The Knowledge Revolution and Its Impact on Consumption and Resource Use

Today, the pattern of resource use in the world economy is clear: most resources are used in the industrial countries which house 20 per cent of the world's population. For example a single country, the United States, uses about 25 per cent of the petroleum produced in the world, although it has less than 4 per cent of the world's population. This may be traced to resource patterns of resource use and consumption that have been encouraged by institutions created and led by today's Western industrial societies. Since the end of colonialism, development policies encouraged by the Bretton Woods institutions (The World Bank and the IMF) have perpetuated a pattern of development in which the world's less advanced countries play the role of resource producers and exporters, resources which are then imported and over-consumed in the industrial nations. This pattern of trade and the attendant low resource prices, is in great part explained by the historical difference property rights between the North and the South in the context of a rapid expansion of global markets (Chichilnisky, 1994x). Countries in the latter hold most resources as common property, while in industrial economies these are on the whole private property. Differences in property rights have been invoked successfully in explaining the fact that the South extracts natural resources for the international market, selling these below real costs (Chichilnisky, 1994x). As a result, the North over-consumes resources and the South over-extracts them. In a world where agricultural societies trade with industrial societies, global markets magnify the extraction of natural resources and as a result world exports and consumption of resources exceed what is optimal (Chichilnisky 1994a). These facts have led to the view that today's global environmental problems. such as climate change and extensive biodiversity loss, are due mostly to the patterns of consumption and resource use in industrial nations. This view has merit in the short run. In the long run, however, the fate of the world's resources is likely to depend on the developing world. For these reasons this paper concentrates on today's patterns of development for industrial nations, and on future patterns of development for the rest of the world. It advances a vision of a new society in which humans live in harmony with each other and with nature, and describes the transition to this new society as a 'knowledge revolution'. This refers to a swift period of change, that is already partly underway in industrial nations, but requires new institutions and policies in order to reach a sustainable outcome. I propose here the introduction of new institutions and policies which can lead the transformation of industrial society into a sustainable society through the knowledge revolution. As part of these institutions, I propose the creation of a new type of market organisation, involving markets that trade a mixture of private and public goods. These new markets require new regimes of property rights, also proposed here, and carry with them the seed of a human oriented society, which, by its own functioning, encourages a better distribution of knowledge and of natural resources. A similar vision is proposed for the future of developing nations, which, through their own knowledge revolution, could be transformed into sustainable societies in the future, often bypassing the stages of heavy industrialization that are damaging to people and their environment. The arguments proposed here are supported by economic theory, presented in Appendix I, and by empirical evidence, presented in various figures and tables across the paper and explained in Appendix II. The vision is global, and is orierted to transforming today's economies imoawrrient of human welfare and knowledge creation, leading to sustainable patterns of consumption and resource use.