economic growth

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Who Does Economic Growth Serve?

Published by Anonymous (not verified) on Fri, 16/10/2020 - 5:09am in

By Brian Snyder

For many people, one of the causes of our obsession with economic growth is our belief that it will make our lives better. We think that with a little more money and a little more financial security, we will be able to better provide for our families, pay for our children’s college, and eventually retire, perhaps not wealthy but safe in the knowledge that we will never be poor.

For others, economic growth is needed as a means to help the poor. We drive around our communities and see a great deal of poverty—people without healthcare, food, or decent housing—and think that if we had a bit of economic growth with the new businesses and jobs it brings, we could alleviate this suffering.

These are noble and understandable goals, but they are based on a faulty assumption: A rising tide lifts all boats, and national economic growth increases financial stability for the middle class and raises the poor out of poverty. There was a time in American history when this was the case. But for the past three decades, economic growth has almost exclusively benefitted the top 10 percent, and done little to nothing for the bottom 50 percent.

Economic Growth and the Unequal Distribution of Wealth

Recently, the Federal Reserve released an analysis which showed that the 50 richest Americans controlled as much wealth as the 164 million poorest. While that shocking number led to headlines, the more interesting aspect of this data is the way in which equity shares have changed over time. In 2002, the top 1 percent owned about 40 percent of equity in corporations, while those in the 50th to 90th percentile owned about 20 percent, and the bottom 50 percent owned about 1.5 percent. Today, the 1 percent own over 50 percent of equity, while the bottom 90 percent own about 11 percent of equity. Of that, the bottom 50 percent own about 0.5 percent of equity in corporations.

Moving more broadly to the estimate of wealth, the trends remain the same. The top 1 percent of the nation own 30.5 percent of its wealth, up from 24 percent in 1989. Meanwhile, the bottom 50 percent’s share of wealth has declined from 3.6 percent in the late 1980s to 1.9 percent today.

Of course, these statistics do not necessarily imply that the poor and middle class are growing poorer, but they do imply that the benefits of economic growth are not spread evenly or equitably. The bottom 50 percent, or perhaps even the bottom 90 percent, support an economic system that is built for the benefit of the top 10 percent. We support this system because we believe that it is the means to move from poverty to prosperity, but it turns out that this prosperity is not our own.

Jeff Bezos and economic growth

Jeff Bezos and then-Secretary of Defense Ash Carter, 2016. (Image: CC0, Credit: Senior Master Sgt. Adrian Cadiz)

What is especially galling in this situation is that this growth is an affront, not just to steady-state heterodox economics but to neoclassical economics as well. Jeff Bezos, CEO of Amazon, made $5 billion dollars last Wednesday, enlarging his fortune to $188 billion. Inexplicably, that was not his personal best. Neoclassical economists assume that utility plateaus as consumption increases. That is, there is some amount of money beyond which further income does not add to happiness. Certainly, this limit to human utility must be decidedly south of $188 billion dollars. If so, then why do we have a system that encourages billionaires to build wealth ad infinitum?

Critics will argue that the rising tide of economic growth has indeed lifted all boats. They will argue that poor and middle-class Americans are richer than we were 20 or 30 years ago. Certainly, we all have more stuff than we did a few decades ago, and our stuff is fancier and more expensive. So, in a sense, such critics would be correct. But they neglect the fact, described by Herman Daly and John Cobb long ago, that wealth is at least partially relative. Humans are social animals, and one of the ways in which we situate ourselves on the social hierarchy is through wealth. Thus, what matters is not just how much stuff I have, but how much stuff I have relative to that other guy. Therefore, in a very real sense, when the rich get richer faster than the poor get richer, the poor really do feel poorer.

Unbeknownst to most, this economic growth that benefits the rich extracts a cost on natural resources and the environment. Our aquifers are being depleted, fisheries are in decline, forests are disappearing, air is toxic, oceans are acidifying, soils are eroding, and the planet is warming. At some point, perhaps next year or perhaps 100 years from now, these environmental crises will become a global humanitarian crisis. Indeed, climate change may already have contributed to the war in Syria, the most terrible humanitarian disaster of the 21st century. Yet when this socio-ecological crisis comes, who do we imagine will suffer the consequences? Will it be the children of the 1 percent, or the children of the bottom 50 percent?

Who Will Pay the Price?

The COVID-19 crisis illustrates the linkage between environmental crisis and wealth. While many may not think of COVID-19 as an environmental crisis, it was caused by a parasitic organism that a wild animal transmitted into humans and spread through densely populated cities in China and the USA. Thus, the pandemic is an anthropogenic environmental crisis.

Graph and economic growth

Impacts of climatic variation on corn yields in the USA. Source: EPA.

A year ago, we might have thought that we were all equally vulnerable to an infectious disease. Certainly, we would expect differences in population density to impact transmission, but not differences in wealth. While it is certainly true that the rich and poor get COVID-19, it is not true that we have all contracted it at the same rate. African Americans and other minority groups have been disproportionately impacted as well as people living in areas with historic particulate matter pollution.

The same pattern is likely to hold for the next environmental crisis, whether it is another pandemic, a climate-induced famine, or some new terror that we have not yet imagined. The poor—the people that live in polluted locations with less healthcare, more violence, and more food insecurity—will pay the costs of environmental degradation, either through a reduction in the ecosystem services they rely on, or via an increase in ecosystem disservices like parasitism, fires, and extreme weather.

No More Economic Growth! No More Malarkey!

Map and economic growth

Anthropogenic soil degradation. Source: UN FAO.

In sum, the richer have gotten richer through economic growth while the poor and middle class have grown relatively poorer. Furthermore, the children of the poor and middle class will pay for this growth. In a best-case scenario, they will pay higher taxes to pay off the government debt the rich have required to fuel growth and build the infrastructure needed to resist the various environmental crises that befall them. In a medium case, perhaps they will also be displaced from their homes. But in a worst-case scenario, they will pay with their lives.

Of course, they already do. Globally, over 3 million people die each year from air pollution, with about 200,000 of those deaths in the U.S. Lethal air pollution, mostly in the form of particulate matter, is a direct result of our economic activity, and it has increased in China and India in recent years because of the globalized world we created to fuel our economic growth.

Given this ludicrous yet abhorrent situation, I wonder what the first step should be. Not a long list of radical policy ideas, but the first, moderate step. A step someone like Joe Biden could take to slow growth and change the beneficiaries of the growth that remains. Reversing the Trump tax cuts would certainly be helpful, and it is in Biden’s plans, but that seems almost trivial compared to the scale of the problem. Instead, I think we must change the mandate of the Fed to favor employment rather than growth. That seems like real progress that is both symbolic and meaningful. It is radical without being overly so, and it is the sort of change that may gain popular support. Perhaps, if Biden is elected, advocates of the steady state economy might focus on one or two such policies with the broadest appeal. Policies that, while not turning the train of economic growth around, at least start tapping the brakes.  

Brian F. Snyder is an assistant professor of environmental science at Louisiana State University and CASSE’s LSU Chapter director.

The post Who Does Economic Growth Serve? appeared first on Center for the Advancement of the Steady State Economy.


Colorado River: “Lifeline of the Southwest” Suffering Effects of Economic Growth and Climate Change

Published by Anonymous (not verified) on Fri, 02/10/2020 - 5:37am in

By Haley Demircan

The Colorado River, also known as the “Lifeline of the Southwest,” spreads along 1,450 miles (2,330 kilometers), from northern Colorado to the Gulf of California in northwestern Mexico. This legendary river provides water for 40 million people in cities such as Denver, Phoenix, Los Angeles, Las Vegas and San Diego, as well as millions of acres of vital farmland. Seven states rely on the Colorado River as a primary source of water. But as economic growth and climate change ensue, there is major cause for concern regarding depletion and the impacts of climate change in the Colorado River basin.

Colorado River Basin

The Colorado River system covers a huge expanse of the American Southwest. Image: CC0, Credit: USGS)

Whether residents of the Southwest are using water from the river or groundwater, they are withdrawing the region’s most vital resource much faster than it can be replenished. In other words, the Southwest’s water-use challenges constitute a textbook case of a not-so-steady state economy.

The Effects of Climate Change

Over the past century, regional temperatures have risen 1.4 degrees Celsius and water usage has increased, both of which are a function of a growing, environmentally-destructive GDP. Researchers Chris Milly and Krista A. Dunne at the United States Geological Survey (USGS) published a study in March 2020 using a hydrologic model and historical observations to demonstrate that the decrease in water flowing through the river is due largely to the evapotranspiration associated with climate change.

Global warming drastically affects the snowpack that feeds the river. As temperatures in the region rise, more winter precipitation falls as rain rather than snow. Snow cover declines, causing the land to become exposed and dry. Without this snow cover, less energy from the sun is able to be reflected back through the atmosphere into space. Instead, it becomes trapped and warms the surface of the earth. Furthermore, plants need more water when temperatures rise. Just in the last century, waterflow from the Colorado River dropped 20 percent, and half of that percentage is from climate change. This reduction of water has left the two largest reservoirs in the nation, Lake Mead and Lake Powell, which were completely full in 2000, almost half empty. From 2000 to 2004, both had lost enough water to supply California with five times its Colorado River water.

