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Hello, everyone. Welcome to the Oxford Martin School, where we have a talk,

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where we're slowly moving from doing everything in two dimensions to doing things in three dimensions.

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So I'm here this afternoon with the speaker, Professor Dieter Helm.

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We don't have a audience here, so we are sort of in the rather odd position of looking at an empty lecture theatre.

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But we have a large audience online and you're very welcome and we look forward to some questions at the end.

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So Dieter, who's a friend and a colleague at Oxford, is going to be talking this afternoon about what would a sustainable economy look like.

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Dieter, I think it's fair to describe as a Renaissance man. He has made major contributions to academic economics.

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He has had major success in the private sector working on energy consultancy,

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and he has had a number of very important roles in government, very germane to what is happening in the world today.

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Dieter led a cost of energy review for the UK government a couple of years back, and when I first got to know Dieter,

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my background is as a biologist is in the 10 years since he chaired the UK's Natural Capital Committee,

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and Detroit is one of the three or four people globally who I think has brought together the fields of

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economics and the environmental sciences in a way that is really changing the way we look at things today.

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So with no further to Dieter over to you, and I'm fascinated to hear about the what a sustainable economy would look like.

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Well, thanks very much, Charles, and thank you very much for inviting me this evening.

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And hello to all you people online. The topic I've chosen to speak about is deliberately broad,

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so it's not in the fashion of economists nowadays who talk about the inside of the table tennis ball.

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This is about the table tennis ball as a whole, and I want to talk about what a sustainable economy would look like.

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But let me contextualise my remarks first. I'm sure many, if not most, of you watching and listening are disappointed by the outcomes of COP26.

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The difference might be between some of you and me that I'm not the slightest bit surprised like the previous twenty five cops,

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virtually no serious progress being made on climate change.

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And I suspect that many of you have forgotten that there is a cop process for biodiversity as well,

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of which the Cop 15 is second part delayed until next year.

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But I don't suspect any of you have noticed the Convention on Biodiversity and the process on biodiversity,

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how much difference making much difference to the devastation of biodiversity that's going on around us.

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So we live in a world in which climate change is ongoing every single year since 1990.

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Two parts per million has been added to the atmosphere. And that's, by the way, the only thing that matters the concentration of carbon,

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the stock of carbon in the atmosphere and the other greenhouse gases are the processes have done nothing to that.

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And what I think should alarm anyone is the notion that despite the emissions cuts that took place during the great lockdowns,

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we went up another two parts per million in concentration in the atmosphere. And there are several reasons why the processes don't produce outcomes.

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But a couple of fundamental ones are, firstly, that it focuses on the indices of emissions and not on the concentrations.

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It focuses on territorial national emissions, not on the impact of carbon consumption in any country across the globe.

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And of course, it focuses on emissions and largely neglect sequestration.

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Whereas the concentration of carbon in the atmosphere is the outcome of the emissions going in and the sequestration coming out.

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And in addition to the alarming observation that the lockdowns globally made no difference to the increase in concentration the atmosphere.

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The other fact,

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although I'm somewhat questionable how the analysis is done that appeared last year was the claim that the Amazon is now a net emitter of carbon,

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and it seems to me that sent me for a long time and why I wrote my book on Net Zero is that, you know, the idea of one more heave.

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One more cop and we're going to get there. Each one is the turning point.

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You can take the speeches from each of them and just update them from the world leaders.

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There's one more he is going to do the job. That doesn't seem to me to be a likely to work, and one needs I might call a Plan B and on biodiversity.

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Well, that seems to be very little evidence that much is happening.

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That's doing anything to slow down the destruction of biodiversity worldwide.

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So for anyone concerned about this, and I'm sure all of you listening watching are equally concerned about these great changes.

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The question in my mind is a kind of problem.

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So supposing we got this right, wrong and wrong, supposing we actually wanted to live in a sustainable economy.

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Rather than simply just think about what things should we do to nudge the process forward,

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to do a bit better on climate change and a bit better on biodiversity. Important though, those incremental and marginal improvements are.

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Why not ask a different question, which is so what would have to be true of our world that we could be rest assured that we

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were actually in a sustainable economy and that rather than our unsustainable economy,

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which of course, because it's unsustainable, will not be sustained. So it's not as if there's a happy ending to what we're doing at the moment.

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What would what would this economy actually look like? And I'm well through trying to write a book which answers that question.

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And in doing so, what I'd like to do this evening is paint the broad brushes of what that story looks like,

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and it's unlike the way in which many people approach these problems.

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I'm actually going to try to be comprehensive. I'm going to show how all the bits fit together.

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And I readily accept that on any individual bed, people will have different views and disagree,

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etc. But what I want to paint for you is a holistic picture of what that economy would look like.

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And in the process of doing this, I have arrived to the set of conclusions, which are odds.

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To much, if not most, of modern economics and modern neoclassical economics in particular.

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And that's not a new thing I've arrived at. I've been thinking about this for a long time, but I want to illustrate this evening.

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Some of the main foundational building blocks of a sustainable economy,

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which are not the same and indeed largely incompatible with the way in which a conventional economists would think about this.

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So I realise I am being extremely brave in covering this territory,

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and I realise that I'm probably going to end each and every bit offend the maximum number of conventional economists in this frame.

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But the least I want to achieve is to challenge the way we're going about it at the moment,

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because I actually think that many of the current approaches that economists take and the policies they recommend

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are part and parcel of why we're in the mess we're in and why we're not getting out of the mess we're actually in.

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So if you define a sustainable economy, you have to start by asking the question, what's his objective?

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What's it for? And I have an answer to that, which is, I think, a controversial answer,

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which is that the objective of a sustainable economy is to leave the next generation with a set of assets at least as good as it inherited.

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In other words, it's pretty much straight from the report from, I think, 88.

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And that claim. But that's what we're trying to do is already a long way from a conventional economic approach.

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So if you ask an economist what the objective is, the objective is to maximise utility through time.

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It's essentially a version, a stripped down version of utilitarianism.

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What we want is people to be happy through the continuum of time, and we want to share utility through the generations that flows, not stocks.

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But I said assets, not utility.

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When I describe this, my world is not a world where we're trying to maximise utility.

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And you might say, Well, why is that the case? What's wrong with utility in utilitarian?

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What's that got to do with the, well, sustainable economy looks like?

