Van Jones spoke at a TED event in Santa Monica in November, about the economic injustice of plastic, and the culture of disposability that permeates our society. He brings up a really interesting point when he compares the person who recycles their plastic water bottles and the person who throws them away. Typically, the person who recycles their bottle will feel satisfied that they are doing their part for the environment. However, the cost of plastic manufacture and recycling are borne by the poor of the world. The stretch of American known as ‘Cancer Alley,’ along 85 miles of the Mississippi River from Baton Rouge to New Orleans, produces plastic and petrochemicals, and has disproportionately high cancer rates. Van Jones points out that plastic is often shipped to China for recycling, where more poor people process it. When we satisfy our thirst conveniently with disposable containers, there are costs borne outside of the direct transaction, what economists call externalities.
However, our culture celebrates convenience and consumption, and many of us don’t understand the true costs of how we live. Bill Gerlach talks about Mindful Consumption in his blog, The New Pursuit. He writes about restoring our balance with the natural world, and becoming present to our lives, the world around us, and our place in it. He offers some helpful strategies for mindful consumption, including buying less plastic, single-tasking, and pausing before making a purchase. Becoming more mindful is difficult in today’s world, with the litany of communication media, and our go-go-go lifestyles. However, we have crucially lost touch with what it is that makes us human. Thomas Berry, author of The Dream of the Earth, was a Catholic priest and a deep ecologist. He wrote that our culture is distorted, and is “the origin of the deteriorating influence that we have on the life systems of the Earth.” We would be smart to rethink our throwaway culture, because honestly, there is no ‘away.’
Naomi Klein speaks at TED last month about how “our underlying assumption of limitlessness allows us to take the risk that we do.” She looks at the Alberta Tar Sands, the BP Oil Spill, and our ever falling EROEI, and examines why we continue to see unending growth as the answer to all of our problems.
When you talk with Conservatives about regulation, they will generally tell you that government regulation is too pervasive and ineffective; additional regulation is out of the question, and existing regulation should be simplified. Those same conservatives often blame the financial crisis and the Great Recession on government involvement, and claim that if only the markets were free of government interference, rational actors would allow the markets to regulate themselves. However, deregulation during the last three decades eliminated most of the protections put in place after the Great Depression, and put us in a hole we have yet to dig ourselves out of.
Simon Johnson and James Kwak, creator of The Baseline Scenario blog and authors of 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown, examine the long history of financial regulation and deregulation in their recent book. They show that, without question, the Wall Street banks continue to hold inordinate power over our government and the U.S. economy. They carefully trace the bipartisan financial deregulation that began under Ronald Reagan but continued through each successive administration, leading to the near collapse of the Global economy:
“Never before has so much taxpayer money been dedicated to save an industry from the consequences of its own mistakes. In the ultimate irony, it went to an industry that had insisted for decades that it had no use for government and would be better off regulating itself – and it was overseen by a group of policymakers who agreed that government should play little role in the financial sector.”
For example, Johnson and Kwak explain the SEC agreement of April 28, 2004 that allowed the five large investment banks (Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers, and Bear Sterns) to calculate their own net capital based on internal models, rather than using standard models, allowing them to expand their leverage extensively for the next three years. In fact, the regulation put in place by FDR after the Great Depression was systemically dismantled, and 13 Bankers shows how that dismantlement created massive financial institutions that were not only Too Big to Fail, but too powerful to control:
“The fact that their failure could entail the loss of millions of jobs gave the banks the power to dictate the terms of their rescue. If the government insisted on paying market prices for the toxic assets, or insisted on taking majority control, the banks could simply refuse to go along, secure in the knowledge that the government would have to come back to the table.”
13 Bankers examines many common assumptions about the financial crisis; for example, conservatives tend to blame the entire crisis on Fannie Mae, Freddie Mac, and the Democratic Party. However, Johnson and Kwak artfully disarm that claim:
“The riskiest mortgages, however – the ones that pushed the housing bubble to dizzying heights – were simply off-limits to Fannie and Freddie. The [Government Sponsored Enterprses] could not buy many subprime mortgages (or securitize them) because they did not meet the conforming mortgage standards… ultimately regulatory constraints prevented them from plunging too far into subprime lending. As housing expert Doris Dungey wrote, ‘the immovable objects of the conforming loan limits and the charter limitation of taking only loans with a maximum [loan-to-value] ratio of 80%… plus all their other regulatory strictures, managed fairly well against the irresistible force of innovation.’”