With further global warming, Milly and Dunne estimate that the river will be depleted another 14-26 percent by 2050. They stated that more than half of this depletion is attributable to higher temperatures. As this trend in increased temperatures continues, the risk of severe water shortages for the millions of people who rely on the water from the Colorado River will grow.

The higher end of the percentage of depletion would mean a loss of about 1.5 million acre-feet of water—or 326,000 gallons of water—which is enough water to cover an acre of land about one foot deep. With temperatures on the rise and rainfall and snowpack declining, it is impossible to keep up with the water demand. In an interview with CNN, Brad Udall, a climate scientist at Colorado State University, warned, “Without this river, American cities in the Southwest would dry up and blow away.”

River basin study

Water supply and demand for the Colorado Rover. Credit: March 2016 Report by U.S. Bureau of Reclamation.

The Drought Contingency Plan

With the 19-year-drought affecting the Colorado River basin, all seven basin states had to come up with a plan. In an effort to keep the levels of the two major reservoirs from becoming critically low, they created the drought contingency plan (DCP). All seven states signed the DCP for the Upper and the Lower Colorado River basins. The plan is actually a set of specialized plans unique to each state and designed to help stabilize the river system and reduce the risk of reservoirs falling to critically low levels.

The Arizona drought contingency plan goes into effect when levels in Lake Mead reach 1,090 MSL (mean sea level). Currently, Lake Mead is 1,085 MSL. Arizona is only allotted 37.3 percent of the Colorado River’s lower basin water, and the state will receive a drastic decrease in water resource as the DCP and cutbacks are managed, from 2.80 million acre-feet per year to just over a million acre-feet per year.

Ground Water Depletion, Farmland Abandonment, and Economic Impacts

In an effort to source water elsewhere, Arizona is now relying on ground water aquifers, which is not a viable solution for the future. These aquifers provide corporate farms the ability to grow as much food as possible in a short time frame. Using ground water in this way depletes the underground, fresh water much too quickly. Water depletion in Arizona has caused several issues in the past, such as land abandonment, earth cracking/collapse, and major dust storms.

Lake Mead

Recent photo of Lake Mead showing an alarming drop in water level. (Image: CC0, Credit: USGS)

In Pinal county, Arizona, farmers are experiencing a lack of water resources. With the new DCP, farmers have lost two-thirds of the irrigation water they had been receiving from the Colorado River. They are now relying on groundwater; however, drilling and pumping groundwater is costly, and many farmers cannot afford the large increase in the cost of water for their farmlands. Ashley Hullinger, a research analyst from the University of Arizona, conducted a water loss study specifically for Pinal Country, and she found that there could be enormous economic repercussions if ground water depletion continues at this rate.

With the loss of 300,000-acre feet of water, the study found that there would be:

  • $63.5 million to $66.7 million lost in gross farm-gate sales (this accounts for 7 percent)
  • $94 million to $104 million lost in total county sales (farm and non-farm sales)
  • $31.7 million to $35 million lost in county value added (this includes net farm income, profits in other industries, employee compensation and tax revenues)
  • 240 to 480 full-time and part-time jobs lost

Depleting water from underground aquifers at high rates provides a small solution to the large cut in the Colorado River water allocation; however, there are severe consequences to the land as well as the economy.

Where do we go from here?

With temperatures on the rise due to climate change, there is no doubt that water depletion will occur. The next steps in the DCP are critical in reducing the risk of further shortages. One long-term goal is for reservoirs like Lake Mead and Lake Powell to replenish and hopefully allow for the water flow to increase in the Colorado River. Scientist like Udall, believe that the only way to save the Colorado River is by addressing what he considers the root cause of the problem—climate change. We might add an even deeper root: the GDP growth that drives greenhouse gas emissions and climate change.

“The science is crystal clear—we must reduce greenhouse gas emissions immediately,” he says. “We now have the technologies, the policies and favorable economics to accomplish greenhouse gas reductions. What we lack is the will.”

We’re not so sure about the “policies and favorable economics” part. While the microeconomics of installing renewable energy facilities may be more favorable, we still have pro-growth policies that ensure not only more renewable energy technology, but dipping further into the wells and deposits of fossil fuels.

 

Haley Demircan is CASSE’s fall journalism intern.

The post Colorado River: “Lifeline of the Southwest” Suffering Effects of Economic Growth and Climate Change appeared first on Center for the Advancement of the Steady State Economy.


Fair Incomes for a Healthy Future: The Sustainable Salaries Act

Published by Anonymous (not verified) on Fri, 25/09/2020 - 4:43am in

By Ashfia Khan

To achieve sustainability in the USA and generally, it is crucial that we narrow the income gap between the highest and lowest earners. An equitable distribution of income is a prerequisite of social and environmental sustainability. It’s not just about sustainability, either—it’s about fairness, too.

yacht

Unsustainable salaries lead to unsustainable consumption. (Image: CC0, Credit: Roman Boed)

People tend to be happier and healthier in societies where there is a more equitable distribution of wealth, as well as more likely to receive higher education and have a longer life expectancy.[i] Among the G7 countries, the USA ranks highest in income inequality, and the wealth gap more than doubled between 1989 and 2016 and continues to widen.[ii] The more the income gap widens, the worse it gets for economic mobility.

Sometimes called the “Great Gatsby Curve” by economists, the relationship between income equality and mobility is such that children from lower-income families will be far less likely to improve their economic status compared to their parents.[iii] It simply seems unfair that so little of the USA’s population controls so much of its wealth while 20 percent of Americans are unable to even pay their monthly bills and give their children the opportunity for a better future.

Income Inequality and Its Negative Effects

Domestic and international researchers have explored the effects of income inequality through the “Gini coefficient.”[iv] The Gini coefficient ranges from 0 to 1, where 0 represents perfect equality and 1 represents perfect inequality. In other words, when the coefficient is 0, everyone receives an equal share; when the coefficient is at 1, only one group or individual gets everything.

The Gini coefficient is not a perfect indicator, as it depends on every country having reliable income data and doesn’t measure informal economic activity. However, it does provide useful insights for how income inequality effects people’s wellbeing. For example, one researcher compared infant mortality rates in the USA by mapping CDC data against the Gini Index and found that as income inequality increased, so did infant mortality.[v] Researchers also found that U.S. teenagers living in states with higher levels of inequality are more likely to become pregnant than those living in states with a low level of inequality.[vi]

Gini coefficients have also been analyzed with data from the U.N. Human Development Indicators, revealing that Japan has the lowest Gini coefficient (lowest inequality) and the U.S. has the highest, and that there is a significant relationship between inequality and obesity.[vii]

The pervasive reach of income inequality extends beyond societal impacts. Researchers have also discovered strong threats to the environment and sustainability. While many of the causes of biodiversity loss, such as habitat loss and climate change, are more directly causal, some studies have explored the relationship between income inequality and biodiversity loss. Even after controlling for factors like biophysical conditions, human population size, and per capita GDP and income, researchers found that as the Gini coefficient increased, so did the indicators of biodiversity loss.[viii] This pattern remained the same whether compared across countries or U.S. states. The researchers noted that correlation does not equate to causality, but they postulated a strong likelihood of causality in this case.

It doesn’t end at biodiversity loss either. One researcher found that there was a consistent trend, at least among wealthy countries, whereby those with higher inequality consumed more resources and generated more waste.[ix] U.S. water consumption per capita is more than twice that of Japan. In Japan, the top 10 percent of the population has an income 4.5 times that of the bottom 10 percent. In the U.S., the top 10 percent earns 16 times that of the lowest. Similarly, in New Zealand, where the top 10 percent earn 12.5 times as much, the per capita annual consumption of fish and meat is close to three times as much as that of Japan.

graph and salary caps

Inequality and consumption of fish and meat across countries, 2002-2007. Note: Circle size corresponds to the size of a country’s population.[xi]

This same pattern is reflected in how much per capita annual waste countries generate. Sweden, which has a relatively low ratio of income inequality, generates 513kg of waste annually. Switzerland, with an income inequality ratio of 9, generates 728kg, and Singapore, where the top 10% earns 18 times as much as the bottom 10%, generates a whopping 1072kg.[x]

Salary Caps

One proposed solution to narrow the income gap is to implement a salary cap, which could also be considered a 100 percent tax rate beyond a certain salary. The tax revenue may be repurposed to serve the public good.

Salary caps have been kicked around the policy arena as early as 1933, when members of the House of Representatives were introducing amendments to limit annual incomes to $1 million. In 1942, Franklin Roosevelt proposed that annual incomes should be capped at $25,000 (which would translate to $375,000 today).[xii] These proposals were never legislated, but academics and policymakers have explored the concept with increasing interest and support.

The NFL and NBA, among other athletic organizations, have famously adopted salary caps. Since 1994, the NFL has enforced both a salary floor and cap for its athletes and teams. These minima and maxima are readjusted after annual reviews. Sports teams have found that leveling the playing field not only makes for a more egalitarian league, but it also makes the performance more engaging for their audience as well.[xiii]

It would hardly make sense, though, to set one overarching salary limit across all industries and occupations. Some industries require higher levels of education and more skilled qualifications. Industries that require specialized education and experience will have less competition than other industries and may garner greater profits. Holding industries with a huge disparity in profit margins to the same salary cap doesn’t seem feasible. If set too low, the political prospects for establishing the cap would be nil. If set too high, it would lose effectiveness.

