But the movement in India has one key distinction, which holds the key to its future. The environmental movements of the rich world emerged after periods of wealth creation and during their period of waste generation. So, they argued for containment of the waste but did not have the ability to argue for the reinvention of the paradigm of waste generation itself. However, the environmental movement in India has grown in the midst of enormous inequity and poverty. In this environmentalism of the relatively poor, the answers to change are intractable and impossible unless the question itself is reinvented.

Just consider the birth and evolution of the green movement. Its inception dates back to the early 1970s with Indira Gandhi’s famous words at the Stockholm conference on environment that ‘poverty is the biggest polluter’. But in this same period the women of the Chipko movement in the Himalaya showed that the poor, in fact, cared about their environment. In 1974, years before the environment became fashionable, the women of this poor, remote village stopped loggers from cutting down their forests. This movement of poor women was not a conservation movement per se, but a movement to demand the rights of local communities to their local resources. The women wanted first rights over the trees, which they said were the basis for their daily survival. Their movement explained to the people of India that it was not poverty but rather extractive and exploitative economies that were the biggest polluters.

This is because in vast parts of rural India, as in vast parts of rural Africa and other regions, poverty is not about a lack of cash, but a lack of access to natural resources. Millions of people live within what can be called a biomass based subsistence economy where the gross nature product is more important than the gross national product. Environmental degradation is not a matter of luxury but a matter of survival. In these cases, development is not possible without environmental management.

In the environmental movement of the very poor there are no quick-fix technological solutions that can be suggested to people who are battling for survival. In this environmentalism there is only one answer: to reduce needs and to increase efficiency for every inch of land needed, every tonne of mineral and every drop of water used. An environmentalism of this kind will demand new arrangements for sharing benefits with local communities so that they are persuaded to part with their resources for common development. It will demand new paths to growth.

I say this because the environmental movement of the relatively rich and affluent is still clearly looking for small answers to big problems. Today, everyone is saying that we can deal with climate change if we adopt measures such as energy efficiency and some new technologies. The message is simple: managing climate change will not hurt lifestyles or economic growth: a win-win situation where we will benefit from green technologies and new business.

Biofuel — growing fuel, not food, on land, to run the cars of the rich — is one such techno-fix. But there has been no discussion of whether biofuels, already competing for land with food crops and raising prices, will reduce emissions when vehicle numbers are increasing. With biofuels under criticism for forcing up food prices and depleting water resources, the next generation technical solution is on the cards — hybrid cars. I am not against biofuels or hybrid cars. But these are only small parts of the big change we need. The transition to a low-carbon economy is not just about technology but also about redistributing economic and ecological space. This change will hurt, as indeed climate change itself already has, with variable weather events destroying crops and hurting the most vulnerable and powerless.

Re-learning Knowledge: Water

It is also clear that these new answers will lie in learning the frugality and rationality practised by poorer societies. It will require us to re-learn certain technologies.

Take water management. For many countries of the South, water insecurity, which on the one hand leads to declining agricultural productivity and on the other to waterborne disease and death, has become the biggest limiting factor for growth. Today, water management is the starting point for getting rid of poverty in the world. Water security is the starting point for food security.

Countries of the water-stressed South need a new paradigm for water management. This will demand a realisation that water and culture go together and that water shortage is not about mere failure of rain. It is about the failure of society to live and share its water endowment. But to get our water practice right, we will first have to deal with the poverty of the professional mind, which has over time become fossilised and rigid in its outlook. We actually need a movement for water literacy to build a new understanding based on past traditions and the wisdom of our people who learnt to survive and indeed make the best use of their environment.

Take the fascinating case of ancient Rome and Edo (the ancient Japanese city on which modern Tokyo is built). The Romans built huge aqueducts that ran for miles to bring water to their settlements. These aqueducts even today are the most omnipresent symbols of that society’s water management. And many experts have praised the Romans for the meticulousness with which they planned their water supply systems.

But, no, these aqueducts represent not the intelligence but the utter environmental mismanagement of the great Romans. Rome was built on the river Tiber. The city did not need an aqueduct. But as the waste of Rome was discharged directly into the Tiber, the river was polluted and water had to be brought from long distances away. Water outlets were few as a result and the elite appropriated these using a system of slaves. By contrast, the inhabitants of Edo never discharged their waste into the rivers. Instead they composted the waste and then used it in the fields. Because they used the common and shared rivers, Edo had numerous water outlets and a much more egalitarian water supply.

Dying Wisdom: Building New Practices

Ancient Indians understood the speed with which water, the world’s most fluid substance, disappears. They understood that the mathematics of water is simple: if you harvest just 100 mm of rainfall on just 1 ha of land, you receive as much as 1 million litres of water. But on the other hand, if you don’t capture this rainfall the wettest place on Earth will have water shortages.

Research published by the Centre for Science and Environment in the mid-1990s showed that countries like India need to learn from their traditional community based water management systems so that they can build ways to the future. In today’s India it is imperative that groundwater be recharged so that the rate of extraction is not greater than the rate of water infiltration. The traditional water systems were designed to ensure that rainwater was stored in millions of disaggregated and diverse structures, which in turn led to local recharge of water into the ground. It is such distributed water harvesting that will build water security.

In other words, India must rework the paradigm of water management so that it is designed to harvest and augment local water resources so as to lead to local and distributed wealth generation. It is also clear that local and distributed water infrastructure will require new forms of institutional management, as water bureaucracies will find it difficult to manage such vast and disparate systems.