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My answer to that is in two parts. The first part is essentially an ethical part, and utilitarianism is ethical as an ethical claim to.

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I take the view that what we're trying to do for the next generation.

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By the way, I think that we should focus on the next generation and then each generation can focus on the one that comes after them is to.

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Make sure that future people next generation have the wherewithal to choose how they live their lives.

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So if you want an underpinning for this, this is very much a marcher said capabilities and functions.

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It's not utility maximisation through time.

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And so the notion is that what we want for the next generation,

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what I want for my children or my grandchildren is what they have in place the set

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of assets which are necessary for them to be able to participate in the economy,

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in the society and choose how to live their lives.

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Of course, I want my children, my grandchild, to be happy, but I don't go about it by trying to buy them as many sweets as possible.

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What I try to do is to make sure they get a good education.

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They have a healthy life and they have around them the set of assets within which to flourish as a March asset and also would put it.

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Okay, now if I ask, what are those assets? Those assets are systems and they're essentially capitals and they are natural capital.

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They are the infrastructure systems of physical capital and social capital and human capital to add into those rights.

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So I'm focussed on citizens rather than consumers, and I want future citizens to have that bundle of opportunities that I have.

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And I see that in terms of assets as opposed to in terms of utility.

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The next point is that I don't buy the subjective expected utility maximisation idea

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that the way we treat the future is essentially as if we were maximising utility now,

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but instead have a probabilistic picture of the future.

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Everything in the future can be reduced to probabilities.

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Then we could maximise with it and much more taken with the idea of radical uncertainty that we don't know what the future will hold.

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Therefore, what we want to do is take a precautionary approach, and that precautionary approach includes within it some of the building blocks that we

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do know that they will need in order to work out how they're going to live their lives.

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So it's pretty clear to me that the future generation, the future generations,

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will need a set of natural capital assets and in particular, renewable natural capital assets.

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The stuff nature gives us for free and that these assets are extraordinarily valuable for the future.

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Why? Because unlike any other part of our functioning economy, these assets go on giving their goodies forever,

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provided you don't interfere and bring them below the threshold by which they can reproduce.

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Think about an easy example. Think about herring swimming around in the North Sea, provided you don't take too many out in a thousand years time.

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They can eat herring and in 100000 years time they can eat herring.

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And indeed, they can go on for as long as it takes for evolution to catch up with the herring.

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And if you think about that, that is an open ended sense of returns through time rather than you either consume the oil now or you consume it later,

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you either consume ordinary goods and services now or you consume lighter, but just once, and that's it.

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So these assets are valuable beyond the normal way of valuing capitals and flows from those components.

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That means you have to be incredibly careful that you don't snap out all that future, which is I mean,

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it's probably not infinite because there will be a point where evolution will catch up.

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There will be another Ice Age, et cetera. But for all practical purposes and cost-benefit analysis misses all of this out.

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You have to recognise that yield into the future, and you have to recognise you don't know how good it's going to be.

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As my colleague and friend Colin Mayer often says, when people planted forests at the beginning of the 20th century,

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they had no idea there would be carbon stores at the head. We don't know what those possibilities are.

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We want to make sure those opportunities available.

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But we also need for the next generation, particularly an electricity system, a water system, a transport system and the fibre communication system.

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It's pretty clear we're going to need those and they are all systems as well.

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They do not come in discrete bits for which cost-benefit analysis applies the marginal kind of calculation to them.

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So in my foundations for thinking about the sustainable economy, its assets, rather than flows its citizens rather than purely consumers.

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It's capabilities that we're focussed on, not utility per say.

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And given the uncertainty, these core systems are not things which are, in some sense, temporary.

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Their assets in perpetuity for all practical purposes.

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Therefore, our focus must be on capital maintenance, not on depreciating.

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Now, of course, what the electricity system have to look like to decarbonise is somewhat different from the current one.

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So the thing we want in place is a set of assets capable of delivering energy provision so that people can participate in society.

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But that's a pretty important thing to say today, because there's going to be some people are going to be extremely cold and actually

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they'll probably be more deaths because the price of electricity is rising. These are core water systems, too.

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And they may change. We may have widespread desalinisation all sorts of other possibility, but you're going to need water.

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We haven't worked out how to do human life and food production without fibre lies behind absolutely everything now.

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So in my world, my sustainable economy, these systems are put in place.

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They are systems, infrastructures of capitals,

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which are assets in perpetuity and for which the important thing to ensure that the next generation has them as good as us.

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We must do capital maintenance. Okay. To put it in a trivial example, you know,

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if the next generation is to have roads at least as good as ours and by the way, they'll need the electric cars.

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You have to fix the potholes. Right? And if you don't fix the potholes, the asset is not as good as it was previously.

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Now this has some quite radical implications for the way you think about national income,

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the way you think about accounting and the way you think about what is the sustainable level of consumption that we can pursue in this economy.

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So the first thing to say is that what I regard as a kind of complete red herring in discussions about environmental economics.

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We don't need to value these things since we're not going to depreciate them.

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We're going to insure these assets are there for future generations.

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What's the point of saying they're worth 16 billion, five hundred sixty two thousand fifty two pence?

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It's irrelevant. You just got to have them. OK.

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What you got to do is look to the costs of capital maintenance because these things aren't going to naturally look after themselves.

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You've got to look at the remedial investment that you need to make to make good some of the glaring holes in these assets,

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which we must do now for future generations, which climate change is the obvious example.

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And then we might think about enhancements, how we can use our capacity to enhance those opportunities for future generations.

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So just for a moment,

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imagine that our chancellor of the exchequer is still chancellor of the Exchequer and not Prime Minister or something else quite shortly.

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And he stands up or will be Rachel Reeves for the opposition if they win election, stands up and delivers the budget.

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Now, I've always thought that what I'd like to know on a budget is, how are we doing?

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How's it going? Well, that's what I want to know before either you tell me how much you're going to spend.

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How's it going? And in my world, it's a doomsday book question.

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You know what? William the Conqueror went down and said, You know, well, how many forms are there?

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How many stock of this? How many stock of that? How many mill wills are.

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And are they in good state? That's the question you would ask if you came from Mars and landed on this planet and compared one country with another,

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you say, Well, a lot of cities here, they've got lots of roads. This place hasn't got lots of roads.

