THE CORRECT RESPONSE to the all-encompassing process of globalization, as most critics have realized, is to reconnect economic relationships with their regional basis. Most regionalization schemes attempt to either compensate for or work alongside the globalization process, or they consist of measures to make national economies more attractive locations from which to do business. Large – sometimes disproportionately so – quantities of public money are spent on such projects, including airports and facilities for trade fairs, without considering whether the new capacity is really needed. In many cases, it is regional economic policy designed to ensure global competitiveness that puts the regions at the mercy of globalization in the first place. If regionalization is to be an adequate response to globalization, it must take a completely different course: there must be a revitalized circular flow of goods and services at the local level, so that more activities can be taken out of increasingly global supply chains.

Just as vague as the concept of economic regionalization is the notion of what exactly constitutes a ‘region’. The term usually refers to geographical areas delimited by state-defined boundaries. In the broadest sense, a region is an area that is small in comparison to its larger geographical and political context: a continent in relation to the planet, a country in relation to a continent, a borough in relation to a county or province. On a global scale, the EU and other subcontinental economic organizations and free trade areas are regional associations. However, regions delineated by administrative boundaries are too formal to embrace the opportunities that an ecologically oriented economy would offer for regionalization.

Proposals for stimulating the regional economy always run into the question of the extent to which regionalization policy may be ‘protectionist’ within the terms of the WTO and the European single market. If successful, policies that focus on attracting industrial firms do so at the expense of other locations. Although regional politicians have a direct responsibility to seize any opportunities that may arise, such policies do not resolve the contradictions inherent in the direction the global economy is taking. Policies that focus on filling the niches which have either been left by supraregional firms or are currently of no interest to them do make good sense, but they cannot counteract the general dependency on developments in the global market as a whole. The aim of regional policy must be to bring the focus of economic relationships from the global market back to regional markets. The crucial questions are therefore: how can this shift take place organically? How can regional economies be given a lasting structure that does not degenerate into a Sisyphean struggle against the global market, in which the efforts of today will be relocated or displaced tomorrow?

To anybody with a basic appreciation of natural ecosystems, it must be obvious that the flow of goods and services in the economy conflicts with the flow of nutrients and energy in the natural world. It is only really possible to make proper allowance for ecological loops at the regional level; everything else is a more or less imperfect approximation. As the laws of nature have priority over all market rules – and over any doctrine of economic planning – it is regional market links that we should be improving, rather than expanding global free trade. This must take place without recourse to the old tactics of economic isolationism, which have all too often been used to prop up unproductive structures or to place one economy at an advantage over another. The way the EU market has been closed to banana imports in order to benefit French overseas dependent territories is one such negative example.

The smaller the scale at which economic loops can be realized, the greater the chances for achieving ecologically sustainable economic activity. The supply chains are shorter, the middlemen can be cut out and it is possible to return resources directly to the local ecosystems whence they were extracted. That said, it does not necessarily make better environmental sense to organize economic activity on a regional rather than a global level in every case. Supplying the German market with solar power from North Africa rather than locally produced electricity from coal and nuclear power stations meets environmental criteria; likewise, shipping German-made solar panels to Nigeria makes more sense than burning oil from local reserves. Obviously, however, those same criteria would be even better filled if German solar power were locally generated, and solar panels installed in Nigeria were to come from local production.

A return to old national trade boundaries is neither desirable nor achievable at either the national or the global level. The idea that national economies should not erect trade barriers at will is in principle correct. But it is also correct that environmental scandal and social disaster would be the inevitable result of subjecting all instruments for safeguarding regional economic structures and environmentally sustainable practices to the same prohibition. It is in any case naive to believe that it is only backward, unproductive and therefore poorly performing sectors that are displaced by global agents. The victims of unfettered competition all too often include ultramodern and productive firms, because market access is controlled by the ‘global players’. It is common knowledge that transnational corporations erect their own barriers to trade: statements to the effect that trade will be free if only the administrative barriers can be removed are absurd.

Neither undifferentiated regionalization nor undifferentiated globalization can yield long-term solutions. This begs the question: which economic activities should be fundamentally regional in scope, and for which activities is global free trade important? What generally applicable criteria and values make the case for regional markets? Supporters of globalization appeal to values like freedom, peace and the fight against nationalism, as if globalization were the modern expression of basic pacifist ideals. On the other side of the scales must be set social and environmental values. The standard demand is for social and environmental standards to be included within the remit of the WTO. Whether this can be achieved in a concise and consistent way, given the enormous variations in culture and levels of economic development from country to country, is, however, more than questionable. So what is to be done?

Regionalization effects through solar resources

The most important impulse towards regionalization would come from the transition to a solar resource basis. This is the lesson that the experience of conventional resource supply chains has to teach. The more thoroughgoing the transition to local renewable sources of energy, the stronger will be the regionalization effect that automatically results – right down to the smallest parish or ward. The process will take hold without any need for administrative boundaries, and the capital accumulated from energy cost savings remains within the local or regional economy. New and lasting jobs will result.