In short, the banks lobbied for years to remove the regulations that limited their size and scope; they developed complex financial instruments that were impossible to understand without a PhD from M.I.T.; they used those instruments to hide risk inside AAA rated securities that ultimately plummeted in value, and to move debt off their books; and finally, they had the nerve to complain about government interference after taxpayers backed up those risky bets.
Last summer, the Financial Reform Law was finally passed by Congress and signed by the President. On The Baseline Scenario, Simon Johnson quickly identified the missing ingredient in the new regulation: it does nothing to reduce the size of institutions that are Too Big To Fail. In 13 Bankers, Johnson and Kwak examine some common arguments about large banks, that they supposedly gain economies of scale, and that our large corporations require large, multi-national banks. In fact, those claims “suffer from a shortage of empirical evidence.” Johnson and Kwak provide good evidence to the contrary; for example, Johnson & Johnson used 11 different banks in their 2008 debt offering, and 13 different banks in their 2007 debt offering.
13 Bankers clearly identifies the systemic risk that TBTF banks offer, and warns of an even more dangerous crisis to come in the next financial cycle. One of the main reasons is that TBTF institutions are effectively subsidized by the government, getting money for lower interest rates than smaller competitors; this occurs because investors know the government will always bail out TBTF institutions; this competitive advantage will provide the TBTF institutions a strong incentive to take excess risk. Ultimately, until TBTF institutions are reduced in size, they will remain dangerous to long-term economic health. Johnson and Kwak propose that commercial banks be limited to 4% of GDP and investment banks to 2% of GDP. This would affect only six institutions: Bank of America (currently at 16% of GDP, JP Morgan Chase (14% GDP), Citigroup (13% GDP), Wells Fargo (9% GDP), Goldman Sachs (6% GDP), and Morgan Stanley (5% GDP). The goal would be to allow these banks to fail without taking down the entire economy with them.
13 Bankers will give you a good understanding of how bankers and the government have navigated the regulatory question over America’s history, and what caused the financial crisis. The book also provides an excellent prescription for tackling the TBTF problem. The Baseline Scenario is also an excellent resource, updated daily.
Today, the last roll of Kodachrome film was developed into slides in Parsons, Kansas, at Dwayne’s Photo, the last store in the world to process the film. This story brings to mind the Season One Finale of Mad Men, the famous Carousel scene, when Don Draper speaks about how “technology is a glittering lure, but there is the rare occasion when the public can be engaged on a level beyond flash, if they have a sentimental bond with the product… a deeper bond: nostalgia; it’s delicate, but potent… In Greek nostalgia means the pain from an old wound. It’s a twinge in your heart far more powerful than memory alone.” He then goes on to show images of his family taken with Kodachrome film.
In the months leading up to today, people flocked from all over the world to Dwayne’s Photo in Parsons, Kansas to get their film developed. This is the reverse of a story like the release of the iPad, or a new iPhone, because Kodachrome is nostalgia personified. Unlike the new smartphones, which will be outdated in a few years, Kodachrome managed to stick around for 75 years. Paul Simon wrote an unforgettable song about it. The nostalgia which Don Draper talks about is indeed potent. In fact, nostalgia is under-appreciated when it comes to marketing sustainability. While technology increases in leaps and bounds, it can overwhelm us; the simplicity which will be necessary to shift towards sustainability is channeled through nostalgia. Nostalgia is the long letters we used to write, the joy we used to find in our communities, and the pleasure of making things for ourselves. Nostalgia is the emotional key to our collective hearts. The folks who flocked to Parsons, Kansas certainly felt it.