In Supply Shock: Economic Growth at the Crossroads and the Steady State Solution, Brian Czech proffers “sectoral salary caps” of fifteen times the lowest in-sector salary or wage, calling this a common-sense starting point for feasible policy negotiations. Using the example of a barber in Pulaski, Tennessee versus a barber in New York City, it makes sense that the New York barber could, would, and should charge more for a haircut. For producing what would be a $15 haircut in Pulaski, the New York barber may receive up to $450. A $450 haircut is hardly a glowing example of sustainability, yet it’s not a $1,000 haircut, which would be wantonly wasteful by almost anyone’s standards. The cap, then, would move us in the direction of sustainable consumption.

Green Bay Packers and salary caps

The NFL is no paragon of sustainability, but has implemented salary caps since 1994. (In the case of the Green Bay Packers, shown above, the team is community-owned as well). (Image: CC BY-SA 2.0, Credit: Mike Morbeck)

The Sustainable Salaries Act

Consistent with Czech’s sectoral salary-capping proposal, I propose a “Sustainable Salaries Act.” The legislation may be included in CASSE’s broader Full and Sustainable Employment Act. Alternatively, it may be introduced as an independent bill.

The Sustainable Salaries Act would prohibit top employees in most industries from making more than fifteen times as much as the lowest-paid employees. Somewhat lower proportional caps would apply to sectors known for inequitable business practices or the production of non-essential goods and services.

The bureaucracy entailed may not be as onerous as some would suspect. Companies already report their employees’ salaries and wages to the IRS. Pursuant to the Sustainable Salaries Act, the IRS will compile this information and submit it to the U.S. Department of Labor. If a company violates the act, it will face criminal penalties and fines in proportion to excess salaries, and CEOs may even face jail time in egregious cases.

The following is a conceivable Section 3 (Declarations) of the Sustainable Salaries Act. This should give readers a better sense of how the law would function and provide a starting point for conversation on sectoral salary capping. As the act is further developed, some of the subsections may be broken out into full sections.

 

Sec. 3. DECLARATIONS

 

1. In General.—The salary of the most highly compensated employees of any
organization or corporation may not be any greater than fifteen times the salary of
the lowest paid employee of the same organization or corporation.
(A) The salary of the most highly compensated employees of any organization or
corporation engaged in activities—
   (1) in the pharmaceutical and drugs sector, real estate sector, and commercial lending sector may not be any greater than ten times the salary of the lowest paid employee of the same organization or corporation.
   (2) in the amusement and recreation sector, cosmetics sector, and jewelry sector may not be greater than twelve times the salary of the lowest paid employee of the same organization or corporation.

 

2. REPORT.—The Internal Revenue Service shall submit the salary and
wage information of all employees within the top ten percent of highly compensated
employees and the salary and wage information of all employees within the lowest ten percent of the least compensated employees within an organization or corporation to the U.S. Department of Labor for review.

 

3. CRIMINAL PENALTIES.—Whoever—
     (1) knowingly and willfully exceeds the salary limit set forth under the Sustainable
Salaries Act shall be fined under this title or imprisoned for not more than two years
or both.
     (2) willfully reports a record of compensation as set forth in the Sustainable
Salaries Act with the intent to deceive, mislead, or otherwise falsely misrepresent
information, knowing that the record contains false information or does not meet all
the requirements set forth in the Act, or both, shall be fined not more than
$5,000,000 or imprisoned not more than ten years, or both.

 

Enforcing salary caps pursuant to a Sustainable Salaries Act is just one step toward a steady state economy, but a crucial one. By reducing income inequality, we move closer to not only a more equitable society, but a more sustainable one as well.

 

[i] According to a study in Italy, where the Gini coefficient was mapped against life expectancy at birth, income inequality was shown to have a significant negative correlation with life expectancy. G.A. Cornia, R. Gnesotto, R. Mistry, R. De Vogli. 2005. Has the relation between income inequality and life expectancy disappeared? Evidence from Italy and top industrialised countries. Journal of Epidemiology and Community Health 59(2):158–162.

[ii] Schaeffer, K.,”6 facts about economic inequality in the U.S,” Fact Tank: News in the Numbers, Pew Research Center, February 7, 2020, https://www.pewresearch.org/fact-tank/2020/02/07/6-facts-about-economic-inequality-in-the-u-s/.

[iii] Vandivier, D. “What is the Great Gatsby Curve?” The White House: President Barack Obama, June 11, 2013, https://obamawhitehouse.archives.gov/blog/2013/06/11/what-great-gatsby-curve.

[iv] Chappelow, J, “Gini Index,” Investopedia, February 3, 2020, https://www.investopedia.com/terms/g/gini-index.asp.

[v] Erwin, P., M. K. Jones, and A. Siddiqi. 2015. Does higher income inequality adversely influence infant mortality rates? Reconciling descriptive patterns and recent research findings. Social Science & Medicine 131:82–88.

[vi] Levine, P.B. and Kearney, M. S. 2012. Why is the teen birth rate in the United States so high and why does it matter? Journal of Economic Perspectives 26(2):141-63.

[vii] Brunner, E., Kelly, S., T. Lobstein, K.E. Pickett, K. E. and R. G. Wilkinson. 2005. Wider income gaps, wider waistbands? An ecological study of obesity and income inequality. Journal of Epidemiology and Community Health 59(8):670-674.

[viii] Gonzalez, A. G.M. Mikkelson, and G.D. Peterson. 2007. Economic inequality predicts biodiversity loss. PLOS ONE 2(5):e444.

[ix] Islam, S. “Inequality and Environmental Sustainability.” New York: DESA Working Paper No. 45., 2015.

[x] Ibid.

[xi] Ibid.

[xii]Pizzigati, S., “For Minimum Decency, a Maximum Wage,” Institute for Policy Studies, June 6, 2018, https://ips-dc.org/for-minimum-decency-a-maximum-wage/.

[xiii]Vassallo, J. The Advantages of Salary Caps. Houston Chronicle, July 31, 2020.

Ashfia Khan is a Policy Specialist with the Center for the Advancement of the Steady State Economy (CASSE) and a prior CASSE Legal Intern. She is also pursuing a J.D. at George Washington University. 

The post Fair Incomes for a Healthy Future: The Sustainable Salaries Act appeared first on Center for the Advancement of the Steady State Economy.


Wealth Transfers, Carbon Dioxide Removal, and the Steady State Economy

Published by Anonymous (not verified) on Fri, 18/09/2020 - 5:24am in

By Brian Snyder

In 2019, the U.S. per capita GDP was $65,000. It seems obvious that this level of economic activity is more than sufficient to meet the needs of the U.S. population; after all, if we can’t live fulfilled, productive lives in an economy producing $65,000 per person per year, more money and production will never be enough. Further, additional per capita economic growth in the USA is uneconomic. For example, economic growth to $75,000 per person per year will not increase our economic wellbeing nearly as much as it will decrease ecological wellbeing; hence, the justification for a steady state economy.


Just one example of wealth in the USA. Mansion in Newport, RI. (Image: CC BY 3.0, Credit: silvervoyager)

But much of the world is not like the USA. Afghanistan’s per capita GDP was $502 in 2019. Burundi’s was $261, and the average per capita GDP in sub-Saharan Africa was less than $1600. In these nations, most citizens cannot meet their basic needs—food, water, sanitation, electricity, education, and healthcare—at current levels of economic activity. In these places, a steady state economy is unsustainable because poverty is unsustainable.

There are two reasons we may consider poverty unsustainable. The first is simply definitional. One of my favorite definitions of sustainability is “meeting the needs of the present without compromising the ability of future generations to meet their own needs.” While this definition was originally used by the Brundtland Commission for “sustainable development” rather than “sustainability,” it works just as well for either. Given this definition, poverty is unsustainable because it does not allow for present generations to meet their basic needs.

But there is also a more fundamental reason why poverty is unsustainable, and it has less to do with poverty per se than the unequal distribution of wealth. If we consider sustainability to be “able to be sustained” or “able to be repeated for long periods,” then poverty itself is actually quite sustainable. Almost every human in history has lived in what we would consider abject poverty and could continue to do so for millennia.

Syrian Army

Poverty and an uneven distribution of wealth are major factors of the Syrian Civil War. (Image: CC BY 2.0, Credit: Freedom)

Yet while poverty may be sustained over long periods, a vastly uneven distribution of wealth cannot; just ask Marie Antoinette or Tsar Nicholas II. While the French and Soviet Revolutions were, in part, a reaction to the inequal distribution of wealth and extreme poverty within a country, unequal power and wealth between nations can also fuel international rivalries, terrorism, and wars, all of which are unsustainable regardless of the definition you choose. A large part of the reason that Afghanistan and Somalia have been fertile soil for terrorism over the last three decades is that they are some of the poorest nations on Earth. Likewise, intranational economic inequality and poverty is an important cause of the Syrian Civil War, the deadliest conflict of the 21st century.

In sum, poverty and the unequal distribution of wealth between nations is unsustainable, and per capita GDP growth is required in the developing world to rectify it. Without such growth, asymmetries in wealth will continue to incite violence.