The extent to which renewable energy creates new jobs has not yet been quantified in any coherent way – ie, by comparing energy supply chains. It is probably possible to estimate the gross number of new jobs from renewable energy by deriving a figure for new jobs per unit of capital investment from comparable activity in other sectors. This method was employed by Wolfgang Palz at the EU Commission as part of the preliminary studies for the EU White Paper on renewable energy. According to his figures, trebling the contribution of renewable sources to EU energy supplies by 2010, from just under 7 to 20 per cent, would create two million new jobs, of which 800,000 would be in agriculture, 800,000 in the construction industry and the remaining 400,000 in the manufacture of technological equipment, solar technology services and consultancy.¹

The real figure for additional new jobs will only be known once the number of jobs lost in the conventional energy sector during the transition has been subtracted. Calculating this net effect is far more difficult, as any serious study would need to take into account not only redundancies in power plants, refineries and traditional installation services, but also the entire workforce employed along the whole nuclear and fossil energy supply chain, from extraction of crude oil through to power station and pipeline construction. As 20 per cent production from renewable sources would leave the conventional energy supply chain largely intact, it can be assumed that initial job losses would be fairly small. Only conventional energy sales would fall, with concomitant increases in unit costs. But as soon as the demand for fossil energy fell to the point where no new contracts for extraction technology, power stations, replacement of ageing distribution infrastructure or conventional heating systems were being awarded, waves of redundancies would follow.

For this reason, it may be that the number of new jobs is lower in the long term than some optimistic estimates suggest. What is for certain, though, besides the creation of new industries on both the small and large scales, is that there would be considerably more employment in rural regions, in the construction industry, in the trades and in engineering consultancy, and that this would be widely and evenly distributed across all cities and regions. The new jobs would also be stable in the long term, as they would be tied to the locations of distributed energy production.

The manufacture of solar technology – solar cells, solar glass, fuel cells, wind turbines and small-scale hydro, Stirling engines, storage media, appliances with built-in solar panels, etc – will probably devolve to a few producers operating mass-production plants in just a few locations. The market for solar collectors and specialized PVs is more likely to develop a broader structure. Plant manufacture, however, will not bring as many new jobs as installation and maintenance services, or the forestry and agricultural enterprises that produce foodstuffs, energy and raw materials. Table 10.1 lists which renewable energy functions will be evenly distributed across regions, by comparison with the centralized organization that inevitably goes with nuclear and fossil supply structures. All energy functions, with the exception of the manufacture of generating plant, are overwhelmingly performed at local or regional level in the case of renewable energy, up to and including the financing of innumerable individual installations.

Table 10.1 Regional distribution of economic activity: renewable and non-renewable resources compared

It is possible to bring local and regional economic agents into a nuclear and fossil energy supply, but this is more a chance occurrence and is not intrinsic to the system. Exploiting renewable energy, by comparison, results in a redistribution of labour from large firms and their geographical locations to regional or local situations and small and medium-sized undertakings, agricultural and forestry enterprises, and to tradesmen and the professions in the case of engineering design and installation services for renewable energy systems. Whereas, in decades past, jobs in municipal power plants were replaced by jobs in large power stations, now the reverse will be the case. Biomass farmers and foresters replace jobs in oil and gas extraction in Saudi Arabia and Russia, or in coal mining. Those currently employed in the lignite mines of eastern Germany could find new work in the same region, cultivating and harvesting biomass; power station installation engineers could move into the installation of solar systems; refinery workers could find new work in regional oil mills, biofuel production or in the processing of plant-derived materials.

Local councils and regional bodies with an independently managed budget and the power to raise taxes on commercial activity, and which also receive a proportionate share of the revenue from general taxation in their area, ought to have strong interests in seeing a swift transition to renewable energy. Local tax revenues would rise not only because money formerly spent on imported energy would remain within the local economy, but also through the new jobs that would result. Pure self-interest ought logically to push regional authorities into driving forwards the uptake of renewable energy on a large scale. Such investment for the future would pay for itself through the boost it would give to renewables businesses – quite apart from the accompanying environmental benefits, which really speak for themselves. By creating new jobs, the commercial exploitation of renewable energy also contributes more than any other conceivable initiative to achieving the original goal of regional economic policy, namely tackling social inequality.

Another impetus towards regionalization will come from the demise of the monthly energy bill and an end to the concentration of capital in the hands of the energy suppliers. Revenue from conventional energy supplies accrues to large public companies and their shareholders, in whose hands it also further fuels the consolidation and globalization activities of the business world, loosening their ties to national economies. Although the regionalization of energy supply induced by the switch to renewable energy will also lead to a loss of income in regions where existing conventional energy extraction and processing industries will be forced to close down, at the same time these regions would not be placed at a disproportionate or unacceptable disadvantage, as they will have the same opportunities for exploiting renewable energy as anybody else. Renewable energy levels out the international playing field and helps to deliver equality of opportunity, no matter where people live.

Large cities will also see improvements in their economic situation as businesses return and energy costs fall. New rural opportunities will put the brakes on rural depopulation, thus also lessening the pressure of migration on the cities. Urban–rural trade links will be strengthened as biomass production from farming and forestry takes centre stage. Urban demand for renewable energy or growing demand for ever more varied raw materials will spark the foundation of new rural businesses, ultimately leading to a decentralization of the national economy.