These ideas have captured the imagination of policy planners in the country. It is now well established that water management strategies will need to devolve power to local communities so that they can build structures for local water conservation and practise its use for efficiency and equity. This alternative practice and policy research has all converged into policies to build local water structures under employment guarantee schemes, where the state guarantees the right of employment to the poor. Employment is used to build water conservation structures so that drought relief can become relief against drought.

The Great Water Leapfrog

The problem becomes more intractable as India progresses — as it moves from using water in traditional sectors like agriculture to industries and urban areas. India is considered a traditional water economy that has to make the transition to a modern water economy. In other words, the water sector has to become part of the formalised economy, with formal institutions and mechanisms for its management and pricing.

The point to understand is what this modern, formal water economy means in the rest of the world and what it will mean for countries like India. In the industrialised world, industry and urban households use over 70 per cent of the water resources, while agriculture gets the remaining 30 per cent. In traditional water economies like India the reverse is true: agriculture consumes over 70 per cent and industry and urban areas the rest.

The fact is that urban areas and industrial centres in countries like India are now putting greater pressure on water resources. Cities across the country need more water for their growing populations and, more importantly, their growing affluence. Growing demand leads to pressure to source water from further and further away. The capital city of Delhi will get water from the Tehri dam, over 300 km away in the Himalaya. The software capitals of Hyderabad and Bangalore respectively will receive water from the Nagarjunasagar dam on the Krishna river 105 km away and the Cauvery, about 100 km away. The desert city of Udaipur used to draw its water from the magnificent Jaisamand Lake, but it is drying up and so the city is desperately seeking a way out of its new thirst.

The problem for the ‘informal’ water economy of rural India is that its agriculture-dependent population still exists. The economy has not transformed into a manufacturing or service sector economy. The water crisis is about the management of these competing needs — the vast rural economies, which need water for their food and livelihood security, and the newer growth economies of modern, industrial India. This water competition is leading to low-intensity conflicts between different users. For instance, when the southern city of Chennai wanted to source its drinking water from the Veeranam Lake some distance from the city, farmers agitated against it. When the Gujarat city of Rajkot needed water, farmers drew fire and were killed. In 2005, in two separate incidents in Rajasthan, farmers were killed as they rioted against water withdrawal from their neighbouring reservoir and canal for distant cities. It is for these reasons that the cities and the industries of rich India must begin to pay for the water they use. But pricing and markets will not suffice. It is equally imperative that water management paradigms and their technologies be reinvented for this poor–rich world.

On the one hand, the rich cities of the poor world will have to first invest in efficiency, so that they do not become water wasteful, then learn the science and art of efficiency. On the other hand, they will have to invest in managing and treating their waste water. Today, cities extract from cleaner upstream sources and discharge sewage and industrial effluents downstream, which in turn leads to increased problems of polluted water and ill-health for poorer users of the rivers. The capital intensity of the modern sewage system — its transportation and eventual treatment before disposal — is such that it cannot be afforded by all users, or even all urban areas. The question then is how will India’s modern cities grow without creating water waste and pollution? How will these cities innovate so that they can practise recycling and reuse even before their counterparts in the industrial world? The challenge is to re-invent the most modern waste management system that reuses every drop of water discharged, at a cost that can be afforded by all.

A country like India has to leapfrog over the modern economic paradigm, to create its own — hybrid — version of the water future. Modern water policy will have to be built on the premise that scarcity is not about the lack of resources but about being wise about their use.

Defining the Challenge of Economic Growth

Years before India became independent, Mahatma Gandhi was asked a simple question: would he like free India to be as ‘developed’ as the country of its colonial masters, Britain? ‘No,’ said Gandhi, stunning his interrogator, who argued that Britain was the model to emulate. He replied: ‘If it took Britain the rape of half the world to be where it is, how many worlds would India need?’

Gandhi’s wisdom confronts us today. Now that India and China are threatening to join the league of the rich, the environmental hysteria over their growth should make us think. Think not just about the impact of these populated nations on the resources of our planet but, again, indeed all over again, of the economic paradigm of growth that has led to much less populated worlds pillaging and degrading the resources of Earth.

Let us be clear. The Western model of growth that India and China wish most feverishly to emulate is intrinsically toxic. It uses huge resources and generates enormous waste. The industrialised world has learnt to mitigate the adverse impacts of wealth generation by investing huge amounts of money. But the industrialised world has never succeeded in containing those impacts: it remains many steps behind the problems it creates.

Take the example of local air pollution control in the cities of the rich world. Postwar economic growth saw these cities struggling to contain pollution. The growing environmentalism of citizens led to investment in new technologies for vehicles and fuel. By the mid-1980s the indicators of pollution, measured then by the amount of suspended air particulates, led us to believe the cities were clean. But by the early 1990s the science of measurement had progressed. Scientists confirmed the problem was not particulates as a whole, but those that were tiny and respirable, capable of penetrating the lungs and the circulatory system. The key cause of these tiny toxins was diesel fuel used in automobiles. So vehicle and fuel technology innovated. It reduced sulfur in diesel and found ways of trapping the particulates in vehicles. It believed new-generation technology had overcome the challenge.

