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  • I want to talk to you today about prosperity,

  • about our hopes

  • for a shared and lasting prosperity.

  • And not just us,

  • but the two billion people worldwide

  • who are still chronically undernourished.

  • And hope actually is at the heart of this.

  • In fact, the Latin word for hope

  • is at the heart of the word prosperity.

  • "Pro-speras," "speras," hope --

  • in accordance with our hopes and expectations.

  • The irony is, though,

  • that we have cashed-out prosperity

  • almost literally in terms of money and economic growth.

  • And we've grown our economies so much

  • that we now stand

  • in a real danger

  • of undermining hope --

  • running down resources, cutting down rainforests,

  • spilling oil into the Gulf of Mexico,

  • changing the climate --

  • and the only thing that has actually

  • remotely slowed down the relentless rise

  • of carbon emissions over the last two to three decades

  • is recession.

  • And recession, of course,

  • isn't exactly a recipe for hope either,

  • as we're busy finding out.

  • So we're caught in a kind of trap.

  • It's a dilemma, a dilemma of growth.

  • We can't live with it; we can't live without it.

  • Trash the system or crash the planet --

  • it's a tough choice; it isn't much of a choice.

  • And our best avenue of escape from this actually

  • is a kind of blind faith

  • in our own cleverness and technology and efficiency

  • and doing things more efficiently.

  • Now I haven't got anything against efficiency.

  • And I think we are a clever species sometimes.

  • But I think we should also just check the numbers,

  • take a reality check here.

  • So I want you to imagine a world,

  • in 2050, of around nine billion people,

  • all aspiring to Western incomes,

  • Western lifestyles.

  • And I want to ask the question --

  • and we'll give them that two percent hike in income, in salary each year as well,

  • because we believe in growth.

  • And I want to ask the question:

  • how far and how fast would be have to move?

  • How clever would we have to be?

  • How much technology would we need in this world

  • to deliver our carbon targets?

  • And here in my chart --

  • on the left-hand side is where we are now.

  • This is the carbon intensity of economic growth

  • in the economy at the moment.

  • It's around about 770 grams of carbon.

  • In the world I describe to you,

  • we have to be right over here at the right-hand side

  • at six grams of carbon.

  • It's a 130-fold improvement,

  • and that is 10 times further and faster

  • than anything we've ever achieved in industrial history.

  • Maybe we can do it, maybe it's possible -- who knows?

  • Maybe we can even go further

  • and get an economy that pulls carbon out of the atmosphere,

  • which is what we're going to need to be doing

  • by the end of the century.

  • But shouldn't we just check first

  • that the economic system that we have

  • is remotely capable of delivering

  • this kind of improvement?

  • So I want to just spend a couple of minutes on system dynamics.

  • It's a bit complex, and I apologize for that.

  • What I'll try and do, is I'll try and paraphrase it

  • is sort of human terms.

  • So it looks a little bit like this.

  • Firms produce goods for households -- that's us --

  • and provide us with incomes,

  • and that's even better, because we can spend those incomes

  • on more goods and services.

  • That's called the circular flow of the economy.

  • It looks harmless enough.

  • I just want to highlight one key feature of this system,

  • which is the role of investment.

  • Now investment constitutes

  • only about a fifth of the national income

  • in most modern economies,

  • but it plays an absolutely vital role.

  • And what it does essentially

  • is to stimulate further consumption growth.

  • It does this in a couple of ways --

  • chasing productivity,

  • which drives down prices and encourages us to buy more stuff.

  • But I want to concentrate

  • on the role of investment

  • in seeking out novelty,

  • the production and consumption of novelty.

  • Joseph Schumpeter called this

  • "the process of creative destruction."

  • It's a process of the production and reproduction of novelty,

  • continually chasing expanding consumer markets,

  • consumer goods, new consumer goods.

  • And this, this is where it gets interesting,

  • because it turns out that human beings

  • have something of an appetite for novelty.

  • We love new stuff --

  • new material stuff for sure --

  • but also new ideas, new adventures,

  • new experiences.

  • But the materiality matters too,

  • because in every society

  • that anthropologists have looked at,

  • material stuff

  • operates as a kind of language --

  • a language of goods,

  • a symbolic language

  • that we use to tell each other stories --

  • stories, for example,

  • about how important we are.

  • Status-driven, conspicuous consumption

  • thrives from the language

  • of novelty.

  • And here, all of a sudden,

  • we have a system

  • that is locking economic structure with social logic --

  • the economic institutions, and who we are as people, locked together

  • to drive an engine of growth.

  • And this engine is not just economic value;

  • it is pulling material resources

  • relentlessly through the system,

  • driven by our own insatiable appetites,

  • driven in fact by a sense of anxiety.

