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The Meat of the Matter: Diet, Climate, and the Steady State Economy

Published by Anonymous (not verified) on Sat, 31/10/2020 - 2:03am in

By Haley Demircan

The saying “you are what you eat” is clearly true to a great extent, but there’s more to the story. The food we consume not only affects our being directly, but also the environment and the economy—and therefore us indirectly as well. Eating more vegetables and less meat and dairy is better for the health of most individuals here and now, and certainly for the health of the planet, now and for the long run. Without a healthy planet, there’s no healthy economy.

Cow and plant-based diet

A dairy cow raised for milk production. (Image: CC0, Credit: USDA)

The science is pretty clear, starting with the fact that Earth is warming at an alarming rate and economic growth is a major cause. According to the latest estimates, many regions have already surpassed 1.5 degrees Celsius above pre-industrial levels. Meanwhile the Intergovernmental Panel on Climate Change clearly links greenhouse gas emissions to GDP growth. Among the factors contributing to that GDP growth is food consumption, and not all food consumption contributes equally (Figure 1).

When most people think about what they can do to help reduce greenhouse gas emissions, they don’t even think about GDP. They don’t think about their diet, either. That’s a problem. As Jalava et. al found: “Shifting away from animal-based foods [could not only] add up to 49% to the global food supply without expanding croplands; but would also significantly reduce carbon emissions and waste byproducts that end up in our oceans and as seafood byproducts.”

Greenhouse Gas Emissions

When shopping at a grocery store or eating at a restaurant, how many of us think about the process of meat production and how it affects the climate? It’s a question with significant repercussions. In 2018 farming was responsible for 574 million metric tons of carbon dioxide emissions in the USA, or 8.3 percent of the nation’s total greenhouse gas emissions. Meat production accounts for the lion’s share of these emissions.

Due to population growth and the lack of a plan for replacing or slowing meat production, those numbers will continue to grow. Emissions from agriculture are projected to increase to 80 percent by 2050.

 


Figure 1. Greenhouse gas emissions per food product. (Image: CC0, Credit: Vision Capitalist)

 

Earth or One Big Farm?

Ten percent of Earth’s surface is covered by glaciers (Figure 2). Nineteen percent of Earth’s surface is desert, salt flats, beaches, and sand dunes. The remaining 71 percent is considered “habitable land”—land that includes forests, grasslands, surface freshwater, and urban areas. As of this year, about half of the habitable land is farmland (which, as with urban areas, is much less “habitable” for wildlife).

Agriculture not only emits copious greenhouse gasses, it commits a colossal water footprint. Agriculture including livestock production accounts for 70 percent of freshwater use and is the largest water-consuming sector worldwide. This percentage accounts for all the sectors of agriculture; however, meat and dairy products are responsible for using the most. It takes about 1,840 gallons of water to produce one pound of ground beef, mostly because of the water needed to grow grain and other forage crops, and to provide drinking water for the cattle.

If we compare those 1,840 gallons to the daily per capita water use of an American (101.5 gallons), then the meat produced for a quarter-pound hamburger costs 4.5 days of water use. Meanwhile, the water footprint of a chicken egg is 50 gallons. If the USA cut animal product consumption by half, our food production would require 37 percent less water.

 


Earth’s surface and land use. (Image: CC0, Credit: Our World in Data)

 

Diet and Savings (In More Ways than One)

Consuming less meat (or no meat) is not only beneficial to the environment and human health but seemingly also the economy. If we continue increasing meat consumption at current rates instead of shifting to a vegetable-heavy or plant-based diet, it will cost the USA $197 billion–$289 billion each year, and the global economy up to about $1.6 trillion annually, just in direct and indirect healthcare costs. If we’d eat less meat or adopt a plant-based diet, we’d save a lot or all of that money. 

