EUROPEAN PAPERS ON THE NEW WELFARE

Chapter 5: The Club of Rome and the Limits to Growth

11. “One always ends up talking about God”
One of the effects of the Club of Rome’s initial success was that debates and confrontations were sparked off at every level and in every country. Annual assemblies and conventions followed one after the other from Tokyo to Algiers, from Kuala Lumpur to Madrid, Salisburg, Montevideo, Paris and many other cities. These were almost always attended by ministers and statesmen, even those at the highest levels.
Some years later Karl Schwab gave a fresh impetus to the World Economic Forum which had taken up the Club of Rome’s first experiences, widening and improving them, concentrating on the economic questions being discussed by world institutions. The great political and economic leaders needed a private, non institutionalised place where they could compare their ideas and discuss the great questions of the moment. I was invited to Davos three times to suggest discussions on insurance, and in particular on the management of the new vulnerability. My success, however, was very modest: neither the economic world nor the insurers (of whom only a few came to Davos, dispersedly) were ready to consider the strategic importance of insurance and the institutes managing risks in the modern world. Despite this, for twenty eight years at the Geneva Association, I committed myself to demonstrating it. Now we’ve got there, probably. Change is underway, and with it of course the need for new points of reference.
Many other initiatives were born after the shock from the Club of Rome. At Geneva, for example, for years Jacques Freymond, Director of the Graduate Institute of International Studies – and a member of the Club of Rome − coordinated a discussion group, in which Hugo Thiemann, Director of Battelle, had delegated me to participate, on the impact of technology on society. In that circle, a small group of scientists supported by the Club presented a study project on the importance and significance of possible climate changes.
This occurred thirty years ago and no one, at that time, had any idea of a possible warming of the planet or of the role of the greenhouse effect.
M. Kaplan, the Director of Pugwash, also took part in these meetings. He led an initiative within the circle, together with a group of scientists, to study in depth the aspects of their social responsibility. During this period I got to know Maurice Goldsmith very well in London. He was the guiding force behind the Science Policy Foundation that had the same objectives. With Walter Stahel and the help of Charles Enz, professor of physics at the University of Geneva, we organised the European section of this foundation in my offices.
Lew Kowarski was one of the most assiduous participants at Jacques Freymond’s meet­ings. He was a specialist in the nuclear heavy water industry that had been developed after the war by the Canadians. During the world conflict Lew Kowarski had gotten the available heavy water out of Norway before the German occupation. A fairly successful film was even made about the event. I had gotten into the habit of driving home with him after the meetings, once Francois Perrin came too. Lew Kowarski was very open to every kind of discussion. He thought it important and legitimate to study and check the Club of Rome’s hypotheses. Once, during a dinner he surprised me right in the middle of a discussion with a philosophical sentence. “You know, at a certain point one always end up talking about God”.

12. Evaluating the Reserves in order to Measure the Wealth of Nations
There is a report to the Club of Rome, dated 1986, produced by Elisabeth Mann Borgese, daughter of Thomas Mann, the great German writer, which embraced my suggestion that the notion of economic value should be reconsidered. This report concerned “The Future of the Oceans”, a subject to which Elisabeth had devoted several decades.
Her adventure in this field had begun in the early sixties together with Arvid Pardo, Maltese Ambassador to the United Nations and co-founder of IOI (International Ocean Institute). They both fought to have all those ocean surfaces, not belonging to a sovereign State, recognised as the Common Heritage of Mankind, and managed as such. All said and done we are talking about more than half of the globe. Around forty years ago the United Nations Assembly approved a law to this effect, but the battle to have it ratified ended just a few years ago. In this area of activity, or rather this mission, the IOI and Elisabeth Mann, who taught at the University of Halifax in Canada till her death, set up training seminars, pretty much around the whole world, for the management of marine resources and coastal areas, essentially in favour of the developing countries. The majority of the world’s population lives along the ocean coastal areas which are the most affected by questions of vulnerability, risk and pollution.
The problem is that when “the economic value of the oceans” is taken into consideration it is difficult to calculate. It is possible to quantify the value of maritime traffic, the resources extracted from the sea and from coastal areas, the costs of operations needed due to pollution, and then add up the figures. This first step proves unsatisfactory because some of these costs represent an increase of wealth, others a decrease (destruction and accidents). And what about the potential of the oceans and their role in regulating the planet’s weather and atmosphere?
On these points Elisabeth Mann, in that book, and in others that she wrote, the last being in 2000, never stopped making use of proposals contained in my first two reports to the Club of Rome.*
Essentially we are speaking of a general economic policy capable of estimating the value of stock and not only of added value (which is the measure of a flow), still used today as the basis for calculating the wealth of nations. This means that GDP does not calculate destructions but only reconstruction. It is a little absurd.

