Creative versus Extractive Economies

The sands of Iraq and the karst mountain bones of the Grecian hills tell a story. These were once fat lands; the Tigris/Euphrates fields of Sumer, the Arcadia of Greece. They were once Mediterranean empires, now struggling countries of a somewhat lower prestige. Shelley’s Ozymandias – that arrogant king of kings – lived then, and walks the world still.

It is a story of taking too much, too fast, for the benefit of a few whose love of deal making, money and power made them the unwise tyrants, above the gods. No doubt these least philosophical of (mostly) men rationalised environmental degradation as “necessary”; for the latter-day equivalent of ‘jobs and GDP’, and environmental ‘compromise’ and ‘balance’. These are the particular clichés of short-term commercial minds.

Behind their words they mean to steal the commons and leave us the slag heaps. Adam Smith warned us against them: “It comes from an order of men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.” Today, we seem to welcome this order with open arms, and even promote them within some political parties.

The history of our world is not held in particular regard by these minds. We had our own Prime Minister refer to colonisation as peaceful and bringing capital. The inaccuracy is bewildering. The capital frame of reference is disturbing.

This wholly capital frame of reference inevitably creates future environmental and social collapse because it is – frankly – profitable to destroy. It sees the economy as the driver of all, rather than dependent upon a functioning whole.

This is not to say that all ‘development’ is bad. We have a choice of a better tomorrow; of an economy that is “Creative” rather than “Extractive.” Collapse is not inevitable in any social system (of which economics is a part) unless we push the ball past the point-of-no-return on the edge of the chasm, as we are trying so hard to do right now.

We live in a resurgence of an Extractive Age. It is no longer Creative, if it ever was. The deal makers look to easy extraction; mining of ‘resources’, forests felled and left, the soil with all its water-holding lost, the cod fisheries netted to collapse from which it may never return. The irrational exuberance for polluting irrigation and dairy expansion is more of the same.  We demand higher inputs to keep the rusting tramp steamer afloat, creating junky dependency. This Extractive Age continues to ask for more, which is great for GDP. Those that follow this practice are usually not resident within a place for long. They become absent because they can afford to leave once the slag heaps appears.

The Creative Economy recognises that the bedrocks of a strong economy are our people and our place. That is its focus, not measured resources within a spreadsheet. The evidence is overwhelming on this point, from these lessons of history to the writings of economic philosophers who show that an enterprising, ever-adapting economy is embedded within a planet and a community where trust and inspiration reign over hierarchy and obedience. The extractors prefer the latter.

Within Extractive Economies we deal in low value commodity, the simple homogenous economy, increasingly expropriated by outside owners, our colonial masters. This is New Zealand’s immediate past history whose lessons are obvious. It is still happening. Mega-corporations make money by a type of colonial extraction, and so their political support goes to those who think in similar ways. Who then argue for the rights of corporates over local firms.

Commoditisation reduces land and people to ‘resource’ and ‘task performer’, defined by dollars; resulting in the degradation of both landscape and of community. Things fall apart. The centre cannot hold. The long-run economy goes with it.

Gandhi wrote well about the process from the heart of the beast. He argued that such extractive ‘development’ was a “nine days wonder.” Part of that process is a self-reinforcing vicious cycle. Commodities inevitably loses price to the strong buyers. The response from short-term thinkers is not a re-examination of strategy – heaven forbid – but the cutting of costs and increasing yields. They increase scale and reduce diversity in the interests of standardised ‘efficient factory’ thinking. They think shorter and shorter until the monthly income statement is all.

Social conditions are bargained down; the environment is something to be ‘compromised’; pollution and further theft of the commons is rationalised; public subsidisation imperative. Commodity value chains are short or non-existent, processing centralised to some other place. The effect is that more and more wealth is exported out of a region, and most become poorer. If the environment
or the social conditions are reduced beyond a point, a sharp collapse occurs. This is not theory. It is history, and it is happening in our current day.

The alternative is to focus on people and place, to create value, to hold price, to multiply value through long local value chains, to keep that value here and stop the various forms of colonial extraction, and, finally, to attract value and enterprise because we live in a place with inspiration and trust. We can turn the vicious circle into a virtuous circle.

But it will require a political shift. It is not about left or right, or environment versus commerce. We can build mutually-beneficial connections rather than the ‘compromised’ trade-offs of the narrow technocrats.  People matter. The land matters. The economy is co-dependent on it all. If you don’t believe that, then you are out of step with not just a Creative Economic future, but the meaning of life itself.