Wouldn’t saving that money, and/or preventing those costs, be a smart thing? Of course, this perspective entails the recognition that more expenditure—higher GDP—is no longer the goal. The economic benefits of saving as opposed to spending is highly congruent with the trophic theory of money, and hopefully with the common sense of many citizens, but not with conventional economics and growth politics.

Advertising Kills

Given all the evidence for how a plant-based diet is more sustainable for society and healthier for people, why do we continue to consume so much meat and so many other animal products? It’s not entirely a matter of rationality on our part. For one thing, advertising gets in the way!

The U.S. meat and poultry industry represents $1.02 trillion in “total economic output.” With that kind of money at stake, the meat and poultry industries have an abundance of motivation (and resources) for advertising. The same motives apply to the dairy industry. Advertising plays an enormous role in what consumers believe and buy.

Direct advertising by producers isn’t the only form of public relations conducive to meat, dairy, and poultry consumption. The American Cancer Association’s “champion sponsors” include the likes of Tyson Foods and Perdue Farms. The American Diabetes Association gets money from Dannon and Kraft. It is no surprise then that the recipes promoted by these “health” associations include ingredients from these heavy hitters in the meat, dairy, and poultry industries.

Behavioral and Policy Implications

People can readily change their diets to reduce their carbon footprints. Customers can opt for lentils or beans in their home-cooked meals, or even plant-based “meats” that have gotten increasingly similar to the real thing and quite tasty in their own right. Yet, individual dietary choices will not be enough to solve climate change, prevent the transmission of animal diseases, or conserve wildlife habitats. Among other things, we need systemic reform in our agricultural system.

For starters, a tax should be imposed on meat products. This could prevent 222,000 deaths and save $41 million in global health costs every year. Health warnings could also be issued on meat packages to inform consumers of harmful side effects. Certain farm subsidies could be cut, too, saving taxpayers money, reducing overproduction, and reversing the trend toward factory farming.

Farmers markets are an encouraging and more sustainable option for purchasing agricultural products due to the organic and low-impact practices of participating farmers. These markets have grown in popularity, and with help from local governments, their accessibility could be improved in more regions. The Farmer’s Market Coalition has already proposed recommendations for cities and counties to follow in building healthy foundations for farmer’s markets.

Of course, these types of reforms—especially the fiscal and regulatory policies—will be far more feasible if tied to the goal of a steady state economy. Otherwise the argument will be made at every step that such reforms are “getting in the way of business” and impacting GDP. Only when steady staters are populous enough will we overcome such arguments with, “Yes of course lowering meat consumption will lower GDP, and that’s just what the doctor ordered for you, the climate, and our planet.”

Haley Demircan is CASSE’s fall journalism intern.

The post The Meat of the Matter: Diet, Climate, and the Steady State Economy appeared first on Center for the Advancement of the Steady State Economy.


Machine learning the news for better macroeconomic forecasting

Published by Anonymous (not verified) on Tue, 20/10/2020 - 7:00pm in

Arthur Turrell, Eleni Kalamara, Chris Redl, George Kapetanios and Sujit Kapadia Every day, journalists collate information about the world and, with nimble keystrokes, re-express it succinctly as newspaper copy. Events about the macroeconomy are no exception. So could there be additional valuable information about the economy contained in the news? In a recent research paper, … Continue reading Machine learning the news for better macroeconomic forecasting →

Trade, saving and an economic disaster

Published by Anonymous (not verified) on Mon, 12/10/2020 - 8:05pm in

 The UK is running a trade surplus. No, really, I am not joking. This is from the ONS's latest trade statistics release:

The UK total trade surplus, excluding non-monetary gold and other precious metals, increased £3.8 billion to £7.7 billion in the three months to August 2020, as exports grew by £21.4 billion and imports grew by a lesser £17.5 billion

It's the first time the UK has run a trade surplus since the late 1990s:


 And if you were thinking this was because of the lockdown, you would be wrong. The UK has been running a trade surplus since the beginning of 2020:

Admittedly, the trade surplus widened under lockdown. But the UK economy reopened to some degree from June to August - and yet the trade surplus continues to widen.

