Saturday, June 2, 2012

The Economics of De-Growth

It is the law of the universe. What goes up must come down. And it’s not whether we are coming down, but how fast we will come down that is the issue.  

We seem stuck on economic growth, but it is not a wholesome growth, it is a growth that undermines itself.  The ecological economist Herman Daly asks:  “ When the economy is growing, what is it that is getting bigger?”.  

“Throughput is the relevant magnitude for answering the question of how big the economy is” , Daly says.    It’s “the metabolic flow of useful matter and energy from environmental sources, through the economic subsystem and back to the environmental sinks as a waste. “  

Most economists picture the human economy in a separate box somewhere, existing independently of nature.  It’s a way of simplifying the initial assumptions in order to build a model of human behaviour .  This assumption works  well for deriving supply and demand curves but there is a problem with these assumptions when the concept of economic growth is introduced.  With growth, our assumption of the economy being independent of nature leads to disastrous results.  

Why is this idea of throughput relevant? Because the earth and the living system that exists on it is finite. There is a finite amount of energy and materials available to the  web of life that supports us.

 The human economy is a part of the earth’s Eco-systems but the economy is growing big enough to threaten the entire web of life.  A major extinction event, like the one that finished off the dinosaurs 65 million years ago,  the kind that has happened about every 100 million years in Earth’s history, is happening right now.  And it’s human economic growth that is fueling it.  We are burning up our future inheritance in a giant flare of fossil fuels.

If the economy is growing what is growing?  Throughput.   Through-put is taking things from nature, then processing them and consuming them and sending the remains back into nature in a degraded state. The best illustration I have seen of this idea is  an entertaining two minute  youtube video called “The Impossible Hamster.”   

If we live on a world, that world has bounds.  We cannot escape those bounds. However,  we could extend out our future on Earth if we stopped economic growth.

 In his new book Prosperity Without Growth, British Economist Tim Jackson, explains what’s involved in stopping growth, why it’s controversial, and sketches how we would go about doing it.

One of Jackson’s arguments is that  The focus  of the present system on continually increasing the efficiency of  labour is  wrong when the result is increasing inequality,  job loss, and declining communities. .  A job is a fundamental part of a meaningful life.  Every community works better when there is less unemployment.  Jackson suggests that job-sharing and worker owned enterprises be expanded.  

This is a similar position that local, Vancouver author Conrad Schmidt also emphasizes in his book “Efficiency Shifting”. What economic efficiency usually means is needing less people to do the same thing.  So if agriculture becomes more efficient, then we get a lot of unemployed agricultural workers. 

Schmidt recognizes that we cannot keep growing the economy in order to reduce this  unemployment.  He argues that we can avoid  both growth and unemployment if we  let certain economic sectors such as education, healthcare, and agriculture become more inefficient by employing more labour.  Too much efficiency in education and healthcare leads to inferior quality and less caring. These are activities that benefit from people taking more time rather than less time to do the job right.  

Schmidt devotes a separate chapter to agriculture.  In it, he argues that a policy of encouraging organic farming would be better for farmers in less developed nations because it wouldn’t flood global markets with cheap food, as does present U.S. policy of encouraging industrial farming. Plus organic farming  employs more labour and uses less pesticides, and encourages less meat production than industrial farming.

Economic efficiency is not as important as the fulfilment of human potential.   People ought to be productively employed, jobs ought to be fulfilling and rewarding.  Economic incentives ought to be turned around to support investment in social capital, natural capital, and in strengthening the  public sector.   People’s worth and dignity need to always be respected over the demands of the market.  

As the authors of Economics Unmasked say:  Economy for the people, not people for the economy. Profits and prices need to be driving sustainability not the degradation of humanity and nature.

 As Tim Jackson argues, the financial sector needs to change into the Eco-economic sector:  the overall incentive structure should encourage investments in renewable energy and in increasing resource efficiencies, and discourage the underemployment of human resources.

There needs to be a massive shift from consumption to savings.  And a new incentive structure in place to encourage investment in public enterprises like mass transit, railways, universal education,  and in the conservation of Eco-systems for they form the basic support for our economies.If we invested in Eco-system health and maintenance we would be ensuring our survival and the stability of our civilization.  

Because the earth’s climate has gotten warmer we know we’ve reached a limit.  We need to stop the growth of throughput, if we are to save the earth’s biological systems from degrading.      Better to take a slow descent by putting on the brakes now, then overshooting the peak and running off a cliff.  Planning for the worst and making ourselves more resilient, more able to survive and adapt to shocks to the system  is the most prudent option.
 It’s not because it’s not possible, it’s because of the way we define economic variables and the way we’ve structured the system that it seems so difficult to see our way out of it.  Let’s redefine economics so that the economy is recognized as a part of the Earth’s biosphere.  This alone would lead to fundamental changes.  

The other big point of leverage is fossil fuel use.  Fossil fuels are exactly what has allowed our economies to  grow and they have done this by fueling the rapid acceleration of throughput.  This acceleration is at the heart of what is causing global warming and mass extinctions.  

One of the least difficult, but most significant things we could do to change this destructive spiral is to accompany our children to school, either by walking or by cycling, rather than driving them.   And if that is not physically possible consider moving to a community where it is safe to walk or cycle to school.   It is an opportunity to let our children  be more active and self-sufficient.  The results will be healthier adults and a healthier society.  

Our dependence on fossil fuels is a terrible trap that is slowly choking the life out of this planet. There should be massive dis-incentives to fossil-fuel use.  A carbon tax, should be put on all fossil fuels at the well-head or in the coal mine.  All subsidies to the fossil fuel industries should be eliminated.  It is, after all, the richest industry on the planet and can survive very well without subsidies.

There are many unacknowledged costs to economic growth and fossil fuel use. For example, destruction of clean water by fossil fuel extraction and processing.  The greater risks of cancer from being downstream of tar sands oil extraction or nuclear plant disasters.   The increase in respiratory ailments due to particulate matter and toxic byproduct from burning fossil fuels.  The loss of our physical health from our overuse of motor vehicles and subsequent  lack of exercise.  Our loss of mental health and the destruction of once viable communities  due to the  Increasing isolation and excessive individualism of consumer, suburban, automobile culture. I’m only highlighting a few of the costs. And others could list many more.
Unfortunately our political and ideological systems are fixated on seeing economic growth as the only way forward.  This almost religious tendency -  to see growth as our salvation, is having the bizarre consequence of leading our political and economic elite to embed themselves with the fossil fuel industry.

It’s a big mistake to leave economic planning up to our political leaders.    We should All participate in planning a new economic system.