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You would compare and contrast. OK, so imagine for a moment the chancellor was actually interested in telling us how well we're doing.

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So the first thing that would happen would be that we would have a set of accounts, which, by the way,

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accounts never exist in any one to one economics textbook at all because they're about stocks, not flows.

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And they tend to be if they are accounts in a in vague vogue to work out how much people are spending.

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But in my world, you wouldn't start by asking how is accurate demand?

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All the shoppers going out and buying loads of stuff, you'd start by saying, here are our core assets, all we maintain properly.

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How much money do we have to set aside to maintain those assets intact, to meet our intergenerational objective?

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So it will be straightforward. You have the men holding the road, but you can't claim we didn't spend the money on the whole.

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The fixing, the potholes in the road and therefore we've got more money to spend on something else.

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We're better off. We're not better off. The asset is not been.

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So I would doubt the capital maintenance cost from the current account of any national income accounts.

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So what you might think of in a business terms a profit loss account and the surplus

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from taxation available for expenditure will be net of the capital maintenance.

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Now it's a bit beyond this discussion, but I've thought about this.

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Of course,

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it's not clear whether it's on the national accounts or the private accounts as whether the water companies have done the capital maintenance to look

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after the state of our rivers and prevent the sewage going in the rivers on a regular basis and to stop the depreciation of the quality of the rivers.

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As a result of their sewage discharges, that's a current example now from UK Pelosi's point of view from these national accounts.

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I would incorporate the utility systems in those accounts.

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And after all, water companies are emanations of the state monopolies regulated by the state that sets the terms,

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the returns and all the component parts of never seem to be right to take these infrastructures out of the national income accounts,

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then treat the residual left even worse to take the sale proceeds of a privatisation,

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a claim that makes you better off because you sold it and then spend the cash. And that's what we did.

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But then also, by the way, as well.

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OK, so capital maintenance will be deducted from the taxation revenue to give the expenditure position that will be dramatically different.

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There'd be no question of us saying, let's go out and have a party, let's get a case load of bottles and take him into number 10.

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If we have first fix the tiles on the roof of number 10 and fix the structure, you know the old adage,

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you know, fix the tiles when the sun fix the roof in the sunshine and you just fix the roof first, right?

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And you don't improve your welfare, you're not better off.

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If you didn't fix them and just spend the money down the pub or buying the suitcase of wine bottles to take back to number 10.

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So that's a radical difference. Now we didn't go to the capital side of the balance sheet, which contains the assets, OK?

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And there are. Three things we might do that we don't need to value these systems because they're in perpetuity.

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But what we do have to do is having first down the capital maintenance.

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We then think about remedial investment.

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It's pretty clear my generation has done a fantastic amount of damage to the climate that shouldn't be an item of free spending and consumption.

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We have a guilt, a responsibility for what's up there,

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and there are things we ought to do to make good the inheritance we've damaged for the next generation in my generation.

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The amount of damage we've done to biodiversity is quite staggering in this country.

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Charles will know much more about this than me, but we've done a lot of damage.

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So remedial investment comes first. That's a straight claim. OK, but then we might say, but we want to do enhancements.

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We want to make the future generation better off because there's these fantastic opportunities

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out there and there are lots and lots of them in natural capital in particular to take full.

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If we enhance those assets, then the next generation is getting a better set of assets than we inherited.

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And it's perfectly reasonable that they should pay for those enhancements.

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That's what borrowing is for. So we should give them better assets, and they should pay for it by inheriting the debt that is incurred to do that.

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So this is borrowing for investment, not for consumption, which is what we're doing at the moment.

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Consumption based borrowing. OK. And it's tied to those assets that have been added to the frame going forward.

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And then the debt on the balance sheet is essentially debt, which is balanced balance sheet by assets, assets, liabilities.

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It will be as if the water companies had not borrowed to pay out extra dividends

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not borrowed to gear up the balance sheet for financial engineering purposes.

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But when we privatised the water companies,

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their borrowing would have been for capital investment for the next generation's benefit enhancing the assets.

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And I assure you, the balance sheets will look completely different from what they are now.

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By the way, I think that was the intention of privatisation,

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and it's part of my critique of what's going on the water industry and why what privatisation has done has not been in any sense, sustainable.

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But you can see what the logic of this is. So what would emerge out of this balance sheet approach is a.

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Macroeconomics, which essentially defines what level of consumption,

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which is sustainable as the residual of what's left after we have done the capital maintenance.

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But not after we've done enhancements, because the enhancements being paid for by the next generation.

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And I think it would be pretty easy to show that that level of consumption is quite a little lower than the current level of consumption.

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And I need to add to twist to that in this sustainable economy, the prices would include the cost of pollution.

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The polluter pays principle would apply, after all. And here I am.

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Common ground with conventional economists and efficient economy is one where all the costs are internalised.

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It's extremely inefficient not to price pollution.

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And so the carbon price would be in there, and so would be the costs of lots of the other things that are produced for us by companies.

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So we are the polluters,

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we are doing the consuming we as the polluters should pay the oil companies and all these other people producing stuff for us,

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which we are consuming and.

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It's pretty easy to show that since we're not paying for the pollution costs of what we're doing, we're living beyond our sustainable means.

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So again, the sustainable consumption path is adjusted for the cost of the pollution going forward.

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And of course, we have to have a savings ratio.

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In order to support what we're doing in the economy, and that's that that savings ratio, savings should equal investment,

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etc. Ultimately, that debt has to come from somewhere that's simply supporting the assets on the balance sheet.

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Therefore, we'll have to save more. We also have to do lifetime savings as well.

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So that's all about pensions and all those kind of patterns. And quite clearly, we're not saving sufficient to meet those criteria.

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Now, some environmentalists, some very green environmentalists, might still be with me so far in this argument, but they won't like the next bit.

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The next bit is there's no reason why economic growth can't go on.

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So there is no growth. Motion is not necessary in a sustainable economy provided you understand what the

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sources of growth are and how they enhance our and future generations possibilities.

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So look around in this university. I doubt there's ever been a time when science is advancing as fast as it currently is.

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I doubt there's ever been so much technical innovation.

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You know, in my lifetime, I've gone from a typewriter to a computer to a laptop to an internet and a mobile phone and internet banking.

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This is all new and in Charles as well. What genetics has done in our lifetime is just stunning.

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These are just what I think about the envelope, the cornucopia of technical advances out there.