Heidi Cullen, author of the new book The Weather of the Future: Heat Waves, Extreme Storms, and Other Scenes from a Climate-Changed Planet, has a background rare for any research scientist, let alone a climate scientist: she worked for The Weather Channel, and gained a lot of expertise in communicating complex climate science to the lay person. This work has given Cullen a unique understanding of where misunderstandings of climate science exist:
“This is the only way a lot of people can truly connect to the issue of climate science – via a long-term investment like real estate. The more I thought about this question, the more I realized the scientific community had failed to communicate the threat of climate change in a way that made it real for people right now. We, as scientists, hadn’t given people the proper tools to see that the impacts of climate change are visible right now and that they go far beyond melting ice caps.”
Cullen’s new book aims to provide those tools. She explains some of the big reasons (single-action bias and the ‘finite pool of worry’) why many Americans understand the dangers of climate change, but not urgently enough to change our behavior. More importantly, she explicitly separates the concepts of ‘climate’ and ‘weather’ and shows how the former shapes the latter. Cullen’s writing reminds me of Michael Lewis’ The Big Short, when she shows how climate science developed and where it stands today: she eloquently and economically conveys the complex science in a way that is pleasurable to read. The groundbreaking part of Cullen’s book what comes next: she picks seven of the most at-risk locations around the world, explains how climate change is already impacting the weather, and uses state-of-the-art models to create climate projections for each of these places into the next half-century. Two of the locations really hit home for me: Cullen examines the Central Valley in California, as well as New York City. She also looks at the Sahel region of Africa, the Great Barrier Reef in Australia, the Arctic, Greenland, and Bangladesh.
Cullen borrows a metaphor from Paul Saffo, a technology forecaster who was among the first in Silicon Valley to take Y2K seriously: ”Imagine you’ve got a sailboat and you’ve got to sail around an island. You can start to circle when you’re a mile from shore and it will be easy. But if you wait until you’re only 100 meters away, there will be rocks and reefs. There will be a lot more drama.” In her analysis of these climate hot spots around the world, Cullen makes clear the economic impact of waiting until the proverbial sailboat is close to the rocks and reefs.
The Weather of the Future lays bare the unequivocal nature of climate change, and the need to take actions, what Cullen calls “a million boring little fixes.” In time, we will all make these fixes; the question for policy makers, skeptics, and citizens in general is, are we going to wait until those fixes become all the more expensive and painful? This book is timely and necessary.
There is much debate about what exactly it would mean for humans to “consume” sustainably. Tim Jackson confronts that question in the excellent new Earthscan Reader in Sustainable Consumption, which he edited. The essays are divided into four parts: Framing Sustainable Consumption, Resisting Consumerism, Resisting Simplicity, and Reframing Sustainable Consumption. That last part is key to solving the big problem facing policymakers and activists: finding consensus about what exactly sustainable consumption would be in a world of inequality, and how to best achieve the behavior change necessary to limit resource throughput, lower energy consumption, and reduce greenhouse gas emissions globally. There are plenty of good intentions, but little progress. In fact, the efforts to date may provide a false sense of accomplishment.
Take energy efficiency, for example. Elizabeth Shove examines consumption in the United Kingdom in her essay “Efficiency and Consumption: Technology and Practice.” She finds that despite a national program to encourage energy efficiency, consumers actually increased their consumption by raising their thermometer, and increasing the use of appliances like dishwashers, freezers, and washing machines, even after new efficient models are installed. In fact, she identified consumers that consciously increased their consumption as an intentional use of the gained energy efficiency. This conundrum is pertinent because the public case for sustainably is primarily framed around efficiency: the consumer can still have it all, but lose that guilty conscience! However, efficiency will not take us to the top of Mt. Sustainability, to borrow a metaphor from Interface Inc.’s Ray Anderson.
One big problem may come from the frame ‘consumer.’ In a country whose former President responded to an unimaginable terrorist strike by encouraging Americans to go shopping, we are taught that the consumer has sovereignty, that we can each buy whatever we need, and the free market will meet those needs. In sustainability circles, the same frame is adopted: we ‘vote with our wallets,’ we support the businesses that make the more sustainable product. That type of effort certainly helps; companies like Seventh Generation have penetrated markets dominated by the conglomerates, and have reduced the toxic chemicals in our homes. However, the ‘consumer’ cannot consume his or her way out of the problems we face in the world. How can we start? We might want to stop calling ourselves consumers. Instead of defining humans as consumers, what about stewards? Stewardship is central to the behavior we need to encourage.