Chris Perley

Chris Perley has a background in primary sector and regional strategy, policy, research, and operational management across land use community, economy and the environment.  He is a research affiliate in the Centre for Sustainability (CSAFE) Otago University.

Creative Economies – The Shire	Extractive Economies – Mordor
Post-Colonial: Focus shifts from ‘resources’ to ‘functional integrity’ of the natural and cultural systems (Socio-ecological, not economic). An interdependent complex adaptive systems view of the economy. Financial criteria sit within strategy, never directing it. First imperative is to maintain the functioning system.	Colonial: production of cheap resources for processing by and profit for absentee owners, with people included within the purview of ‘cheap resources’. Mechanical view. Environment is defined as a resource, rather than a life-support system.   Financial criteria, CBA and Input:Output models justify the mining of any finite or slow-cycling system – soil, forest, fisheries, or even community capacities and social capital.   Future is highly discounted in real terms (<4%).
People centred: qualitative, culture expression.  The economy’s purpose is to serve the people. People are treated as human beings who are ends in themselves. Cf: Manfred Max-Neef . High ‘Social Capital’ – trust, participation, engagement, dialogue, discussion, ideas & concepts, esprit de corps, freedom to express, outcome (goal) focus, innovative, devolution, decentralisation, co-management	‘Resource’ centred: quantitative, obedience, mechanical.  The purpose of people is to serve the economy, and the rentiers. People are treated as things, resources, as means to others ends. Reduction of humans to instruments to others – as ‘means to others’ ends’. Low ‘Social Capital’ – distrust, nonparticipation & engagement, dialogue is dissent, non-conceptual and task-focused, authoritarian, inflexible, obedience, lack of expression, non-innovative, centralisation, concentration,
Land-System Centred: The environment is a functioning life-support system and an interconnected system that can generate multiple functions and benefits. This means that using an understanding of key functions (soils, hydrology, economy, stock behaviour, the relative economics of site for different land cover – pastoral, cropping, woodland & wetland systems) and spatial principles, a system can be designed that can create – in combination – high economic value, high market position (healthy food with a positive environment), low cost, high environmental values and high social values. A shift to a Land-System Centred approach aligns with realising the potential of not just land, but of market position and price potential, and a cost reductions that arise by either not pushing land to an uneconomic land cover – e.g. pastoral systems that lose money rather than woodlands that make money), or by integrating benefits between parts of the system – e.g. water quality benefiting animal performance and lowering health costs; shelter & shade effects, health from plant diversity.	Land as ‘Factory’: The land is treated as a single resource defined by the focus on the corporate enterprise. Opportunities, market position, multifunctional benefits, environmental and social benefits are unrealised. These systems are focused on assumptions of ‘efficiency’ but actually create inefficiencies through the non-realisation of opportunities and functions they can to see, let alone imagine how to realise. Technocratic obsessions overrule systems perspectives.
Multi-functionality, Diversity & Constant Differentiation (Resilience): economies continually adapt, with new enterprise linking into new enterprise – cf Jane Jacobs The Nature of Economies. And here.	The Cult of Efficiency (Non-Resilient – loss of adaptive capacities): cost structures, throughputs, standardisations, assumptions of certainty and controllability. Highly technocratic and reductive.
Create value focus (high value à longer decentralised local value chains). More local employment.	Produce volume focus (lower value high volume commodity, and shorter centralised value chains). Less local employment.
High market position retains price & margin, foundation for virtuous circle.	Low market position constantly loses margin as prices drop, focus on cutting costs to detriment of local economy, vicious circle
Multiply values down local value chains – tertiary processing and higher	Single or non-existent values down centralised out-of-region value chains
Retain value locally – local ownership, employment, expenditure. Virtuous circle of gain	Value extracted – profits, expenditure, processing – vicious circle of loss
Build an attractive place to be by choice: Culture, opportunity, sense of community, amenities, beauty, belonging	Build an unattractive place where most would leave by choice. Loss of culture, few opportunities, disintegrated community, ugly, loss of connection
Attract people: creative cultural expression. More virtuous circles.  Our place becomes a meaningful Shire.	Repel people: creative people leave. More vicious circles – our place becomes a Mordor commodity.
Ownership structures are challenged. Resurgence of the idea of managed (i.e. not free-for-all) commons – our rivers, waters, sea, land, access rights, harvest rights, roads, infrastructure etc. Elinor Ostrom thinking.	Privatisation of the commons – all is Hardin’s Tragedy.  The assumption that privatisation benefits the public when it clearly benefits the bigger players who continue to accumulate and expropriate.