CDR Systems as a Solution

If we agree that economic growth is counterproductive in wealthy nations yet productive in poor nations, we may then ask which policies will be useful for transferring economic growth from the developed to the developing world. One obvious alternative is to transfer wealth from rich countries to poor countries. However, if this wealth is used to invest in industries, especially extractive industries, such wealth transfers may become counterproductive. For example, imagine that the developed world provides $100 million in cash to country X to build a factory that exports goods to developed markets. In this case, the developed world may benefit from cheap goods, facilitating economic growth in the developed world and defeating the purpose of the transfer. In other words, creating more low-cost production centers in a Western-financed race to the bottom is not in anyone’s interest.

Instead, we need to find a cash flow that facilitates economic growth in the developing world without creating economic growth in the developed world. Given that the economies of poor and rich nations are intertwined, this is unlikely to be possible, but there may be industries that could be targeted and developed that come close. One possibility is investments in carbon dioxide removal (CDR) systems financed with developed-world cash and using developing-world labor and land.

Reforestation

Reforestation in Haiti. (Image: CC BY-SA 4.0, Credit: Cunningchrisw)

CDR, also called negative emissions technologies, are systems that use energy to remove carbon dioxide from the atmosphere. CDR systems range in technology from very low tech (like reforestation) to very high tech (like direct air carbon capture), and, at first glance, might not be the sort of thing many steady staters are inclined to support. After all, steady-state folks tend toward technological moderation and generally favor halting consumption growth, rather than developing new, often energy-intensive means for mitigating the impacts of consumption. Further, many CDR systems are likely to be unworkable or create larger problems than they solve. Hence, some skepticism is warranted.

But many CDR systems have considerable potential. Reforestation stores carbon and produces ecosystem services like soil protection, water retention, and wildlife habitat provision. Some bioenergy with carbon capture and storage systems may likewise produce ecosystem services if the biomass is harvested and managed sustainably. Enhanced weathering also is promising as a low energy means for sequestering carbon. And while direct air carbon capture systems are energy intensive, that energy could be supplied by renewable resources, especially in parts of sub-Saharan Africa with exceptional solar resources.  

Furthermore, CDR is likely the only plausible path toward meeting the Paris commitments. To limit the temperature increase to 1.5°C, we need to be at about net zero CO2 emissions in 30 years and achieve net negative emissions in the last decades of the 21st century. Because of our dependence on fossil fuels in industrial and power applications, it is highly unlikely that our gross emissions of CO2 will be zero around 2050. We would need some negative emissions to achieve a net zero emission. In other words, even if we decarbonize rapidly, it likely won’t be enough.  

The Function of Wealth Transfers and CDR

Consider a policy in which developed-world nations transfer wealth to the developing world for investments in CDR systems. This wealth transfer would act like a tax in the developed world, potentially reducing economic growth. Of course, some portion of this wealth transfer will return back to the developed world for purchasing technology for CDR implementation, subverting the purpose of increasing growth in the developing world without increasing growth in the developed world. Yet much of the wealth will be used to pay for labor in the developed world, especially in lower-tech CDR systems like reforestation and biomass-based systems. If much of the wealth from the policy stays in the developing world and isn’t used to buy developed-world goods and services, the policy may be effective at transferring wealth.

Jeff Bezos

Jeff Bezos has accumulated hundreds of billions of dollars. Image how many countries could be supported on his income alone. (Image: CC BY 2.0, Credit: Seattle City Council)

The use of wealth transfers to fund CDR has an advantage that less targeted wealth transfers do not have because CDR is, in a sense, parasitic. CDR does not produce something of value that can be sold in the same way that a factory or a coal mine does. Instead, it consumes wealth to produce a theoretical emissions credit that can only have value because governments require them. The physical “thing” itself, stored carbon, has no value—especially in its oxidized form stored in underground formations. Thus, CDR systems are akin to wealth furnaces that take land, labor, and capital and turn them into nothing that can be used to stimulate economic growth in the developed world.

We can think of investing in CDR as akin to investing in sanitation. Like sanitation, CDR produces a public good that is absolutely necessary, but funding it serves as an inefficiency for the economy. By tying CDR with wealth transfers, we may be able to increase this inefficiency, and thus slow growth, for the developed world while creating employment and infrastructure in the developing world.

A Just Transition

The nations of the developing world did nearly nothing to cause climate change, yet they are likely to bear a disproportionate share of the burden of the direct impacts of climate change and the indirect economic impacts of decarbonization. Not only are poorer countries less able to adapt to climate change, but by using up the carbon budget, wealthy nations have effectively foreclosed poorer nations’ abilities to extract and use their own fossil fuels.

village child

We need a just transition for countries who will suffer from climate change and are not economically stable. (Image: CC0, Credit: ajaykhadka)

As mentioned above, the transfer of wealth will help to rectify this injustice, but we need a means to determine how much money to transfer. One possibility is to use a climate easement system in which developing-world nations are compensated for the lost value of their hydrocarbon resources. In such a policy, nations may estimate the net value of their hydrocarbon resources and enter into easements with wealthy nations that compensate them for their lost value and ensure that the resources remain underground.

Climate and Energy are Not Just Developed World Problems

In discussions about climate policy, we tend to focus on wealthy emitters—the USA, China, Europe—and ignore the developing world. This makes sense because it is how we have dealt with nearly every international problem in history: The rich people get together and make decisions, and the poor people get ignored. But energy and climate are the glue that binds us all together. We cannot craft an energy and climate policy that ignores the developing world because, if we do, developing-world nations will either develop into major emitters or remain mired in poverty, susceptible to conflict as temperatures rise and resources decline. Thus, we need a climate and energy policy that includes an explicit path toward sustainable development (as opposed to unsustainable growth) for the developing world. Without such a path, climate policy will fail.

Brian F. Snyder is an assistant professor of environmental science at Louisiana State University and CASSE’s LSU Chapter director.

The post Wealth Transfers, Carbon Dioxide Removal, and the Steady State Economy appeared first on Center for the Advancement of the Steady State Economy.


Frederick Soddy’s Debt Dynamics

Published by Anonymous (not verified) on Sat, 12/09/2020 - 11:39pm in

In the field of ecological economics, Frederick Soddy looms large. Born in 1877, Soddy became a chemist and eventually won a Nobel prize for work on radioactive decay. Then he turned his attention to economics.

Between 1921 and 1934, Soddy wrote four books that looked at how money relates to the physical economy. For his ground-breaking work, Soddy was rewarded with deafening silence. Here’s how ecological economist Eric Zencey puts it:

… Soddy carried on a quixotic campaign for a radical restructuring of global monetary relationships. He was roundly dismissed as a crank.

(Eric Zencey in Mr. Soddy’s Ecological Economy)

Although ignored during his life, Soddy’s work would become a central part of ecological economics. Let’s have a look at Soddy’s thinking.

Wealth vs. virtual wealth

Like a good natural scientist, Soddy insisted that human society is constrained by the laws of physics. Humans survive, he noted, by consuming natural resources. Exhaust these resources and we’re done for.

Think of humans (and our economy), says Soddy, like a machine. We transform energy into physical work. Like all machines, we’re bound by the laws of thermodynamics, which say that you can’t get something for nothing. Energy output requires energy input. That means humans are forever dependent on natural resources.

Now comes the problem. Our biophysical stock of resources — what Soddy called ‘wealth’ — is bound by the laws of thermodynamics. But money — which Soddy called ‘virtual wealth’ — is bound only by the laws of mathematics. Money can grow forever. Natural resource extraction cannot. This mismatch, Soddy claimed, is the root of most economic problems.

Cows and virtual cows

Here’s an example of Soddy’s thinking. Suppose that Alice is a would-be cattle farmer. She inherited some land and wants to use it to farm cattle. The problem is she has no money.

Not to worry. Alice goes to the bank and gets a $100,000 loan. With this money, Alice buys 100 cows. She’s now a cattle farmer — her dream is fulfilled!

Wait, says Soddy. Alice has a problem. She’s invested her ‘virtual wealth’ (money) in ‘real wealth’ (cows). But her ‘virtual wealth’ came from interest-bearing debt. That means the amount she owes the bank grows with time. Let’s have a look at this dynamic.

Banks usually require that you make regular payments on your debt. But to simplify the math, let’s assume Alice’s bank operates differently. It requires no regular payments. Instead, after t years, the bank demands full repayment (with interest). The amount Alice owes depends on three things:

  1. The size of her loan (the principal, P)
  2. The interest rate (r)
  3. The time (t, in years) since her initial loan

Assuming interest accrues annually, here’s the formula for the amount (A) that Alice owes:

A = P(1 + r)^t

Suppose the bank charges 5% interest (r = 0.05). Here’s how much Alice will owe for various call-in times:

Call-in time
Amount owed

5 years
$127,628

10 years
$162,889

20 years
$265,330

30 years
$432,194

What’s important are the dynamics of Alice’s loan. As the call-in time increases, the amount she owes grows exponentially. This exponential dynamic, says Soddy, is a problem. Here’s why.

Alice used her $100,000 loan to buy 100 cows. If the bank calls in her loan after 10 years, she owes $163,000. That’s the equivalent of 163 cows. If Alice wants to avoid bankruptcy it seems she has only one choice. To repay her loan, Alice must breed more cows.

