There's nothing like a good crisis to make us rethink old ideas. The depression
of the 1930s led to the rejection of the prevailing idea that unemployment would
right itself if only people would work for lower wages.
Governments could do very little to help. These ideas were overthrown by experience...
and by the invention of modern macro economics by British economist, John Maynard
Keynes. By the end of World War II, most Western governments had adopted Keynesian
economic policies designed to ensure that total expenditures were sufficient
to maintain full employment.
Keynesian economists soon discovered that full employment today meant a bigger
economy tomorrow because some of the investment expenditures required to keep
unemployment down: on infrastructure, buildings and equipment, also expanded
the productive capacity of the economy. So does an expanding population and
labour force. Initially, governments pursued economic growth to meet the more
pressing concern of maintaining full employment, but this soon changed. In the
1950s, economic growth became the number one economic policy objective of governments
and all others, such as productivity, innovation, free trade, competitiveness,
immigration, even education, became a means to that end.
Until a year or so ago all seemed to be going reasonably well. Then came the
breakdown in the financial sector followed quickly by a recession that through
globalization, spread further and faster than swine flu. Now governments are
congratulating themselves for acting together to stimulate spending to get the
economies back on course, much as Keynes might have recommended. But times have
changed since his day. World population has increased almost three times, world
economic output has increased ten times and with this massive expansion of the
human presence on earth, we are confronting limits to the availability of cheap
energy, to fresh water, and to the capacity of the atmosphere to absorb increasing
emissions of greenhouse gases. At the same time we are destroying the habitat
of numerous species of flora and fauna and the security of our own food supplies
is threatened.
It is time to rethink the old idea that the solution to all our problems lies
in the incessant expansion of the economy. Rich countries like Canada should
explore alternatives, especially if poorer countries are to benefit from economic
growth for a while in a world increasingly constrained by biophysical limits.
Some deny or simply ignore these limits and argue that economic growth in rich
countries is necessary to stimulate growth in poorer ones. Others say that with
'green' growth we can expand economic output as we reduce the demands we place
on nature through more efficient production, better designed products, fewer
goods and more services, compact urban forms, and organic agriculture. While
these measures may well help in a transition they are an unlikely prescription
for the long term. What is required is a radical rethinking of our economies
and their relation to the natural world.
Although no 21st century Keynes has emerged to prepare the intellectual ground
for such a change in thinking, we do have a body of knowledge built up over
many decades and now thriving under the name of 'ecological economics'. Ecological
economists understand economies to be subsystems of the earth ecosystem, sustained
by a flow of materials and energy from and back to the larger system in which
they are embedded. It is understandable that when these flows were small relative
to the earth they could be ignored, as they have been in much of mainstream
economics. Economists are not alone in treating the economy as a self-contained,
free standing system largely independent of its environmental setting. It is
a widely held view that environmental protection is just one among multiple
competing interests to be traded off against the economy. And anyway, this mainstream
perspective teaches that if resource and environmental constraints are encountered,
scarcities will be signaled by increases in prices that will induce a variety
of beneficial changes in behaviour and technology. Should this system of scarcity,
price, response fail then economists can estimate 'shadow' prices which can
be imposed directly through taxes or used indirectly through policies based
on cost-benefit analysis to fix the problem.
To ecological economists, this is an inadequate response to the myriad problems
of resource depletion, environmental contamination and habitat destruction confronting
humanity in the 21st century. They question the pursuit of endless economic
growth and contemplate a very different kind of future.
In my own work, I have examined whether and under what conditions a country
like Canada could have full employment, no poverty, much reduced greenhouse
gas emissions, and maintain fiscal balance, without relying on economic growth.
Using a comparatively simple model of the Canadian economy I have explored scenarios
in which these objectives are met. The ingredients for success include a shorter
work year to reduce unemployment yet retain the advantages of technological
progress, a carbon price to discourage greenhouse gas emissions, and more generous
anti-poverty programs.
In such an economy, success would not be judged by the rate of economic growth
but by more meaningful measures of personal and community well-being. We would
adjust to strict limits on our use of materials, energy, land and waste, guided
by prices that provide more accurate information about real rather than contrived
scarcities. We would enjoy more services and fewer but more durable and repairable
products, and we would value use over status when deciding what to buy. Rampant
consumerism would be history, advertising would be more informative and less
persuasive, and new technologies would be better screened to avoid problems
to be fixed later, if at all. Infrastructure, buildings and equipment would
be more efficient in their use of energy and we would think and act more locally
and less globally. With more free time at our disposal we would educate ourselves
and our children for life not just work.
Is all this simply wishful thinking of a sort that flourishes in troubled
times? I think not. The undercurrent of discontent with modern life is rich
with ideas for a better future, one that is not dependent on economic growth.
For example, in March of this year the UK's Sustainable Development Commission
delivered its report "Prosperity without Growth?" to the British Government
endorsing and amplifying many of the ideas expressed here. The Centre for the
Advancement of a Steady State Economy based in the USA has obtained over 3000
signatures on its position statement designed to help change the goal of the
economy from growth to sustainability. At the local level, Transition Towns
has spread in less than four years from the UK to many countries including Canada,
to raise awareness of sustainable living and to build local resilience in response
to the combined threats of peak oil and climate change. Even mainstream economists
are moving with the tide. Nobel Laureate economist Robert Solow said last year:
"It is possible that the US and Europe will find that either continued growth
will be too destructive to the environment and they are too dependent on scarce
natural resources, or that they would rather use increasing productivity in
the form of leisure." Let's add Canada to the list and go from there.
Culture Change mailing address: P.O. Box 3387, Santa Cruz, California, 95063, USA, Telephone 1-215-243-3144 (and fax). Culture Change was founded by Sustainable Energy Institute (formerly Fossil Fuels Policy Action), a nonprofit organization.
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