Volume 6, Number 6

TRADING ECONOMIC THEORIES: A Critical Analysis of the Nature of Things

DURING 1992, CBC CAME UNDER ATTACK FOR ITS controversial documentary: "The Valour and the Horror." At the centre of the controversy was CBC's journalistic policy of fairness and how the corporation deals with charges of bias. The Ombudsman, in his report, concluded that the program was flawed and needed to be changed in order to be rebroadcast. This decision and the ensuing cries that the CBC was being overly concerned with the issue of balance inflamed the debate about freedom of the press and the public's right to balanced programming.

One expectation of this controversy was that CBC reporters and producers would be more careful in constructing documentary and public affairs programming. At the very least, point-of-view documentaries would be halted and every program would have to live up to CBC's high journalistic standards.

This spring, CBC aired a special two hour "Nature of Things" which examined the global economy and its effect on the environment. The ad campaign promoting the special intimated that this would not be a balanced program. In the print campaign the following headline was presented: "Does Money make the world go round or Stop it dead in its tracks?" In a smaller caption: "Tonight, David Suzuki examines the real cost of the way we do business."

This issue of On Balance takes a critical look at the "Nature of Things" program, "Trading Futures," and asks whether the program lives up to CBC's journalistic policy of fairness and dealing "...ethically with persons, institutions, issues and events." As Gerard Veilleux, the president and CEO of CBC wrote in a letter to the Kitimat Chamber of Commerce: "The Nature of Things is not an exception to the journalistic excellence demanded by the CBC."

Suzuki Blames all Earth's Problems on the Market

DAVID SUZUKI'S "NATURE OF THINGS" SPECIAL "Trading Futures" was a mix of contradictions and false assumptions. The main premise of the program was that we have created an unsustainable economic system: the free market. As Suzuki states at the close of the first segment: "Economic perspective sees nature as a resource to extract and use instead of the foundation of all life on earth. That's what's carving up the world and denying us a sustainable future." For Suzuki, all the ills of the planet are placed on our "inventing a theory of unlimited growth." He claims that this theory is wishful thinking, and then proceeds to show the problems that it has caused the earth.

At the centre of the theory is the free market system. Suzuki admits that markets are the best way to generate wealth but in doing so, the free market has four shortcomings: first, the market knows nothing about limits. If it did, Suzuki argues, there would have been a price adjustment to signal the disappearance of the North Atlantic cod. Second, Suzuki argues that the market does not reflect real costs. He states that the costs of disposing of a good are not factored into its price. Third, the market concentrates wealth. He provides the tired cliche that "the rich get richer and the poor, poorer" as an example. Finally, he states that some people are excluded from the market and that the trickle-down theory simply does not work.

Is the problem markets or government interference?

While Suzuki's definition of the market is that it "...freely operat[es] without interference," ironically, all of his examples include some form of government interference. In fact, almost all of Suzuki's examples of the failure of markets can be easily attributed to the fact that markets were not completely in control. More accurately, government licenses and regulations are the likely offender. Take Suzuki's first example of how the "global economy calls the shots."

Suzuki chose the herring roe industry to illustrate how only a few are fortunate enough to harvest herring for the lucrative $150 million-a-year Japanese market. The special highlighted this industry because of its waste and massive depletion of an important resource. As the program points out, only the roe is valuable; the herring is considered waste and is used for fertilizer or pet food. The program shows a sustainable method of harvesting the roe. Native fishermen take only the roe by using an ingenious and centuries-old technique of suspending leaves into the ocean and having the sticky roe collect on the leaves.

This technique of "roe on kelp" is highly valued by the Japanese and earns twice the price of the roe caught by the commercial fishermen. The native community would like to harvest more but have been only granted one license. The problem in this case is not the market--for the market values the "roe on kelp" more than just the roe. It's the system of granting licenses to commercial fishermen rather than granting licenses to those who would harvest "roe on kelp." "Trading Futures" failed to explore the fundamental issue of who gets licenses. Why didn't Suzuki critique the government's awarding of fishing licenses? At the very least why didn't he question why the government awards more licenses to commercial fishermen than to native communities?

Suzuki's real costs ignore government interference

The issue of the market not taking into account the real costs is one which Suzuki comes back to throughout the program. But is it the market's failure, as Suzuki describes, or that of the government? Suzuki points out that the cost of a car is based on production costs. But disposal costs are ignored. "Market prices don't reflect real costs--that's another failing. Gas prices don't include pollution or depletion of the planet's oil reserves."