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So one of the core assets in my sustainable economy is knowledge and ideas and innovation through

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enhancing knowledge and ideas increases the possibilities for us and future generations.

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That is economic growth. So in my world, you go from the current unsustainable consumption path and you drop down onto a sustainable consumption path.

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But he can carry on growing. OK, through time and what you don't do, which is what we're doing at the moment,

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and I'm amazed that lots of environmentalists seem to be in favour of this stuff.

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We are trying to boost consumption and all the QE, the deficits, et cetera.

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It's true they've been supposed to build back better, et cetera. But the majority of these stimuluses have been to get people to do more shopping,

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maybe online instead of going to the shop to spend more to consume more.

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Because the Keynesian argument is, if we consume more,

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it'll be multiplied through the economy and then economic growth will result because people invest, etc. because there's more consumption.

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My starting point is we want to maximise the sustainable consumption path through time and since we're miles above it.

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Who thinks that printing an enormous amount of QE is consistent with addressing climate change, biodiversity loss and the sustainable framework?

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If? The borrowing was to enhance the physical infrastructures and the natural capital, having first maintained them properly.

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Fine. Let's borrow to invest because that's what my balance sheet does.

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But that's not why we're doing it. You look at the accounts of TfL.

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Transport for London. They have spent the last few years borrowing to cover their current expenditure.

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That's just an extraordinary state of affairs. And that is an unsustainable one.

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So. There are dimensions of this,

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which will immediately occur as alarm bells to lots of different interests and lots of particular intellectual traditions.

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But I want to go beyond simply saying that's what I think a sustainable economy should look like.

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Onto what would we actually have to do to get from here to there?

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And in my green and prosperous land, I spend a lot of time spelling out what we do in river catchments, in uplands, et cetera.

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In a UK context is part of the twenty five year plan, which I had a privilege of being involved in.

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But in this context, I think the starting point is what would the core institutional framework look like?

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What would we have to do to embed this?

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And of course, one of the things they'll be screaming out of this framework is, well, what's the distributional frame of this?

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So what about environmental justice, what about social justice in this frame?

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Well, my starting point is back to the citizens.

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We're going to provide every citizen in my sustainable economy with a set of assets which enables them to participate in society with energy,

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transport, water communications, natural capital in its full form.

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So that's putting in place the assets.

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So everybody in society as citizens, not as individual consumers and independent of income has access to these systems.

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But it's pretty obvious that while that would be an a massive step forward and we wouldn't be having the energy pricing debate having literally today.

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Out there, and we would advance the welfare of many in our society a long way.

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It's not sufficient. Because you still have to consider providing income for the other stuff of which one, of course,

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is food, even though the food system in place and close to Charles is a heart in this right.

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So people need income. So I am strongly in favour of a particular version of Universal Basic Income.

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Again, I want to provide citizens with the capacity to participate in society and for that in addition to the assets they need,

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a minimum income may not be as high as they need in the current world because they'll be getting these infrastructure systems already.

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But I don't want this is an open ended notion that politicians can compete from election to election,

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just simply increase it, like the discussion about universal benefit, et cetera.

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So I am very much in favour of tying it to the national dividend.

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So there is a surplus on all these assets and particularly on non-renewable natural capital.

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There is a revenue flow from the environmental taxation and in my green and present land, I set that up as a nature fund.

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But actually thinking about the sustainable economy, it's broader than that. And if, for example, something like the coronavirus comes along.

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We can't go on pretending we're just as well off as we were the day before,

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and there are no costs or impact as the current there is a Keynesian argument is essentially trotted out us.

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We have to face up to those things. So it has to be tied to the performance of those national accounts and those

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balance sheets and the surplus of taxation to spend after capital maintenance.

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And I kind of thought out that in some detail as to how that fits together.

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Then I've set my citizens up. I've got them in place.

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They've got their basic assets to participate.

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I met the Brundtland condition going forward and I given income to go with.

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Of course, there are taxation consequences, but it can't be sustainable.

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Live in a world where a small number of individuals can have bigger environmental negative footprints than whole countries,

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and that rich people with billions can play around in space tourism when our environment is going towards three degrees or more.

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And we're destroying the biodiversity is completely unacceptable and no sustainable economy would would

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allow the kind of what I think is unsustainable inequality and asset ownership that we currently have.

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Now you can argue about how far you want to go, but in my world, that's tied to how much basic income do you want?

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Because the other claims for enhancing and protecting the assets have already been deducted.

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So next, you need a regulatory set of institutions. Nothing in my world says this should be a statist approach.

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This isn't a socialist economy, it's an economy where we want to produce the things we produce as much as efficiently as possible.

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There's a lot of scope for competitive markets,

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but because lots of these features the economy have natural monopoly elements, you have tough regulation.

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And currently our five year peer reviews for our core utilities are extremely inadequate down to one level, you know,

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allowing companies to just give up their balance sheets without matching it with investment,

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making dividends or profits without any retained earnings.

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This is just bad regulation. And I've written extensively about that, particularly in regard to energy, but also a water as well.

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And then finally. And this is the difficult question, which is, but nobody will vote for this right to which I my answer is, yeah, fine.

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Well, you know, if you don't want to vote for this, you don't want to have a sustainable economy.

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You will have an unsustainable one. Then you're going to hit a brick wall with three degrees.

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And it's a lot less biodiversity. It's going to be very unpleasant. So it's not that you can avoid this, right, this pattern.

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It's just a question of which way do you want to get there? Do you want to get there in a benign way and get loads of the benefits of this?

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It's a great place to live in this economy. Much more, much more social capital, much more engagement, much fairer society, much greener society,

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better mental health, better physical health, better air quality, you name it.

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This has got lots of attraction, but you don't want to do that. Then you're gonna hit the brick wall.

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OK, but the real problem is is the old democratic problem of the tyranny of the majority,

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which Tocqueville wrote about John Stuart Mill vote wrote about on why people

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have constitutions and when the Constitution of the United States was set up.

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The key issue was to prevent a majority terrorising a minority.

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That's part and parcel that, well, my generation is terrorising the prospects for my children and grandchildren.

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They don't have a seat at the table, and there's lots of thoughts about how that could be done.

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You know, future generations, representatives, ministers for the future and all that kind of stuff.

