Buttonwood's column in The Economist of 31 March 2012 points out that profit margins of companies in America are now higher than at any time in the past 65 years. Corporate investment as a percentage of GDP is at a 30 year low! This, Buttonwood quips, is 'good for the corporate sector' but 'bad for workers and savers'. This stunning fact - which of course does not make headlines during recession times because it is so embarassing (and also somewhat unbelievable for the average citizen) - is only possible because corporates are employing fewer people, investing more in mergers and acquisitions and benefitting from huge government deficits. In other words, they get richer without adding value and feed off what is causing the misery of billions. But to make matters worse, corproates say they are underinvesting because of the high level of uncertainty. But by not investing to just to look good in the quarterly reports means the long-term future is being sacrificed for short-term gain. So while the G20 tinkers and economists philosophize about the 'animal spirits' that are needed to revive the economy, the rules incentivize the worst possible habits and routines. Surely there must be an alternative to this mess.

Mark Swilling, 15 April 2012

This week I came across 5 publications that attempt to understand the current global crisis as part of a wider set of historical 'waves' or 'cycles'. Like Chapter 3 of the Just Transitions book they want to peak into the future by projecting long-wave patterns into the future. Remarkably, they all come to very similar conclusions (using different conceptual languages to Just Transitions), i.e. that the next long wave is going to be about technologies that counteract the rising cost of resources and energy.

The publications are as follows:   

On Tuesday 3 April I delivered a paper on the Resource Curse at the Winelands Conference on Integrity and Governance that took place in Stellenbosch. Building on Chapter 7 of Just Transitions, I wanted to achieve two things. Firstly, I wanted to take advantage of recent work by UNCTAD that applied material flow analysis to Africa's economic growth challenges with some fascinating results. Secondly, I wanted to further explore the work of Paul Collier who has posited some interesting ideas about governance that could contribute the breaking of the grip of the infamous 'resource curse' on Africa's economic fate. The paper was very well recieved thus encouraging me to further pursue this matter. Admittedly, however, I was somewhat uncritical of Collier's economic reductionism. I need to counteract this with the work of people like Mike McGovern - see his wonderful review paper entitled Popular Development Economics - An anthropologist amongst mandarins that was published in Perspectives on Politics, June 2011, Vol 9, No 2.     

As argued in Chapter 3 of Just Transitions, Carlota Perez expects the current crisis to “follow the script” of previous recoveries. Besides the fact that this will not happen until the deeper underlying constraints of unsustainable resource use are addressed, it was argued in Chapter 3 that we should also be looking for signs that the financial system is being restructured. Although there is a lot of reports about the huge complexities of the re-regulation of the US banking system which is so complex it won’t have much effect, March 2-9 2012 edition The Economist ran a report on p.66 on “The Kay Review of the UK Equity Markets and Long-Term Decision Making”.  Although I intend reading the report itself, the report in The Economist – which is the first reference I have come across about this report – makes very interesting reading. The headline is – tellingly – “The British stock market is not fit for purpose”. In essence the Kay report seems to be addressing a range of problems with the way equity markets work, especially with respect to the role that these markets should play in long-term decision making. The problem identified is that equity markets have in recent decades been structured to serve the interests of investors seeking short-term capital gains rather than businesses looking for long-term capital investments. Although a second report by John Kay is expected in future that will address the solutions to this fundamental and related problems, the mere fact that this report has come out to address this fundamental question is hugely important in light of the argument in Chapter 3. Following Perez it was argued that they key indicator of a shift in power will be when finance capital which thrives on short-term capital gains is disciplined and replaced by more patient productive capital that invests over the long-term in order to reap the rewards of dividends. It is, however, quite clear that in light of the Kay Report, this won’t happen when the rules of the game favour finance and productive capital. Hence the title of the article! I will be interesting to see what the next Kay report says about interest rates. What is interesting is that one of the problems with the equity markets at the moment is that businesses in low interest environments can access cheap debt and that this may in fact work out cheaper than equity, especially if stock markets are buoyant. This speaks to another fundamental of the world that Greenspan built, i.e. the worship of low interest rates. Put differently, surely this means that if we want businesses to return to the stock markets to secure investments from productive capital, average long-term interest rates might need to be higher. We need to read the Kay Report and what comes next.