This is no doubt music to the ears of balance of payments obsessives. Could the UK at last be pivoting away from a consumption-led growth model to an export-led one? 

At first sight, it appears so. Exports have increased more than imports. And the strongest growth in goods exports was in manufactured goods, particularly machinery and transport equipment:

Hooray! If this continues, the UK will become an export powerhouse to rival Germany! There will be jobs and prosperity for all! 
Not so fast. The trade balance is a net figure. The gross figures that make it up matter too - and gross imports and exports have both fallen considerably since August 2019:

The UK's trade surplus is not a sign of a booming export economy.  Far from it. The only reason for the trade surplus is that imports have fallen even more than exports over the last 12 months. 
An abrupt switch from trade deficit to trade surplus accompanied by sharp falls in both imports and exports is usually caused by what is known as a "sudden stop", when investors abruptly pull their funds from the country, causing the currency to collapse and bond yields to spike. It is almost always associated with a deep recession. The UK has experienced sudden stops twice since World War II, in 1975 and 1989. In both cases, the pound's exchange rate fell sharply - so sharply, in fact, that in 1975, when the UK still had exchange controls, it was forced to ask the IMF for help to stop the pound collapsing. 
But this time is different. Sterling's exchange rate did drop sharply in March, but it bounced back again:
There was no sustained currency collapse. And although there was a brief spike in March, bond yields then fell to the lowest levels in history: 

Resilient currency, falling bond yields....this is hardly a typical "sudden stop". 
In fact the UK is in no serious danger of running out of the foreign currency it needs to pay for imports. Permanent central bank swap lines make FX-driven sudden stops a thing of the past for currency-issuing developed countries (though not for Eurozone countries). Imports are falling not because of lack of FX, but because the UK population has cut back discretionary spending hard. This is what is causing both the widening trade surplus and the deep recession. And the fact that the UK was already running a trade surplus before pandemic restrictions were imposed shows that it was collapsing consumer confidence, not the lockdown, that caused the switch to trade surplus.

The import figures for August show that domestic consumer confidence is still on the floor. And this is supported by the GDP figures:
A trade surplus is not necessarily a sign of a healthy economy. 
When there is a trade surplus, domestic saving must be high, since the country is exporting capital. The UK's domestic saving ratio is currently at an all-time high:

In my view this massive increase in the domestic saving ratio is the cause of the trade surplus. And it is not a healthy sign. It does not reflect the desire of people to provide for their own age or build an economy for future generations. And it is not providing capital for needed investment: if it were, interest rates would be significantly positive, rather than heading for the basement. The extraordinarily high domestic saving ratio actually reflects the unease that many people feel about exposing themselves to the virus for the sake of an evening's entertainment, the fear of many more people that their jobs and incomes will evaporate, and the obstacles that pandemic restrictions create for people who do want to spend.
The saving ratio is a tale of two halves, too. Higher earners who can work from home are saving like mad, while people on lower incomes are losing their jobs or suffering pay cuts, forcing them to dis-save:

(chart from Resolution Foundation)

So both high and low earners are cutting discretionary spending, though for very different reasons. And large though it is, the UK government's deficit spending is nowhere near large enough to compensate for this massive fall in domestic consumption. That's why GDP has fallen so much and has been slow to recover. Now that the government is imposing more restrictions while cutting support for those affected, GDP will fall again. 
Neither a trade surplus nor a high saving ratio necessarily mean a strong economy. It depends on the circumstances. A country with a large middle class and an effective social safety net might have a low saving ratio and a trade deficit, because people enjoy buying foreign-made goods and have little need to save. But this is without question a more prosperous country than a country with a trade surplus and high saving ratio, if the population of that country doesn't earn enough to buy foreign-made goods and must save because there is no social safety net.

