Speech to the Business & Environment Program Delivered at
San Francisco's Ferry Building on Mon. 7th Nov. 05 -- Part 2

By His Royal Highness Prince Charles
November 28, 2005

Part 2: The Right Kind of Growth

The problems and challenges of the market economy are seen most starkly at a global scale. On the one hand, the global economy provides huge opportunities to bring emerging and developing economies into international trading and financial systems, thereby assisting those countries to lift themselves out of poverty. On the other hand, access to those same international systems can lead to new problems in the developing world. I have often said in gatherings such as these around the world that globalization of opportunity has to be matched by globalization of responsibility, and there are indeed many examples of multinational companies delivering real benefits through their activities in the developing world.

We also have to accept that globalization often comes at a most alarming price for the future, and that price may be paid in terms of displaced rural communities, an intensified drift towards already overcrowded and inhumane urban slums and the destruction of social and cultural systems built up over many centuries.

I believe that developed and developing world economies will need to accept that they have a common responsibility to develop policies that will mitigate the damaging effects of rapid growth.

One of the concepts in the market economy that surely needs close examination is growth. The orthodox view, of course, is that the pursuit of economic growth is what drives wealth-creators and secures prosperity for nations and their people. And of course that’s true -- up to a point! As Senator Robert Kennedy put it so succinctly in the 1960s, GDP “is indifferent to the decency of our factories and the safety of our streets alike. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. GDP measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country. It measures everything in short, except that which makes life worthwhile.”

And I would add that it doesn’t deliver environmental sustainability either.

So what sort of growth do we need? I suggest that, as a minimum, we need growth that is not achieved at the expense of the "natural capital" on which we all depend. As with financial capital, when we do spend natural capital we need to ensure that we are doing so wisely, and that we take steps to replenish it -- if not for ourselves, then for our children and grandchildren. This means accepting the concept of natural limits in a resource-constrained world.

We also need growth that promotes sectors and technologies which will reduce our reliance on declining fossil fuel resources, growth that generates lasting value for consumers and citizens, as well as shareholders, and growth that emphasizes improved wellbeing, not merely consumption.

And achieving this sort of growth will require innovation, of which there has never been any shortage in this country, and particularly, if I may say so, in this state. The United States of America has an extraordinary capacity to solve problems, to find ways of doing things that were thought impossible and to bring them to market. The advances that have been achieved here in renewable energy, for instance, and in the development of fuel cells, have had an impact around the world.

An Unprecedented Opportunity for Innovation
The challenge of achieving environmental sustainability provides unprecedented economic opportunities for innovation. This process moves even more quickly when there are unmistakable price signals from the market, as in the case of rapidly rising oil prices driving demand for fuel-efficient cars -- seen first in the 1970s.

It is interesting to note that, between 1977 and 1985, the United States cut oil use by 17 percent, while GDP grew by 27 percent. In the same period, total oil imports fell by 50 percent and imports from the Persian Gulf fell by 87 percent. With 70 percent of oil being used for transportation, it seems that fuel-efficient vehicles hold the key to energy security in the United States. This was no doubt one reason why fuel-efficiency standards were introduced in 1978, when the average consumption was 16 miles-per-gallon. By 1987, that figure had increased to 22 miles per gallon. After a further 18 years, it has actually decreased to 21 miles per gallon, and it will be interesting to see what happens now that oil prices have risen rapidly once again.

It is clear that capitalism is by far the most dynamic economic system for driving forward new technologies and processes. So how do we harness and shape innovation to the cause of sustainable wealth creation?

The essential first step is for governments to set the clear, long-term frameworks which will provide sufficient security for businesses to make major investment decisions. In doing so, they must provide a spur to eco-efficiency -- making the best use of natural resources -- and "closed loop" systems which eliminate waste. The aim has to be to de-couple the benign growth we need from the damaging externalities, such as pollution, waste and climate change that we need to avoid. At the moment, we too often appear to be living in a “throwaway” society and, increasingly, a “throwaway” world...

We also have to find ways of ensuring that technological breakthroughs work as much for the world’s poorest people as they do for the rich world. This is particularly important in the case of climate change since the negative impacts will fall disproportionately on already vulnerable communities in the poorest parts of the world. One of the keys to success, therefore, will be to put a full and proper value on ecosystem services, because in doing so, we will generate more demand for new, less-damaging technologies.