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I think it has to be constitutional. Just like there are certain basic rights that the majority cannot overturn without supermajority to do so.

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I think a principle that the next generation should inherit a set of assets at

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least as good as us should be one of the cardinal constitutional principles.

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And then my generation exercising its democratic rights has to work within that constraint.

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But I have some other thoughts on constitutions, too. But I.

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Was asked to finish at twenty two. It's twenty two, so I shall stop at that point, Charles.

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Thank you very much. If we have an audience run with a rousing crowd to thank you, thank you very much, Clara.

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I'm going to take chairman's programmes and ask questions to begin with.

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I'm going to ask two questions. And first is not about the future world, but the world we're in now.

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And if you look at some of the rhetoric about building back better and in particular, what Biden had hoped to implement.

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So two questions in principle would that have been a positive move, if not wholly towards the world that you want, at least in that right direction?

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And of course, how it's actually turned out with the squabbles in the states and what's happened here

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has been far short of that of what they hope with in principle would have been good.

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Well, the two parts that, by the way, it's interesting that Biden went to recently make a speech about infrastructure.

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So I think it's Philadelphia, where the bridge collapsed as he arrived, as you could see the size of the infrastructure.

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So should you be addressing the state of infrastructures? Yes.

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And it's very interesting that Anglo-Saxon countries, but I would stress the UK and the US have generally pretty terrible infrastructure.

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Nobody in their right mind would locate a factory in Britain because you say, Wow, the infrastructure is fantastic, right?

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And the United States is a story of neglect of. So of course, you want to put the infrastructure right.

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Why it's capital maintenance. The problem with build back better is his two trillion of borrowing.

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All right. So it's saying you the next generation we all going to like the US is better, but you're going to pay to do.

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The capital makes welcome the homes very much. We're just going to patch and mend.

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We're going to fix the potholes in the road. That's what's wrong with that equation.

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So you know where the money should be spent, but it should be spent out of the current, the current taxation, current taxation,

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because we we have the duty to maintain these assets in perpetuity and in the natural capital renewable case.

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Of course, you know, as we're talking earlier, the the critical thing is if you don't do the maintenance, you've lost the benefits forever.

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That's what extinction is doing, right? So it's not just the component parts.

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And actually, Joe Biden, you have to say, like Obama, you know, cut out the rhetoric.

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He's presiding over an enormous expansion of fossil fuel industries in America, and he's begging the Saudi Arabians to increase oil output.

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But Obama was the president for the fossil fuel industries.

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He presided over that huge expansion of fossil fuel output in the United States, taking over 10 million 10 million barrels a day.

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And when he makes speeches that call and then he sings angrily, you know,

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tells the young that they must do these things evolve, do as I say, but not as I did.

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And so I find the direction towards capital investment and maintenance fine.

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But the $2 billion is not net of is not growth of sustainable consumption.

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It should be net of that. But I mean, you eloquently said what we've done with with running down our assets and just the scale of remediation.

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Yeah. Is it feasible to pay for that from taxation?

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Might this be a one off where we have to borrow from the future? And that once we have got our assets into a bit better state,

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then we could move to well to your supposing you're talking to me and I'm I'm my granddaughter, right?

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And you say, Look, I bucket up your world so much, my granddaughter.

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And it's such a mess, and I'm not willing to face up to the consequence of what I've done.

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So I want you to pay to make good the damage that I've done for you.

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So I think a lot of humans are making it. It's not the principle which I agree with you, but just on the print quality,

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whether it's really possible to raise enough money to do the remediation.

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And so you'd want to spread it over time. Yeah, that's a practical issue.

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So, you know, you know, going out and saying, by the way,

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I want to cut your standard living by the full amount tomorrow morning is not exactly going to win the next general election.

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We understand that. And there might be a structure in which you spread it out through time.

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But the question is, why would I believe you? All right.

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That you are then going to make good.

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Why wouldn't I believe that you're going to spend large sums of money on current consumption and make me pay in the future?

381
00:44:03,000 --> 00:44:06,720
That's what's going on. The money's not even that I'm getting something.

382
00:44:06,720 --> 00:44:11,160
At least the things are being maintained properly in the future. You borrowing against me?

383
00:44:11,160 --> 00:44:18,810
For you, maintaining your standard living despite the financial crash, despite the coronavirus lockdowns, et cetera.

384
00:44:18,810 --> 00:44:24,960
That's the point. And the way out of that might just be, well, we'll just let inflation rip now.

385
00:44:24,960 --> 00:44:29,790
That's how quite a lot of this is going to get written off, as it was in the 1970s.

386
00:44:29,790 --> 00:44:36,420
And that's you and me paying. Yes, right? Correctly. But we just won't realise what's happening.

387
00:44:36,420 --> 00:44:45,030
Yes, right? And I mean, look at the 70s, we had two years of twenty five percent inflation, followed by three years of 10 percent inflation.

388
00:44:45,030 --> 00:44:49,260
But Mrs Thatcher came to power. It wasn't only that it was all written off.

389
00:44:49,260 --> 00:44:53,160
Well, it's five percent today, and who knows what they know?

390
00:44:53,160 --> 00:44:58,680
You know which we would work from his two. All right.

391
00:44:58,680 --> 00:45:07,470
It's true that the CPI is lower, but as is pointed out by the statisticians at the time, the reason the CPI was chosen because it was lower, right?

392
00:45:07,470 --> 00:45:16,620
I'd love to ask more questions. I'm going to go to to the audience and the audience have a chance to vote on what questions they'd like to put to you.

393
00:45:16,620 --> 00:45:23,940
So the first one which has the most votes is from Pippa. How can we foster a sustainable economy in a capitalist world?

394
00:45:23,940 --> 00:45:31,080
Do we need a system change or should we be encouraging the micro changes we see in existing companies,

395
00:45:31,080 --> 00:45:35,190
i.e. net zero targets reducing waste refill shops?

396
00:45:35,190 --> 00:45:43,320
OK, so the two bits to this, the first bit is, you know, is capitalism responsible for all of this?

397
00:45:43,320 --> 00:45:53,310
My view is no, capitalism isn't responsible. This and pure socialism of the form of been tried is much worse.

398
00:45:53,310 --> 00:45:57,000
It's not how we organise production of the problem.

399
00:45:57,000 --> 00:46:06,690
It's the incentives, prices, the constraints that are placed on the way in which the economy functions, at which the polluter pays is the greatest.