13. Evaluating the Stock and not just the Flows
This language may seem obscure to those not employed in this work but in effect it is very simple. Let us think of a bathtub full of water (or, by analogy, of heritage made up of money, houses or land, or of all of it together): we are speaking of a reserve, or rather of a stock. Now let us consider two taps, one supplying hot water and the other cold water. The latter represents all the products and resources made available by nature without man’s contribution such as the air that we breathe. The hot water tap represents the flow of resources realised with the intervention of man, rendered extremely efficient by the Industrial Revolution.
The notion of value in economic analysis, born on the theoretical plane some decades after the classical Industrial Revolution, effectively makes an estimate of and assigns a monetary value to the flow of hot water, always supposing that this flow is completely positive and is added to the pre-existing reserve. Unbeknownst to some experts, the notion of wealth in political economics is hence linked to a measurement of the flow and not, as the term “wealth” might suggest, to a measurement of the stock (i.e. of the effective result).
Let us not forget that at the level of business economics, at the end of the year there is usually a situation in which there are reserves, stock or available assets. It goes without saying!
When it comes to the definition of the wealth of nations it is not so.
So long as one was living in the classical Industrial Revolution period, rightly motivated by the need to produce more without taking into account the various side effects, this estimate of economic reality could be admitted and be very useful. Instead, when it comes to qualified public opinion the increasingly accepted notion of “sustainable” development breaches the meaning of a valuation made on the basis of stock, even of what has not entered into the formal production system and that is set by a market price that always favours the short term.
We also do well to understand that the notion of value added, considered classical in economics, has the undeniable advantage of being quantifiable in a specific manner. However there are moments when more imprecise measuring can become more efficacious, and downright necessary, in order to stimulate the wealth of nations in the contemporary context. With time it is probable that, though preserving the current respect for value added, it will be inserted, as a sub-system, into a larger framework, measured by indicators that, to return to our bathtub, will give a value to the cold water tap and to the quantity and quality of the water in the tub. We should not forget that the value added is not net but gross: it includes the cost of repairs or rebuilding that is always added to the quantitative measurement of wealth, even when an asset or estate that has been damaged is repaired or rebuilt, without being properly recorded in the economic statistics.
You destroy a city: the expenditure on reconstruction will give a statistically fabulous impetus to value added. It might be useful to think also in terms of “value deducted”, something that exists in the “micro-economic” calculations of amortizations without every­thing being transposed into the accounting of wealth of nations.

14. Building an “Economics of Common Heritage”
This whole debate on the “bathtub” seemed very abstract twenty years ago. But this is precisely the direction being taken, not only when sustainable development is spoken of (to protect resources and stock even before being able to quantify them clearly on the basis of a price system), but also on the basis of several United Nations reports. Some define the development and wealth of the various nations taking into account consumer power at the local level (how much bread can I buy for a dollar in Switzerland, and in Burkina Faso?). Still more, some reports introduce other indicators besides national income, such as state of health (which is a measurement of a person’s stock) or the level of education or that of poverty in relation to available resources, monetised or not.
This then is a long explanation to contribute to the difficult task of building an Economics of Common Heritage on which twenty years ago I presented a report together with another collaborator, Max Borlin, at a convention in Halifax, Canada, organised by the ICOD (International Center for Ocean Development).
Today, more than ever before, the vulnerability of coastal areas and environmental questions involving the oceans represent one of the important challenges of our times. A thank you and a dear remembrance are owed to Elisabeth Mann.

* See “The Oceanic Circle”, Elisabeth Mann Borgese, United Nations University Press, Tokyo.New York, 1998


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