So here is the problem with interest-bearing debt. It comes with a baked-in need for economic growth. Or so it seems …

Inflating away debt

Repaying interest-bearing debt doesn’t necessarily require economic growth. There’s a second option. Interest-bearing debt can be paid back with inflation.

To see how, let’s return to farmer Alice. With her $100,000 loan, Alice bought 100 cows. After 10 years, the bank calls in her loan at $163,000. If cow prices don’t change, Alice needs to sell 163 cows to pay her debt. At first glance, it seems like her only option is to breed more cows. But there is an alternative. She could raise the price of cows.

Alice bought her cows at $1,000 per head. If she sells them for $1,630 per head, she can repay her loan without breeding more cows. So repaying interest-bearing debt doesn’t necessarily require economic growth. It can also be financed with inflation.

Breadth and depth

Our toy model of debt (based on Soddy’s reasoning) leads to a simple conclusion. If interest-bearing debt is to be repaid (en masse), there are only two options:

  1. The economy must grow
  2. Prices must grow

Jonathan Nitzan and Shimshon Bichler call these two scenarios breadth (economic growth) and depth (inflation). Although it’s theoretically possible to pursue both strategies at once, Nitzan and Bichler find that real-world societies tend to be single minded. They cycle between rapid growth with slow inflation (breadth), and slow growth with rapid inflation (depth). (For details, see Chapters 15 and 16 of Capital as Power.)

Both scenarios allow societies to pay off debt en masse. Yet both have problems. Let’s start with breadth. It’s simply suicidal (and impossible) to pursue economic growth forever. At some point we’ll either exhaust our resources and/or pollute the environment so badly that growth will cease. So paying off debt with perpetual growth is not an option.

What about depth? At first glance, it seems like inflating prices is a sustainable way to deal with debt. After all, the environment doesn’t care if prices grow exponentially. But humans do seem to care. Few people want inflation. Why?

The answer can’t be found on paper. That’s because in theory, inflation is a uniform increase in prices. But in practice, it never works this way. Real-world inflation is always differential. Some people are able to raise prices faster than others. This means that inflation always redistributes income. Unfortunately, the winners tend to be the powerful. (For details, see Jonathan Nitzan’s thesis Inflation As Restructuring.)

So based on Soddy’s reasoning, we find that interest-bearing debt comes with a fundamental problem. There is no fool-proof way to pay it back. Perpetually economic growth isn’t an option. And if we try to inflate away debt, the accompanying income redistribution creates instability. It seems there’s no way out of debt.

Debt default

Actually, there is a way out of debt, and it’s surprisingly simple. We wipe the slate clean. We debt default.

In his book Debt: The First 5,000 Years, David Graeber argues that throughout history, default was the most common way of dealing with debt. Often this happened on a large scale in something called a ‘debt jubilee’. Unpayable debts were wiped off the books, allowing debtors to start fresh. Of course, this wasn’t a long-term solution. Eventually debts would accrue again, requiring another jubilee. But as long as debt loads remained reasonably small, the cycle could repeat without too much trauma.

This debt cycle is a good example of a wider phenomenon found everywhere in nature — stability through fluctuation. Natural systems are stable not through stasis, but through small-scale fluctuations. These fluctuations are a way of mitigating the exponential dynamics that would otherwise be catastrophic.

As an example of such fluctuation, take population growth. If left unchecked, populations (of any organism) tend to grow exponentially. But they never grow forever. Eventually resources are depleted and the population declines. When the population is again small enough that resources are plentiful, exponential growth resumes. The result is a boom-bust cycle — stability through fluctuation.

Of course, if the fluctuations are huge, we can hardly call this ‘stability’. But in most healthy ecosystems, population fluctuations are small. The key to dampening boom-bust cycles appears to be diversity. When there are many species in an ecosystem, each keeps the population of others in check. Prolonged exponential growth never gets a foothold.

Debt monoculture

In nature, the surest way to provoke exponential growth is to destroy diversity. This is something that industrial farmers know well. Here’s their recipe. Cut down a forest, plant a single crop, and wait … for the exponential growth of pests. In nature, monoculture is the enemy of stability. The same is probably true among humans.

Back to Soddy’s debt dynamics. Soddy thought that the exponential dynamics of interest-bearing debt were a problem. Looking at nature, however, and we realize that exponential dynamics are everywhere. So it’s not the dynamics themselves that are the problem. The trouble starts when these dynamics go unchecked. In nature, exponential growth goes unchecked when we plant monoculture crops. In human societies, exponential growth goes unchecked when we have debt monoculture.

The term ‘monoculture’ is especially apt, because debt is literally a culture. Debt is an idea — a convention of quantifying property rights, and then applying exponential dynamics to these rights. The dynamics themselves are not the problem. The trouble starts when the idea of interest-bearing debt becomes a monoculture.

Interestingly, throughout most of human history the use of debt was limited. And when it was used, many people were skeptical that debt should accrue interest. Hence the ban, in many medieval societies, on interest-bearing debt (dubbed usury). Think of this skepticism of debt as a sign of cultural diversity.

Debt, anthropologist David Graeber argues, is just one particular way of solving a fundamental social problem. All societies function by keeping track of a web of social obligations. Throughout most of human history, these obligations were tracked loosely and qualitatively. Alice helps Bob catch a fish. Bob returns the favor by helping Alice cook. Different cultures (and even different sub-cultures) had different ways of conceiving and tracking these obligations. Cultural diversity.

Then came capitalism.

There are many ways that capitalism is different from other forms of culture. But perhaps the most important is the use of quantification. In capitalism, the web of social obligations (that have always existed) suddenly became quantitative. Bob doesn’t owe Alice a favor. He owes Alice $10. And if he doesn’t pay, that amount grows exponentially with time.

The idea of interest-bearing debt is an old one. But it’s only with capitalism that this idea became widespread. In other words, capitalism is the first debt monoculture. Capitalism takes the diverse ways of thinking about social obligations and replaces them with one. Interest-bearing debt.

As with any monoculture, we expect boom-bust dynamics to be amplified. And so they have been. But here’s the terrifying truth. For the last 200 years we’ve been riding one long boom. For two centuries, debt has grown continuously. We’ve achieved this by perpetually consuming more resources and by perpetually raising prices.

Eventually there will be a reckoning. Societies like the United States are now plumbing the depths of income inequality (i.e. income redistribution). And humans are pushing the limits of the Earth’s carrying capacity. So what’s worked for the past 200 years won’t work for the next 200.

It seems clear that debt monoculture is doomed to fail. So in a way, Frederick Soddy was right. The dynamics of interest-bearing debt are a problem. But only because we’ve allowed them to become the dominant human culture.

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[Cover image: Linda Hall Library]

Further reading

Graeber, D. (2010). Debt: The first 5,000 years. New York: Melville House Pub.

Nitzan, J. (1992). Inflation as restructuring. A theoretical and empirical account of the US experience (PhD thesis). McGill University.

Nitzan, J., & Bichler, S. (2009). Capital as power: A study of order and creorder. New York: Routledge.

Soddy, F. (1926). Virtual wealth and debt: The solution of the economic paradox. London: George Allen & Unwin.

Soddy, F. (1934). The role of money: What it should be, contrasted with what it has become. London: George Routledge & Sons.

Zencey, E. (2009). Mr. Soddy’s ecological economy. The New York Times. http://www.nytimes.com/2009/04/12/opinion/12zencey.html

Wildlife on the Way Out While the World Wildlife Fund Lays a Policy Egg

Published by Anonymous (not verified) on Sat, 12/09/2020 - 6:22am in

By Brian Czech

It’s been awhile since wildlife—not just a species here or there but wildlife at large—has been front and center in the news. Usually the biggest environmental news pertains to climate change at the global level, or local pollution problems such as lead in the water pipes. “Biodiversity” gained traction as an issue in the 1990s, but seems to have slipped off the public’s radar. (When’s the last time you saw it in a prominent newspaper headline?)

WWF

Rubber pandas and social science at the WWF? Another Living Planet Report leaves us without a clear message on economic growth. (Image: CC BY-SA 2.0, Credit: DocChewbacca)

“Wildlife,” on the other hand, seems always to be waiting in the political wings. It has plenty of constituents, as evidenced by the millions of members of wildlife organizations including the World Wildlife Fund, National Wildlife Federation, and Defenders of Wildlife. Constituents range from the “hook and bullet” crowd of hunters and fishermen to organizations such as the International Fund for Animal Welfare, which fights for the humane treatment of wildlife such as harp seals, elephants, and wolves. Wildlifers come from both sides of the political aisle and from all over the ethical map.

So, every once in awhile wildlife comes out of the wings and onto center stage, as it briefly did this week with the release of the 2020 Living Planet Report by the World Wildlife Fund. The report spawned headlines such as “Wildlife in Catastrophic Decline,” “World Wildlife Plummets,” and “Humans Wiping Out Wildlife.” The report itself used phrases such as “freefall,” “wrecking our world,” and “desperate SOS.”

Unlike most of the headlines, the report does use the phrase “biodiversity,” which the WWF finds has declined 68%—just since 1970! What is their measure of biodiversity? Populations of wildlife. While biodiversity runs along a spectrum from DNA to biomes, trusty wildlife species and populations are still the key indicator of health on our “Living Planet.”

biodiversity graph

Biodiversity is the variety of life and runs from the molecular level to the landscape level. For the Living Planet Report, the World Wildlife Fund focuses on populations of species. (Figure Credits: CASSE.)