But this is not the case. Now Western scientists are discovering that as emission-fuel technologies reduce the mass of particles, the size of the particles reduces and the number emitted goes up, not down. The particles are even smaller. Called nanoparticles (measured in the scale of a nanometer, one billionth of a metre), these particles are not only difficult to measure but, say scientists, could be even more deadly since they easily penetrate human skin. Worse, even as technology has reduced particulates, the trade-off has been to increase emissions of equally toxic oxides of nitrogen from these vehicles.

The icing on the cake is a hard fact: the industrialised world may have cleaned up its cities, but its emissions have put the entire world’s climatic system at risk and made millions living at the margins of survival even more vulnerable and poor because of climate change. In other words, the West not only continues to chase the problems it creates, it also externalises the problems of growth onto others, those less fortunate and less able to deal with its excesses.

It is this model of growth the poor world now wishes to adopt. And why not? The world has not shown any other way that can work. In fact, it preaches to us that business is profitable only when it searches for new solutions to old problems. It tells us its way of wealth creation is progress and it tells us that its way of life is nonnegotiable.

But I believe the poor world must do better. The South — India, China, and all their neighbours — has no choice but to reinvent the development trajectory. When the industrialised world went through its intensive growth period its per capita income was much higher than the South’s today. The price of oil was much lower, which meant growth was cheaper. Now the South is adopting the same model: highly capital-intensive and so socially divisive; material and energy-intensive and so polluting. But the South does not have the capacity to make investments critical to equity and sustainability. It cannot temper the adverse impacts of growth. This is deadly.

Let’s stay with the challenge of air pollution. Some years ago, the organisation I work with argued that the city of Delhi should convert its public transport system to compressed natural gas. The move to gas would give us a technology jumpstart as it would drastically cut particulate emissions. Delhi today has the world’s largest fleet of buses and other commercial transport vehicles running on gas. The result is that the city has stabilised its pollution in spite of the huge number of vehicles, poor technology, and even poorer regulatory systems. In other words, Delhi did not take a technology-incremental pathway of pollution control on the basis of fitting after-treatment devices to cars and cleaning up fuel. It leapfrogged in terms of technology and growth.

Equity Provides the Basis for Change

This is the challenge that we in India are discussing and finding ways to solve. We know that our cities are on a different developmental trajectory: people still catch buses and cycle or walk to work. In Delhi, for instance, even now 60 per cent of people use buses, which occupy less than 7 per cent of the road space, while cars, which crowd over 75 per cent of the roads, transport only 20 per cent of the people. Our cities can and must develop an alternative vision for growth.

The question is can they leapfrog from cities with few cars to cities with few cars? Can they build their mobility plans based on a mix of swanky buses, trams, bicycle paths and pedestrian walkways? In other words, can they do everything today that the modern cities of the old-rich world — from Berlin to Vancouver — want to do tomorrow?

For instance, in Delhi, policy makers are now working towards creating a new mobility model. It includes the building of a rapid transit bus system on a 15 km road in the heart of Delhi. This system creates a central lane for buses to drive along without obstruction, dividing the remaining road space between cars (two or three lanes), bicycles and pedestrians. The project is built on the premise that road space must be equitably allocated to the various road users. It is also investing in a metro and augmenting its bus system.

Climate Change: Equity is a Pre-requisite

For the past sixteen years (the first intergovernmental negotiation took place in Washington DC in early 1991) the world has been haggling about what it knows but does not want to accept. It has been desperately seeking every excuse not to act, even as science has confirmed and reconfirmed the fact that climate change is real — that it is related to carbon dioxide and other emissions, and that emissions are related to economic growth and wealth. In other words, it is human made and it can devastate the world as we know it.

The fact is that science is not just certain but ‘unequivocal’ that climate change and its devastation are now inevitable. But along with trying to understand the science, we must begin to put a human face to the climate change that is beginning all around us. We must see climate change in the faces of the millions who have lost their homes in the Sidr and Nargis cyclones that ripped through Bangladesh and Myanmar. We need to see climate change in the faces of those who lost everything in the floods caused by intense rainfall events. We need to know that the thousands of people who died in these events did so because the rich have failed to contain emissions necessary for their growth.

Energy is the Key

The world’s need for energy — to run everything from factories to cars — is the cause of climate pain. The fact is also that after years of talk no country has been able to de-link its growth from the growth of carbon dioxide emissions. No country has shown how to build a low carbon economy. No country has yet been able to re-invent its pathway to growth. This then is the challenge. After years of talk, the proportion of new renewable energy — wind, solar, geothermal, biofuels — comprises just about 1 per cent of the world’s primary energy supply.

What is tragic is that the world is hiding behind the poverty of its people to fudge its climate maths. The renewable sector is made up of the biomass combustion — the firewood, cowdung or leaves and twigs used by the desperately poor in our world to cook their food and to light their homes. It is this that is providing the world its space to breathe.

What, then, is the way ahead?

Firstly we must accept that the rich world must reduce emissions drastically. Let there be no disagreements or excuses on this matter. There is a stock of greenhouse gases in the atmosphere, built up over centuries in the process of creating Western nations’ wealth. It is a natural debt. This has already made climate unstable. Poorer nations will now add to this stock through their drive for economic growth. But that is not an excuse for the rich world not to take on deep, binding emission reduction targets. The principle has to be they must reduce so that we can grow.

The second part of this agreement is that poor and emerging rich countries need to grow. Their engagement with any emissions targets will not be legally binding but based on national targets and programs. The question is how to find low-carbon growth strategies for emerging countries without compromising their right to develop.