Suzuki fails to acknowledge that our system of waste removal is controlled by the government, not by markets. Thus, consumers are not required to consider the costs of disposal. Some economists hold that if there were a market in garbage, the costs of disposal would be factored in the costs of production. The assertion that market prices do not provide for depletion is an assertion by Suzuki that he knows more about the future supply of energy alternatives and hence the future demand for petroleum than the collective wisdom of the participants in the marketplace. Where does Suzuki get his special knowledge?

What about Eastern Europe?

Throughout the program Suzuki condemns our economic system as being the root of all environmental problems. For example, he states: "Our economic system has impoverished the planet at the expense of most of its inhabitants. But instead of reining it in, we're imposing it everywhere on earth."

While Suzuki is convinced that the marketplace is the centre of all the earth's problems--and he is quick to point out North-South examples--he fails to illustrate the worst polluters on earth: Eastern Europe. According to Geoffrey Lean and Dan Hinricksen, "Eastern Europe suffers the worst air quality in the industrialized world. In cities like Krakow in Poland, Bratislava in Czechoslovakia, Miskole in Hungary and Tulcea in Romania, residents are exposed to such high levels of sulphur and nitrogen oxides, heavy metals and soot, ash and dust that their health is endangered . . . Benzi, near the North Korean border, is China's--and perhaps the world's--most seriously polluted city."[ Lean, Geoffrey & Don Hinricksen (1992) Atlas of the Environment, (Oxford, England: Helicon Publishers Ltd.)]

Undoubtably this omission is influenced by Suzuki's primary source, Susan George, whose work focuses on third world debt. But while George stays within her thesis, there is no reason that this program should not examine other nations. How can one honestly critique the market without examining centrally-planned economies? While the market may be flawed, it has not committed the environmental blunders that East Germany, Poland and the former Soviet Union have committed. While North America and Western Europe are not exempt from having problems with air pollution, fewer North American than Eastern European cities exceed international guidelines in several categories of air pollution. For example, in Canada only Sudbury and Hamilton have air that is a clear health hazard for part of the year. And while five cities in the United States are considered polluted by the WHO, in the former Soviet Union, 25 cities exceed those same guidelines. [Lean & Hinricksen, ibid.]

Suzuki admits governments don't always protect citizens

Almost all of the examples Suzuki cites as evidence that we're imposing our economic system on the third world actually illustrate how governments do not always work in the best interests of their citizens. For example, Suzuki points out: "The government of Mexico decided more than 30 years ago that export agriculture was the key to economic development. Today, the country's finest farmland produces food for the United States and Canada. But most Mexicans aren't eating very well. The 3,000 workers here once belonged to a subsistence economy, where small farmers lived off the land. Now the food they package competes successfully in the global market place, but they keep getting poorer. Mexico's crippling debt has devalued the peso and reduced their earnings to less than a living wage. Mexico's exports keep on rising, but so does its national debt."

The program indicates that the reason for the farmers' poverty is because of industrial farming from corpora-

The assertion that market prices do not provide for depletion is an assertion by Suzuki that he knows more about the future supply of energy alternatives and hence the future demand for petroleum than the collective wisdom of the participants in the marketplace. Where does Suzuki get his special knowledge?

tions such as Del Monte. Suzuki states that: "...economic policies have cost Mexico its ancient, sustainable way of life." But Suzuki ignores his own evidence that the government decided to favour export agriculture. As well, he makes little of the fact that: "Regulations favour export agriculture at the expense of small farmers." Since when do markets pass regulations? Those are the decisions of governments, not markets. Despite admissions by Suzuki that: "The Mexican government believes export agriculture will build the country's economy..." he continues to blame the market for Mexico's problems.

To support his assertions, Suzuki uses economists such as David Barkin who state that globalization does not improve the quality of life for Mexicans. "Mexico is a very good competitor in the international market place," Barkin says, "But, what is it competing with? By lowering wages and living standards to below those in some of the most terrible living conditions in Asia, can Mexicans, should Mexicans, be forced to compete by having living standards which involve increasing infant mortality rates, declining nutritional standards, a terrible worsening of the environmental, the air pollution, water contamination, soil degradation, are these the costs? Competition in the present state of the world, which only looks at certain parts of the costs, is unviable. Globalization is a very very bad deal."