Competing Headlines

Obviously the WWF is trying their best to get media coverage with the use of such dramatic language. They’ve succeeded in a number of key outlets including BBC, NBC, CNN, PBS, and Aljazeera.

But what about Fox News? Wouldn’t the right wing of our polity be interested in wildlife? Certainly the hook and bullet crowd has a lot of skin in the game.

Using Google and the same wildlife search terms, but limited to Fox News outlets, we instead find headlines such as “Starlings captured on film fighting in mid-air,” “Tiger on the loose near Knoxville,” and—wait, what?—something about “…more imperiled species being saved.” The latter was from an article by Rob Wallace, an assistant secretary in the Department of the Interior. Wallace made the ridiculous claim, “No administration in history has recovered more imperiled species in their first term than the Trump administration.”

I spent 18 years at U.S. Fish and Wildlife Service headquarters. I was hired as the first “conservation biologist” in the National Wildlife Refuge System. That was after my Ph.D. research, which was a policy analysis of the Endangered Species Act. I’ve got three things to say about Wallace’s article:

First, no one administration “recovers” imperiled species. By the time a species is listed as threatened or endangered pursuant to the Endangered Species Act, decades of conservation effort (regulation, habitat provision, law enforcement and more) are required to prevent the species from going to the ultimate graveyard of extinction. Real recovery takes science, conservation proficiency, plenty of luck, and decades of time.

Second, once the Fish and Wildlife Service determines that a species has recovered—meaning the population and habitat goals of its recovery plan have been met—delisting or downlisting (from endangered to threatened) is a contentious, laborious, bureaucratic process that itself can take years. Wallace’s article gives credit to Trump for species recovered “since 2017.” What rubbish. Every one of these species would have clawed their way back in the decades preceding Trump, with Trump reaping the benefits of efforts under Obama, Bush, Clinton, and probably Bush the Elder as well.

Third, knowing what we do about Trump’s tampering with the regulatory process, does anyone trust a delisting process under his watch? Right now, for example, most FWS employees aren’t even reporting to the office. They’re teleworking, and that means there are no in-person meetings, no conversations in the halls, no reinforcement of cultural integrity. Who’s minding the store?

It’s not hard to envision a sequence similar or identical to the following:

  • Trump tells cabinet members, including the Secretary of the Interior, to do all they can to reduce the regulatory burden on economic activities (to stimulate GDP growth and to appease corporate donors).
  • Secretary of the Interior David Bernhardt, the former oil lobbyist, knows exactly what Trump means, and (among other things) tells FWS Director Aurelia Skipwith, the former Monsanto executive, to delist some species. Rob Wallace, the former energy lobbyist and a bureaucratic layer of fat in the chain of command, may or may not have any significant role in the process.
  • Skipwith meets with the smallest possible number of bureaucrats in the Ecological Services Program necessary to initiate or speed up the process of delisting species. She inquires, cajoles, and insists, and then prohibits the bureaucrats from talking about the conversation with anyone else.

If you think that last step sounds a bit like conspiracy theory, think again. I know all about gag orders in FWS. Then there was the warning from Brett Hartl of the Center for Biological Diversity, “Aurelia Skipwith has been working in the Trump administration all along to end protections for billions of migratory birds, gut endangered species safeguards and eviscerate national monuments. [She] will always put the interests of her old boss Monsanto and other polluters ahead of America’s wildlife and help the most anti-environmental administration in history do even more damage.”

I’m not denying that a few species are being delisted or downlisted (with hundreds of other species more imperiled by the day). But I am nominating Wallace’s propaganda—“No administration in history has recovered more imperiled species…”—for slippery shibboleth of the year!

Meanwhile, Back at the World Wildlife Fund

The World Wildlife Fund does the world a service by publishing the Living Planet Report. It’s an ambitious effort that provides an easily understood metric, the Living Planet Index. This index is a big-picture metric that should be monitored along with the Genuine Progress Indicator, Human Development Index, Index of Sustainable Economic Welfare, and Gross National Happiness. We should be looking to these metrics rather than blindly following GDP as the measure of welfare.

Judy Woodruff

Judy Woodruff and PBS producers are hamstrung by muddled messaging
from the environmental NGOs. (Image: CC BY 2.0, Credit: PBS NewsHour)

We do need to measure GDP, just like an obese patient needs to monitor the scale. The other measures, though—including the Living Planet Index—are akin to the blood pressure cuff and the stethoscope, providing key measures of holistic, societal health. They deteriorate as the “patient” (our body economic) gets obese.

It’s a shame, though, that the WWF interprets the Living Planet Index with such mixed messaging. It leaves people like Judy Woodruff on the PBS Newshour blaming the plight of wildlife on “human population and resource consumption” (September 10, 2020). What’s wrong with that, you ask? Isn’t it true?

Yes, but where’s the policy hook? If WWF wants to put a dent in the plight of wildlife and biodiversity, broadcast journalists like Woodruff need to be talking about “economic growth.” Then, suddenly, we hit the mother load of policy implications, starting with overhauling the antiquated Full Employment and Balanced Growth Act of 1978, and changing the entire dialog on the economy, GDP, and growth.

You might then ask, “But wouldn’t Woodruff and the producers figure that out for themselves, that human population goes hand-in-hand with GDP growth, and requires more resource consumption? Wouldn’t they talk about economic growth themselves then?” Nope. Otherwise they would have by now! These broadcasters won’t be uttering the phrase “economic growth,” at least not in response to the Living Planet Report, unless the WWF highlights the point for them and makes the messaging clear and easy to adopt. Meanwhile it’s down to “human population and resource consumption,” and good luck taking that to the policy arena.

WWF Has Huge Potential

Judy Woodruff, along with Lester Holt, Norah O’Donnell, and David Muir (and of course their counterparts around the world) could easily be saying, “The Living Planet Report shows how wildlife is being decimated around the planet by economic growth. As GDP goes up, wildlife populations decline and species are driven toward extinction.” They could easily be saying that if only the Living Planet Report said it that clearly.

Imagine how instantly that would impact the tone of everything from the rest of the show (stock markets, GDP figures, etc.) to the presidential campaigns. For example, Trump’s presidential calling card—GDP growth—would suddenly come into question. Rather than vying with Trump for who can grow GDP faster, other candidates (Democratic or Republican) would be empowered to counter, “Are we sure that’s a good thing?” Serious, high-level, American political dialog about limits to growth would commence at that instant.

Imagine the upside for WWF, too. They could become the standard bearer for 21st century conservation affairs. They would set themselves apart from virtually all other big environmental NGOs, at least in North America (where only Greenpeace and IFAW have said a peep about GDP growth). And, they could drive home the point every two years with their Living Planet Report.

This would probably entail some heartburn for WWF, which has a messy history of dealing with economic growth. When CASSE led the way in getting The Wildlife Society, the U.S. Society for Ecological Economics, and the American Society of Mammalogists (all scientific, professional societies) in adopting a unified position on economic growth, key opportunities were narrowly missed in the American Fisheries Society (AFS), Society for Conservation Biology (SCB), and Ecological Society of America. In the SCB case, one of the biggest detractors was a social scientist, from WWF!

For at least two decades now, well-intended social scientists have made things difficult for the biologists and ecologists who get it about limits to growth. With their knowledge of concepts such as carrying capacity, niche breadth, and competitive exclusion, ecologists are the “economists of nature.” Unfortunately the social scientists without such background aren’t always interested in the hard science of limits to growth. They tend to be more concerned with social psychology and the “human dimensions” of conservation, and consistently “overthink it” on the topic of economic growth.

Instead of helping to figure out the best ways to communicate the fundamental conflict between growth and conservation, social scientists try to figure out the best ways to avoid even using the phrase “economic growth” because they know that (currently) economic growth is politically entrenched. They’re dialog takers, not dialog makers. Then, they persuade the biologists, ecologists, and leaders of environmental NGOs that they have a better way to go about the social business of conservation. This makes them natural allies with the pro-growth neoclassical economists, who further muddy the waters (such as in the AFS), and they all feed right into the perpetual growth machinery of Wall Street and the Dark Money think tanks.

At CASSE we have challenged the environmental organizations to overcome this history and this culture, and join us in telling the truth—in the clearest of terms—about the fundamental conflict between economic growth and wildlife conservation. WWF may be on the right track. In the “At a Glance” summary of the report is this tidbit: “Global economic growth since WWII has driven exponential human improvements, yet this has come at a huge cost to the stability of Earth’s operating systems that sustain us.” So, at least they are using the phrase “economic growth,” and noting that it can be problematic for wildlife. The phrase is used six other times in the report, but unfortunately without a single clear statement about the fundamental conflict between it and wildlife conservation.

Marco Lambertini, Director General of WWF International, introduces the report thusly: “It’s time for the world to agree [to] a New Deal for Nature and People, committing to stop and reverse the loss of nature by the end of this decade and build a carbon-neutral and nature-positive economy and society” (page 5). On page 99, WWF urges us to develop a “new grammar” of economics, which will then have “profound implications for what we mean by sustainable economic growth, helping to steer our leaders towards making better decisions that deliver us, and future generations, the healthier, greener, happier lives that more and more of us say we want.” Is that clear as mud yet? Imagine the howls on Madison Avenue.

