Category Archives: Economy and Ecology

I’m an ecologist, not an economist.

Yet economy means ‘household management’

If the earth is our house, and we are to manage it, ecologists are economists of the future.

I share some views here.

Trees’ party

Recently, I was standing at a party in the dunes with my friend, the sun was slowly rising, the drinks running out, we just collected firewood and we were having a conversation about what life really is. We discussed that if you look at the earths history, land plants and trees have actually emerged quite recently. Knowing that, it suddenly becomes visible that we aren’t that much worse than the other species around. We’re just a bit quicker.

People forget that plants consume rocks. A forest is essentially a layer of dead plant bodies with trees on top of them, which slowly but steadily empties the earth’s crust of its vital mineral content. These minerals slowly disappear into the rivers, then disappear at the bottom of the sea. That way, entire forests slowly make their environment unsuitable to themselves. If you want to keep a planet intact, the best you can do is to sterilize it (and remove the atmosphere and the surface water). No plants, no animals, no change. Just rock.

Nowadays, we humans tend to believe that we are bad, because we blow up the planet. Yet if you compare our behaviour to that of plants, we’re not that different. We pull minerals out of the earth, and work them into a nurturing ground for endless forms and shapes of art, housing, thought patterns divinities and so on. We aren’t doing this over the back of nature: we are nature doing it. Isn’t that what life is? Reshaping the environment into a whole lot of other beautiful things?

While standing at the party in the dunes, my friend exclaimed that life itself is indeed a party. It appears in a vast nothingness, grows, hits an apogee, then starts disappearing. Trees dance, so do we. They consumer rocks, we consume them and all of us knew in advance that one day, the music stops and the lights will go off. It’s fine that, parties don’t go on forever, they’re just parties.

With or without us, sooner or later all life here will die out (by the way, I’m not suggesting we’ll even get close to killing life itself). Does that matter? In a way yes, but in a bigger way not at all. We should be grateful we were once alive. Of course, we as mankind have the option to stop behaving like that one drunk guy who entered his drinking rage, making an enormous mess finishing the booze on his own while heading straight towards a huge hangover full of regrets. That would prolong the fun for others. We could do that. But would it essentially make any difference? I don’t think so. Life will go on, and sooner or later we will all feel great at a new party with a filled up fridge.

What stock investors can learn from ecologists

The recent volatility on the global stock markets is leaving many experts puzzled. While there are surely many factors that influence the worth of stocks, I’d like to propose that the ecological perspective should take a more prominent place in economics in the coming decades, given the predicted increasing scarcity of resources.

Before we start, here’s a quick distinction between stock investors and stock speculators. Investors are the type that buy a share of a company and hold it for a while, which supports a cause they expect to grow. Their goal is to earn money by investing in profitable businesses. They navigate and serve the system that way, though they can also damage it if they have too much power. Speculators, on the other hand, are people who buy and sell in very short time spans, anticipating market dynamics. They amplify the movements for their own gain, and by that put others in poverty. Their role is essentially parasitical, living only for as long as they keep the system alive. Investors are those who’ll need the ecological insights.

While we arrive at the limits of the global capacity to sustain our demands, we can expect increasing scarcity of water, food, climatically stable zones and raw materials. A recent example of how this impacts markets is the El Niño effect on the global prices of numerous food products. Understanding ecological processes helps assess the economic value of scarity driven market systems, because ecosystems deal with scarcities on a day to day basis.

Just like ecosystems, economical markets encompass a number of layers of production and consumption. At the base of a vast economic pyramid are the producers of raw materials. Their produce gets bought and converted into something more valuable. That step is then repeated until the product is sold to the final consumer. Trees, for example, get converted into timber, which then gets converted into furniture and then sold to us.

Similarly, plants of an ecosystem get eaten by caterpillars, who then get eaten by birds. More plants means more bugs, means more birds. And since it takes time for each to grow, there is a delay in the growth for the next trophic layer. So: if there are many plants today, then there will be many caterpillars in eight weeks, and many birds in a few months. But since caterpillars eat plants, their food stock will decrease when their population grows, and some will starve. Having a far longer lifespan, birds will keep capturing caterpillars which then may quite suddenly go extinct, because their population no longer grows. This can cause the bird population to collapse a while afterwards.

Market mechanisms work in the same way. When raw materials such as trees are cheap, the makers of timber can earn money by buying cheap wood and selling it easily. It means that there is space to grow on the wood market, and this space will be filled by organizations who expand. That means that demand will grow, causing the price to go up. Now, since the tree processing organizations have grown, they need more resources to sustain themselves, meaning they have to work harder to attain a similar standard. They will therefore have to buy and sell more wood than before to survive, or increase their price which would cause problems for the furniture company. Thus, high availability of trees leads to high availability of timber, leads to high availability of furniture, leads to reduced prices, leads to increased demand. Like in scarcity driven ecosystems, this can ultimately backfire on the system, causing bankrupcy of one or several of the businesses in the chain. This effect becomes more pronounced if the availability of raw materials is fickle.