‘Own implementation’ versus ‘joint
implementation’: opportunities for the
developing world

Through the mechanisms already described, renewable energy contributes to a more equal distribution of income on a global scale wherever the process of replacing conventional energy is put in train. Renewable energy is the ideal tool for bridging the global gulf between rich and poor. Blindness to the societal consequences, and the enduring mythology and supply-chain influence of the conventional energy industry, are the only factors that can explain why renewable energy does not have pride of place in national strategies for economic development.

Developing countries whose currency is not yet freely convertible and which therefore have direct control over their foreign currency reserves are in an entirely different position. The obvious strategy here would be to reallocate foreign currency reserves to renewable energy by steering investment flows. As there is virtually no lead time between installing and commissioning renewable energy generation plant, developing countries could invest their foreign currency directly in imports of renewable energy technology. The investment would need to be costed over several years for a sensible comparison. The expected price of the amount of energy produced over ten years could be offset against the one-off capital cost of the generation plant: energy contracting on the scale of an entire economy. The calculations would almost certainly favour renewable energy. Developing countries thus have a real opportunity to make the transition from conventional to renewable energy under their own steam.

The majority of developing countries currently import both supplies of primary energy and the generation technology required. Domestic manufacture of the much less complex technology needed to exploit renewable energy, however, would yield an economic benefit that the industrialized countries have hitherto reserved for themselves, to the detriment of developing countries. From an economic perspective, it is irrelevant whether importers of renewable energy technology are required by law to manufacture their own equipment domestically, or whether the equipment is manufactured and sold by domestic firms. Either way, domestic production results in significantly lower costs as lower local wages mean considerable reductions in the large proportion of total cost due to labour. Countries with domestic renewables industries also gain the possibility of exporting plant to other countries – either to other developing countries which have not yet embarked on the same strategy (South–South trade), or as cheap imports to industrial countries, raising the woefully low level of South–North trade. In order to seize these opportunities, governments of developing countries must take the plunge and embark on the direct route to distributed energy systems for renewable energy without further ado. As already discussed, this is the only route they can sensibly take, because this is the only way to deliver high-quality energy supplies to rural communities, where there is desperate need for economic, social and cultural development capable of bringing forth viable enterprises in agriculture, the trades and other small businesses.

Development of the rural economy is also of vital importance for the production of regenerable raw materials, over and above the specific issues faced by developing countries. Without rural access to a modern energy supply, the production of bio-materials, for which developing countries have the greatest potential, will remain firmly in the hands of transnational agribusiness. This would deprive developing countries of the opportunity to produce raw materials for domestic consumption through a diverse range of small businesses and cooperatives. There would also be a clear danger that bio-materials would be cultivated in an environmentally damaging, extensive, export-oriented manner. An international bio-materials firm can go elsewhere once the land is exhausted: domestic cooperatives cannot, which means they are more strongly motivated to manage their farms or forests in a sustainable way.

This strategy is wholly impossible with conventional large-scale power stations, and not just because of the ongoing need for imports of primary energy. Importing a large-scale power plant can bring a developing country to its knees financially. As a proportion of total economic output, developing countries had already been far worse hit by the oil crises between 1973 and 1982 than the industrialized countries. Total debt ballooned six times over from around $200 billion to $1.2 trillion, and despite a number of debt relief programmes this debt millstone still hangs around their necks today. Further global oil price rises of comparable magnitude would drive many states into economic meltdown. Yet such price rises must be expected in the near future, between 2010 and 2020. As the next price leaps will not be caused by arbitrary decisions by the OPEC cartel, but rather by dwindling reserves, prices will remain high, and can only go up from there. Developing countries already run the risk of never being able to amortize costly new investment in conventional energy infrastructure.

Renewable energy thus represents the only, and at the same time a unique, opportunity for the economies of developing countries. New investment in conventional energy is a wanton use of economic resources. At best, such investment is only free of risk in countries that have their own fossil fuel reserves, which of course overlooks the environmental damage that results from developing countries’ focus on fossil energy as a strategy for economic growth. The key, crucial point is that developing countries can follow the path outlined here under their own steam. Developing countries can no more enter a solar global economy by the power of development aid alone than industrial countries can make the transition from nuclear and fossil fuel to renewable energy solely through government grants and tax breaks. The main thrust of their efforts must come from within. To an even greater extent than for the richer nations, this is an issue that will directly decide the fate of whole developing country societies. And the path taken by the developing countries will also determine events in the wider world.

The result will be a historic irony if developing nations replicate the nascence of fossil fuel industrialization just as it enters its twilight years. There are sound, comprehensible reasons why today’s industrial societies followed the path of technological development that they did. For today’s developing countries, these reasons no longer obtain: the alternative is there for the taking! The way to satisfy the energy needs of the developing nations is not ‘joint implementation’, arm-in-long-arm with the industrialized countries and their energy corporations. Joint implementation mechanisms and tradable emissions certificates are the most frequently proposed suggestions for global action on climate change.² The underlying assumption is that because of the global effects of emissions from energy consumption, it does not matter exactly where emissions are reduced. It is therefore in the interests of all, the argument continues, that investment take place where it can have the greatest effect, and industrialized countries should therefore be permitted to meet their emissions reduction obligations under the international protocol on climate change through investments in developing countries as well as at home. This would also have the general advantage of transferring low-emission technology to developing countries.