This can be done. It is clear that countries like India and China provide the world with the opportunity to ‘avoid’ additional emissions. The reason is that we are still in the process of building our energy, transport or industrial infrastructures. We can make investments in leapfrog technologies so that we can avoid pollution. In other words, we can build our cities on public transport; our energy security on local and distributed systems, from biofuels to renewables; our industries using the most energy- and so pollution-efficient technologies. We know it is in our interest not to first pollute then clean up; or first to be inefficient, then save energy.

As yet, the rich world has found small answers to existing problems. It wants to keep its coal power plants (even as it points fingers at China and India). It wants to build new coal power plants. It believes it can keep polluting and keep fixing. This time, the answer it has hit upon is carbon capture and storage — to pipe the emissions underground and hope the problem will just go away. In this way it can have its cake and eat it too.

It also wants to keep its cars and add more. Or drive more. It can do this by simply growing fuel and pumping it into vehicles. It does not matter if this biofuel is a small blip in the total consumption of oil — all the corn in the United States can only meet 12 per cent of current US petrol use. It does not matter if it there is not enough land to grow food and fuel in the world. The cynics will say, after all, the corporations rule the oil and the food business. Scarcity will only increase their business. But the realists should say the ‘illusion’ of solutions is the opiate of the rich. This way they do nothing but can create an illusion of action.

The New Deal

If we know that the emerging world can leapfrog to make the transition to cleaner technology, the question is why is this not happening? Why is it that the world talks big but gives small change?

When the Kyoto Protocol was being negotiated, the world decided to invent the clean development mechanism (CDM) to pay for the transition in the poorer world. But the mechanism was designed to fail. The obsession was to get the cheapest emission reduction options for the rich world. As a result the price of CERs — the certified emission reduction unit used in this transaction — has never reflected the cost of renewable and other high technology options. It is a cheap and increasingly corrupt development mechanism. It is also a convoluted development mechanism, in which rules bind governments not to think of big change. In fact, current CDM provides disincentives for governments in the South to drive policies for clean energy or production. Any policy, which is already designed for good is bad in the CDM portfolio. It will not qualify for funding.

The world must realise the bitter truth. Equity is a prerequisite for an effective climate agreement. The fact is that without co-operation this global agreement will not work. It is for this reason that the world must seriously consider the concept of equal per capita emission entitlements so that the rich reduce and the poor do not go beyond their climate quota.

Rights Based Agenda

In 1990, the Washington based World Resources Institute (WRI) published its report showing that annual greenhouse gas emissions of the developing world almost equalled those of the industrialised world and that in fact the emissions of the developing world would overtake the industrialised world’s emissions in the near future. However, the critique of the report by Centre for Science and Environment (CSE) found that the methodology used by the WRI to compute the responsibility of each nation favoured the polluter.

Under the WRI methodology each nation was assigned a share of the Earth’s ecological sink, but the assignment was proportional to the nation’s contribution to the Earth’s emissions. The sinks are natural systems, like oceans and forests, which absorb emissions. Global warming is caused because emissions exceed this natural capacity of the Earth to clean pollutants. The WRI had estimated that the world produced 31,000 million tonnes of carbon dioxide and 255 million tonnes of methane every year. It then estimated that the sinks of the Earth naturally assimilated 17,500 million tonnes of carbon dioxide and 212 million tonnes of methane annually. On this basis it then computed a ‘net’ emission of each nation by allocating a share of the sinks to each nation, based on its gross emissions contribution.

The CSE argued that there were two main types of sinks where carbon dioxide is reabsorbed by the biosphere: the oceans and terrestrial sinks. While terrestrial sinks, such as forests and grasslands, may be considered national property, oceanic sinks belong to humankind. They can be regarded as common global property. The CSE then apportioned the sinks of the basis of a country’s share in the world’s population, arguing that each individual in the world had the entitlement to the global commons. This allocation, based on individual rights to Earth’s natural cleansing capacity, changed the computation of the nation’s responsibility drastically. For instance, under the WRI methodology the United States contributed 17 per cent of the net emissions of the world, while CSE methodology computed that it actually contributed roughly 27.4 per cent of the net annual emissions. Similarly, China’s contribution decreased from the WRI estimated 6.4 per cent of the net annual emissions to 0.57 per cent and India’s decreased from 3.9 per cent to just 0.013 per cent.

This allocation of Earth’s global sinks to each nation, based on its population, created a system of per capita emission entitlements which, taken together, were the ‘permissible’ level of emission for each country. This, according to CSE, would create a framework for trading between nations, as any country that exceeded its annual quota of carbon dioxide could trade with those countries with ‘permissible’ emissions. This would create financial incentives for countries to keep their emissions as low as possible and to invest in zero-carbon trajectories.

We have also argued that, as much as the world needs to design a system of equity between nations, nations of the world need to design a system of equity within the nation. It is not the rich in India who emit less than their share of the global quota. It is the poor in India, who do not have access to energy, who provide us with the breathing space. India, for instance, had per capita carbon emissions of 1.5 tonnes per year in 2005. Yet this figure hides huge disparities. The urban-industrial sector is energy-intensive and wasteful, while the rural subsistence sector is energy poor and frugal. Currently it is estimated that only 31 per cent of rural households use electricity. Connecting all of India’s villages to grid-based electricity will be expensive and difficult. It is here that the option of leapfrogging to off-grid solutions based on renewable energy technologies becomes most economically viable. If India’s entitlements were assigned on an equal per capita basis, so that the country’s richer citizens had to pay the poor for excess energy use, this would provide both the resources and the incentives for current low-energy users to adopt zero-emission technologies. In this way, too, a rights based framework would stimulate powerful demand for investments in new renewable energy technologies.