Recently, the availability of raw materials such as crude oil has grown enormously, which will result in cheaper production of basically everything we can buy. The fact that this effect is so strong and sudden will induce a shock through the market chain. As markets start competing for the opportunities, the availability of the materials will decrease, and the new demand it spawned will devour the market again. Thus, to stick with the tree-timbre-furniture example, investing in closets may be tempting now, but may not be a wise long-term move, if you don’t look at other factors as well.

Now, the beauty of resilient ecosystems is that they do not rely on sudden pulses of resource input, but instead constantly reuse and recycle the present nutrient stock in highly intricate ways. As such, they have stabilized their internal nutrient and water availability, meaning all consumers and producers in the system know exactly what they can expect. By working as much as possible with closed loops, ecosystems protect themselves against sudden periods of drought or decreased nutrient availability in the soil. Indeed, ecosystems prevent such deficiencies in a region. Markets can do the same thing.

To analyse the chance of stable development of chains in an increasingly volatile market, it would be recommendable to pose a range of ecologically inspired questions. How embedded are the systems in their surroundings? How do they treat their waste? How dependent are they on a single resource, or a single type of buyer? Do they moderate their growth so as not to undermine the succes of potential future partners? Do they maintain their independence from the potentially devastating global stockmarket fluctuations? How much do they look like a real, resilient ecosystem?

Depending on how formalized the process of circular economy and collaboration with regional partners will become, it may become harder to fathom the value of certain companies or regions by their numbers alone. It will require more grounded perceptions of value with a more complete, ecosystem-like outlook on organizations and their market, political, cultural and ecological contexts. An interesing development, I think, which deserves further exploration.

Oil to the Rockefire

The Rockefellers will abandon their oil investments and advice others to do the same. It’s history in the making. The movement is an indicator of the next economic collapse: the burst of the carbon bubble.

Five years, that’s how much time it will take until they shift all of their 860 million dollars to alternative investments, including sustainable energy. Seventy foundations are joining them, for a total of 4.2 billion dollars. Some moral arguments hover along their reasoning but it’s rooted in the idea that “the market is increasingly risky”.

I have little knowledge of the financial impact this will have on the oil market, but it’s probably not that much. What I do understand is the psychological impact this will have on other oil investors. A financial giant has just moved to the other camp.

Allow me to throw some oil on this fire. What will happen with the oil prices when other investors, now scared, start backing off? What happened to the house prices in the US in 2006? What happened to tulip prices in 1637? They collapsed. Now, I’m not saying that this will happen tomorrow, but there is no clearer signal that a ship will sink, than the first rats that abandon it.

Are you paying a pension fund? Do you know where it has invested most of its money? If you don’t, then it’s probably in oil. What happens if the tanker sinks? Bye bye, “security”. Would you like that? No? Well, then maybe now is the time to sell your investments and put them where the Rockerfellers do?

I’m just saying…

Call to the aged

“Hello, is this Mr. Havik?”
“That’s me”
“I am calling you on behalf of the pension fund. Have you thought through your pension yet?”
“No I haven’t”
“Do you mind if we ask you some questions about it?”
“I’m sorry, miss, but I don’t believe in pension funds.”
She was irritated and astonished when she hung up.

I have talked this topic through with several friends of my age. It am not the only one who doesn’t believe in pensions anymore. We are the live-for-the-moment generation. Raised in a world possibilities, we have been taught that all that matters is that we do what we like.

If you, reader, are above fifty and have worked hard all your life to collect a stash for a lean-back old age, I’m sorry to inform you that I believe your final years may become harder than you expect. To put it simply: the system of the pension is based on investments in companies that grow. In a shrinking society, withdrawing money from the current situation equals removing it from businesses that need them. You will consume the wealth you created. But as lifestyles have expanded, you will consume it too quickly.

But let me ask you: why have you cast your money into the future in the first place? Did you really think that would keep you safe? Or was it an excuse to stop wondering about the things you could do to keep the earth from turning into a barren ball in space?

The older generations will need their cash, so it should be paid. The wave of prosperity they surf will take its toll for as long as life standards remain high. Meanwhile, the younger generation has seen MTV grow from a creative collective into a mass of shiny show-offs. We’ve seen banks pop and now we witness how we run out of oil. We are learning what our preceding generations have forgotten: you don’t protect your future by saving money. You do it by opening up to the world as it is. It is not in the future but in the cycles of the seasons, where our safety should be sought.

We, the young ones, will have to take over the weight that our parents lifted. We’ll have to place it down gently, hoping our backs will not break. I think we’ll see the day in which value is expressed in food and love again. The young generation will have to show the world what self-sufficiency really means. Please, aged reader, help us with that, even while you are retired.

Will you?