High-tech "Fixes" Are Not Appropriate Technology
But let me just add a word of caution. It is all too easy to get carried away with enthusiasm for new technology (and at this point I can hear the usual, predictable cry that I am “anti-science,” which I am not – I am just "pro" its appropriate use). As one good idea succeeds another, it would be tempting to conclude that nothing is impossible, that there are no limits to human ingenuity and that every problem we encounter can be "fixed" if we just apply enough time and research dollars.

I may not be an economist, but I am a historian and I would have thought history suggests that attempting to re-engineer our planet is fraught with danger and that simple solutions are usually the most sustainable. In the drier parts of the world, for instance, water-harvesting is more sustainable than massive water-transfer schemes. Energy efficiency is more sustainable than developing new power stations. Organic farming is more sustainable than the use of chemical fertilizers and pesticides -- and will become more so as the price of oil rises. Preventing pollution through good design is more sustainable than end of pipe or clean-up solutions. And I could go on... and on...

But if environmental sustainability is the aim, how will we monitor progress and measure success? And how will we know whether our prosperity and quality of life today are being achieved at the expense of our children and grandchildren?

In a world of scarce resources, it is essential that we secure the best value for money over time. But, with all due respect to accountants, their profession tends to look at historical costs, not future consequences. Our accounting mechanisms simply have not kept pace with our requirements for information about sustainability. That is why, if I may say so, I established an “Accounting for Sustainability Group” with the active assistance of Britain’s National Audit Office to see, in particular, what could be done to encourage longer-term and broader perspectives in decision-making, which are, of course, the essential prerequisites to ensuring that we live and work more sustainably.

This group published a booklet, entitled Realising Aspirations, earlier this year and I then -- rather hesitantly I must admit! -- launched it at the 125th Anniversary dinner of the Institute of Chartered Accountants in London. This made two over-arching points. Firstly, that sustainability can be good value for money and can enhance rather than be an enemy of economic growth; and, secondly, that a new accounting and forecasting system is needed to ensure that the longer term and broader consequences of our actions are taken into account more effectively in decision-making.

The Group is now determined to raise the funding needed to develop such a new accounting system. But as you can perhaps imagine, that isn’t necessarily an easy proposition... If you need some light, bed-time reading, copious quantities of this booklet should be available as you leave this seminar... And perhaps the US Government’s Accounting Office, the equivalent of our National Audit Office, might be interested to glance at a copy, too...

Becoming Carbon-Neutral for the Sake of our Children
Ladies and gentlemen, I fear I am the kind of interfering busybody who, when I read the list of conclusions produced by the Millennium Ecosystem Assessment, finds myself quite unable to sit back and do nothing. There are clearly no easy answers, but our actions, or inactions, will all make a profound difference to the lives that our descendants will lead.

I simply cannot stress this more strongly. For their sakes we must take a longer-term view. One day, our children and grandchildren will look back and assess what we did, in the light of what we knew. At the current levels of progress, it seems likely that their assessment of our generation will be rather harsh. But there is a lot that we can each do and it is the cumulative effect that matters.

In my case, I can both raise these issues (as likely as not to a chorus of well-orchestrated abuse!) and try to demonstrate what is possible, as I have done with my various organizations, with the organic farm at Highgrove and new models of integrated development at Poundbury, in the South of England, and elsewhere, and with a current study into how my whole establishment could become more carbon neutral.

Throughout my lifetime, your country has been willing to take responsible actions for the greater good of the global community, even when it had no direct need to do so. The environmental crisis we face is another situation in which I believe the United States could use its power and influence to help create a sense of unity in a common cause among disparate peoples and sectors of society.

This country had the strength and conviction to forge -- and indeed continues to forge -- a single nation from people from all over the world. Those same characteristics could be harnessed to create a united sense of purpose around the agenda of environmental stewardship and a market economy reshaped to deliver it. If that were done, the benefits would be felt around the world, and for generations to come. And the people who can perhaps do more than most to make it all happen are right here in this room.

The-Edge would like to thank the British Embassy for providing us with the full transcript of HRH Prince Charles' speech.

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