The internationally-agreed concept of emissions certificates allocates an emissions quota to every country. In aggregate, the quotas should equate to the targets for global emissions reduction – up to 50 per cent by 2050, measured against 1990 levels. The allocated emissions quotas would have to be lower for industrialized countries and higher for developing countries than their respective current emissions, because of the much lower energy consumption in developing countries. Should an industrialized country desire to emit more than its allocated quota, it should be able to purchase or lease additional permits from developing countries. In theory, all countries therefore have an incentive to reduce emissions. Individual companies should also be able to participate in this trade in emissions.

Both mechanisms are designed to motivate governments to pursue a more rigorous policy on climate change. Both approaches have problems, on top of their failure in practice. Trade in emissions permits gives industrialized countries the option of buying their way out of the need to reshape their energy systems, despite the fact that it is the industrialized countries who most need to change. Developing country governments are also so mired in chronic budget deficits that it is highly questionable whether they would use the revenue from permit sales for purchasing and implementing energy-saving technology in order to limit their need for emissions permits. The joint implementation mechanism also illustrates the casual arrogance of the developed world, presupposing as it does that those guilty of causing climate change can put developing countries on the right path by transferring their energy technology. Here as nowhere else, following decades of profiting from the wrong technology, the industrialized world is skating on thin ice. Yet the real problem with both these mechanisms is that renewable energy has so far not featured prominently in discussions on combating climate change. The focus has been above all on lowering the consumption of fossil fuels, with almost everything hinging on emissions reduction rituals. Discussions on climate change prevention are generally regarded as impeding economic development, and thus meet with resistance, not least on the part of developing countries.

This problem would not arise if, rather than international obligations to reduce emissions, countries were to be set binding targets for the percentage of domestic energy generated from renewable sources, measured against current fossil fuel consumption. Such targets would automatically serve the objective of lowering greenhouse gas emissions, and the goal of increased energy efficiency also receives indirect consideration, because binding targets for renewable energy use are easier to achieve as total fossil fuel consumption falls. Focusing climate change agreements primarily on renewable energy use would also render them more acceptable to their signatories, as the shift away from the fossil resource base would no longer appear to be an economic burden. Renewable energy offers a unique opportunity – for developing countries above all, because they would be pursuing their own individual paths of development, rather than copying the mistakes of the industrialized world.

Regionalizing trade flows

Global trade in goods and services requires a global transport infrastructure. The faster the medium of transport, the wider the spectrum of goods and services sent round the world. The greater the transport capacity available, the lower the cost and the greater the volume transported. Faster and more economical transportation has probably done more for world trade than all the free trade agreements in the second half of the 20th century. Transport infrastructure has certainly made the current consolidation taking place in the global economy possible, allowing mass production to be extended to cover more and more markets.

The fossil energy industry has always profited from the growth in the global transport industry in at least two ways: through increased sales, and by expediting the industry’s expansion into more and more walks of life, thus increasing sales still further. As this twofold sales boost lowers the energy industry’s unit costs, it gains even greater scope for flooding existing markets with cheap products and thereby tightening its grip on them. Transportation networks powered by fossil fuels place a manifold burden on the environment. This is simply ignored by statistical success stories suggesting that economic growth has been decoupled from resource use in the transition to a ‘weightless’ economy. Replacing domestic production with imported goods only lowers energy consumption in the importing country; this is balanced by rises in the exporting country.

For this reason, among others, fuel duty exemption for international shipping and aviation is what has done the global environment the greatest damage. While the exemption for shipping is a hangover from earlier times, the exemption for aviation was only introduced after the second world war. The effect of these exemptions on the structure of the global economy began to be felt with the construction of giant freighters of over 100,000 tonnes displacement, and of large cargo planes.

The decision to accord tax-exempt status to aviation fuel was taken by the International Civil Aviation Organization (ICAO), an association of what were for a long time primarily state-owned airlines acting in their own interest. Although ICAO decisions are not binding, governments have always abided by them, in some cases even enacting new legislation. In Germany, tax exemption for aviation fuel is enshrined in the Crude Oil Act; in the EU it is guaranteed by directive 92/81/EEC (ie, since 1992). These regulations are also anchored in innumerable bilateral agreements on aviation, of which Germany alone has signed over 120.

But the tax subsidies did not stop there. Their scope was expanded to include the purchase of aircraft, which is zero-rated for VAT and attracts further tax breaks, in Germany amounting to some 30 per cent of the purchase price. Airline operating capital held outside national frontiers is not liable to capital gains tax where the signatories to bilateral agreements so stipulate. Airports in most countries are not liable to property taxes. The shipping industry also benefits from tax breaks for the purchase of freighters. It has also become standard practice – without any serious political action ever being taken – to sail under so-called ‘flags of convenience’ such as that of Liberia, by which means shipping companies obtain yet further tax exemptions while also protecting themselves against most insurance and public liability provisions. The shipping and aviation industries have thus become a global tax-free zone.

