Toward a Sane Economic Model

12/16/21

Hello everyone:

Here’s what I have this week in curated Anthropocene news:

Good Ideas, Working: From Yale e360, a debunking of the myths that claim renewable energy sources make the grid unreliable, and an overview of the remarkable floating housing projects the Dutch are building as an embrace, rather than a retreat, from rising seas.

Climate of Conflict: From the Crisis Group, an effective visual explainer of how climate change exacerbates armed conflict around the world. As intensified droughts and flooding plague regions, the Crisis Group expects conflicts to arise from the food insecurity and refugee crises that have already worsened political strife.

War and Peace and the Anthropocene: For the literati among you, a fine – and somehow brief! – exploration of a few ways Tolstoy’s classic novel informs us about our “war” against the Earth. It’s one of many good picks from Nicie Panetta’s Substack newsletter, Frugal Chariot.

Now on to this week’s essay. This is the third (and last) dive into the modern world’s catastrophic obsession with economic growth, so new readers might want to start at the beginning.

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Much of Earth at night

The fantasy of constant growth has inflicted extraordinary harm on Earth’s systems. It has done so in a period of time so short it scarcely exists in Earth history.  But some signature of that harm, even if we do as we should and lessen it from this day forward, will persist for millions of years in the geological record. This is the marvel and the malice of the Anthropocene.

For humans, the consequences of obsessive, remorseless constant growth have ranged from the truly horrifying – slave labor, resource-driven genocide, the deliberate impoverishment of billions for the enrichment of millions, industrial poisoning of our homes and water and bodies, plus a couple World Wars – to the beautiful and astonishing accomplishments of medicine, science, art, literature. We’re mapping DNA, the universe, and consciousness. We’re carrying computers in our pockets and eating ice cream in orbit. We power everything with Mesozoic slime. Standards of living for those of us reading this would be unimaginable to preindustrial societies. (That they’re also still unimaginable to a billion or so people living today gets back to my first point.)

The metastatic growth of global trade brings goods to every corner of the Earth, provided someone with money is there to receive it. Case in point: I’ve stood on a very remote glacier in Antarctica and watched a small plane appear between unnamed peaks as it brought me some tractor parts, a few chocolate bars, and my mail. (It was your money – your tax dollars – that paid for the plane and chocolate and my salary, by the way, so Thank You.)

But I think it’s worth saying that these heady benefits, which have filtered through to many of us from an economic engine that devours landscapes, are now very much at risk. For a sense of just how fragile things are, look no further than the impact of the pandemic on the web of resource extraction we euphemistically call “the global supply chain.” As terrible as it is, SARS-CoV-2 has a mortality rate among the infected of about 1.4%. Imagine the rapid collapse of economies if it had the 15% or 37% mortality rates of two other noted coronaviruses, SARS and MERS.

But it’s not the likelihood of the next pandemic that I’m thinking about when I suggest the benefits of constant growth are at risk. It’s the multifactorial risk of social and political instability posed by the twin crises in climate and biodiversity. I’m not here to predict the end times, but to remind you and me both that within the very nature of constant growth is its own demise. A system of exploitation, trade, and finance built on two centuries of destruction so intense that it will have a geological signature resembling at least a hint of a mass extinction is not a safe path forward. Growth for its own sake is a dangerous fiction of infinity on a very finite planet.

Specifically, as species falter around the globe, as the atmosphere and oceans transform amid our supervolcanic flood of carbon, as temperatures climb and weather patterns are torqued, and as refugee populations increase, it seems rational to wonder if the infrastructure of civilization will struggle to offer the rich benefits some of us have enjoyed for several generations now. As chaos increases in Earth’s systems and in human societies, to what extent will the latter be able to sustain, say, complex food networks and the provision of advanced medicine to whoever asks? How will democracies and alliances fare? Will extreme poverty around the globe continue to decline, or will that progress be disrupted? We don’t have answers, because we’re still writing the story of the 21st century. But like so many questions about the Anthropocene, the answer matters less than the active responses to the risk: finding motivation, changing behavior, building resilience, creating adaptations, regenerating some of what’s been lost.