If the prosperous country, driven by mistaken envy of the poorer country's trade surplus, deliberately depresses domestic incomes to gain international market share, and shreds its safety net with the aim of "making work pay", then it might find its saving ratio rises and its trade balance shifts towards surplus. But its population won't be more prosperous. They will be poorer. Rather than the poorer country becoming more like the richer one, the richer one becomes more like the poorer.

Right now, the UK's high but divided saving ratio is raising its (already high) wealth inequality, while collapsing consumption is destroying the jobs and incomes of those at the lower end of the income spectrum. The trade surplus and high saving ratio aren't making us prosperous. Indeed they have no causative effect at all, in either direction. As is so often the case, the switch to trade surplus and excessive saving simply reflects the effects of an economic disaster. Those who think that a trade surplus and a high saving ratio are the route to prosperity for all might like to reflect on this. 
Related reading:
Currency manipulation is a really bad ideaThe high price of dollar safetyRainy Days - Resolution Foundation

 

Valuing Knowledge: The Impact of Human Capital Accounting on Global Economic Governance

Published by Anonymous (not verified) on Mon, 12/10/2020 - 5:14pm in

Since the 1990s, with the rise of endogenous growth theory, the internet and the new economy, knowledge – or ‘human capital’ – has been widely understood as the central factor underpinning growth and competitiveness in advanced post-industrial economies. There’s just one problem: no one has known how to measure it. Recent efforts to develop monetary estimates of human capital are deeply problematic, however, because they capture only a narrow measure of value, and push countries with supposed deficits of human capital towards market-oriented welfare and labour market policies.

Post-GDP accounting

Human capital measurements for a long time remained crude – unmonetized indicators of educational attainment, such as the % of the population with a college degree. Standardised comparisons of school pupils’ performance attempt to measure skill attainment directly, but still fail to measure the economic value of these skills. This means that, unlike the produced and financial assets that show up in the balance sheets in the national accounts, human capital has not had a monetary value and cannot enter growth accounting models or other types of economic analysis.

As I explored in a recent article published in RIPE, this has been changing over the last decade as global economic governance institutions have sought to develop a more formal accounting framework for estimating the monetary value of a country’s ‘human capital stock’. As a recent UNECE document indicates:

Understanding and quantifying human capital is becoming increasingly necessary for policymakers to better understand what drives economic growth and the functioning of labour markets, to assess the long-term sustainability of a country’s development path, and to measure the output and productivity performance of the educational sector.

We can situate this measurement agenda within a broader ‘post-GDP’ movement in global economic governance that has sought to adjust national accounting systems to better capture the realities of post-industrial economies and societies. Under this governance agenda, the ‘wealth accounting’ approach to sustainable development has emerged as dominant since the late 2000s, with the publication of a key UN, Eurostat and OECD report as well as the Stiglitz commission on the reform of global socio-economic statistics.

According to this framework, to account for all the non-produced assets and resources that modern economies increasingly rely on (‘natural capital’, ‘human capital’ and ‘social capital’), we should extend national balance sheets to show whether ‘total wealth’ across all asset classes is being preserved or depleted. A recent UN taskforce suggested that:

If these stocks are calculated using a common measure and assumptions are made about the substitutability of various capital stocks, changes in the total stock of wealth (per capita) will provide information on the sustainability of the development path of each country.

This is an elegant idea: a way for economic analysis to internalise the externalities that GDP growth relies upon, re-embedding the market economy in its ecological and social context.

Knowledge as capital

Regarding human capital, however, operationalising this framework is fraught with methodological difficulties. The way in which global governance organizations have confronted these valuation challenges is little understood, buried in technical accounting manuals and methodological appendices – but it exerts an ever-increasing influence on development discourse and policy.

Most notably, emerging international standards for valuing human capital – used by the UNECE and the World Bank – are heavily influenced by neoclassical capital theory first outlined by Irving Fischer in the 1900s. This views the accounting value of a capital asset as the discounted market income that its owner can expect during the lifetime of the asset.