Kenya's Price Setting Seen as Solution

SUZUKI'S MESSAGE WAS NOT ALL DOOM AND GLOOM-- to his credit he offered positive examples of how communities could ostensibly prosper outside the global economy and within a sustainable future.

One example was Kenya's self-sufficiency in sugar. Suzuki explains: "In Mumias, sugar cane is part of traditional farming. Weeds and waste are ploughed back instead of burnt, as they are on plantations. Crops are rotated. Good husbandry here conserves the soil, and the community that depends on it. A British-based transnational corporation used to own the Mumias sugar mill. The Kenya government contracted them to set up a new system, one that would make Kenya self-sufficient in sugar without displacing local farmers. It's now the largest sugar mill in Africa, and it's owned and run by Kenyans. The country no longer imports sugar." Despite this seemingly idyllic scenario Suzuki admits: "The Kenya government sets the price of sugar to protect small growers from the slump in world commodity prices..."

He adds, "Conventional economics would call the Mumias system inefficient. It's low yield, labour-intensive agriculture. Its product is priced by the government, not by the global market. But it sustains 34,000 families, and it keeps the land healthy."

Suzuki contrasts Kenyan sugar with Canadian wheat

Interestingly, Suzuki's next example is of the Canadian Prairie wheat farming. "If Mumias breaks all the rules of efficient farming, here's a place that practically invented them. From the foothills of Southern Alberta, the land seems to go on forever, 1500 kilometres of the finest farmland in the world. Most of it is devoted to mass production of a uniform top-quality commodity: wheat. This is super efficient farming--large-scale, capital intensive, high-tech. And it's run by experienced owner-managers, seasoned by tough competition in the global market. And world demand for their product has never been higher. So what went wrong? The Canadian Prairie, one of the great bread baskets of the world, is facing financial and ecological crisis. In just 40 years, harvests here have risen sharply because of new seed varieties, technology, and chemicals. Costs have risen sharply as well. High yields produce surpluses, and competition for customers in the international grain market is fierce. At the Chicago board of trade, brokers speculate on grain prices. They know the main factor isn't the cost of production--it's politics. The brokers may guess right, but Prairie farmers are losing the gamble. In the past decade, thousands of Canadian farmers have gone bankrupt, trapped in a market where the price of wheat is far lower than the cost of production."

Even though Suzuki and his experts point out that the Canadian farmer is the victim of an international price war that was due to subsidization, Suzuki also attributes the price war to short-sighted economics: "Perhaps we can adjust the market, but can we fix the shortsighted economics which take surpluses today at the expense of tomorrow's harvest?" But the very short-sighted economics he is critical of in the case of wheat is precisely what he touts in the case of Kenyan sugar: government subsidies encouraging increased domestic production.

It is incredible that an organization as sophisticated as the CBC could permit such simple-minded and incorrect analysis at a time when this very issue--in the form of European subsidies for agriculture--are posing a threat to the world trading system in the GATT. This glaring error would have been avoided if the producer has submitted the script of this major special on economics to a panel of economists for review. Why didn't he do this?

Experts Used to Support Suzuki's Theories

SOURCES WERE USED IN THE PROGRAM RELATIVELY sparingly and essentially to highlight a point made by Suzuki, or in some cases refute so-called traditional economic thinking. Julian Simon, former economic advisor to Ronald Reagan, was used as a source representing the old model. Simon made the point that historically things have been getting better for people. "All resources have been getting more available rather than more scarce. Just the opposite of what everybody expects. That is the prices of all natural resources have been falling rather than increasing. And our air and our water and our rich countries have been getting cleaner rather than dirtier over the past decades. So, all the facts show us that things have been getting better with respect to human welfare, rather than worse." This view was refuted by two experts, Lester Brown of the World Watch Institute, and Herman Daly of the World Bank.

Click here to view Figure: The Nature of Things: Expert Sources

No mention is made of the fact that the predictions that Simon made more than a decade ago have largely proved correct, thus giving his views credibility. Lester Brown's views, on the other hand, have proven incorrect continuously. His predictions in the books Population Time Bomb and The Twenty-ninth Day that the world would run out of food were totally incorrect. In 1990 Brown predicted: "the first concrete economic indication of broad-based environmental deterioration now seems likely to be rising grain prices." Why is he used as an expert to refute Simon?