The growth mindset has morphed us from residents of a small island paradise to castaways carelessly practicing slash-and-burn agriculture because we know the island has always provided. Or rather, a minority in power on the island have convinced the majority that the destruction is in their best interest. The island in this metaphor is a sphere in space, of course, and it’s no accident that today’s billionaires are zooming into low orbit and promising that mining on the Moon and beyond is high on their to-do list.

The odds that Moon mining will benefit the world’s poor are slim. Economic development – the application of wealth to human well-being – has made amazing strides but has never been the purpose of global economic growth. Growth feeds itself, and we compete to feed off of it. Just as the experiment of extreme capitalism has had a limited period of time to thrive, there have been only a limited number of people who have thrived within it. It’s true that the percentage and total number of people living in extreme poverty have dropped steadily due to overall growth, but only a tiny sliver of the world live on what we consider a decent U.S. income. According to an incredibly comprehensive and well-written page on global poverty at the Our World in Data site, “Most people in the world live in poverty. 85% of the world live on less than $30 per day, two-thirds live on less than $10 per day, and every tenth person lives on less than $1.90 per day.”

Continued growth, “green” or not, is incapable of solving its equity problem. Bigger, richer mining companies scraping the Moon’s surface, for example, aren’t going to trickle down wealth or health through Earth’s atmosphere to the slums of India, to farmers in a parched Midwest, or to the dislocated residents of drowned island nations. Alexander Zaitchik touched on all of this in his article in The New Republic:

Even if you accept the argument that inequality would be best addressed by more centuries of trickle-down growth, you keep running up against the simple fact of its impossibility. Even just one more century of growth – which so far has shown no sign of taking a less destructive form – will require multiple earths. This is the neatest explanation for why Eric Schmidt, Elon Musk, and Jeff Bezos have invested in interplanetary colonization and asteroid mining. They know we can obey laws of the universe or the laws of growth, but not both.

Which begs the question of whether a different kind of global economy, one that eliminates growth as its purpose and treats the Earth as our host and health, is possible. It certainly seems necessary.

Two ideas at play here are a “steady state” economy and “degrowth.” As I wrote at the end of last week’s essay, a steady state economy is based on stability in population and consumption, and on sustainable resource use. Degrowth is about shrinking the global economy until civilization threads into, rather than shreds, the planet’s ecology. Let’s take them one at a time. Each is underpinned by a library of books and academic research, so this very brief tour is akin to walking through the stacks and running my fingers along the spines. But it’s a start.

And my starting point for steady state economics is CASSE, the Center for the Advancement of the Steady State Economy, whose mission is “to advance the steady state economy, with stabilized population and consumption, as a policy goal with widespread public support.” It’s well worth reading their list of 15 policy priorities as a way of mapping out the steady state concept. Here are a few that caught my eye. The first is daunting to the point of impossibility, the second is brilliant (I love the pairing of minimum and maximum income, and the idea of taxing “bads” rather than goods), the third is a rational view of GDP, and the fourth is the kind of simple fix we all think about but never hear about:

Stabilize population, and aim for a long-term population size that enables a high standard of living for everyone without undermining ecological systems and the life-support services they provide.

Limit the range of inequality in income and wealth, including both a minimum and maximum allowable income. Implement tax reforms to tax “bads” (e.g., pollution and depletion of natural resources) rather than goods (e.g., income from wages).

Continue to monitor GDP, but interpret it as a measure of the size of the economy and an indicator of environmental impact. Use other indices to measure economic welfare and social progress, such as the Genuine Progress Indicator.

Limit the scope of advertising to prevent unnecessary demand stimulation and wasteful consumption.