The conceptual sleights of hand needed to translate this methodology to the valuation of human knowledge are heroic. For instance, we must assume that knowledge and skill are something separate from, and ‘owned’ by their bearer. This has meant that ‘knowledge’ is quickly reduced to formal qualifications in these frameworks, since these can (if one squints hard enough) be seen as something owned by the student, unlike informal skills gained on-the-job. Perhaps most bizarrely, cost-based estimates require accountants to assume that ‘like physical capital, human capital depreciates over time’, due to ‘the wear and tear of skills due to aging’, in a manner analogous to the deterioration of aging physical equipment.

Even with more commonly used output-based methods, which value knowledge based on discounted future wages, the human capital of the unemployed falls to zero (as this ‘asset’, the skills of the worker, is no longer generating an ‘income’ stream) and that of the elderly close to zero. They also assume that education spending is pure investment – that there is no intrinsic pleasure or ‘consumption’ aspect to learning and that it is something endured purely for the enhanced wage prospects it offers the student.

Human capital metrics and the commodifying of care

Methodological choices made on these issues would be of academic interest if monetary estimates of human capital were confined to experimental papers in economics journals. But increasingly they are used by global governance agencies to pathologise certain countries and judge which welfare regimes and labour market policies are deemed ‘sustainable’.

An illustration of this is the use of human capital wealth estimates by the World Bank, within its Human Capital Project (HCP) launched in 2018. Based around ‘using policy and results-based lending to support critical human capital reforms’, this agenda plays a central role in the Bank’s wider development strategy for poverty eradication by 2030. In 2019 the Bank launched human capital plans for the MENA region and Africa, to support the HCP. In MENA, human capital targeted financing is set to increase from $1.119bn in 2019 to $2.5bn by 2024, while in Africa it is set to reach $15bn by 2021-23.

In both strategies, these regions are pathologized on the basis of comparative analysis of their human capital wealth. For instance, the MENA human capital plan laments how ‘with the lowest percentage of human capital as a share of total wealth per capita of any region in the world (35%), MENA faces a severe human capital gap’. This is, moreover, linked explicitly to their relative lack of labour commodification and an insufficiently developed free market economy. By comparison, Bank analysis of human capital in China applauded the ‘very rapid increase in urban human capital from the mid-1990s, in part because of the transition to a market-oriented economy’.

In the MENA region as well as in Africa the World bank strategy outlines a number of ‘priority interventions that can help build, protect, and utilize human capital’. These involve using targeted funding and policy consultancy to adapt education systems to competitive job markets, encourage entrepreneurship and focus teaching on young people’s employability in the private sector.

An interesting feature of this agenda is the way in which it interacts with the Bank’s discourse on gender equality and female empowerment. Human capital estimates are used to justify the commodification of care work, by bringing female labor market participation up to parity with male workers. The MENA strategy prioritises ‘closing the gap in female employment by improving conditions that facilitate women’s insertion into the labor market to realize their potential as productive workers’.

This is not of course to suggest that moves towards gender parity in labour markets are unwelcome. Notably, however, human capital estimates render one particular means of achieving this (full-time employment for both genders in the context of commodified care provision) as a contribution to the national balance sheet, while other routes (for instance, job sharing and work redistribution or commons-based care networks) cannot.

As this case illustrates, currently dominant human capital accounting methodologies naturalise the assumption that ‘sustainability’ depends on a particular market-oriented development trajectory. These policy recommendations are a tautological result of methodological choices. Because the value of a nations’ human capital wealth has been made to depend upon its projected contribution to labour market income, countries with higher levels of de-commodified care provision will necessarily have lower human capital wealth.

Global governance discourse frames these policy recommendations as neutral, technical assessments of how to build human capital. However, by unpacking the black box of the concepts these valuations rely on, we see that they are based on highly contentious assumptions grounded in neoclassical wealth accounting theory.

Dr David Yarrow is Lecturer in International Political Economy at the University of Edinburgh. His research examines the impact of post-growth ideas on global economic governance, most recently by investigating the rise of alternative accounting practices in international statistical agencies. More broadly he is interested in how economic ideas frame the challenges of automation and post-industrialism in democratic politics.