Merriam Webster defines stewardship as “the careful and responsible management of something entrusted to one’s care.” Boy Scouts are taught to leave the campground cleaner when they leave than when they arrive; one problem is that people don’t necessarily appreciate their impact on Earth, and don’t feel a responsibility to leave it in a better condition for future generations. The Iroquois Nation had a Law that encouraged its people to think about their actions and the impact they would have on the Seventh Generation. Today we lack that kind of mentality, and think only about immediate gratification. The gratification becomes more immediate through advances in technology, but also seems to pass quicker as a result. To successfully frame sustainable consumption, and thereby change behavior, a frame like the Iroquois’ seventh generation is a start. On top of that, finding a way for stewards to become aware of what they consume, and the impact that consumption has on resources, is paramount. Most people don’t know how many gallons of water and fossil fuels go into a Big Mac; most people don’t even realize that potable water is a scarce resource. Making that resource intensity transparent for stewards is a good place to start. In the end, Mt. Sustainability is a steep climb, and the fall from its icy slopes is perilous. Finding a more effective way of inspiring people to take the long view is the challenge of the moment.
This weekend, while visiting the Wintertime Farmers’ Market in Pawtucket, RI, I stopped by the booth of New Harvest Coffee Roasters, a local roaster of whom I am a loyal customer. I typically pick up their packages of Whole Bean coffee when I shop at Whole Foods, but often I will savor a cup of their Pour-Over coffee while I idle around the Farmers’ Market. On Saturday, I approached the booth, and asked the barista for a cup of Kenya AA Gaturine Estate, a coffee I had not seen previously at Whole Foods. The barista carefully prepared my cup, then handed it to me. To quote Agent Dale Cooper in the seminal television program Twin Peaks, it was a damn fine cup of coffee. I asked the barista why I never saw this coffee at Whole Foods. He told me that Whole Foods is very careful about what types of coffee they want. A post card explained:
SOURCE DIRECT: How to connect coffee consumers with coffee growers
A DIFFERENT WAY
Source Direct is an alternative to Fair Trade. As artisan roasters, we need to connect with small producers to develop the highest quality coffee. This is difficult under the Fair Trade model, which is based on very large cooperatives that produce huge mixed-lots of coffee. It treats coffee as a commodity. We consider coffee to be an artisan food, and Source Direct is a way for us to achieve new levels of quality with our farmer producers.
Source Direct is not a certification. It is commitment to do what it takes to create real collaboration between New Harvest and small coffee farms. The most important element is communication: farmers need to know what we want and we need to know what their challenges are in meeting our needs. Usually it means visiting the farms at least once a year, checking up on the picking and processing practices, tasting coffee with growers and comparing notes. Sometimes it involves purchasing a crop months before we receive it. Occasionally, or barista trainer will find himself training 30 Costa Rica farmers at a Tarrazu wet-mill.
At Whole Foods, New Harvest sells 4-5 varieties of coffee that are all Shade Grown, Fair Trade, and USDA Organic certified. Yet, at the farmers market, New Harvest was promoting a variety of coffee with none of those certifications, but instead under a new program where the company pledges only to “do what it takes.” New Harvest’s Source Direct program, a brand new initiative from the local company, represents a potential paradigm shift away from Fair Trade. The example of these two types of coffee, sold through two different distribution channels, speak to the complexity associated with the Fair Trade label as it continues to grow in volume; estimated worldwide sales of Fair Trade products increased 187% between 2004 and 2007.
Valery Bezencon, a management consultant and Peruvian business professor, in his thesis The Fair Trade Journey: Conciliating Romance and Strategy, examines the Fair Trade market as a whole, specifically comparing the growing mainstream distribution growth with traditional alternative distribution, and identifies the different motivations of customers who purchase Fair Trade products. Bezencon’s analysis provides context for the New Harvest Source Direct program, as well as prescriptions for marketers and managers of Fair Trade products.
Fair Trade’s continued growth and relevance hinges partially upon the manner with which it is marketed to consumers. The Fair Trade label that consumers see on products serves as an instrument to provide information to consumers, and to convey the underlying values of the company that sells the product. Fair Trade products are not competitive on price with non-Fair Trade products, so the Fair Trade products must provide an added value.