Mark Swilling 

Every year for the past ten years Eve (my wife) and I have taught the introductory module of our Masters Programme in Sustainable Development. The module – called Sustainable Development – includes a session that I deliver on the 3rd day of the course which provides students with an overview of the evolution of the global economy from the end of the c.19th to the crash of 2007 and the current recession.

Prof Malcolm McIntosh is appointed as Extra-Ordinary Professor in the School of Public Leadership and heads up the Centre for Social Enterprise at Griffiths University, Australia. Every year he finds time in his busy schedule to teach the Corporate Citizenship module. He is also a globe trotter of note, connecting into all sorts of interesting engagements that give him a keen insight into the dynamics of global change. Below is an email he sent to friends and colleagues on 1 December 2011. It is worth a read.

On 24 November 2011 I had dinner amongst the dinosaurs in the Natural History Museum in London as a judge at the International Green Awards which were established by Sir Paul Judge (who also set up the Judge Management Institute at Cambridge University). The awards covered all manner of sustainability initiatives ranging from individual acts of innovation to major progress.  This meant that Yalumba wines from Australia won an award as did Dublin Fire Brigade. The Grand Prix winner was Unilever for their Sustainable Living Plan but they were held close by Marks & Spencer for their Plan A because there is no Plan B strategy. The lifetime achievement this year went to German Brazilian model Giselle Bunchen who has promoted sustainability against the odds (and beat Paul McCartney this year). As the awards spread the number of international awards reaches out beyond London. I was partly responsible for the educational award which went to South West College in Northern Ireland. To win you have to enter and we will next year: www.greenawards.com

I got a call from a senior ANC policy maker after I was quoted in the Mail & Guardian calling for an 'Investment CODESA'. He asked me to write a briefing note on the idea for discussion. This is what I wrote. Needless to say he did not find it very useful.

Rationale for an Investment CODESA
In 2009 the global economy contracted for the first time since WWII. This moment effectively marked the end of the post-WWII long-term development cycle. The first half of this 60 year cycle was characterised by a commitment to inclusive, equalising growth with a strong welfarist component – it was a post-fascist and eventually post-colonial moment of liberation. This growth period was driven by productive capital and ended with the stagflation crisis of the 1970s.

Published in the Cape Times 16 November 2011

If you were responsible for running a major economy, what would you need to know in order to make a decision about the largest capital investment in a generation? Tax payers will pay for this investment for the next 25 years and it will determine the nature of the country’s growth path, how many dollars it must generate from exports and the technologies that will dominate the way things are done. Surely you would like to know why you need to spend so much money and whether there are alternatives? Right?
Well this is not what happened when Cabinet made the decision to support the Integrated Resource Plan (IRP) which is South Africa’s electrification investment strategy.

I was emailed by a journalist from the Mail and Guardian with great questions about why corporates are not spending their surplus cash. Below are her questions and my answers. At this stage, note sure if she is going to use these answers.

Last week while Eve was putting the final touches to Chapter 2 of our book Just Transitions, she came across a paragraph I had written in a rather cavalier style that worried her. So she sent it off to John Van Breda, our colleague who coordinators the TsamaHub. Mark

Eve wrote:

"hi john,

can one use kant in this way:

The revolutionary Enlightenment intellectuals (with origins in Galileo’s [1564-1642] battle against the Catholic Church in defence of Copernicus) were struggling against a universalizing cosmological order that was legitimized and institutionalized by the Church. Starting with Descartes (1596 – 1650) and ending with Habermas (1929 - ) today, they needed to assert that the mere act of thinking constituted an act of rebellion and therefore of self-identity – the famous “I think, therefore I am”. This liberatory aspiration centred in the endogenous rights that stem from being human was captured in the African context by Kwame Nkrumah’s “I speak of freedom” and Steve Biko’s “I write what I like”. It was the humanism of this aspiration and the legacy of Kant’s conception of rationality that established the notion that the rational mind was capable of grasping a set of objective realities via the application of predetermined analytical procedures. This, in turn, paved the way for the mind-body split, with the body associated with nature and the mind isolated as the exclusive means of knowing and doing. It also opened up the space for Western intellectual culture to part ways with sophisticated knowledge systems that had evolved in Asia and Africa over at least the previous thousand years that did not depend on the modalities of the West European mind/body split.

what do you think?"