These are not welcome topics for discussion. The German government’s report on subsidies, for example, listed an annual subsidy – in the form of lost revenue – of only DM250 million (€ 128 million; $114 million) for aviation fuel and DM350 million (€179 million; $159 million) for shipping, DM600 million (€307 million; $273 million) in total. Only when a parliamentary question put down by the Green Party in 1995 insisted on the calculation of lost revenue in comparison to the standard rates of duty on petrol and diesel did the federal government have to admit a figure of DM8.1 billion (€4.1 billion; $3.7 billion) for the 1993 fiscal year. A statement to the parliament justified the discrepancy by claiming that the figures only referred to fuel consumed within national borders, as ‘there can be no question of loss of tax revenue outside the tax domain’.³ The same report listed DM35 million (€17.9 million; $15.9 million) of revenue lost on the purchase of ships and aircraft, a figure that is also obviously too low.

Criticism of these tax privileges has centred on the consequences for the environment of the growth in air travel. The tax breaks enjoyed by the shipping industry have generally escaped critical examination, with the result that many are either not aware of them or do not think them worthy of comment. The crucial economic consideration has been overlooked: these subsidies represent a subsidy for global trade which places it in a privileged position over local trade, confined as it is to road and rail. They are a targeted benefit to global firms, denied to firms with only regional scope. No attempt has yet been made to calculate the aggregate value of this subsidy. Its value to the global players, by comparison with average duty on fuels, is mostly likely to be around the $300 billion mark – to the detriment of regional trade flows.

This tax break thus does not just represent the greatest act of patronage in economic history, which, besides the shipping lines and airlines, primarily benefits exporters and the energy industry. It is also the largest single factor behind the accelerating degradation of the environment. Shipping and aviation account for around 15 per cent of all global oil consumption, and the proportion is set to increase in coming years. As emissions from aircraft cause at least three times as much damage to the atmosphere as ground-level emissions, aviation as a tax-exempt polluter causes around 30 per cent of the damage to the atmosphere. Oil-drenched international waters and numerous oil-coated coasts are ample testament to the environmental havoc wrought by the shipping industry.

Without these subsidies, global trade flows could never have reached their current scale. The agricultural sector above all would look very different. More than any other, the overwhelmingly US-based food-processing companies owe their rise on a global scale to international freight subsidies. Since the 1960s, the cost of shipping food products from the USA to Europe has fallen by 80 per cent.⁴

Tax exemption for freight has helped to destroy agricultural structures in developing and developed nations alike. By extension, it has also contributed to the appearance of slums; to the introduction of environmentally damaging cultivation practices in the pursuit of global competitiveness through enhanced yields; to the drain on government budgets from subsidies to prop up ailing domestic farms; to the falling quality of foodstuffs; to the global redistribution of nutrients through shipments of animal feed, which seriously compromise land quality in both exporting and importing countries; to the global dependence on a few, mostly US-based, suppliers of crop seed, thereby running the risk of acute famine should these companies be afflicted by, for example, drought or flooding; and to the poverty of modern food supplies and the demise of the agricultural sector, the indispensable basis of all societies.

Tax-exempt fuel for shipping and aviation has directly led to the deregionalization of economic links. It discriminates against regional suppliers. That it can now cost more to transport a comparable load from Passau to Bremen or from London to Glasgow than over the Atlantic or from Australia to Europe by ship or plane is a greater environmental problem than the – equally scandalous – preferential treatment of road over rail transport. Exemption from fuel duty privileges environmentally harmful over non-harmful freight transport, global over regional trade flows and industrial corporations over small- to medium-sized enterprises. It promotes the separation of product from consumer and the anonymity of the economic process, which runs counter to the purpose of a market economy. The rationale for artificially rescinding transport costs in this way is that there should be equality of opportunity among all producers, regardless of location.

Economic and environmental regionalization must respect and exploit the natural advantages of the right location. Subsidizing these advantages out of existence places a burden on nature and society that benefits distant, scarcely accountable economic agents. Freight subsidies are an attack on society and on the natural world. If the regions are to see a revival, then the subsidies for shipping and aviation fuel must be abolished at once. Freight costs that fully reflect the actual distance travelled will automatically lead to the regionalization of trade flows without any bureaucratic intervention. Firms will be motivated to manufacture in proximity to their markets, and thus to decentralize their production. Small and mediumsized firms will have better opportunities, as will domestic agriculture. The amount of energy consumed by shipping and warehousing will fall, lessening the strain on transport infra- structure. The scale of fossil energy supplies will be reduced, thereby weakening their position on the global market and hastening their replacement. It will be easier to market regionally produced biomass for energy and raw materials. Regionalized trade flows will be disintermediated, putting producers back in direct contact with consumers, with cost savings to both. The new relationships between producers and consumers will resemble the models described by the early 19th-century economist Johann Heinrich von Thünen in his work on the ‘ideal city ’ and the ‘ideal state’:⁵ the economic process as a series of concentric circles around the regional centres. These circles would not be administrative boundaries, but would result from varying production costs and distance-dependent transport costs.

Taking this step towards the regionalization of trade flows would probably have a wider effect than any other political proposal. It could also be immensely popular. Measures such as a tax on global capital transfers (the so-called Tobin tax) would be far more difficult to implement. Ending unfair treatment is a simple measure because it ought by rights to be a matter of course. It is precisely because such self-evident principles have been neglected for decades that the world is endangering its own survival.

