The dysfunctions of subsidy

Part two of David Haenke's paper on Ecological Economics:

As our political and economic systems continue to support the pillage of the earth, this selection of writing focused on outlining the dysfunction of our current subsity based economic paradigm is more and more pertinent to understanding what the problems are, and how to fix them.

read on....

The dysfunctions of subsidy

Viewed ecologically, the dominant economic order of the
nations and transnational corporations is inherently contradictory
and non-sustainable, nowhere more so than with regard to
subsidies.

The national- and transnational-scale industrial operations
of corporations and governments derive their profitability and
"viability" through massive subsidies of many kinds. These entities
skim off profits or surpluses gained primarily through the
great volume of their subsidized activity, growing through feeding
off undervalued resources and labor. It is the inefficiency
and destructiveness of their use of such enormous quantities of
these resources--often for unnecessary or even trivial purposes --
that is the prime agent of human-caused entropy, or
"economic cancer," resulting from the generation of
vast amounts of pollution and toxic waste, as well as general
social and ecological disintegration.

What if we were to do an ecological audit of whole economic
systems, of socialism, capitalism and the "free market", of the
global economy, of the United States? The results would be
startling, shaking the very foundations of the nations and the
global trading system.

Ecological cost evaluation -- ecological auditing -- of the
international economy will show a system that is thoroughly
unsustainable. Our fragile and finite planet's resources and
ability to absorb wastes cannot continue to support the massive
scale of fossil fuel driven production and transport of physical
goods all over the planet.

Despite the increasingly desperate, depleted state of societies
and ecosystems all over the world, international prices --
both relative and real -- for labor and many key types of primary
resources and raw materials needed for large scale industrial
activity continue to fall or remain steady. This is occurring in
the face of escalating social and ecological costs.

How can this be happening? It is because the financial
machinery of the dominant market nations and the transnational
corporations is geared towards driving down global prices of
labor, natural resources, and basic commodities: a goal of "Free
Trade". Every laborer, independent farmer, and small business in
the world is forced to compete in selling their labor and
production against the buying and selling power of multinational
corporations and the hourly wage of the most desperate of
sweatshop workers in Asia, Africa, or Latin America.

The economic leverage needed by governments and national- and
transnational -scale corporations to enable this global price
distortion is provided by government subsidies: varied, massive,
pervasive, often hidden. Primary among these subsidies are broad
(often planetary) access to natural resources, labor, and capital
at radically undervalued prices, these prices supported by tax-
payers' money; also included are cheap land leases, tax incen-
tives, resource depletion allowances, loan guarantees, regulatory
favoritism, contract preference, and outright government grants
for product and marketing research and development. Both taxpayers
and mother nature unwittingly underwrite corporate costs and
profits, while absorbing and paying for the pollutants and their
cleanup. Not only that, the publics of the world's nations end
up servicing the gargantuan debts run up by the international
corporate trading and banking systems. For example, the 1980's
S & L scandal in the U.S. was strongly connected to international
corporate resource speculation, particularly in oil.

With all this, along with the great volume and scale of
production and distribution, it's not hard to see where the
profit margins come from. As Herman Daly has pointed out, in
this international system, benefits are privatized, costs socialized.
Or to put it more succinctly, the essence of the present maco-economy
is : "Privatize profits; socialize cost's". (Daly and Cobb, For The Common
Good, 1989, p. 231).

If the majority of the world's larger economic enterprises
and national economies were made to pay their way in terms of
full ecologically-audited costs of their raw materials, labor,
production-distribution operations, waste, and pollution, most of
them would go bankrupt in a very short time, along with the
governments that support and subsidize them.

It is this kind of economics of profit subsidy for the
largest, most powerful, and most centralized economic entities
that most thoroughly fails an ecological audit and most
compromises a future for human beings and other species on this
planet. Ecological economics clearly establishes that these
kinds of enterprises will eventually fall. They violate most
ecological principles, and many moral ones, as well as making a
mockery of the "free enterprise" market system that they claim to
represent. The biggest question is: how much will they take with
them when they go down. The kind of politico-economics that
combines the least functional aspects of capitalism with those of
socialism I call "special interest socialism", or "corporate socialism".