 

 

The post Valuing Knowledge: The Impact of Human Capital Accounting on Global Economic Governance appeared first on Political Economy Research Centre.

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.


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.


Six graphs that explain Australia's recession

Published by Anonymous (not verified) on Wed, 02/09/2020 - 10:32pm in

Tags 

GDP

Australia’s recession is the deepest since the Great Depression of the early 1930s.

Nothing else comes close.

The economy shrank an extraordinary 7% in the three months to June – by far the biggest collapse since the Bureau of Statistics began compiling records in 1959.

The previous worst quarterly outcome was minus 2%, in June 1974.

Quarterly percentage change in gross domestic product

ABS National Accounts

It was going to be worse.

Treasurer Josh Frydenberg told a parliament house press conference that in March his advisers were predicting a collapse three times as big in the June quarter – 20%. In May the forecast was for a June quarter collapse of 10%.

Britain’s economy actually did collapse 20% in the June quarter; the US economy collapsed by nearly 10%.

What staved off a collapse of the order feared was unprecedented government support – more than A$100 billion in JobKeeper and expanded JobSeeker payments alone–enough to actually lift household incomes while 643,000 Australians lost their jobs and many more lost hours.

Contribution of government benefits to household income growth

Commonwealth Treasury

A better measure of living standards, taking account households and businesses, so-called “real net national disposable income per capita”, fell nonetheless, by a record 8%.

Quarterly percentage change in living standards

Quarterly change in real national disposable income per capita. ABS Australian National Accounts

Consumer spending fell by even more, an extraordinary 12.7%, in part because lockdowns and caution in the face of COVID-19 provided fewer opportunities to spend.

Given that consumer spending climbed not at all over the three quarters leading up to the June quarter, it meant that household spending fell over the entire financial year, for the first time since records have been kept.

Quarterly change in household final consumption expenditure

ABS Australian National Accounts

Spending on goods was barely hit, while spending on services collapsed 17.6%.

Spending on transport services, a category that encompasses everything from flights to public transport, fell 88%. Spending on accommodation, a category that encompasses tourism, fell 55.7%.

Spending on recreational and cultural services, a category that encompasses sporting events, gambling and performances and cinema admissions, fell 54.5%.

Household spending by category

Commonwealth Treasury

It meant far more income than usual was saved. During the depths of the global financial crisis, Australia’s household saving ratio climbed to a peak of 10.9% as households squirrelled away one in every ten dollars they earned.

In June they squirrelled away a remarkable 19.7% – one in five dollars that came in the door.

Household saving ratio

ABS Australian National Accounts

The Bureau of Statistics says if household income from special initiatives including early access to super was included, the household income ratio would be even higher. What it calls the “household experience savings ratio” would be 24.8%.

It’s possible to see households saving one in every four dollars as a “glass half full”. Frydenberg does.

He says this never-before-experienced accumulation of savings will be useful in the recovery, giving people the capacity to spend big when restrictions ease and they are better able to spend.

What if we remain unwilling to spend…

That’s assuming people aren’t “scarred” by the experience, left with damaged psyches and unwilling spend, a possibility the Treasurer acknowledges.

He says for the next quarter, the current one that encompasses the three months to the end of September, the Treasury is expecting economic activity to shrink only a little further or no further at all.

A lot depends on how soon Victoria’s Stage 4 restrictions and other restrictions are eased, which means a lot depends on things that are unknowable.

…and businesses unwilling to invest?

The Treasurer will deliver the budget in a little over four weeks’ time.

He said a key part of it will be measures to make it easier for businesses to do business, unlocking “entrepreneurship and innovation” at low cost.

Businesses certainly could invest more. Non-mining business investment was down 9.3% in the quarter. On Tuesday the Reserve Bank made available an extra $57 billion at low cost for banks to advance businesses and households.