400
00:46:06,690 --> 00:46:12,120
So the modern fashion and I know are going to offend a lot of people can now say, Oh, well,

401
00:46:12,120 --> 00:46:17,790
we must get the boards of these companies to take stakeholders seriously, not just pursue profits.

402
00:46:17,790 --> 00:46:25,810
They must look after the environment, adopt net zero targets and all that ESG stuff.

403
00:46:25,810 --> 00:46:28,630
And I stand back from this and say, well,

404
00:46:28,630 --> 00:46:36,320
isn't it the job of government to put the rules in place so they have to pursue an environmentally benign course?

405
00:46:36,320 --> 00:46:44,380
The truth is the governments have given up on actually trying to do the environment, so they palm it off on the company boards.

406
00:46:44,380 --> 00:46:56,530
And I'm slightly offended by the idea of some plutocrat or chief executive in a large company with market power deciding what's best for us.

407
00:46:56,530 --> 00:47:03,590
How much to put into social as opposed to environmental stuff when they're going through in their pollution.

408
00:47:03,590 --> 00:47:07,920
But I remember it's all for us. We're buying this stuff. All right.

409
00:47:07,920 --> 00:47:13,750
And so my take on this is that though the right way to do this is to start with the functions

410
00:47:13,750 --> 00:47:20,320
of society in the state and to set the rules within which markets capitalism function,

411
00:47:20,320 --> 00:47:26,530
whatever you like functions. And it's a great illusion that there's either the state or capitalism.

412
00:47:26,530 --> 00:47:31,390
The only reason why markets function is because there's a monopoly on violence.

413
00:47:31,390 --> 00:47:37,450
There are laws that enforce contracts and set the rules and regulations the way they function.

414
00:47:37,450 --> 00:47:44,770
I mean, I'm just going to ask my students what they thought was the most capitalist market, and they would tell me it's the stock exchange.

415
00:47:44,770 --> 00:47:50,650
And then I'd say, what do you think's the most speculative market in the world? The answer is the stock exchange,

416
00:47:50,650 --> 00:47:55,390
and I don't want to live in a society where rich people running large companies

417
00:47:55,390 --> 00:47:59,350
with market power decide what my future environment's going to look like.

418
00:47:59,350 --> 00:48:03,130
They haven't done a good job so far. But it's not their fault.

419
00:48:03,130 --> 00:48:08,290
It's our fault for not putting in place the laws, the regulation of making polluters pay.

420
00:48:08,290 --> 00:48:17,710
So are you encouraged at all? We are seeing the state getting more involved in regulation in the older society now.

421
00:48:17,710 --> 00:48:24,820
I know and I agree with you that that QE is a funny way of getting involved.

422
00:48:24,820 --> 00:48:33,370
But as the economist said, I think the week before last they were against it that there has been an advance of the state over the last five years.

423
00:48:33,370 --> 00:48:37,210
And even if they're not doing what you'd like at the moment hasn't changed the political

424
00:48:37,210 --> 00:48:43,060
mood that might allow the state to get more involved than the orthodoxy of the 70s.

425
00:48:43,060 --> 00:48:53,070
I definitely think that the 30 years of privatisation, liberalisation and competition as sort of started in the 80s is over.

426
00:48:53,070 --> 00:48:59,050
Yeah, I definitely think when we get to write the history books, the turning point was the financial crisis.

427
00:48:59,050 --> 00:49:07,390
And, you know, remember, actually, since 2000, we've been running most of the world economies at negative real interest rates,

428
00:49:07,390 --> 00:49:12,040
and it's extraordinarily high, just absolutely extraordinary. So I think that's part of it.

429
00:49:12,040 --> 00:49:21,280
But only the growth of regulation, et cetera. There's a world difference between having smart regulation and just having more regulation.

430
00:49:21,280 --> 00:49:30,890
So, for example, I'd like a carbon tax. But I've been putting together what I call my opticians slide on the energy sector at the moment.

431
00:49:30,890 --> 00:49:35,690
I did it several years ago. You know, you got the opticians, you've got glass Typekit glasses and it says up there the letters,

432
00:49:35,690 --> 00:49:39,770
you know a c and you try to read as many as you can down the list.

433
00:49:39,770 --> 00:49:47,180
And you know, you even tried out small feel to see if you can remember what they were saying and come back around and they have tests to that.

434
00:49:47,180 --> 00:49:55,950
So I have the equivalent of one slide and I put on there every single intervention in the energy sector in the last five years.

435
00:49:55,950 --> 00:50:02,280
And you can't read a single line on my slide, right, and there is no official that I know of,

436
00:50:02,280 --> 00:50:09,690
no minister who could tell me what all those interventions are. Do you think the energy sector is the better state today than it was five years ago?

437
00:50:09,690 --> 00:50:14,910
It's an utter mess. The supply competition models imploded.

438
00:50:14,910 --> 00:50:22,880
We've got the price of electricity tied to the price of gas, even though many of the costs of electricity got nothing to do with the price of gas.

439
00:50:22,880 --> 00:50:27,090
You know, we have a let's intervene here, let's intervene there.

440
00:50:27,090 --> 00:50:31,680
What you need is some principles for regulation. You need the architecture of the polluter.

441
00:50:31,680 --> 00:50:35,640
Pays principle in a carbon price is carbon border adjustments.

442
00:50:35,640 --> 00:50:41,460
Yes, you need other things as well. But what we've got is all the other things as well.

443
00:50:41,460 --> 00:50:48,450
No carbon price. And we delude ourselves that if we pursue our net zero target when we get there,

444
00:50:48,450 --> 00:50:53,380
we're no longer going to be causing climate change, which of course, is nonsense.

445
00:50:53,380 --> 00:51:01,710
The question from Peter Thomson, which is about Kate Ray, was down economy indicators and should be spoken here about this.

446
00:51:01,710 --> 00:51:10,200
How realistic is the rate with doughnut economy model and what does the assessments of his application by Amsterdam?

447
00:51:10,200 --> 00:51:14,440
Do you find that economics are useful and not the conceptual things?

448
00:51:14,440 --> 00:51:18,090
No, no interest whatsoever. Might you just say 30 seconds what it is?

449
00:51:18,090 --> 00:51:24,780
Just really for anyone in the audience who doesn't know it? I'm not really.

