China have led to the destruction of the environment will unavoidably result in disaster. And if we took into consideration the abundance of African wildlife, the disaster could easily prove catastrophic. Far be it from me to suggest that Africa should be a stranger to wealth, but it is in the best interest of the human kind to offer countries which host the largest ecosystems in the world, African states being just an example, the chance to thrive on the basis of a different model.

Let`s take for instance the Arab states and imagine how they would look like without all the oil deposits. We don`t have to think too much. Such countries are already out there.  Suffice it to take a look at the sub-Saharan African nations whose main wealth lies in…..sand and which are struggling in dire poverty. The wealth of the Arab countries, with virtually no industry, is the wealth transferred from oil importers.

The same model could also work in African countries. On one condition. To acknowledge the fact that on a planet faced with major environmental issues, these countries` forests producing oxygen is at least as important as the oil generating CO2. This would require that a wealth transfer from net oxygen-consumers to the former be recognized as the norm. In other words, the countries should be paid in “oxydollars”, by analogy with the petrodollars collected by the Arab states.

Would that mean that they will remain unindustrialized and unable to create jobs? Yes and no. Under the Arab model, the development of the service industry may be a way which inflicts less environmental damage, all the more so because a green country may draw in more tourists and residents than a desert land.

And, as is the case of petrodollars, a large portion of the money would go back by the purchasing of goods and services from the paying countries.

Would the alternative of having companies cut their carbon footprint by buying forests make sense? On the face of it, it would. The more they buy, the higher the price which in turn will encourage reforestation.

However, I do believe that this approach would come with some challenges. Firstly, transferring forests to foreigners might be considered as a significant loss of national assets and generate considerable resistance. Secondly, the pressure to reduce carbon emissions should be maintained without presenting the main polluters with any “shortcuts”. Thirdly, transferring the responsibility of this issue entirely to businesses carries the risk of excessive approaches spiraling out of control.

At the same forum, the chairman of the oil company ENI, an honorable lady, introduced us to the reforestation and conservation projects that the company was funding. Commendable corporate social responsibility actions which will at most slow down the degradation process. To reverse it, a lot more would be in order.

Such as having a centuries-old paradigm changed. A trifle. …

Have a nice weekend!

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