This rights based agenda is critical to the resolution of the climate change challenge. The fact is that climate change teaches us more than anything else that the world is one; if the rich world pumped in excessive quantities of carbon dioxide yesterday, the emerging rich world will do today. It also tells that the only way to build controls will be to ensure that there is fairness and equity in the agreement, so that this, the biggest co-operative enterprise, is possible.

Strengthening Global Democracy

In conclusion, there is no doubt we live in an increasingly insecure world. Indeed, the state of insecurity in the world is made more deliberate, more wilful, because of the intentional and unintentional actions of nation-states and governments in the name of development and global justice. So, if the rich world is increasingly paranoid about its defence from the failed, bankrupt and despotic states of the developing world, the poor are insecure because they are increasingly marginalised and made destitute by the policies of the rich. The challenge of climate change is adding a new level of insecurity for the world’s people. It is also equally clear that the business-as-usual paradigm of growth will lead the world towards a vortex of insecure people, communities and nations.

It is here that the countries of the South face even greater challenges. They will need to rebuild security by rebuilding local food, water and livelihood security in all villages and cities of their world. And in doing this they will have to reinvent the capital- and material-intensive growth paradigm of the industrialised North, which deepens the divide between the rich and the poor. They will have to do things differently in their own backyards. But, more importantly, these countries will have to become the voice of the voiceless, so that they can demand changes in the rules of globalisation in the interest of all.

Sustainable development needs to be understood as a function of deepened democracy. Sustainable development is not about technology but about a political framework, which will devolve power and give people — the victims of environmental degradation — rights over natural resources. The involvement of local communities in environmental management is a prerequisite for sustainable development.

The South’s quest for an alternative growth strategy will have two essential pre-requisites. Firstly, a high order of democracy, so that the poor, the marginalised and environmental victims can demand change. It is essential to understand that the most important driver of environmental change in these countries is not government, laws, regulation, funds or technology per se. It is the ability of its people to ‘work’ democracy.

But democracy is much more than words in a Constitution. It requires careful nurturing so that the media and the judiciary, and all other organs of governance, can decide in the public and not private (corporate) interest. Quite simply, this environmentalism of the poor will need more credible public institutions, not less.

Secondly, change will demand knowledge: new and inventive thinking. This ability to think differently needs confidence to break through a historical ‘whitewash’, the arrogance of old, established, ultimately borrowed ideas. A break-through — a mental leapfrog — is what the South lacks the most. The most adverse impact of the current industrial growth model is that it has turned the planners of the South into cabbages — believing it has no answers, that it has only problems, for which solutions lie in the tried and tested answers of the rich world.

It is also important that this environmentalism of the poor, building bottom up, based on principles of equity and human need, must influence the world. It is essential if the world has to combat climate change that it learns from these movements about the need to share resources so that we can all tread lightly on Earth.

Sunita Narain is director of the Centre for Science and Environment, New Delhi. This article is an edited extract from her 2008 K. R. Narayanan Oration titled ‘Why the Environment Needs Equity: Learning from the Environmentalism of the Poor to Build our Common Future’, presented at the Australian National University. Ms Narain’s visit to Australia was supported by the Australia–India Council.

The effects of this orientation towards the market go far beyond the diminution of the role of the state in economy and society. While success has eluded the market in the privatisation of air, as some market theorists advocated (the major market effect has rather been to treat the biosphere and our oceans as commons to be taken for granted as dumping grounds), it has had greater success in shifting the ethic of intellectual inquiry towards selfinterest and the profit motive. This has left the university in a depleted state. Its once proud traditions, grounded in relations of inquiry that supported the free circulation of ideas, are not beyond retrieval, but they are a fading memory. This same market has also made over family and community institutions, emptying their reciprocal, noncommodified processes of that substance which gave them a basis outside of market forces.

While no one knows how far the current plunge of financial and capital markets will go, there can be no doubting the seriousness of the crisis on Wall Street and in global financial markets. Nor can it be doubted that it will reach significantly into the economy proper. How far that may go depends very much on leadership and political judgement. But this very special neo-liberal market, composed of computerised techniques and global satellite communications, together with an ever-expanding range of engineered financial instruments, has allowed twenty-five years of enhanced leverage of debt. This alone will call out massive contractions now that the worm has turned. It is not merely the fact that the cheap debt that allowed business and individuals to fund projects on a grand scale over the past decade has disappeared. Far more seriously, the availability of credit for everyday working capital and other transactions can no longer be assumed to be available, not even to a state like California. If this situation is unable to be corrected it is likely to be a prelude to a more encompassing social collapse affecting all the institutions.

For a generation now the rule of the market has been taken for granted by a growing proportion of the general and educated public. It was supported by the work of philosophers like F. A. Hayek who, although seeing an irreducible contribution made by the family, denied primacy to any ethics beyond that sustained by the market. It was as though the market became the only defensible social institution. Yet after the Wall Street bailout there is little doubt that this same neo-liberal global market, so central to all levels of contemporary social, economic and cultural affairs, and the major prop for neo-liberal ideology, now faces the most profound challenge to market organisation since the Great Depression. Arguably, this neo-liberal market, even if not the market as such, is in its death throes. It is a failure so significant that it may well turn out to be definitive in terms of the demise of the United States as a superpower.

