VIctor
Milne:
I quite appreciate that when we start off from a small
base, a large percentage rate of increase is insignificant. We are, however,
talking about the Big Five in Canada. If they (and all the other big banks
in the world) were to achieve a 64-fold multiplication of profits in 50
years, the impact would be far from insignificant. I agree that they are not
going to do it, but that is what they are trying to do with no regard for
the effects it will have on society and the environment.
Weick: A couple of points here: One is that there is a
difference between trying and doing. In the long run (which, as I'm
sure you know, is not the same as "a long time"), it is not likely
that any type of business will be able to increase its profits, or grow,
more rapidly than the growth of the economy unless, of course, it cuts into
the growth and profits of other types of businesses. In the case of
banks operating in any one country, the question I would ask is whether
their growth and profitability is being driven by rapid economic expansion -
that is, the demand for the kinds of products they provide - or whether it
is driven by increasing market share. In the case of Canada, I'm not
sure of which is the foremost reason. I would, however, suggest that
our growth has been relatively unspectacular, so increasing market share
must play a role.
My other point is, where is government in all of this? Surely one
of the outstanding functions of government is to ensure responsible business
behaviour. It is the business of business to grow and be
profitable. It is government's responsibility to ensure that business
does not grow at the expense of the environment or consumers. All too
often, it fails to meet that responsibility, and in fact abandons it.
I worked for a very large oil company years ago. It hired some very
good environmental scientists and had a much broader understanding of
environmental issues than the government agencies it had to deal with.
The government agencies had little data of their own and were in fact
relying on the industry to provide information which would then form the
basis for regulating the industry -- a little like trusting the fox to guard
the henhouse. Currently, at least in Canada, the capacity of
government agencies to ensure responsible business behaviour is pretty close
to zero -- witness the mess in the Health Protection Branch.
Currently, the government of Canada is in trouble for pepper spraying
some protesting students at the University of British Columbia. This
is probably the best thing that could have happened for the government
because it focuses attention away from the fact that has arrived at a point
where it is virtually incapable of doing anything but pepper spraying.
Milne: I apologize for giving my comments a
misleading focus on banking alone, which I had not intended to do. As I see
it banks are at the top of the industrial food chain. All the other
industries want to increase their profits by 10 per cent per year or
whatever their industry standard is. So the point about the banks' profits
is just that it is an indicator of what is happening throughout all
industries.
Take an oversimplified chain. We focus first on a
manufacturer of widgets, who wants to increase his profits by 10 per cent
per year. Upstream from this is the machine tool manufacturer who wants to
increase his profits and beyond that the steel company supplying the raw
material for both widgets and machinery to make widgets. Downstream from our
widget manufacturer is the trucking company transporting the widgets and the
retailer selling them, all wanting to increase profits. Helping to finance
all of these operations are the banks. What is the impact on the environment
of all this? Are we not accelerating towards the Limits to Growth--if we
have not indeed already passed them.
Weick: My point,
again, is that there is a tremendous difference between what business would
like to see happen, and what will actually happen. Everybody wants
profits to grow at 10%, but if the economy actually only grows at 2%, very
few firms will realize their profitability objectives, and many will in fact
lose money.
And I would again point out that, when it comes to Limits to Growth, it
is not profits that we should focus on, but costs and revenues. By
"costs" I mean all of the resource inputs that a firm must use to
undertake production. In the case of some types of business, such as
the production of oil and gas, the environment itself is an input. For
a very long time, it was treated as a free input. Now increasingly,
there is a cost attached to it and that cost is rising. It has already
begun to act as a drag on economic activity -- e.g. try to get anything done
in the northern Canadian environment without an army of lawyers! That
it has not risen high enough to stop us from using the environment
indiscriminately is, I would suggest, the fault of regulatory authorities,
not the oil companies. I would argue that costs need to go much higher
and need to be reflected at the gas pumps before some real responsibility
works its way into the system.
In the case of revenues, I refer to the demand for
end products. As J.K. Galbraith and many others have pointed out, this
is not independent of costs: the more the oil industry spends on
advertising, the more likely we are to put tigers in our tanks and buy every
energy using gizmo that the engineers can design. However, my concern
is what we do with all of the stuff. As Jay Hanson has pointed out
ever so many times, we are extremely wastefully garbage producers, true
agents of entropy. By being good and gullible consumers, we pollute
the air, ruin the oceans, and generally make the planet less
inhabitable. Once again, I call on Pogo the Possum: "We have met
the enemy and he is us!" We will either have to change our ways
ourselves or we will be forced to do so by a radical change in our
circumstances.
Ed Weick