450
00:51:24,780 --> 00:51:28,570
I mean, it just doesn't interest me. Right, right. Full stop.

451
00:51:28,570 --> 00:51:38,430
Right. I mean, it's like many of these propositions, there are bits of it which are quite interesting and you might want to do,

452
00:51:38,430 --> 00:51:42,510
you know, you might feel different when they call to all sorts of other component parts.

453
00:51:42,510 --> 00:51:47,250
But in itself, as a coherent answer to the question What is a sustainable economy?

454
00:51:47,250 --> 00:51:53,340
Look like? Nothing. Do you find planetary boundaries a helpful concept?

455
00:51:53,340 --> 00:52:04,560
It's not unhelpful. Mm-Hmm. And clearly, in some obvious sense, if an economy is sustainable, it's going to be within planetary boundaries.

456
00:52:04,560 --> 00:52:09,360
My difficulty with with the concept itself is it's not neat.

457
00:52:09,360 --> 00:52:14,490
Simple concept is I'm not sure that it actually does have a single answer.

458
00:52:14,490 --> 00:52:17,250
Yes, I think it's much more complicated, right?

459
00:52:17,250 --> 00:52:23,910
And you know, if you ask me, what's the planetary boundaries of it's going to be when we're at three degrees,

460
00:52:23,910 --> 00:52:30,330
which we're well on the course for nothing at COP26 is going to make much difference to that process.

461
00:52:30,330 --> 00:52:35,920
And so, you know, I mean, you're you're the scientist, but it's a set of interlocking systems.

462
00:52:35,920 --> 00:52:43,170
All right. And so if we're thinking about the sustainable economy, it's probably not the world which has the Amazon, in fact, because he's gone.

463
00:52:43,170 --> 00:52:48,510
Yeah, right? It's not one that's got the great deciduous forests of Europe.

464
00:52:48,510 --> 00:52:54,780
We cut them all down. So the world is already a man-made environment.

465
00:52:54,780 --> 00:53:05,790
So I should say human made environment shows my age. And you know what the moving parts about here and how we're going to compromise between them?

466
00:53:05,790 --> 00:53:11,760
It's much more complicated than saying on the 13th of July, we crossed the the boundary.

467
00:53:11,760 --> 00:53:18,020
I'm got to merge two questions from David Mather and Brenda Isley.

468
00:53:18,020 --> 00:53:24,660
I'd like to have Professor Helm address how we can move away from the great gorge of ever expanding GDP.

469
00:53:24,660 --> 00:53:30,270
So how useful is GDP? Well, not very naive, but I'd say so.

470
00:53:30,270 --> 00:53:34,410
Is there a better metric? Plenty better metrics in this frame.

471
00:53:34,410 --> 00:53:44,970
And indeed, my framework has one metric to it, which is the starting point is, have you maintain the state of the asset in good enough shape?

472
00:53:44,970 --> 00:53:47,490
And is your consumption sustain? What basis?

473
00:53:47,490 --> 00:53:57,000
But the only cutting cost is I'm very careful to say economic growth is fine, provided it's driven by ideas and technology.

474
00:53:57,000 --> 00:54:03,600
In other words, the capacity the human mind with the ideas that go with it open up the possibilities to us.

475
00:54:03,600 --> 00:54:12,180
I am a lot better off because I have an iPhone in my pocket compared with my Olympus portable typewriter with specs and carbon paper,

476
00:54:12,180 --> 00:54:18,270
which virtually none the audience can properly remember. But this is an advance.

477
00:54:18,270 --> 00:54:21,210
This is an advance, the human possibilities.

478
00:54:21,210 --> 00:54:29,160
That means we can consume at a higher level, but only when we've made good our obligation to the next generation.

479
00:54:29,160 --> 00:54:37,110
So it's not like the arguments of trying to decouple GDP from from just just get rid of GDP.

480
00:54:37,110 --> 00:54:43,800
The problem with GDP is the flow's measure. So that's what the national income accounts are geared to.

481
00:54:43,800 --> 00:54:50,100
And it's about accurate demand across supply that's meant for the GDP accounts we have.

482
00:54:50,100 --> 00:54:55,490
We're essentially a Keynesian invention in the run up to the Second World War because you needed the account.

483
00:54:55,490 --> 00:55:04,040
And Stone and others put together to motivate what was at that stage in general theory, I'm not interested in flows much.

484
00:55:04,040 --> 00:55:10,640
I'm not disinterested. But my primary focus is on stocks and assets and a set of accounts.

485
00:55:10,640 --> 00:55:14,600
Why counts and when the chance to comes back the following year?

486
00:55:14,600 --> 00:55:17,960
It's Rachel Rays or whoever it is, right? They will then look at that.

487
00:55:17,960 --> 00:55:29,340
They'll tell me how my doomsday book is advanced, right? That is a measure of progress within the scope of the intergenerational obligation.

488
00:55:29,340 --> 00:55:34,880
A question from Rachel Morrow. This one makes a lot of sense for developed economies.

489
00:55:34,880 --> 00:55:39,560
But what about developing countries where developing the kinds of assets you

490
00:55:39,560 --> 00:55:46,610
talk about as essential are almost necessarily zero sum for the environment?

491
00:55:46,610 --> 00:55:51,710
So, so a second important question.

492
00:55:51,710 --> 00:55:59,090
So the UN report was called the North-South Report and the driving.

493
00:55:59,090 --> 00:56:12,190
Politics behind it was that the North should enable the south, as it was then defined developing countries to develop in a sustainable way.

494
00:56:12,190 --> 00:56:14,890
And when it comes to climate change in particular,

495
00:56:14,890 --> 00:56:24,220
it blindingly obvious that unless the North contributes to the south, a modern equivalent, we're going to fry.

496
00:56:24,220 --> 00:56:29,470
So if you look at the future sources of emissions, it's not in Europe, right?

497
00:56:29,470 --> 00:56:33,370
We've set the industrialised almost completely now.

498
00:56:33,370 --> 00:56:37,810
It's probably not really very much in the United States, although both the United States and especially Germany,

499
00:56:37,810 --> 00:56:42,130
are burning as much as they possibly can at the moment.

500
00:56:42,130 --> 00:56:48,230
Twenty five percent of German electricity comes from coal still, and dirty coal is a very dirty coal,

501
00:56:48,230 --> 00:56:55,180
and they're not going to phase it out for two 30, I think is that like Poland? But you know, it's going to be India.