The sustainable economy: global technology
markets, regional commodity markets

That fuel-duty exemption for international shipping and aviation is already regarded as a matter of course and irreversibly shows just how one-sided the global economy is. The rules of the global market are drawn up to suit large, globally competitive companies. These corporate empires are in large measure a political creation. If the architects of the world trade regime had set their sights on the economy as a whole within its social context, rather than primarily following the interests of big business, they would have had to draft a framework that made it possible to hold companies to their social and environmental responsibilities.

Many ‘modern’ apologists for the global marketplace, however, denounce all attempts to widen the scope of market regulations to include social and environmental obligations as impracticable or as ‘protectionism’. Protectionism is the new bogeyman of the neoliberal age, and yet all it means is security for individual livelihoods. The freedom or necessity for individuals to protect themselves is not normally open to debate. Anybody who decried the existence of police and military forces as ‘protectionism’ would be seen as a dangerous radical who would yield society up to the forces of naked aggression; at best there might be sympathy for this out-of-touch simpleton who naively trusts in the goodness of humanity, being ignorant of the ways of the world. The antiprotectionist dogma of a global free market has all the hallmarks of an ivory-tower delusion – to think that economic life of all things, that daily battle to survive, would be devoid of aggression! This naive view of the world is proclaimed primarily by the most successful practitioners of economic aggression, whose talk of markets and equality of opportunity is no more than self-interest. There is no question that protection is an essential ingredient of economic life. Those who claim that competition always favours those with the best product and the greatest productivity are preaching sanctimonious economic parables. The world hangs in the balance when ivory-tower dogma becomes global economic practice. Every civilized society needs defensive mechanisms, and that applies also – and especially – to its economic system. The question is simply what society seeks to achieve and protect. Is it the mechanism best suited to satisfying human material needs and to productive economic activity, and is it based on objective and generally applicable principles, or merely the selfish interests of corporations or states?

Whether social and environmental standards should be incorporated into the treaties regulating world trade (GATT, the General Agreement on Trade in Services (GATS) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)) goes to the heart of the debate on protection in the global economy. Such standards would allow countries to close their borders to, or impose additional tariffs on, goods whose low price evidently relies on worker exploitation and environmentally damaging production processes. It is within the bounds of possibility that lengthy and tortuous negotiations might result in the incorporation of social and environmental standards into an expanded global trade treaty. But it is unlikely that such standards would be sufficiently tightly worded to bring about socially and environmentally sustainable practices on a global scale, or that states would have sufficiently powerful measures at their disposal to be able to mount an effective defence of sustainable business forms.

Many people see GATT as the Bible for the global economic system, a sort of world constitution that has primacy over all other treaties – or at least over those with direct implications for business activity. But this is ideology talking. In reality, GATT, GATS and TRIPS are just three treaties among many, including the conventions of the International Labour Organization (ILO), which, among other things, guarantee the right to join a trade union and the right to negotiate salary and conditions of employment in every signatory state; or the UN Convention on the Law of the Sea, the Antarctic Treaty, or the Convention on Biological Diversity and the Convention on Climate Change. All these treaties have equal standing in international law, which recognizes no umbrella treaties other than the United Nations Charter and the UN Convention on Human Rights, both of which have constitutional character or should be interpreted as such. In taking it upon itself to put free markets before existing social and environmental agreements, the WTO is exceeding its mandate.

Demands for the inclusion of social and environmental standards within the remit of the WTO would indirectly accord the organization a role as an international arbiter in economic, social and environmental issues. The remit of the WTO, however, must be bounded by other international agreements. Cases of conflict between the WTO and the ILO conventions or a global agreement on the environment would be referred not to the WTO, but to an international court. It is because the WTO is accorded greater authority than provided for in international law that no such conflict has yet been tried in a court of law.

In sum: there have long been provisions for social and environmental standards in international company law, as Julius K Nyerere has pointed out. Prior to his death in October 1999, the former President of Tanzania and Chairman of the South Centre was firmly opposed to the inclusion of social standards in the WTO treaties.⁶ Whether future trade agreements explicitly acknowledge the validity of social and environmental agreements is irrelevant: they have force in international law. Attempts to incorporate them into GATT and GATS put them at the mercy of negotiations on the future development of the WTO, when WTO delegations have no business deciding which other international agreements shall have force in international law. Heribert Prantl from the newspaper Süddeutsche Zeitung neatly summarizes the overblown aspirations of economic liberalization in an ironic reversal of the German constitution, the Grundgesetz or Basic Law, whose first and second articles declare the freedom of the individual to be inviolable: ‘German competitiveness is inviolable. The undisturbed practice of investment is guaranteed. No-one may be compelled against his conscience to protect the environment, to respect privacy, to provide protection from summary dismissal or to enact any other measures that may place restrictions upon him.’⁷ International law deserves equal protection from erosion when it conflicts with WTO rules.