Consumers approach Fair Trade products for different reasons, but for Benzecon, it all comes down to the level of “involvement,” or motivation, to seek out Fair Trade products; that involvement can originate from the product itself or from the Fair Trade certification. Benzecon coins a term to describe the latter consumer involvement: Fair Trade adhesion, the extent to which consumers buy Fair Trade products because of their underlying Fair Trade principles. According to Benzecon, increasing the Fair trade adhesion will result in greater sales of Fair Trade products. However, New Harvest Coffee, a local roaster popular with foodies who appreciate both Fair Trade and good local food, is marketing a new product that runs in direct opposition to Fair Trade. Why would they do that?
New Harvest took the initiative to communicate about its new product, directly to its most ardent consumers. In one sense, Source Direct is, in the frame of Seth Godin, a Purple Cow. However, New Harvest makes an important claim about the Source Direct coffee: it tastes better. According to New Harvest’s marketing material, Fair Trade coffee is a commodity sold in mixed lots. For a company that continues to sell many pounds of that Fair Trade coffee, that is a bold strategy. According to Benzecon, the folks at New Harvest may be onto something:
“Hedonic value is a weak predictor of Fair Trade decision involvement. This means that taste is hardly an argument to prefer Fair Trade over conventional coffee. Indeed, Fair Trade products do not at present differentiate themselves with better quality or taste.” (Benzecon 86)
According to Benzecon, the biggest indicators of commitment to Fair Trade products are Fair Trade adhesion, concentrating on empowering small farmers and improving their working conditions.
New Harvest emphasizes in its marketing material that Source Direct “is commitment to do what it takes to create real collaboration between New Harvest and small coffee farms. The most important element is communication: farmers need to know what we want and we need to know what their challenges are in meeting our needs.” New Harvest is taking the most important aspects of Fair Trade that appeal to consumers, and repackaging them around their own Purple Cow: finer tasting coffee. In fact, New Harvest seems to be reading right out of Benzecon’s playbook. He recommends that the communication strategy for a company to increase Fair Trade’s revenues “should be focused on the dimensions that exacerbate a differentiated identity in order to nourish consumers with additional signification related to Fair Trade values, adding competitiveness to the products.” (Benzecon 89)
Despite New Harvest’s Purple Cow, Fair Trade products are growing in availability. It used to be that consumers could only find Fair Trade products at specialty shops, and at grocery stores like Whole Foods. Now, most big grocery chains have organic sections with a wide variety of products; even Wal-Mart sells Fair Trade products. How can Fair Trade avoid becoming a meaningless, ubiquitous seal, whose standards of excellence are swallowed under the pressure of greater market share and revenue?
Most companies just throw the Fair Trade label on their product and leave it to consumers to judge. An artisan coffee producer like New Harvest has the luxury of communicating more directly with its customers than a global behemoth like Starbucks does. Benzecon has a strategic recommendation for any company that wants to increase sales of their Fair Trade products: know the market, including its consumer segments, and communicate directly to those niches. Benzecon surveyed 433 consumers of Fair Trade coffee in Switzerland, and discovered some important insights. He found that younger and less educated consumers buy Fair Trade products for different reasons than older and more highly educated consumers. For example, the taste of Fair Trade coffee is very important to less educated consumers. The Fair Trade market is much more complex than previously understood, and communicating with it effectively and efficiently will require more than a simple seal – it will require tailored communication.
However, despite their foray outside the Fair Trade universe, New Harvest is a model for communicating with its customers. New Harvest baristas treat their coffee like fine wine, and empower their customers with knowledge. When New Harvest says they are committed to doing “what it takes” for their partner farms, their customers believe it. The Starbucks of the world can learn a lot from New Harvest.
A wise man once said you always double down when you are dealt eleven in Blackjack. Well, Deepwater Wind is pursuing economies of scale, and has effectively doubled down, increasing its proposed wind park from 100 to 200 turbines, lowering the cost of wind generated to 16 cents/kw. I detailed the long and complicated process of this development, here, here, and here; this study details the great potential of Atlantic offshore wind. Suffice it to say, this expansion bodes well for the approval and completion of the large-scale wind farm. Save the Bay’s Jonathan Stone, director of the largest and most prestigious environmental group in Rhode Island, supports the move. Rhode Island taxpayers will like the lower rates. This is a win-win.