For John's reply click on the link that follows:

Published in Cape Times in June 2011

Unless global economic growth is “decoupled” from escalating primary resource use, recovery from the recession will not be achievable. This was the conclusion of a new report launched Thursday 12th May, at a side event of meetings of the United Nations Commission on Sustainable Development. Entitled Decoupling Natural Resource Use and Environmental Impacts from Economic Growth, the report brings together work done over three years by the International Resource Panel (IRP), an expert panel established by the United Nations Environment Programme (UNEP) in 2007 to address the challenge of making the global economy more sustainable.

The Earth Institute  at Columbia University, New York, hosted the 17th International Sustainable Development Research Conference , 8-10 May 2011. 

Although this is an annual conference that usually provides a forum for a broad range of perspectives from different parts of the world, the Earth Institute used this opportunity to provide a platform to showcase the research of many of its leading research staff and associates.

Every now and then it is possible to be surprised. On Tuesday 28 December 2010 the International Herald Tribute carried an opinion piece by the Nobel Prize winning Keynesian economist Paul Krugman who has hitherto focussed his attention almost entirely on the importance of stimulas spending as a solution to the global economic crisis.

Prof Matthew Heun, a friend of the Sustainability Institute and the Centre for Renewable and Sustainable Energy Studies presented a paper recently on what the world can learn from South Africa's energy crisis - hence the idea of South Africa as the 'canary in the coalmine'.

Eve circulated the following email on Friday - gives a sense of what the SI is all about:

Sustainable Cities, System Modelling, ECD and the Spier staff have all been kept extremely busy by their various teaching staff – the students look whacked, while Naledi, Ross, Mark, Edgar, Alan and Josephine all look surprisingly chilled...amazing support from Gairo, Tania, June, Kerneels and the entire staff, esp Mathilda who somehow keeps all our demands met and agreencafe totally beautiful.

My colleague, Mazibuko Jara, sent me an article by well known Marxist John Hoffman which was arguing for the continued relevance of classical Marxism for understanding the global economic crisis - this was my response...

Hi, I must say that I find these kinds of discussions frustrating: if I wanted to secure a long-term future for capitalism, I would pay socialists to use up their energies having religious discussions like these in a language that no-one below the age of 30 can ever relate to - so what is the use? Why not talk in plain language about what is really going on, rather than through layers and layers of dead jargon that obfuscates more than it illuminates - even if you are over 30. Mark

Published in Cape Times 7 April 2010

In the life of any nation there are rare moments of historic opportunity when great decisions can be taken that will shape the future for generations to come. We are going through one of those moments now, but it all ends in April at a crucial meeting of the Board of the World Bank. Will South Africans let the future be decided in that Boardroom?

I was contacted this week by the architect of a home owner who is building a house. The architect wanted my opinion on a Malaysian source of meranti, and why he thought it unwise to use a local carpenter to make windows and doors from recycled oregan pine wood. This was my response...

3 March 2010 was a momentous turning point for the sustainable development of South Africa's natural resources, but no-one noticed.

The reflections below were written while I was attending various meetings and discussions in Beijing in November 2009. These discussions helped me reflect on research within the African context, and more particularly within Stellenbosch. The reflections below were sent to all the students who were completing their Bphil in 2009 and were preparing to write research proposals for their Mphil theses in 2010. These reflections were aimed at stimulating ideas and research methods for activist research - research that was actively driven by the need to make sure things change.