Which rules and rights are respected, especially in company law, and even more particularly in disputes between countries, also depends on whether those affected have the courage to stand up for their rights. Without trade unions, consumer organizations and a few bold individuals, many national laws against the ruthless application of economic power would exist only on paper. Governments only decide to bring suits against other countries under international law after carefully weighing up the implications for their relations with the country in question. If international environmental law is to be enforced, then individuals must be allowed to bring suits before international courts, and not just governments. There also needs to be an international court of environmental law for this purpose, parallel to the International Court of Human Rights.⁸

Whether countries would abide by the judgements of such a court remains a question of international power politics. The USA takes the liberty of erecting trade barriers even in the face of WTO rulings – for example, against countries that don’t observe the trade embargo against Cuba. As no international organization has sufficient force at its disposal to ensure that rulings by the WTO, ILO or international courts are respected, compliance is always a question of the balance of power between those involved. A verdict is more likely to be respected when it favours an economic power with the ability to impose its own sanctions, whereas rulings in favour of those without further influence are often empty words if the more powerful party chooses to ignore them. While international law may impede the powerful in the pursuit of their own interest, it rarely stops them entirely. As national economies become ever more dependent on transnational corporations and the global market, even for basic supplies such as food, energy and raw materials, they are increasingly at the mercy of an economic force against which no recourse to international rules on the environment, social issues or even trade can help. Whether right is on their side or not, countries can be blackmailed with threats to cut off essential supplies if they do not yield to the economic powers who control the world’s resources. Hence resource autonomy at the level of the national economy is a fundamental objective that grows in importance as economic relationships become more international in scope. From an unblinkered perspective, this is in the economic interest not just of small nations, but of all countries, including those with the highest consumption of resources, the USA above all.

Already, even leading industrialized countries are harming themselves if their governments:

•    act in the interest of the global market power of ‘their’ international resource companies, whose products destroy both the global and their own environment;

•    provide military forces, including ‘rapid reaction forces’, to this end; and/or

•    take the flak for the global economic plundering of resource reserves by the global players.

Governments that act in this way take on the role in the public consciousness of the ‘ugly American’, as Senator Fulbright noted back in the 1960s, or of the ‘ugly European’ or ‘ugly Japanese’, standing in for a few firms with US, European or Japanese names. Even the governments of the industrialized world are faced with the question of whether they would not better serve their interests by embarking on the road to a solar resource base, rather than continuing to defend the ‘free’ global commodities market.

Free trade should only continue to hold sway in the market in which the two core economic arguments for it actually obtain: that is, the market for technological goods. The first argument is that protectionist isolation is ultimately damaging to a manufacturing economy, as there is less incentive to seek productivity gains in a closed economy. The longer insulating tariffs remain in force, the further behind the economy falls as its productivity drops. The second reason is that every product for which there is a demand should be available everywhere, even if it is not domestically produced.

The flaw in the reasoning occurs where global market rules are extended to cover those products whose production depends on factors not under human control. In respect of commodities, this is always the case. Denying this difference and subjecting energy, raw materials and foodstuffs to the same global market rules as manufactured products is an error that criminally disregards the laws of nature. It is an error of the same magnitude to extend the free-market principles applicable to manufactured goods to cultural goods, the spiritual and intellectual resources of humanity and all its diversity in language and way of life.

Cultural levelling and the abuse of the natural environment, through to its irreversible depletion and destruction, are the consequences of these errors. Globalized markets have led in practice to an economic structure that rides roughshod over all moral principles and has no regard for the natural basis of life on Earth. The market principle is exposed as extremist economic dogma. A sustainable market regime must rescind all global market regulations pertaining to the resource industry, restricting their scope to manufactured goods. The global market for technology and technological products must be truly free and open to all comers. In the commodities market, however, every national economy must have the ability to prioritize locally produced over imported resources. This means:

•    Domestic agricultural commodities such as grain, milk, meat and vegetables must have priority. Anything that cannot be produced domestically – in northwest Europe, this includes tropical fruit and vegetables and olive oil – must be freely tradable. The same applies to all foodstuffs where demand cannot be satisfied from domestic production. Equally, there can be no artificial restrictions for quality goods such as wine and speciality cheeses. This basic pattern can be expanded upon with regional preference regimes for basic agricultural commodities in countries with large land areas or in trading blocs such as the EU or the North American Free Trade Area (NAFTA).

•    Domestically harvested or extracted energy and raw materials must be given priority over imports. This would automatically boost the market for renewable energy. Even countries with conventional energy reserves would lose their current cost advantages with the end of mass production for the global market.

This approach would be considerably better targeted, less bureaucratic and of more direct relevance than defining global standards for the entire domain of social and environmental policy. To be effective, standards necessarily have to be detailed – an enormously complicated undertaking, given the very different economic and environmental starting points in each country and their very different social and environmental legislation. The approach I propose returns the economic initiative to the level of national and regional economies, vital if social standards are to be upheld. By starting with the resource base and according priority to regional resource flows, it incentivizes sustainable business practices far more than would an environmental policy that merely sought to rein in the environmental excesses of traditional business through a plethora of individual regulations. How can a system that barely works on a national level be made to function on a global scale? Traditional environmental policy expends considerable administrative effort on improving conventional resource use. A modern environmental policy must focus on environmentally sustainable resources and traffic reduction. A global drive towards regionalized commodity markets furthers both these aims, being the swiftest route to a self-regulating sustainable economy. Regional markets make it possible to largely circumvent the intermediate resale agents that are a particular characteristic of the global market in agricultural products, and thus to avoid higher prices for consumers. It is the middlemen who take the money from the pockets of agricultural businesses, thereby accelerating their demise. Producer-organized direct marketing for foodstuffs and regenerable resources can, with political support, remove the need for intermediate trade, including the use of labels to indicate the origin of the product. One common argument against such a thorough regionalization is that developing country and East European agricultural and resource producers would lose their export markets. Yet all these countries have difficulty feeding their own populations, and in most cases it is not the population at large or domestic companies that profit from resource exports, but rather transnational resource corporations.