As the last two years of the Obama Administration have made clear, crafting effective policy is complicated, difficult, and divisive; the proverbial comparison of the process of crafting laws with that of making sausage still rings true. However, the challenges which our President confronted in the first two years of his Administration, health care reform chief among them, pale in comparison to ‘Mount Sustainability,’ as Interface, Inc. CEO Ray Anderson likes to call the change required to make our consumption patterns, and more broadly, our lifestyles, sustainable. Sustainability is not an academic exercise; as the throughput of resources in our economies continues to grow, as those resources become more scarce, and as the ability of the Earth’s ecosystems to provide services like fresh water and carbon sinks diminishes, we are confronted with a huge challenge: in a world of inequality, how do we craft policy that will help to move us onto a path of sustainability?
In the United States today, environmentally friendly choices are framed as the “Green” thing to do. However, Americans like to frame these decisions around choice; each individual is free to make their own choice, to live their own lives as they see it. As a result, sustainably-minded businessmen and policymakers provide information to consumers, and empower them to make their own decisions. Companies like Seventh Generation make the case that their products are the better choice because they use less toxic chemicals, or use recycled materials. The growth of these types of products, and the efforts of multi-national companies to begin to “Green” their products is undoubtedly a good start. However, when it comes to toxic chemicals and the harm that they have on human lives, there is much disagreement. It becomes difficult for the consumer to know what the responsible decision is, for their family’s health, for their community’s watershed, for their planet. We don’t fully understand the impact of certain carcinogens, or products like cellular phones, on long-term human health. As Barry Schwartz writes, too much choice can confuse consumers, and make them feel unsatisfied:
“So whereas a life without any freedom of choice would not be worth living, and whereas giving people choices enhances their freedom and their welfare to some degree, it appears not to be the case that more choice means more freedom and more welfare. Indeed, a point may be reached at which choice tyrannizes people rather than liberating them. And we may be at that point. The significant implication of this news, both for individuals andfor policy makers, is that even if wealth is a proxy for freedom of choice, it does not follow that wealth is a proxy for well-being.If well-being is what we ultimately care about in setting social policy, we will have to look elsewhere. And if we cant assume that we can make people better off just by giving them more to choose from, we can no longer avoid addressing difficult questions about what enhances human welfare by throwing options at people and letting them find their own answers.”
Schwartz argues for a kind of “libertarian paternalism,” whereby consumers would face simple choices, with information about the impact and benefit of each decision. Clear and common-sized information about the impacts of our economy and our consumption on resources is certainly needed. For example, water and fossil fuel use could be provided for each product sold on the marketplace, in a standardized, visible format. Communities should mandate home energy inspections which provide consumers with a clear indication of the costs of their resource use, where resources are being wasted, and how investments in insulation and more efficient systems could help consumers save money over time. States and cities should publicly finance installation of renewable energy systems, so that the long term cost and benefit of those systems can be passed onto a new homeowner when a house is sold.
Efficiency is not enough, though. As resources become more scarce, there will be economic pressure on consumers to reduce their consumption. People will eventually have to live closer to their workplace, and to live more simply. Today, when many Americans still believe that exponential growth is a guaranteed right, it is difficult to get them to make decisions and investments for the long term. The challenge to policy makers is to change that paradigm. It is not enough to simply be more efficient, we need to maximize the benefit we get from the resources we have. Consumers need to realize that the choices they make today will impact the way we live in the coming decades, and the world that their grandchildren will inherit.
The Senate just passed a sweeping Food Safety Bill that would grant the FDA new power to recall tainted foods, increase inspections, and demand accountability from food companies. The Senate and the House now need to agree on a consolidated Bill. In the Senate, the bill passed 73-25. Apparently, a rare phenomenon has occurred, whereby lawmakers of different parties work together to pass legislation. Historians note that this used to be called bipartisanship. Hopefully the House and the Senate will continue the good work and get a law signed before the end of the session.