The enhanced credit leverage of the global market supported a bubble in asset values. Cheap and seemingly endless debt translated into excess. But the demise of this easy money is more than a typical burst of the market bubble as found in the history of the last 400 years. The way in which the neo-liberal market has failed will leave investors and the public wary for many years to come — not merely of the consequences of a bust, but something far more damaging. What we are witnessing is not the result of a series of mistakes, such as subprime lending and excessive borrowing. The core issue is not even evoked by Kevin Rudd’s term ‘extreme capitalism’ because it relies too strongly on a notion of individual weakness (greed).

Rather, it is the composition of the global market as a system which has come into disrepute. The issue is not merely a matter of this or that category of lender losing financial credibility, but is rather a function of the global market as a set of practical circumstances. Financial engineering through the market removes identifiable obligations so far from actual lenders and borrowers that we cannot know who owes money to whom. It becomes impossible to evaluate financial standing. It is a system that builds into its structure a tendency towards poor credit evaluation, a tendency that eventually issued in the subprime crisis. This is a crisis of the financial system as a system, one that will prevent a return to anything resembling the system before the bailout, related guarantees and government buy outs.

There have been many significant economic commentaries in the last year on the meaning of the collapse of capital markets, culminating in the October 2008 crash. However, most commentators have been silent for the past twenty years about the structure of the new financial markets and their special vulnerabilities since their emergence in the 1980s. It is relatively easy once the dominos begin to fall to piece together the dynamics of an unfolding situation. Acceptance of any critique in the face of an ascendant orthodoxy was a very different matter.

Nevertheless, there have been some critiques, none more impressive than Peter Warburton’s Debt and Delusion (1999). It identified precisely the attraction to central bankers of the new financial markets. In particular, Warburton argued how the de-regulation of financial structures created new forms of debt via investment banks (like Bear Stearns and Lehman Brothers) that bypassed the conventional banking structures and, among other things, helped to control general inflation for twenty years while financing excessive government budget deficits in many parts of the world. In a short time, general inflation had become a thing of the ‘past’, an achievement of neoliberalism, while asset inflation, promoted by the new forms of debt, came to be seen as an acceptable form of alternative income. This led to practices such as the constant re-valuation of housing in order to borrow against, and live off, the enhanced values. This process gained positive recognition as a new wealth phenomenon by Alan Greenspan. In other words the benefits felt in terms of lower general inflation led to turning a blind eye to asset inflation and to the deterioration of credit evaluation which accompanied the new financial markets. What would normally have been regarded as practices especially in need of regulation — hedging, options and non-bank financial instruments — were allowed to multiply to the point where they came to be so dominant they were beyond the control of central bankers. This was the fateful pact between central bankers and the financial markets born in the 1980s.

There is much to be admired in the way Warburton predicted this ‘capacity to transmit violent financial disturbances to [every citizen as well as to] communities, regions and entire nations’ via a massive potential collapse of derivatives markets. However, as an economic critique even it is largely blind to the larger forces that framed the emergence of the new financial markets. These markets, whose trade-mark has been to construct debt that concealed those responsible for it while generating ‘instruments’ radically distant from the familiar everyday world, do not engage in such processes arbitrarily. Rather, such practices and markets reflect a more general principle now at work in global society as a whole: the loss of tangibility in our relations with others, as the face-to-face community of persons is significantly displaced by relations that predominantly work at a distance. In short, there has been a gradual emergence of a world that abstracts us from the settings of our common humanity.

While all markets have this effect to some degree, the global financial markets took this tendency to a new level. This is a crucial matter if the way these markets construct their own self-referential world set far apart from the world of ordinary people is to be understood. Firstly, they did this in their own right because they rely upon the computer, the internet and global communications generally to build their structures. Secondly, this was an aspect of a larger process whereby the whole of contempary society has been substantially displaced by a global order constituted in the new forms of communication and production made possible by high technology. That is, the financial revolution is situated within a larger social and cultural revolution. The silicon chip and computerisation, bio-technology, instant communications: these are products of a social revolution that has transformed society over the past thirty years. Global society is defined by a more abstracted way of being, the ‘knowledge’ society, mediated by the way that tertiary institutions have come into a special constitutive relation to society. The high sciences, via high technology, are re-shaping the human and natural world.

Financial engineering in global markets — the construction of instruments that few people can actually understand — corresponds to the engineering of nature in the pursuit of growth in global society. The indifference to others within global markets corresponds to the indifference to nature in a society removed from nature. All areas of society move away from communities composed in regions and known others towards an order constructed around constant global movement, pursuing the ‘liberations’ and instant gratifications offered by high technology. If the contradictions of financial markets that no longer work through tangible lenders and borrowers are now confronting us, this is only the tip of the iceberg of a new order of conflicts.

