Mike Joy: Orthodox economics conceals real costs of agriculture

OPINION: A recent editorial in New Scientist magazine argues that "evidence-based policy is good medicine for society's ills (and) political decisions should be based on demonstrable evidence".   Thebacteria poisoning of 4700 Havelock North residents provides a topical example of how neoliberal free market economics (hereafter "orthodox economics") can trump peer-reviewed evidence-based science (hereafter "real science").

Real science progresses when a disprovable conjecture becomes accepted as scientific fact, requiring it to be supported by theory, observational evidence, and successful predictions.   As an illustration, the conjecture that carbon emissions from burning fossil fuels cause climate disruption was published 120 years ago by the Swedish physicist Arrhenius.  

Unequivocal proof of Arrhenius' conjecture has been provided by decades of real science consolidated in a fifth Assessment Report of the Intergovernmental Panel on Climate Change (AR5, 2013).   AR5 predicts that population and economic growth without "mitigation measures" will increase global temperatures by 3.7 to 4.8 degrees Celsius above pre-industrial levels by 2100, contravening the 2015 Paris agreement to limit global warming to 2 deg C (which was silent on "mitigating measures").   Meteorological data has confirmed 2015 as the hottest year since 1850.

Orthodox economics has the attributes of a religion rather than real science.   A mythical free market is not only constructed and regulated but is also manipulated.   Free trade in child labour or heroin would be unacceptable to most people.   Faith in a mythical "invisible hand" that somehow maintains market equilibrium by optimally matching supply and demand defies rational explanation and is contradicted by ongoing economic crises and market crashes.

Faith in a mythical "trickle down" mechanism that somehow benefits the poor is contradicted by rampant global concentration of wealth.   Currently, 85 individuals own one-half of the world's wealth.   The divide between the rich and the poor, despite "trickle down", is growing faster in New Zealand than in any other developed country.   Currently 305,000 New Zealand children are living in poverty.   Increasing homelessness can be attributed to orthodox economics.

"Sustainable economic growth", a principal objective of orthodox economics, is an oxymoron according to a real science conjecture that growth within any closed system – including population and economic growth within Earth's closed biosphere – is ultimately unsustainable.   The Limits to Growth report published in 1972 by the Club of Rome tested this conjecture through computer simulations of a future Earth under various assumptions.   Its "business-as-usual" simulation predicts catastrophic "overshoot and collapse" of the global economy, natural environment, and human population from about 2020 onwards.   Disconcertingly this projection has accurately tracked 40 years of subsequent statistical data.   Accordingly it must be heeded as real science.  

Einstein's warning in 1954 about the ongoing threat posed by nuclear weapons is also applicable to the threat posed by overshoot and collapse. "We shall require a substantially new manner of thinking if mankind is to survive."

Dairy NZ reports there are 4.9 million dairy cows in 11,927 herds that produce 1800 million tonnes of milk solids annually, earning NZ$18.1 billion (2013-14) or 37 per cent of New Zealand's merchandise exports. The downside is that dairying contributes about one-quarter of New Zealand's total greenhouse gas emissions through belched methane and deposited dung/urine, and urea fertiliser.  An average herd of 413 cows excretes 3719 tonnes of dung/urine per year which is partially relocated downstream under gravity into rivers and aquifers.

Over time, dairying has transitioned from traditional pastoral farming to a more intensive, corporate model, impacting on the environment (fresh water pollution, greenhouse gas emissions) and also eroding the clean/green brand upon which agriculture and returns to farmers are dependent.  Intensification has required increased inputs of imported fertiliser, palm kernel supplementary feed, and fresh water that impose external costs ("externalities").

The orthodox economics of intensive dairying discounts these externalities because they are met by the public, economically and environmentally, not by farmers. Costs include conversion of pristine rainforests to palm kernel plantations, eutrophication of rivers and lakes by dairy runoff, climate disruption by greenhouse gases, and contaminated drinking water. Since a typical dairy herd excretes the same amount of dung/urine each day as 1.05 million birds excreting 0.01kg/bird/day, Havelock North's mass poisoning was probably caused by cows, not birds, despite a Ministerial assertion to the contrary.

Orthodox economics does not adequately incorporate the costs of environmental externalities nor the true value of natural resources and services, including Earth's life support systems.  Market prices are distorted when true costs of production are understated, causing overproduction and overconsumption and encouraging damaging activities such as intensive dairying particularly when these result in substantial private benefit.

Scientists at Massey University's Institute of Agriculture and Environment have recently published robust real science estimates of the environmental externalities of intensive dairying (KJ Foote et al, 2015).  Even although extremely conservative, these cost estimates substantially exceed total dairy export revenue.   Orthodox economics is concealing a bizarre reality that dairying is a net cost for the New Zealand economy when externalities are included.

Even more bizarrely, Fonterra has announced a forecast payment for the 2016/17 season of $4.25/kg of milk solids, contrasting with Dairy NZ's estimate for the current break-even point for dairy farmers of $5.25/kg.  Not only is dairying a net cost for the New Zealand economy but it is also a net cost for dairy farmers.

Many reports by government agencies and statutory bodies identify the adverse environmental effects of agriculture, especially intensive dairying. Public opinion surveys have consistently established that water quality is New Zealand's most significant environmental issue and that intensive agriculture is a primary cause.

New Zealand's point of difference in differentiating its products in world markets centres on its natural environment.  Its "clean and green/100% Pure" image is promoted as a global brand. Without this brand, New Zealand has little to command market status and an attractive international identity. 

To endure, the brand must have genuine integrity, requiring New Zealand agriculture to make the transition to genuine environmental sustainability underpinned by real (peer-reviewed evidence-based) science.  A faith-based regime that promotes environmentally unsustainable agriculture underpinned by orthodox (neoliberal free market) economics has no secure future.