  • Adam Smith, 200 years ago,

  • spoke about our desire

  • for a life without shame.

  • A life without shame:

  • in his day, what that meant was a linen shirt,

  • and today, well, you still need the shirt,

  • but you need the hybrid car,

  • the HDTV, two holidays a year in the sun,

  • the netbook and iPad, the list goes on --

  • an almost inexhaustible supply of goods,

  • driven by this anxiety.

  • And even if we don't want them,

  • we need to buy them,

  • because, if we don't buy them, the system crashes.

  • And to stop it crashing

  • over the last two to three decades,

  • we've expanded the money supply,

  • expanded credit and debt,

  • so that people can keep buying stuff.

  • And of course, that expansion was deeply implicated in the crisis.

  • But this -- I just want to show you some data here.

  • This is what it looks like, essentially,

  • this credit and debt system, just for the U.K.

  • This was the last 15 years before the crash,

  • and you can see there, consumer debt rose dramatically.

  • It was above the GDP for three years in a row

  • just before the crisis.

  • And in the mean time, personal savings absolutely plummeted.

  • The savings ratio, net savings,

  • were below zero in the middle of 2008,

  • just before the crash.

  • This is people expanding debt, drawing down their savings,

  • just to stay in the game.

  • This is a strange, rather perverse, story,

  • just to put it in very simple terms.

  • It's a story about us, people,

  • being persuaded

  • to spend money we don't have

  • on things we don't need

  • to create impressions that won't last

  • on people we don't care about.

  • (Laughter)

  • (Applause)

  • But before we consign ourselves to despair,

  • maybe we should just go back and say, "Did we get this right?

  • Is this really how people are?

  • Is this really how economies behave?"

  • And almost straightaway

  • we actually run up against a couple of anomalies.

  • The first one is in the crisis itself.

  • In the crisis, in the recession, what do people want to do?

  • They want to hunker down, they want to look to the future.

  • They want to spend less and save more.

  • But saving is exactly the wrong thing to do

  • from the system point of view.

  • Keynes called this the "paradox of thrift" --

  • saving slows down recovery.

  • And politicians call on us continually

  • to draw down more debt,

  • to draw down our own savings even further,

  • just so that we can get the show back on the road,

  • so we can keep this growth-based economy going.

  • It's an anomaly,

  • it's a place where the system actually is at odds

  • with who we are as people.

  • Here's another one -- completely different one:

  • Why is it

  • that we don't do the blindingly obvious things we should do

  • to combat climate change,

  • very, very simple things

  • like buying energy-efficient appliances,

  • putting in efficient lights, turning the lights off occasionally,

  • insulating our homes?

  • These things save carbon, they save energy,

  • they save us money.

  • So is it that, though they make perfect economic sense,

  • we don't do them?

  • Well, I had my own personal insight into this

  • a few years ago.

  • It was a Sunday evening, Sunday afternoon,

  • and it was just after --

  • actually, to be honest, too long after --

  • we had moved into a new house.

  • And I had finally got around to doing some draft stripping,

  • installing insulation around the windows and doors

  • to keep out the drafts.

  • And my, then, five year-old daughter

  • was helping me in the way that five year-olds do.

  • And we'd been doing this for a while,

  • when she turned to me very solemnly and said,

  • "Will this really keep out the giraffes?"

  • (Laughter)

  • "Here they are, the giraffes."

  • You can hear the five-year-old mind working.

  • These ones, interestingly, are 400 miles north of here

  • outside Barrow-in-Furness in Cumbria.

  • Goodness knows what they make of the Lake District weather.

  • But actually that childish misrepresentation

  • stuck with me,

  • because it suddenly became clear to me

  • why we don't do the blindingly obvious things.

  • We're too busy keeping out the giraffes --

  • putting the kids on the bus in the morning,

  • getting ourselves to work on time,

  • surviving email overload

  • and shop floor politics,

  • foraging for groceries, throwing together meals,

  • escaping for a couple of precious hours in the evening

  • into prime-time TV

  • or TED online,

  • getting from one end of the day to the other,

  • keeping out the giraffes.

  • (Laughter)

  • What is the objective?

  • "What is the objective of the consumer?"

  • Mary Douglas asked in an essay on poverty

  • written 35 years ago.

  • "It is," she said,

  • "to help create the social world

  • and find a credible place in it."

  • That is a deeply humanizing

  • vision of our lives,

  • and it's a completely different vision

  • than the one that lies at the heart

  • of this economic model.

  • So who are we?

  • Who are these people?

  • Are we these novelty-seeking, hedonistic,