The crisis of the new financial markets immediately leads to the question of whether this is a pause in the momentum of capitalist growth, be it one year or ten, as most commentators would have it, or a more fundamental historical moment. Does it mark a new realisation of the limits of where the capitalist order can take us? At the very least it seems we are now entering a period of profound uncertainty that will include hardship for many, perhaps most of us. But it could also be a period of genuine possibility. We should keep in mind that the world is not only facing the limits of a now collapsed financial order but also the limits posed by a ravished nature, growing food and resource shortages and unsustainable levels of population. There are movements, however partial, that are seeking to move towards a more rounded life, more in touch with nature and those around them. The ‘food miles’ movement or alternative markets like farmers markets, are cases in point. No particular example is adequate to the task, but these tendencies have deep support; they could quickly take practical institutional shape in today’s circumstances. The need for a social order that entails a more modest demand upon nature and is able to regenerate dense regional social relations that stand in a viable relation to global interchange is an ideal to be pursued. If we are to avoid becoming merely spectators in a world dissolving before our eyes, the organisational stages and processes needed to move towards this ideal should be the subject of intense discussion and practical endeavour.

John Hinkson

‘If we want things to stay as they are, things will have to change’, Prince Tancredi, in Il Gattopardo (1958),

Giuseppe T. di Lampedusa.

‘Empires everywhere, it seems, are on the move again’, writes Alison Caddick in Arena Magazine 96. That ‘big old world’ is still at it, and still guided by ‘hubristic notions of progress and supremacist nationalism’. Globalisation and global warming provide a new theatre for the old brutes, who continue to hog the centre stage as of right, shouting the old slogans louder than those quieter, smaller actors who have increasingly come out from the wings to occupy United Nations space: minorities, dwarf-nations and states like Singapore and East Timor, no-hope out-backs like Tibet, edge-lands like West Papua, reanimated fossils like Scotland and the Basque country.

For God’s sake — what can such pip-squeaks expect, in a globality so evidently configured by and for the big lads? As Caddick puts it, the reborn superpowers naturally seek to maintain ‘a way of life built on unsustainable economic and environmental assumptions … [and] cultural mores associated with the spread of a contagious form of high-tech capitalism’. When it suits them they are entitled to ‘put the clock back’, as Umberto Eco puts it in his new book of that title, with votes where possible (as in India), or by authoritarian means if not (as in China). What they really count on, she suggests, is popular feeling: ‘an exercise of power over actions and desire’, furnished of course by what Eco describes so accurately as ‘media populism’. The proverbial ‘small guy’ (and small nation-state) has no real option but to tag along and make the best of it. Tiddle-pots may sometimes choose sides, but are not allowed a side of their own.

Nor should they have that option, on one influential interpretation of events. The matter has been debated recently in Foreign Affairs, following Jerry Muller’s article in their March–April 2008 issue ‘Us and Them’. In the current issue the question is summed up by none other than Condoleeza Rice. Entitled (yep) ‘The New American Realism’, George Dubya’s Secretary of State is kind enough to add an explanatory subtitle: ‘Rethinking the National Interest’. In years to come (whoever wins in November) the latter must go on being guided by ‘this uniquely American realism’. Unique? It looks awfully like the Great-Chinese and Great-Russian realism that recent events have disclosed. After Iraq and Afghanistan have come Tibet and Georgia. ‘Responsibility’ accompanies ‘stability’ in all these national-interest justifications. Globalisation is fine, but cannot be allowed to upset things.

An academic team has been assembled to back Rice up. Their aim is reinforcement of centre-stage, loud-voice nationalism: ‘responsible’ big-lad politics, in fact. The vanguard is a Harvard–UCLA Sturmabteilung captained by Richard Rosecrance and Arthur Stein, co-authors of No More States? Globalization, National Self-determination and Terrorism (2006). Their message is that ‘apostles of national-self-determination would do well to consider a still more important trend: the return to bigness in the international system’ (Foreign Affairs, vol. 87 no. 4). Some idea of what this implies can be glimpsed in another astonishing essay from the same issue: C. Fred Bergsten’s ‘A Partnership of Equals’, which entreats Chinese leaders to stop being so modest, and turn into international Big Lads with whom Condoleeza can make deals, even alliances. Hey, Beijing, stoke up all that hubris and supremacism, time you joined the club: didn’t you know that economic power entitles you to being a bigness-bully?

Not so long ago, I doubt if Foreign Affairs could have published such rantings. But now there’s something in the air, as Caddick recognises. In the mill-race of globalisation, the previously unthinkable now gets tossed up like this almost every day, casually claiming normality: back-room fantasies, foregrounded as ‘speculation’. The deeper moving impulse behind the No More States? team is simply Great-American nationalism, more often glimpsed in weekend drag these days, as ‘neoconservatism’. However, McCain and Palin are working on a full dress musical revival for the coming Presidential elections.

Naturally, returning to bigness can be seen as favoring the old baton-wielder, the United States of America. But the point is, the latter is also favored by the new conjuncture. As Caddick puts it: ‘The strongest element in this depressing scenario is a common interest shared by these competing empires’. It’s what they jointly perceive as stability and continuity, and holding the clock hands firmly back. Condoleeza Rice’s ‘realism’ is simply an acknowledgement that, good as it was being the superpower, this couldn’t go on for ever. However, much may yet be saved via formal or tacit understandings among suitable ‘equals’. The resultant common interest leaves enough space (for example) to Barack Obama’s notion of the United States returning to ‘inspire’ the globe and renew the leadership beacon. ‘Hegemony’ is the new buzzword here: a fuzzy concoction counting on small fry to colonise themselves, by seeking guidance, collegiate support, orientation conferences and so on.