WWF also repeats the tired theme that “the loss of nature is a material risk for economic development” (page 102). The fact that economic growth is what inevitably causes the loss of nature is completely lost upon the likes of ABC, BBC, and CBS. Again, they could probably figure it out if they dug into the details, but even if they wanted to, their producers don’t have time to read between the lines, and they’re not trained for this topic to begin with. They’re going to take directly from what’s in the report, and we can’t blame them.

So BBC, for example, takes a figure from WWF to inform readers that one of the biggest problems of biodiversity decline is “a huge loss to the economy.” What’s the response to that supposed to be? With the pro-growth mindset we have in the USA, the most likely response is, “Hey, we better reverse as many regulations as we can to compensate for that huge loss to the economy.”

With all due respect, Mr. Lambertini and WWF, reversing “the loss of nature by the end of this decade” is utter nonsense when we have almost all the nations of the world pursuing the goal of GDP growth. That said, at least you have upped the bar a bit with explicit references to the economy and especially “economic growth.” We eagerly await the next big step: a Living Planet Report coming clean on the fundamental conflict between economic growth and wildlife conservation.

Brian Czech

Brian Czech is the Executive Director of the Center for the Advancement of the Steady State Economy.

The post Wildlife on the Way Out While the World Wildlife Fund Lays a Policy Egg appeared first on Center for the Advancement of the Steady State Economy.


It Was Not “Flaws in the U.S. Financial System” that Caused the Great Recession, It Was the Collapse of the Housing Bubble

Published by Anonymous (not verified) on Tue, 08/09/2020 - 5:00am in

Our elites work hard to cover up for each other even if it means an almost Trumpian denial of reality. We got another taste of this effort in a New York Times piece on Joe Biden’s actions with regard to China over the years. The piece talks about the massive job loss of manufacturing jobs due to trade in China and then tells us the problem of the Great Recession was about the financial system:

“From 1999 to 2011, competition from China cost the United States more than two million factory jobs, according to academic research. In the midst of that, flaws in the U.S. financial system set off a global economic crisis. In 2008 and 2009, as Mr. Biden took the reins of the second most powerful office in the United States, the major G.M. and Chrysler plants in his state shuttered.”

In fact, the housing bubble had been driving the economy since 2002. It led a to massive construction boom, which collapsed when the bubble burst. It also led to a massive surge in consumption, as people spent based on their bubble created equity. When the bubble burst, there was nothing to replace a loss of annual demand in excess of 6.0 percent of GDP ($1.2 trillion in today’s economy). If the story was actually the financial crisis then the economy should have been close to normal by 2010 when most aspects of the financial system were operating just fine.

It is useful to policy types to perpetuate the myth that the problem was the financial crisis because finance can be complicated. We have all sorts of exotic financial instruments, many of which are not publicly recorded anywhere. Our policy elite decided that they could be forgiven for not keeping track of such a complex system.

By contrast, the housing bubble and its impact on the economy was easy to see. We saw an unprecedented run up in house prices, with no remotely corresponding increase in rents. Vacancy rates were hitting record highs. And, it was apparent from the GDP data, which is released every quarter, that this bubble was driving the economy.

It was 100 percent predictable that the bubble would burst and lead to a serious recession when it did. Unfortunately, this point is almost never made in polite circles because there is a great interest in pretending the story is complicated to excuse such an enormous policy failure.

The post It Was Not “Flaws in the U.S. Financial System” that Caused the Great Recession, It Was the Collapse of the Housing Bubble appeared first on Center for Economic and Policy Research.


Do Most Economists Think Government Deficits Should Have Been Lower Before the Pandemic Hit?

Published by Anonymous (not verified) on Mon, 07/09/2020 - 9:42am in

Washington Post reporter Heather Long has a series of useful charts comparing the economy’s performance under Presidents Obama and Trump. Most of the discussion is quite good, but one item that raised my eyebrow was in the section on deficits, where it told readers:

“Many economists say the bulge in spending after the Great Recession and pandemic recession were necessary and unavoidable, but they fault Obama and Trump for not doing more to right the federal budget during the good economic years.”

I’m sure many economists do fault Obama and Trump for not having lower deficits, but many also feel that at least Obama, was too aggressive in reducing the deficit. The problem of an excessive budget deficit is that it creates too much demand in the labor market, leading to rapidly rising wages, which then leads to spiraling inflation. Alternatively, if the Fed raises rates to prevent excessive demand, then we would see high-interest rates, which would reduce investment and net exports.

Inflation remained low in the Obama years as did interest rates. There is no evidence that the economy was suffering the harmful effects predicted from excessive budget deficits. The fact that Trump was able to substantially increase the budget deficit with his tax cuts, and still not trigger any problem with inflation, suggests that the deficits were too low under Obama, not too high.

As a result of deficits that were too small, job growth and wage growth was less than it could have been. If Obama had run larger deficits, we would have seen lower unemployment and more rapid wage growth.

There is of course an issue of what the money is used for. If we had run larger deficits to fund child care or clean energy we would have lasting economic and social benefits. By contrast, the increase in the deficits due to the Trump tax cuts, which went disproportionately to the rich, will have little lasting benefit to the economy.

It’s also worth mentioning that the pattern of wage growth is slightly different than indicated in the piece. It had been accelerating towards the end of  Obama’s term, hitting 2.7 percent at the end of 2016. It slowed slightly in 2017 and then began to accelerate again in 2018, peaking at 3.5 percent in 2019. It then began to slow again and had fallen back to 3.0 percent just before the pandemic hit.

In short, there is not much of a story of wage growth being better under Trump than under Obama. The acceleration under Obama continued, albeit unevenly, into the Trump years until it was reversed in the half year prior to the impact of the pandemic.

 

Addendum

Since inflation was lower in the last two years of the Obama administration than in the first three years of the Trump administration, real wages were actually rising more rapidly under Obama than under Trump.

The post Do Most Economists Think Government Deficits Should Have Been Lower Before the Pandemic Hit? appeared first on Center for Economic and Policy Research.


Uncommon Sense—The Foreword

Published by Anonymous (not verified) on Fri, 04/09/2020 - 5:25am in

By Brian Czech

© 2020, Steady State Press
ISBN: 978-1-7329933-0-3
Format: Paperback

Editor’s Note: This foreword is an excerpt from the Steady State Press’ forthcoming book, Uncommon Sense: Shortcomings of the Human Mind for Handling Big-Picture, Long-Term Challenges by Peter Seidel. Preorder a copy now.

I first encountered Peter Seidel at a Society of Environmental Journalists conference in Wisconsin. Or perhaps it was a conference of the U.S. Society for Ecological Economics in New York. Neither of us recall for sure, but we both noticed one thing: Our paths crossed regularly during that first decade of the 21st century. Not only did we find ourselves at the same conferences, but in the same sessions and in the same conversations—and invariably on the same side, in the event of controversy or debate. Most notably, we both recognized limits to growth and the fundamental conflict between economic growth and environmental protection.

Now, I have the privilege of penning the foreword for the latest in a string of salient books in which Seidel offers a lifetime of wisdom on the “big-picture, long-term challenges” facing humanity.

Seidel is an elder statesman of limits to growth, and he had been researching, writing, and conferencing on the relevant topics for decades before I came along with my specialty on the conflict between economic growth and biodiversity conservation. Biodiversity was big in the 1990s and early 2000s; bigger than climate change in academia and in the environmental movement. By then, though, Seidel had seen it all: DDT, a burning Cuyahoga River, Love Canal, the destruction of the ozone layer, coral bleaching, endangered species, resource shortages, and wars too numerous to speak of. Biodiversity loss and climate change were just two more insults—albeit huge ones—heaped upon a planet subjected to rabid GDP growth.

Seidel took an interest in my muffled efforts—with me in the silenced depths of the U.S. Fish and Wildlife Service at the time—to raise awareness of the trade-off between economic growth and environmental protection. He was one of the first 50 signatories of the CASSE position statement calling for a steady state economy, along with the likes of Herman Daly, William Rees, and Richard Heinberg. He was a no-nonsense, sound-science, non-fantasy futuristic thinker, and I took an interest in his work as well, reading several of his books and engaging in lengthy discussions with him on the future of America, the planet, and Homo sapiens.

I could see Uncommon Sense coming. I’d read There is Still Time, the predecessor book, and I knew Seidel had a rare, holistic sense of limits to growth. I was thrilled to hear of his interest in revising There is Still Time—which suffered from production problems and practically zero marketing—into a new book with an apropos title, updated data, and a solid plan for distribution.

Peter Seidel

Author Peter Seidel. (Credit: Gordon Baer)

With Uncommon Sense, I believe Seidel is at the peak of his game. It may seem a peculiar thing to say about an author in his 9th decade, but it’s true in my opinion, and here’s why: While Seidel’s penchant for prose was fully developed by the time he wrote, for example, Invisible Walls (Prometheus, 1998), his inquisitive mind only found more issues to integrate in the decades since. Uncommon Sense packs an impressive sweep of issues into such a compact book. No book that I’m aware of covers environmental, evolutionary, psychological, social, political, and religious subject matter into one cogent, flowing analysis from a limits-to-growth lens. Certainly not in less than a hundred pages!