Trade not talk: beyond the energy industry

‘The congress dances.’ Such was the disparaging view taken of the 1815 Congress of Vienna, where for many months the diplomatic envoys of the governments of Europe negotiated the political future of the continent, following the ‘big bang’ of the French Revolution (1789) and the Napoleonic Wars. In terms of results, however, that congress achieved more that the negotiations, now in their tenth year, on the international treaties supposed to establish a global environmental protection regime. An unprecedented conference marathon produces agreements, when it produces anything at all, that are promptly ignored. Worse still: elsewhere, at the same time, the same governments are signing international agreements whose direct consequence is to negate the agreed environmental targets, from the WTO treaty to the European Energy Charter through to agreements on aviation. Unlike environmental accords, these agreements are usually observed. And yet there seems to be no alternative to global governance on environmental issues. Hence the many conferences, preparatory conferences and follow-up conferences at which protective measures for the climate, endangered species, land, sea, tropical forests and the ozone layer are negotiated. Non-governmental organizations (NGOs) also concentrate their activities largely on shadowing the global conferences in order to present them with their demands. The result is a growing body of international environmental law,⁹ whose further development makes undoubted sense. But the fate of the planet must not be made contingent on the success of efforts in such conferences, be that explicit environmental treaties or new WTO rules. Calls for and attempts to initiate international agreements present an ideal excuse for governments not to undertake even the most urgent revision of policy on global resources, allegedly because an international understanding is a vital prerequisite – usually without any particular effort to bring such an understanding about. ‘Talk globally – procrastinate nationally’, was how my book A Solar Manifesto characterized this abuse of international negotiations as a smokescreen for business as usual.¹⁰ Ross Gelbspan’s book The Heat is On: the high-stakes battle over earth’s threatened climate describes in detail how the ambitious UN Conference on Environment and Development in 1992 in Rio de Janeiro, at which Agenda 21 was agreed, has remained ‘bogged down in diplomacy’.¹¹ Even with dedication on all sides, the broad consensus needed to negotiate an international treaty that will be ratified by a large enough number of countries to give it the status of international law makes for a tortuous process. Not only do the participating countries make concessions to each other, they also grant concessions to transnational firms. Serious and increasingly acute dangers cannot be resolved by such long-winded and ineffectual methods.

It is noteworthy that the only international agreements on the environment to have been achieved so far do not significantly touch on the interests of big business. The Antarctic Treaty, the Treaty on Maritime Law and the Montreal Protocol on the use of ozone-damaging gases are all examples of limits placed on environmentally damaging activities that have either not yet begun or – in the case of the Montreal Protocol – did not endanger powerful economic structures. Protracted efforts to achieve international agreement are scarcely amenable to fast-tracking. There are several proposals for global action, including the proposals contained in A Solar Manifesto for an International Renewable Energy Agency (IRENA), parallel to the International Atomic Energy Agency (IAEA), to organize international non-commercial technology transfers for renewable energy on global scale; and for a ‘proliferation treaty’ on renewable energy in the form of a protocol appended to the existing non-proliferation treaty on nuclear technology. But as useful as these initiatives may be if they succeed, it would be negligent to rely on successful negotiation alone.

In the case of renewable resources, it is also simply inappropriate. There is no need to agree access arrangements for a resource that is universally available. The only requirement is the right technology, for which no international treaty is required. Ultimately, it is a question of individual action, the only possible obstacle being national, European and international market rules that directly or indirectly favour the fossil resource industry. This absurdity must be brought to an immediate end, without waiting for changes to international treaties to establish market precedence for self-sufficient and sustainable resource use. International and European law already enshrines a sufficient number of such principles so that it would be possible merely to give these existing principles priority over market rules. No country need allow itself to be compelled by market rules to accept imports of crude oil or coal or electricity from nuclear or coal-fired power stations to the detriment of renewable energy. Every government can give priority to renewable resources, even if that means taxing environmentally damaging goods. It then has only to apply the same policy domestically, and give priority to renewable over fossil resources in the domestic economy. Governments have greater freedom of action than is generally assumed or claimed: it is just a matter of seizing the opportunities that already exist. And because the transition to renewable resources is not a burden but brings important advantages, there are no real economic constraints. The constraints are mostly imaginary.

Consensus among the masters of the existing superannuated global resource industry is not a precondition for the transition to a solar resource base. As long as this misconception holds sway, the opportunities that renewable energy and resources offer will fail to be adequately and appropriately exploited. We must be prepared to think and act outside the energy industry box. The solar economy will not blossom in debating chambers and boardrooms, but among practitioners of sustainable architecture, cultivators of energy and materials crops and designers of energy technology. Action must be taken locally, not globally.