But surely Caddick’s analysis may be interpreted as pointing also to something more significant, way beyond such compromises. A growing number of people and states in the new global times have no wish to hegemonise themselves, do not long for an eventide beacon, or thirst for inspiration from the City on the Hill. ‘For God’s sake, leave us alone!’ may convey their attitude more accurately. I think quite a few of them resent having been made to feel, six months in advance, that an election where they have no say is, none the less, important enough to make them take sides. This isn’t internationalism. It’s more like unilateralism off its hinges, still pretending to be the only show in town. That there’s more than one unilateralist around — a unilateralist gang, as it were — is no consolation: the streets are even less safe than before.

So what’s the answer? In the decorous language of international relations it’s called ‘multilateralism’ — coined in French, not by chance, as le multilatéralisme. Small guys can defend themselves only by sticking together, and working out their own common interests as a kind of trade union. In the appropriate wider sense, democracy and equality are on their side, not with the City-on-the-Hill kids. The latter want protection money and obeisance (for which of course neoliberalism was the ideal missionary church). Multilateralism calls for something different: initially more modest but ultimately stronger, and more durable.

As for the big-lad populations, I quoted the most famous elegy for a dying culture above, from Colquhoun’s 1960 translation of The Leopard. But the original was slightly more eloquent: what Tancredi said was ‘bisogna che tutto cambi’ — everything, every single thing, has to change. I doubt if Count Lampedusa was looking ahead to globalisation, in 1958, but that’s how it has turned out: like it or not, ‘everything’ and everyone has got involved. And for that very reason, more breathing-space is urgently needed to make the global deal more tolerable. No doubt this is true for big-shot masses as well — but then, that’s the real point: it’s their problem, not ours. They are just nation-states like the rest us, if somewhat weighed down by their ridiculous scale. Would a short cure of ‘isolationism’ really be all that bad?

‘Globalisation’, by contrast, has to mean more differentiation, and substantial rather than formal respect for diversity. This is why Kevin Rudd’s theme of ‘middle-range’ policy and ambition could be so important. He has returned to the idea often enough, since his Lowy Institute address in 2007, and it must be hoped he really means it. David McKnight commented on the trend, pointing out how it represents a rejection not just of neoliberal mania but of the latter’s intellectual basis in the earlier work of Friedrich von Hayek. We may be entering an ideal, and rather prolonged, moment for movement in that direction. Having been disabused of state-led, short-cut socialism in 1989, electorates have now been even more thoroughly disenchanted by the collapse of its contrary, the weird right-wing ‘historical materialism’ of marketolatry and deregulated enterprise. Hayek always urged the Right to imitate the Left in seizing and publicising power, and was rewarded with disastrous success in the 1990s. However, part of that mimesis has continued on into its latter days: the ideological foundering of the Right has now followed (and may well exceed) that of the Cold War Left.

We don’t know how long this disarray will last. In his history of the 1929 Great Crash, J. K. Galbraith points out that about five years passed after the worst moment in 1931–32. Not until 1938 can one find ‘the leaders of the original shock troops (of the New Deal) polishing up speeches on the virtues of the free enterprise system’, satisfied that all that was possible on the public side had been done. George Soros thinks we are not yet at the worst point of system failure. But whoever is right on this, it seems reasonable to hope that, this time round, the disorientation is more fertile.

Rudd’s government had the good fortune to take office in its early phases — the contrary of Brown’s faltering Labour Party regime in Britain, originally set up all too close to the ’90s high tide of neo-liberal exaggeration and optimism. Carried forward on the latter, Blair and Brown felt compelled to focus on the futile business of remaining ‘Great’: the tradition of a once major state that finds it very hard to embrace middle-range identity and aspirations. Instead, it has clung to a Special Relationship that was in truth concealed prostration and camp-following. In other words, the United Kingdom. has consistently chosen the opposite of Rudd’s proposed modesty and co-operative initiatives.

And yet — ‘Never has there been a better opportunity to strike a new social contract between private capital and the people’, wrote Scottish commentator Iain Macwhirter in the Sunday Herald recently (21 September). British Labour seems incapable of making the case. Is there any hope that Australian Labor can do better? ‘Looking at the wreckage wrought by unrestrained greed during the boom years (Macwhirter continues) this should be a great time for a social democratic party like Labour — an opportunity to reaffirm its fundamental values. The people who should be on the defensive are the free-market Conservatives and their friends in the City who have brought us to this state thanks to their bonus culture and predatory lending. All those neo-liberal nostrums about the evils of government intervention have been swept aside as financiers fall over themselves to get state subsidies … ’ Socialism for the banks, as it were, in the service of saving face — Britain’s ‘world role’ — and keeping up with Caddick’s empires on the rebound.

Isn’t this also a new context for the argument on republicanism? Now that a convinced republican has become leader of the Liberals, the case is bound to be re-opened anyway. But the wider republican tradition has always been about more than doing away with monarchy: it embodies a positive drive as well — the reconstitution of collective will and ambition, a reformation of identity and belonging. As Caddick put it, in ordinary (‘middle-range’) states, ‘for ordinary people the struggle and strategy will have to take a different form …’ one that no longer denies ‘more subterranean channels of cultural identity and social meaning’. Wasn’t that a part of Rudd’s great apology to the Aboriginal peoples of Australia, and of the extraordinary emotion it generated? She’s right: the well-springs are there, and calling for more than exploded formulae and time-worn rules.

Tom Nairn is research professor at the Globalism Institute at RMIT University.