But they are only likely to want to invest more when they can see returns.

Read more: When it comes to economic reform, the old days really were better. We checked

Examining the figures on Wednesday, former Reserve Bank economist Callam Pickering said they showed the economy being held together “with duct tape by JobKeeper and JobSeeker”.

At his press conference, Frydenberg resisted suggestions that he revisit the wind-downs of JobKeeper and the JobSeeker Coronavirus Supplement due to take place over the next six months.

But the Victorian situation is far worse than when he announced the schedule on July 21.

He might find there’s a case for more duct tape, for a while longer.The Conversation

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Peter Martin is economics correspondent for The Age and the Sydney Morning Herald.

He blogs at petermartin.com.au and tweets at @1petermartin.

“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.


The Silver Lining of the COVID-Caused Recession is Fading Fast

Published by Anonymous (not verified) on Fri, 21/08/2020 - 5:04am in

By Madeline Baker

From February to mid-April 2020, in an early and shocking stage of the COVID-19 pandemic, greenhouse gas emissions plummeted worldwide. Nowhere was the reduction more notable than in China, the country with the highest emissions. According to Lauri Myllyvirta, the lead analyst at the Centre for Research on Energy and Clean Air, China’s carbon dioxide emissions fell by 25 percent from the end of January through mid-February. Also, for the month of February, average coal consumption at power plants fell to a four-year low, and oil refinery operating rates fell to the lowest level since fall of 2015. This translated to lower levels of nitrous dioxide in China; NO2 levels the week following the Chinese New Year were 36 percent below what they were for the same week the previous year. Meanwhile liquid fuel consumption was 20 to 30 percent lower in March 2020 than in March 2019.

 

NASA tweet demonstrating COVID-caused reduction in CO2 emissions.

 

Along with reduced carbon emissions, industrial output in China reportedly fell by a whopping 13.5 percent in January and February from the previous year. This translated to an economic contraction of 6.8 percent (annualized rate) for Q1, the first quarter since 1992 with declining GDP! Beijing was so taken aback that, for the first time in 30 years, China has no annual growth target.

Given the clear and significant benefits of the shutdown, not just for China but for the global ecosystem, it seems more than logical to ask: Should China, or any other nation for that matter, be striving for pre-pandemic GDP figures, and thenceforth further growth besides? Why shouldn’t our nations, more or less “united” under a UN charter, focus instead on combating the next deadly crisis, or protecting the environment, or the diplomacy of peacekeeping?

Unfortunately, these questions are becoming moot, especially for China, which is already ramping up to pre-pandemic industrial capacity. The Chinese appear to be focusing heavily on power generation, increasing capital spending on utilities by 14 percent from January-May compared to the same period last year, “even as overall capital spending fell by 6 percent.” China also consumes more coal than any nation by a large margin, and accordingly saw carbon dioxide emissions four-to-five percent higher in May of 2020 compared with May of 2019 as the post-lockdown economic push kicked into high gear. Fortunately, the May spike in CO2 emissions appears to have been temporary, abating in June and allowing for projected overall emissions for 2020 to remain 6 percent below 2019 levels. Still—a six percent reduction in emissions is a far cry from the initial 25 percent drop we saw during the lockdown period, and a far cry from the kind of reduction we need for serious mitigation of climate change.

Sustainability experts such as Vinod Thomas for the Brookings Institute are urging the public to view the COVID-19 disaster as akin to an environmental crisis, most notably climate change. Bill Gates makes a similar argument. Globally, the death toll from COVID-19 has surpassed 790,000. We cannot know how many will ultimately die from COVID-19, but we do have estimates for the number of deaths already caused by climate change. The World Health Organization, for example, estimates that 150,000 deaths per year are attributable to climate change, and this number will only continue to rise over the next few decades as we’re locked into the momentum of global warming. Shane Skelton, former energy advisor to U.S. House Speaker Paul Ryan, warned that climate change “will be just as bad as coronavirus when we’re really feeling it.” Is anybody listening?