If these and the other steady state policy objectives sound like the to-do list for freedom-crushing autocrats, that’s a misreading. These policies are the end result of an analysis that starts with a real-world problem (“the biggest idea of the twentieth century—economic growth—has become the biggest problem of the twenty-first”), then imagines a world that has solved that problem, and then lists objectives to move us toward that world. If population growth and runaway consumption and inequality are problems that must be solved rather than freedoms to be enjoyed at all costs, then the solutions (if fairly and wisely implemented) will be difficult but necessary.

A steady state economy sounds like a euphemism for a permanent recession, but CASSE has a nice metaphor for the difference: a growth economy failing to grow is a plane trying to hover, while a steady state economy is a helicopter designed to stay right where it is. With a stable (or in reality, mildly fluctuating) population, a rate of per capita consumption which doesn’t overshoot ecological limits, a banking/finance industry built on real asset values rather than on debt that requires growth to pay off, an emphasis on durable goods rather than wasteful throwaway products, and an overarching purpose to structure economies around human welfare and environmental well-being, a steady state economy is healthiest when it’s balanced.

What’s being balanced? Birth rates against death rates; production of materials against depreciation of goods; and the flow of natural goods through the human economy. Perhaps the best introduction to a steady state economy is the Earth itself. As Herman Daly, founder of CASSE and an ecological economist largely responsible for articulating the modern steady state concept, has noted, “The Earth as a whole is approximately a ‘steady state’. Neither the surface nor the mass of the earth is growing or shrinking; the inflow of energy to the Earth is equal to the outflow…”

Now that I’ve sung steady state’s praises, I’d like to point you to real-world examples. But I can’t. No economy is built on steady state principles. But many of its ideas are increasingly popular. Most environmental legislation, for example, is built on the idea that there should be limits to what we take, destroy, or develop. Most of us want to see inequality reduced and standards of living raised for everyone. Proposals for minimum incomes are increasing, as are calls to increase taxation for industries ignoring their social and environmental costs. And who, assuming wages are strong, doesn’t want the option of a shorter and more flexible work week?

What size should a steady state economy be? How many humans and how much consumption? My sense is that whatever those numbers are, they’re a good deal smaller than today’s. If you want to pursue those answers, you could start this 2008 Daly essay, peruse the CASSE site (esp. their folder of 2-page briefing papers), read their 2013 book, Supply Shock: Economic Growth at the Crossroads and the Steady-State Solution, and check out the UK’s Center for Sustainable Prosperity.

How we might get to a theoretical steady state revolves largely around the next topic for discussion: degrowth. As Brian Czech at CASSE frames it,

In a postgrowth world, we’ll have two basic options: degrowth or a steady state economy. And the fact is, we’ll need them both in stages. Because we’ve liquidated so many natural capital stocks, and destroyed so many funds of ecosystem services, we’ve got to shrink the economy before we can get it back to a sustainable level for a long-term steady state.

Degrowth is more of a European concept, while in the U.S. the conversation (such as it is) revolves around the steady state idea. But the two are bound together, as Czech notes, because of the need to scale back the civilizational pressure on the web of life. As one study put it, “Economic de-growth is not a goal in itself, but the rich North's path towards a globally equitable [steady state economy].” A good introduction to degrowth is Jason Hickel’s new book Less is More: How Degrowth Will Save the World, which I touched on two weeks ago at the start of this discussion. (You can get a quick hit of Hickel’s worldview in this short video, or for a deeper dive you can watch (as I have not) this nearly 2-hour-long video explaining degrowth.)

Again, steady state is more a question of What (we need to do) and degrowth is a question of How (we get there). The idea of shrinking an economy, particularly here at the top of the global food chain, is anathema to the growth mindset we’ve all been taught. Imagine the fears (and fearmongering) in response to any announcement of such a plan: recession, depression, large-scale unemployment, bankruptcies, etc. But degrowth, properly managed, would mean a gradual reordering of the economy, starting with segments that don’t need to be growth-oriented, all while working to drop the birthrate below replacement rate. The way to look at degrowth, Hickel says, is in terms of creating abundance for society rather than setting limits for individuals. That is, degrowth is intended to move production toward building public goods – health care, child care, education affordable housing, mass transit – rather than private wealth. (Zaitchik describes this with a word “that never appears in [Hickel’s] book: ecosocialism,” but that’s a topic for another day.)

