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Sustainable Economy

Since the advent of industrialisation the emphasis has been on resource 'extraction and consumption'.  Over the past two hundred years this has created highly efficient techniques and technologies hell-bent on a path of linear consumption and waste. The emphasis on GNP and GDP (Gross Domestic Product) suggests that economic growth, per se, is a benefit but it fails to factor long-term criteria such as the fertility of the environment or the well being of society. If we sought a conceptual shift towards resource conservation and recycling’, we can anticipate the market responding, in time, with equal voracity and efficiency. But how can this shift be achieved?

The current market approach is based on pricing goods by their cost of production, without factoring the impact of their use. Take the case of petrol. In the USA and many other countries petrol is actually cheaper than mineral water, although the consumption of petrol results in air pollution, ill health and the erosion of the land’s fertility. Our wasteful ways of living are carried on the back of cheap petrol. The price? Massive long-term environmental damage, air pollution and medical costs for those affected by poor air and congested environments. In a single year we consume millions of years of our planet’s stored energy, and at the same time fatally damage humankind’s life support system. We are consuming future generations’ wealth today.

Nor is the market alone in its damaging behaviour. A recent report from the Worldwatch Institute in Washington DC revealed that governments of the Western world were themselves responsible for over $500 billion of public expenditure that directly harms the environment. Bringing the activities of the market and the public sector into the complex matrix of sustainable accounting is desperately needed if we are to progress towards sustainable living.

There is an imperative need for a new concept of holistic economic evaluation.  Sustainability can be seen as a measure of efficiency, but one defined by complex, broad, long-term criteria rather than simple, narrow, short-term ones.  Sustainability is thus a higher order of economic efficiency, and one that benefit all, rather than few to detriment of the many.

At present, taxation is seen mainly as a way of raising revenue rather than a tool that can influence corporate and individual behaviour. Taxation is set at the levels deemed tolerable by the market and the electorate. Thus the tax on fuel or vehicles is determined by the wish to maximise revenue without disrupting the economic status quo rather than by environmental or social considerations.

Environmental policies that encourage greater ‘resource productivity’ - more recycling and less waste - can produce virtuous circles. They tend to be more labour intensive and are predicted to generate large-scale urban job and business opportunities. This is quite logical: the shift from waste disposal by dumping at sea, burning or landfill, for example, to reprocessing and recycling demands a greater level of care. Resource productivity can be further encouraged by balancing taxation between people and machines. Government taxation policies generally favour ‘mechanisation’ as a means of increasing production. As a result they tend to subsidise automation by creating taxation structures that encourage ‘tooling up’ and discourage labour-intensive processes, giving tax breaks for investment in technology while continuing to raise revenue from labour. However, the assumption in favour of machine as against less ‘productive’ labour can be flawed: in some cases the employment of a person leads to broad social or environmental gains that far outweigh the apparent efficiency of the machine.

The extent to which these new ‘efficiencies’ create costs for society both at home and abroad should be carefully evaluated. Where society incurs costs, profits should be shared with social and educational programmes and not just distributed to shareholders and managers. As robotisation is taking over from the worker because it is better at creating certain types of wealth, so taxation must shift from the worker to the product. The ideal is to create a taxation framework that encourages the efficient, environmentally and socially sustainable interaction of society, nature and machine.

Governments should make the purpose of sustainability taxes transparent. In some cases, earmarking the revenue from green taxes for specific sustainability projects makes them more acceptable to the citizen: for example, using the revenue from raising the tax on petrol to improve public transport. Social security benefits should, where possible, be seen to be financing ‘creative citizenship’ initiatives that themselves create further social wealth rather than maintaining people in a state of dependency.

Land taxation should be designed to encourage urban consolidation rather than urban sprawl. At present some land taxes and public works actually promote urban sprawl and, as a consequence, inner-city dereliction and social decay. For example, publicly financed roads have transformed low-value agricultural land into accessible and valuable commercial property. Land taxes on developments on out-of-town sites should reflect the cost of publicly financed infrastructure and the costs to society of retail and commerce abandoning the inner city. This will increase the relative competitiveness of compact urban sites and will encourage developers and retailers to consolidate city centres. Applications for development should be accompanied by rigorous studies of their social and environmental impact. Taxes should penalise schemes that generate unacceptable levels of social segregation, congestion or pollution.

Passing laws that target domestic waste and make industrial producers responsible for the disposal of the products they manufacture - a responsibility normally falling on the end-user or the local authority, would have a dramatic effect on the attitudes of manufacturers towards packaging and recycling, and would begin to close the loop between production and consumption, rapidly improving the efficiency of the city’s metabolism.

Good public information is essential if environmental policies are to be implemented and properly policed. Governments that have committed themselves to ecological targets must suffer penalties if these targets are not reached. Self-policing is vital.

Citizens will be able to apply real pressure on their governments if agreed international standards for measuring the environmental performance of cities are established, targets for improvements set and their progress monitored and publicly published. If this information is made publicly available through the Internet a clear and accessible global picture will emerge. International penalties and aid could be targeted at nations whose cities are failing sustainability criteria.

Governments must ensure that their own enormous direct purchasing power benefits environmental and social sustainability. Government procurement policies could promote innovation in all areas of sustainable design, from electric cars to low-energy buildings and inspiring educational environments.

Rogers, R. and Gumuchdjian, P., 1997, Cities for Small Planet