502
00:56:55,180 --> 00:56:57,750
It will be partially in China.

503
00:56:57,750 --> 00:57:05,250
Although the Chinese economy may come to a shuddering halt sometime fairly soon, it's going to be in sub-Saharan Africa.

504
00:57:05,250 --> 00:57:12,450
If you think about, well, the top three carbon emitters are going to be in 2050.

505
00:57:12,450 --> 00:57:16,810
All right. China and India? Or maybe Nigeria.

506
00:57:16,810 --> 00:57:22,950
Well, you know, Nigeria's population will double by then. This is going to be bigger than the United States.

507
00:57:22,950 --> 00:57:28,300
And the growth rates in GDP terms in Africa are really fast.

508
00:57:28,300 --> 00:57:34,840
So it's very simple. You know, we have to transfer, so this is why it's even more politically difficult.

509
00:57:34,840 --> 00:57:48,100
We should make some contribution to help develop the physical assets and protect the natural capital, renewable assets, the Amazon, etcetera on.

510
00:57:48,100 --> 00:57:51,680
And we should help to do that because we are beneficiaries of that.

511
00:57:51,680 --> 00:57:56,890
It's a perfectly reasonable aspiration to live our lifestyle. But I give an example from Cop 26.

512
00:57:56,890 --> 00:58:04,190
Another is why you might think I'm completely cynical about Cop 26 and have been about the previous twenty five.

513
00:58:04,190 --> 00:58:13,530
So the climate fund terribly exciting. We're going to provide $100 billion a year to help developing countries to adjust.

514
00:58:13,530 --> 00:58:17,080
We actually can provide about 75, which is what we consider to be done.

515
00:58:17,080 --> 00:58:24,570
This is a country, by the way, we would lower the aid budget from no point seventeen point five percent of GDP, and that's vastly popular.

516
00:58:24,570 --> 00:58:29,760
Do you know that $75 billion is the annual dividend of Saudi Aramco?

517
00:58:29,760 --> 00:58:33,820
It just puts in perspective, right? Which is not at the door.

518
00:58:33,820 --> 00:58:39,250
So, you know, back to my starting point, if you want a sustainable economy.

519
00:58:39,250 --> 00:58:48,340
And it has to be one that has a reasonable climate. You've got to solve the global dimensions of emissions and sequestration.

520
00:58:48,340 --> 00:58:57,010
That means you have to transfer some of your consumption opportunities into investments in developing countries.

521
00:58:57,010 --> 00:59:07,030
Are we likely to do that? No. What's the consequence that you will have an unsustainable economy and you'll get three degrees plus, right?

522
00:59:07,030 --> 00:59:14,180
We're out of time, but I want to slip in one final question. And this is from.

523
00:59:14,180 --> 00:59:19,580
It is just jumped from my machine, my machine, and forgive me, I haven't got the name, but I remember the question.

524
00:59:19,580 --> 00:59:28,850
And the question is basically what would you like individual citizens in the UK to do to help trying to push this agenda?

525
00:59:28,850 --> 00:59:37,380
OK, so the essence of my approach is to ask the citizens who are responsible for the pollution.

526
00:59:37,380 --> 00:59:43,410
All right. The companies do pollution for us. I go and fill up my car with fossil fuels.

527
00:59:43,410 --> 00:59:47,150
Actually, it's quite a lot more efficient and quite a lot of electric cars, but that's just inside.

528
00:59:47,150 --> 00:59:53,630
OK, I will probably buy something at the train station on the way home wrapped in plastic in Marks and Spencers.

529
00:59:53,630 --> 00:59:58,320
It's for me, it's not some to. The oil company thought that we should glue ourselves to the door.

530
00:59:58,320 --> 01:00:06,420
It's me that's buying the stuff, right? So one of the things I do in mine that's a book is I suggest that everyone keep a cop diary.

531
01:00:06,420 --> 01:00:14,400
And they just take a typical day haphazard of how much carbon is involved in the palm oil that's produced in the breakfast,

532
01:00:14,400 --> 01:00:22,470
the packaging, the energy to flush the loo, the loo paper, the clothes they're wearing, the travel to work, you know,

533
01:00:22,470 --> 01:00:30,300
God forbid they get on a package holiday, etc. It just takes more time and then saying to yourself, Look what I've got to,

534
01:00:30,300 --> 01:00:37,350
what we've all got to do is take that carbon diary and rewrite it in two 50 and take nearly all of that out.

535
01:00:37,350 --> 01:00:43,620
And that tells you, as an individual, what's at stake here that we as individuals will have to do.

536
01:00:43,620 --> 01:00:48,240
And I'm I think that's a good point, but it's all about consumption.

537
01:00:48,240 --> 01:00:53,250
It's all about us as individuals, and we are the people who changed this frame.

538
01:00:53,250 --> 01:00:59,100
But I'd like the deluded enough to think you might also vote for someone who

539
01:00:59,100 --> 01:01:04,530
would have advanced these possibilities and vote for a proper constitution.

540
01:01:04,530 --> 01:01:09,240
I'm not utopian. My imagination? Peter, thank you.

541
01:01:09,240 --> 01:01:13,860
It was Paul John Martin who asked that question. We have run out of time.

542
01:01:13,860 --> 01:01:17,660
This has been a fabulous conversation.

543
01:01:17,660 --> 01:01:26,780
Completely chock full of really exciting and also challenging ideas data, we look forward to your book coming up.

544
01:01:26,780 --> 01:01:31,160
When would it be? I'm going to take my time and try and get it right.

545
01:01:31,160 --> 01:01:37,670
And I imagine there are enough people this day who could come up with enough objections, which I'll all have to deal with this.

546
01:01:37,670 --> 01:01:45,110
This one, the previous books I've written fast for a purpose and an argument in a policy context.

547
01:01:45,110 --> 01:01:51,230
This one is different from me. I really want to pin down each and every one of the arguments.

548
01:01:51,230 --> 01:01:55,430
I should have said in my introduction that these are rights extraordinarily well,

549
01:01:55,430 --> 01:01:59,330
and I do encourage you to look at some of the other books he's written.

550
01:01:59,330 --> 01:02:05,923
These are thank you again for coming in. It's been a fabulous talk. Thank you.