The last 30 years have witnessed more people moving out of poverty than at any time in recorded history, mostly due to Asia’s rapid economic development. This has been largely fuelled by meeting the West’s rampant consumption needs – a seemingly unquenchable thirst for cheap Asian-made goods – and the relentless application of the growth-led economic model to Asia. Following the financial crisis, leading economists and policy makers have been urging Asia to make a conscious effort to consume more so as to rescue the global economy. This is a view shaped by conventional wisdom which conveniently refuses to acknowledge both the undesirable effects of consumption and the limits to growth.
Try, for example, imagining a world by the middle of this century in which four to five billion Asians are consuming at the same rate as Americans. As Asian economies grow and expectations increase, the two billion Asians now at the margins of the consumption economy will radically transform global demand and supply, not only for non-renewable commodities such as oil and coal but also for renewables such as food.
A simple example of this transformation can be seen in the Asian car industry. China is already the world’s largest car market and Indian car ownership is expected to match that of China in the near future. Chinese car ownership is currently around 150 cars for every 1,000 people while in India it is around 30 per 1,000. (These figures compare to a Western average of 750 cars for every 1000 people.) If both China and India were to reach Western ownership levels, there would be up to 1.5 billion cars in these two countries alone and running them would require almost all of OPEC’s daily oil output.
This type of scenario points to the emergence of a new geopolitical reality which goes well beyond today’s concerns about resource competition and potential conflicts. The failure of the Copenhagen climate change conference in 2009 and the total lack of progress since the Kyoto Protocol was adopted in 1997 points to this and makes it hard to see the world reaching a consensus on global warming, let alone other resource-related issues. In recent years, much of the blame for this international agreement impasse has been laid at the feet of newly emerging economies. Many Asian, African and Latin American countries find themselves at loggerheads with Western approaches to international cooperation. Part of the problem is that many of these international frameworks are steeped in a relatively old world view, where developed nations are used to framing the parameters of such discussions. But growth in the political and economic prominence of Asian countries on the world stage means this framework is decreasingly viable and only hinders diplomatic efforts to find solutions.
In light of this, Asian countries need to take action at home first and be prepared to act unilaterally if necessary. After all, many of these nations have a great deal of work to do in their own countries before they sign up to any grand international schemes (many of which often lie dormant after signing). Asia can start by setting limits on various forms of consumption and putting in place policies to enforce these constraints. To do this, Asian policy makers need to challenge conventional thinking and vested interests that suggest international cooperation is the only route to resolving global challenges and that poverty and unemployment will be inevitable if they embark on a new course.
This means shaping policies around the following core principles:
• Constrained resources: economic activity secondary to maintaining the vitality of resources.
• Equitable resource use for current and future generations: collective welfare must take priority over individual rights.
• Repriced resources with productivity efforts focused on resources and not people: using less material with more people working.
Out of these principles emerge two key mechanisms that governments in Asia must use: pricing and limits:
• Pricing: through the imposition of taxes and the removal of subsidies. This will enable governments to start to put a true price on goods and services. All emissions, not just carbon but also critical resources such as water and minerals, should be taxed.
• Limits: caps need to be placed on the use of resources, including outright bans where appropriate.
These actions will have a direct impact on the most egregious forms of consumption. They will redirect them and force companies to adapt to new resource pricing and consumer reality. Most importantly, they will begin to change behaviour and expectations and allow more users to have a fairer share of limited resources. Examples would include how land, water and biodiversity are distributed, used and priced in relation to the promotion of industrial agriculture and food production. This would lead to an increase in the cost of some products such as palm oil, which is currently exaggeratedly under-priced.
If Asia – especially China, India and Indonesia – does not lead the way, then we need to accept that the threat of climate change and other looming environmental challenges will only increase. Asian governments will need to demonstrate that the actions they take are not only necessary but equitable and therefore legitimate. They should make it clear that these actions won’t force people to remain poor or stop their citizens from aspiring to be prosperous – it means that their expectations have to be aligned with the constraints under which all societies will have to operate, albeit Asian ones (almost certainly) first of all. Needless to say, suggesting a future where economic policy is framed around limits, restraint and restrictions is to invite controversy and even ridicule. But Asian governments must start now; they have no choice. They will be held accountable and responsible by not just their citizens but the world at large.
Asian political and business leaders must now grasp the mantle of leadership for a resource-constrained world – as others cannot. This requires a rejection of the current model of consumption-led economic growth which thrives on under-pricing externalities. This will also require leaders to be politically bold at home. For this reason, the future of the twenty-first century will depend as much on decisions taken in Beijing, Delhi and Jakarta, as those taken in Washington and London.