Out of Sight, Out of Mind

For virtually all of modern history up until the outbreak of COVID-19, society has functioned primarily in a growing economy (all the while headed toward limits to growth). Since the outbreak, however, society’s priority has been public health. With this common good as a powerful motivator, people have been making lifestyle changes they would have previously never considered, such as social distancing, wearing masks, and avoiding close contact with family members. Unfortunately, it took a healthy dose of panic and, in many cases, government mandates for individuals to shift their priorities and act accordingly.

Typhoon and climate change

The devastating effects of typhoon Haiyan on the Philippines. Another result of man-made climate change killing thousands of people and leaving millions homeless. (Image: CC BY-SA 4.0, Credit: Lawrence Ruiz)

So, why is it that despite a large body of evidence warning us of the impending climate crisis, we have been unmotivated to mitigate it? Common sense should reveal that the ecosystem is just as vital a common good as public health, but for many of us in wealthier countries, and particularly in urban areas, the natural environment is somewhat “out of sight, out of mind.” The number of people we find suffering from the effects of climate change is much lower compared to the number of those we know who are sick or dying from COVID-19. While the virus is widespread throughout socioeconomic classes, climate change adversely affects lower-class communities and people in developing countries first and worst. As noted in a study published by the Center for Global Development, “Climate change will be awful for everyone but catastrophic for the poor.”

Further exacerbating the ignorance of the developed world, and especially in the U.S. government, are the vested interests of many powerful players causing climate change. While corporations and political representatives who initially downplayed the effects of the virus have had to renege on their statements due to the massive economic shutdown, the energy majors have been monkeywrenching U.S. policy pertaining to greenhouse gas emissions. For example, Big Oil spent “more than $2 bn…lobbying Congress on climate change legislation between 2000 and 2016.” Expenditures like this make it seem unlikely that we can expect behavioral mandates—federal or state—to mitigate climate change anytime soon.

Sweeping Systemic Change Needed Now

The science is clear and bolstered by evidence from the COVID-caused recession in China: There is a fundamental conflict between economic growth and environmental protection. Recent months have confirmed that a return to our pre-pandemic lifestyle means a return to unsustainable resource extraction and emission rates. Not only have efforts to get the global economy “back on track” come with “compromising global investments in clean energy and weakening industry environmental goals to reduce emissions,” but other lifestyle changes to avoid the virus threaten serious regression in terms of environmental protection. For example, more people are choosing to drive to avoid contracting COVID-19 on public transit, and single-use plastic has become significantly more prevalent in restaurants and food-delivery services as they struggle to keep up with sanitation guidelines.

It’s hard to get enthused about “reduce, reuse, recycle” when we are told that every surface we touch may be contaminated with a deadly virus. Even reverting to pre-pandemic waste practices, which weren’t very sustainable to start with, could take re-education on a massive scale. It just wasn’t wise to get boxed into this corner; up hard against limits to growth.

The global infrastructure vulnerabilities that have been exposed in the struggle to combat the novel coronavirus reveal one thing for sure: Tackling climate change, one of many growth-induced environmental problems, requires an even more systemic approach than recovering from COVID-19. The only solution to these problems is a comprehensive policy shift, first by developed nations, toward a steady state economy, where population and consumption are stabilized within ecological constraints.

If we start to make the transition now, policy reforms could perhaps still be gradual and structured, without the chaos and suffering that comes with a macroeconomic supply shock. We need our leaders and institutions to acknowledge the conflict between economic growth and environmental protection now. Otherwise, we are unmistakably headed for more environmental breakdowns, pandemics, and long-running recessions.

Madeline BakerMadeline Baker is a former CASSE intern (spring 2020) and a senior majoring in International Economics and Finance at the Catholic University of America.

The post The Silver Lining of the COVID-Caused Recession is Fading Fast appeared first on Center for the Advancement of the Steady State Economy.


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