Later Simon continued his thought saying that the experience of the past shows us that all good things are associated with more people: "Surely there must be limits to the number of people you can put on this earth, so people have said for the past 5,000 years. And so we have gone on adding more people, and at the very same time increasing our length of life, increasing the resources available to us, and having a higher standard of living. So if the evidence of history means anything, and if we're going to know anything about the future, how can we know about it except

from the past? The experience of the past tells us that the numbers of people have been going up, and all good things have been going up with it, rather than more people being associated with a poorer state of life. And there's no known reason why this cannot go on forever." This, too, was refuted by Susan George and Herman Daly.

Primary expert not an economist

The program's selection of sources is significant. Susan George was established from the onset as an authoritative source. Not only was she the first interviewee but her statements supported those of Suzuki. Further, throughout the program she offered her criticisms of the market and her view of the future. In fact, she was also the program's last source. While Susan George holds a doctorate degree, it is not in economics. In the introduction to the book, A Fate Worse Than Debt, George states: "I am not an economist. This is a statement of fact, not an apology. Though some may see this as a fatal flaw, I tend, most days, to think of it as my secret weapon." George, Susan (1988) A Fate Worse than Debt, (London: Penguin Books), p. 4.Note Susan George is not so forthcoming about the discipline in which she is trained.

Alcan: The Failure of Global Economies and Transnational Corporations

IN THE CASE OF ALCAN'S KEMANO COMPLETION PROJECT, Suzuki ignored positive examples of how a private company went beyond current government regulations to provide sustainable development and chose instead to portray Alcan as an unethical opportunist. The segment begins with Suzuki stating: "Just a few hundred of these gigantic transnationals now control whole sectors of world trades. Their business is profit; it's the business of government to see that they also serve the community at large. But in the global economy, transnationals are growing beyond the reach of governments, and serving only their own interests and those of their shareholders."

From press clippings obtained from the Omineca Express/Bugle it appears that that segment's producer, Mike Poole, had predetermined that Alcan and the federal government were involved in some form of alliance. On July 22, 1992 in the Omineca Express/Bugle a story was run which discussed the upcoming filming of "The Nature of Things" special: "Poole described a portion of the show as a `rogue's gallery of connections between Alcan and the federal cabinet'. `How they got these extraordinary concessions is one of the subjects we'll be exploring in the program.'"

Veilleux's assurances fail to change tone of report

In documents obtained from Alcan, Gerard Veilleux, the President of CBC, wrote to Mr. W. J. Rich, the Vice President of Alcan, on February 9, 1993 assuring him that no such connection would be made in the broadcast: "No comment is made in the program about relationships between Senior Alcan officials and the federal government. As per our normal policy, `The Nature of Things' will be subject to our journalistic review process before broadcast."

Despite Mr. Veilleux's assurances, such a link was indeed made in the program. The same words were even used: "The intervention by the federal cabinet had raised questions. How did Alcan get such an extraordinary concession?"

It is amazing that "The Nature of Things" chose to portray the federal cabinet and Alcan in this manner. Even their implication that the cabinet and Alcan were trying to hide from CBC is misleading. Suzuki states: "Members of the federal cabinet were unwilling to talk to us about it. Despite our repeated requests, Alcan would not consent to an interview for this program. So the question remains unanswered. How well was the public interest protected?" The question did not have to remain unanswered despite Suzuki's claim that only the government or Alcan could answer it. If Suzuki and his producers has bothered to do the research and examine the costs and benefits of the project, as well as the true impact on the environment, they would not have had to resort to making such broad and incriminating statements.

Despite Suzuki's claim and implication that the first phase of the project permanently wiped out salmon and trout ("Salmon and trout were wiped out far downstream") the evidence is quite the opposite. . . . DFO reported 3500 spawning chinook in the upper Nechako in 1952 just before the flow was interrupted to begin reservoir filling. Currently (1988-92), the numbers range from 2100 to 2900 spawners.

According to Alcan's correspondence with "The Nature of Things," Alcan was willing to do an interview with CBC but Mike Poole's statements to the Bugle made them somewhat reticent. A more accurate description of the situation should read: "Despite Alcan's repeated requests, `The Nature of Things' could not guarantee that they would portray Alcan in a balanced manner." W. J. Rich wrote to Gerard Veilleux: "The `script' for the Alcan portion of the production obviously has nothing whatsoever to do with science and nature. And I must say, that I and others in Alcan are shocked by Mr. Poole's statement. The implied impropriety of the relationships between senior Alcan officials and members of the federal cabinet is a very serious matter. Before I or anyone else in Alcan could agree to participate in the program, we would need a full explanation of Mr. Poole's statement and a clear understanding from the CBC of the substance of that portion of the program dealing with Alcan and the Kemano Completion Project."