Everything about this is ridiculously daunting. Degrowth means rewriting economics with ecological principles, making population a matter of government policy, downsizing or nationalizing or eliminating industries that have pulled government’s strings for generations, redefining wealth while redistributing wealth, and volunteering the wealthiest nations to make the first and deepest cuts.

Why us first? Because according to ecological economists, at our current world population no one should be using more than 8 tons of materials per year. Those of us in high-income nations have a materials footprint of about 28 tons per person. Someone in a low-income nation uses about 2 tons of materials. It’s 4 tons per person in lower-middle-income countries and 8 tons per person in upper-middle-income countries. As with greenhouse gas emissions, the wealthiest countries are responsible for nearly all the damage done so far. That said, it’s not just a matter of some redistribution fantasy wherein spreading the wealth ends the Anthropocene. If today’s level (or 1970’s level, for that matter) of resource exploitation were spread evenly around the world it would still be a catastrophe. An equitable calamity is still a calamity. And remember that much of what’s called the global south is on the move up the consumption ladder, faster now than at any other time in history. So while the wealthiest societies have to voluntarily scale back, the poorer ones have to voluntarily proceed with caution.

So, yes, the path to degrowth is daunting…

But I’d argue that degrowth is no more daunting than the future we’re trying to avoid. The problem is that degrowth and steady state economics are unknowns. Human nature dictates that we’re happier fighting wars we understand – even if we can’t win – than wars we don’t. And make no mistake, this kind of civilizational rewrite will require an all-hands-on-deck approach which has only occurred in the modern age, on a much smaller scale, during WW2.

Zaitchik puts a pretty dark spin on the choice:

Systems scientists and ecological economists have been warning for decades that degrowth is not a political decision that can be put off indefinitely, but a matter of throughput math and physics. The choice before us is the form we will allow degrowth to take – humane and controlled collective action and transformation, or chaotic civilizational tailspin, crash, and ruin.

The hope in this story – yes, there’s hope – is manifold. First, there are good answers out there to the problem of constant growth, and there are good people working to nudge civilization toward the ideas that underpin those answers. Second, we are those good people. Third, we should remember that the pandemic has taught us that when governments are faced with an existential crisis they are capable of listening to the scientists and coordinating a rational response full of actions they would never ordinarily take (universal basic income, anyone?). Fourth, the push for a rational economic model is also a push for a future in which people and nature thrive. As two organizers of the Extinction Rebellion movement wrote in the introduction to Less is More, “There is hope here again of achieving a beautiful coincidence: what we need to do to survive is the same as what we need to do to have better lives.”

I’ve rattled on for long enough, so here’s my final analysis. We know, with exquisite and incontrovertible evidence, that the planet is a vibrant and interconnected web of life, not a pile of inert resources at our disposal. We know now that our identity is more communal (with the species in and around our bodies) than individual, and that we have obligations to the community of life. We know that there are ecological limits, and that we are subject to those limits. We know that growth for growth’s sake is untenable. We know that two centuries of exponential growth have put the current balance of life on the planet on the edge of collapse. We know that growth will not cure the ills it creates. We know from decades of studies that we’re not any happier when we have more money or materials than we need. We know, then, that time has run out on our dangerous splurge with constant growth, and we know there are some smart, if untested, economic theories to replace it. We don’t know exactly how to proceed, and we don’t know how to deal with our fear of civilizational change, but we do know how to deal with the climate crisis and the biodiversity crisis, and that’s an excellent place to start. We may find that, as we reshape industry and policy and international relations in ways that reduce those crises, we’re actually nudging ourselves toward a sane economic model.

Thanks for sticking with me.