The topics aren’t just packed in, though, like sardines squished into some unceremonious can. Seidel has something important to say about each of these topics. While some readers will have encountered similar lines of thought on some of the topics, few readers will fail to find something original, unique, or at least new to them in the pages of this prescient book.

It’s not that Seidel has all the answers, nor has he written the perfect book. (Who has?) As a student who studied the molecular basis of evolution as a supplementary topic during my Ph.D. research, I found the segments on the evolution of the human brain to be somewhat sketchy and lacking corroboration from human DNA analysis. Yet I also found myself thinking, “Maybe he doesn’t have the nucleotides mapped out, but how could he possibly be wrong?” The human brain would indeed have evolved the way he described; if not, surely we’d be behaving differently.

Seidel took on a daunting challenge in writing Uncommon Sense. The task he bore was not simply to journalize and lament on limits to growth, but to analyze, to penetrate, to dissect what it is about Homo sapiens that leads us to the limits as a moth to a flame. Why don’t we stop? Why should we? Can we?

The last question, of course, is the most challenging of all for any writer of such a sweeping book. In my opinion, Seidel provides a most refreshing approach. He doesn’t sugarcoat the answer. You won’t find any wishful notions of “green growth,” “mind over matter,” or “have your cake and eat it too” in Uncommon Sense. In his concluding chapter, Seidel comes clean on the prospects for the human race to handle the big-picture, long-term threats. The prospects, it turns out, are far from sure, easy, or even likely. It’s going to take some work, folks.

But then, humans have evolved to strive, to fight, and to work. We just need to apply a little more Uncommon Sense.

Brian Czech

Brian Czech is the Executive Director of the Center for the Advancement of the Steady State Economy.

The post <em>Uncommon Sense</em>—The Foreword appeared first on Center for the Advancement of the Steady State Economy.


“Consumer Confidence” or Subtle Salesmanship?

Published by Anonymous (not verified) on Fri, 28/08/2020 - 12:14am in

By Brian Czech

Have you ever wondered about the odd pairing of “confidence” with “consumer?” Isn’t confidence supposed to reflect something more virtuous than your shopping cart? When you’re confident, you’ll be comfortable in your own skin, right? It’s all about who you are, not what your stuff is.

Confidence is supposed to play out in places like football fields, gymnastic events, stages, and maybe weddings, not shopping malls and dealerships. In its highest form, confidence melds into bravery. It takes some real confidence to break up a fight or charge into battle.

What kind of “confidence” is needed for buying shoes or iPads or even cars?

Grocery store

Empty aisle, just awaiting your “confidence.” (Image: CC0, Source)

Nor is confidence the same as bluster, arrogance, or braggadocio. In fact, confidence is most convincingly exuded in modest dignity. Boasting, on the other hand, indicates the opposite of confidence: insecurity, neediness, and, in the extreme, sociopathy (as “certain individuals” have demonstrated in recent years).

Well, that’s what the word “confidence” connotes for me, at least. I’m confident it would to most others as well. But let’s check the dictionary, just to be safe.

According to Merriam-Webster, the confident person is “full of conviction: CERTAIN.” That’s meaning #1, and highly relevant. The point I’m making, though, is driven home even more profoundly with meaning #2: “having or showing assurance and self-reliance.”

While Fish May Be Innocent, Odd Pairings Are Fishy

It’s true enough that we’re all consumers. Furthermore, each of us fall somewhere along the confidence spectrum. Therefore, as an adjective, confidence can be applied to consumer. “Consumer confidence” is grammatically sound. Yet I still don’t buy it (so to speak).

When’s the last time you heard talk of “fish innocence?” What about “hiker ambivalence,” or “singer colorblindness” or “dishwasher jocularity?” Presumably all fish are relatively innocent, and yes, all hikers fall somewhere on the spectrum of ambivalence, but who the hell cares? These subjects—fish, hikers, etc.—just don’t need to be described in terms of those (respective) adjectives! In each of the pairings the linkage is irrelevant at best and spurious at worst.

So, when I hear the phrase “consumer confidence,” I smell a fish. Something seems awry, and I have a vague sense of being in the polyester presence of salesmanship and propaganda. Other slick phrases come quickly to mind, such as “jumbo shrimp” and “green growth.” It strikes me that these slippery slogans tend to be oxymoronic, or at least ironic, and “consumer confidence” is no exception.


This fish is innocent. Is that relevant? (Image: CC0, Credit: USFWS)

Certainly the “self-reliance” aspect of confidence is quite at odds with consumption, unless perhaps we’re talking about the purchasing of some fishing line and a hook, on our way to the trout stream for dinner. But then we’re talking about confidence in fishing ability, not the ability to cast a credit card all the way across the counter. “Fisherman confidence” makes sense, and so might “consumer solvency,” but… “consumer confidence?”

The Conference Board and the CCI

The U.S. Consumer Confidence Index (CCI) was developed in 1967 as a measure of “optimism on the state of the economy that consumers are expressing through their activities of savings and spending.” The CCI is measured monthly by The Conference Board, based on a five-question survey issued to 5,000 Americans. Essentially, “confidence” is indicated when (based on the survey) consumers are likely to be spending more than saving.

The CCI is supposed to be a planning tool for manufacturers, retailers, banks, and government. If it’s rising, for example, the retailer may decide to invest in more locations and higher inventory. It’s a bit of an odd duck in the world of economic indicators, though. Investopedia gushes about it as “A Killer Statistic,” yet its predictive value is questionable, and most sources (including another Investopedia site) view it as a lagging indicator. In other words, it’s more of a rear-view mirror than a telescope to the future.

I’m less interested in its merits as leading vs. lagging than in the derivation of the name! One can’t help but suspect that the phrase was coined in some Madison Avenue conference room with the blessing of the New York Stock Exchange, the Federal Reserve Chair, and the Koch Brothers. These folks are always thinking of the margin, looking for any pro-growth influence they can possibly sneak into the system. Just imagine the scheming… “I know,” said one of them, “Let’s call it ‘consumer confidence’ and get it all over the airwaves. Nobody likes to be a chicken; people will start thinking of spending money as a way to show their bravery, by God.” [Guffaws all around.]

I jest, I guess, but the phrase “consumer confidence” clearly reflects a bias toward consumption in the business world and the economics profession. If they really wanted to know about the prevalence of spending (vs. saving), the indicator could have simply and neutrally been called “spending” (as a lagging indicator), “spending likelihood” (as a leading indicator), or even the Keynesian “propensity to consume” (as an all-purpose indicator). And, of course, they could have used “consumer optimism” (straight out of the very definition), with its less normative connotations. Instead, they attached an always desirable condition—“confidence”—to the mere act of consumption!

Madison Avenue

Madison Avenue: “Consumer confidence” branded here? (Image: CC0, Credit: Leif Knutsen)

Actually, there is an economic indicator called “consumer spending.” It’s no mere psychological pulse, either; it’s the outright expenditure on goods and services by households. It’s monitored by the staid Bureau of Economic Analysis and, as a key variable in the calculation of GDP, it’s been around far longer than the CCI. Why wouldn’t that suffice? Why did we need a “Conference Board” to send out surveys on “feelings”?

So, while I’m not advancing a conspiracy theory, I still think there was an element of marketing, salesmanship, or PR in launching the “consumer confidence” paradigm. The CCI may seem like an objective indicator, but it’s designed to steer our subjectivity into a sense that spending is a good thing.

What’s Wrong with Saving, Anyway?

I’d be tempted to say, “Real men save,” but why tempt fate in the minefield of gender politics? You get the picture, though. Being a consumer has nothing to do with confidence. If anything, it’s the other way around: The more confident you are in your own skills, abilities, and general presence, the less stuff you need to show off, make you look better, or help you perform. “Non-consumer confidence,” we might call it.

Furthermore, if we associate consumption with the admirable thing to do, then where does that leave saving? Have we been led into a twisted choice between “consumer confidence” and “saver sheepishness?” When did saving become so frowned upon? What happened to Benjamin Franklin’s wise old adage, “A penny saved is a penny earned?”

Mountains

Inspiring landscape, spared via saving. (Image: CC0, Source)

Without getting into the philosophical depths of Franklin’s particular meaning(s), we have to acknowledge that “saving” means many things among many people. For the conventional, neoclassical, 20th century economist, “saving” meant little more than deferring consumption—so more could be consumed later!

For advancing the steady state economy, though, saving has entirely different connotations. After all, the steady state economy is all about stabilizing the level of consumption. The most prominent connotation of “saving,” then, is as an antonym to consumption. The saver foregoes consumption in order to…forego consumption! The income saved can be used for various other purposes: a rainy day, favorite charity, reduction in work hours, political investment, and other non-goods and non-services that don’t bloat the GDP.

Steady statesmanship, then, rejects the notion of “consumer confidence,” favoring concepts such as consumer conscientiousness, consumer frugality, and even “saver sagacity.” Sagacious savers understand they are saving far more than money. A penny saved—not spent on “consumer goods”—is a penny’s worth of planet earned. (Or at least spared.)

Brian Czech

Brian Czech is the Executive Director of the Center for the Advancement of the Steady State Economy.

The post “Consumer Confidence” or Subtle Salesmanship? appeared first on Center for the Advancement of the Steady State Economy.


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