Poole's last word in the article run in the Bugle was even more telling of his primary intent for the segment: "Kemano is just one example of the failure of global economies and transnational corporations to totally account for all the costs of doing business."

However, the example provided in the story does not support Poole's view that transnational corporations do not account for the costs of doing business. Suzuki states: "Throughout central B.C., people feared that taking so much water would destroy the salmon runs. And they weren't alone. After more than a hundred studies, fisheries department scientists concluded that the project posed a grave danger to a fishery worth millions of dollars. But eventually, in 1987, in spite of those studies, the fisheries department agreed to give the company all the water it wanted from the Nechako. In exchange, Alcan agreed to alter stream flows and water temperatures to mitigate damage to the salmon."

According to Alcan and the Nechako Fisheries Conservation Program, the stated objective is not to "mitigate damage to salmon" but to conserve the natural salmon stocks of the Nechako River. This difference in interpretation underlines the fact that the Conservation Program sought sustainable development and not some minor concession to the salmon stocks. The historical record shows that the natural salmon stocks were conserved.

Suzuki ignores Alcan's sustainable development successes

Despite Suzuki's claim and implication that the first phase of the project permanently wiped out salmon and trout ("Salmon and trout were wiped out far downstream") the evidence is quite the opposite. According to Alcan: "No water releases were made for several years in the early 1950's during the reservoir filling period but once that was completed and water releases commenced, salmon and trout populations in the upper river re-established . . . DFO reported 3500 spawning chinook in the upper Nechako in 1952 just before the flow was interrupted to begin reservoir filling. Currently (1988-92), the numbers range from 2100 to 2900 spawners. This is considered by DFO `to be approaching historic returns' and is in line with the overall recovery target for chinook salmon returns throughout the Fraser River system. The Nechako Fisheries Conservation Program has established a long-term standard of 3100 chinook spawners and Alcan is obligated to maintain that number.

"The sockeye salmon which use the lower Nechako as a migration route to their natal streams in the Stuart and Nautley tributary systems have similarly been unaffected. In recent peak years, up to one million adults have returned to spawn."

Suzuki also alleges: "Trees were left to rot in the water, ruining it for other life." Again, according to Alcan: "In the 1950's, lands flooded by dams were not clear-cut. That was the `state of the art'...There is no substantiation whatsoever to the statement that the trees `ruined it (the water) for other life.' Sport fishing in the reservoir and hunting in the immediate area are actively pursued, and there are a number of resort and guide/outfitter operations. Large, trophy-sized rainbow trout are regularly caught. The reservoir also has a high population of osprey. Ironically, this attributed in part to the ideal nesting habitat created by the standing flooded trees. Of course, osprey also need a ready and abundant source of fish. Fishing resorts and ospreys are unlikely to locate where there is `no life in the water.'"

Conclusion

The lengths to which "The Nature of Things" program "Trading Futures" went to prove its point illustrates the inherent problem with point-of-view documentaries. Sources are selected to present only the point of view of the program. When information is presented that supports another view it is ignored or distorted to serve the theme of the program.

If documentary programming at CBC is to be taken seriously in the future, greater lengths will have to be taken to ensure balance. These programs ought to be reviewed by a panel of experts as is done in academic journals. In that way biased reporting--as was the case in "Trading Futures" and controversies--such as "The Valour and the Horror"--might be avoided. More importantly, the tax-paying public will not have to be subjected to one-sided and misleading programming.

SUZUKI'S ECONOMIC WISDOM

"Currency traders buy and sell over $200 billion worth of currencies every day. Speculation on this scale holds governments to ransom, driving up interest rates, creating widespread unemployment. In the economic world, money markets rule, even though they don't produce a dime of real value."

"Everywhere, the rich are getting richer and the poor are getting poorer. Today, more than a million Canadians depend on soup kitchens and food banks. It's one of the few reliable growth areas in our economy. This is the stuff that makes the fantasy of economics possible-money-something we invented as a medium of exchange."

"Government policy lets them dodge local taxes and environmental regulations. The result is a disaster: poisoned air and water, sickness, birth defects. Across the border in Arizona, plant managers live in a town called Rio Rico."

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Last Modified: Wednesday, October 20, 1999.