Limits To Growth And Beyond – Part II

Affluence is a relative term in societal contexts because in each society standards there are rich and poor. But there are few in the world, as many from North as from South, who are rich by any standard. Similarly, despite raised standard of living, there are under-privileged people in both the developed and developing nations, people who lack jobs, health security, education, food and home. And there are a large number of people under famine, malnutrition, water and sanitation stress and vulnerable to diseases and death. When world economy collapses and industrial output plummets down the curve, it is the most vulnerable section of humanity that receives the mortal blow first. But for now, the Limits to Growth are felt by the affluent societies of the developed world more than the developing world.

‘For the first time in the history of America, America’s debt rating has been downgraded. Wall Street’s past three sessions tanked over 1,200 points, the biggest nosedive since November 2008. Billions, if not trillions, of dollars in 401k plans and investment accounts have disappeared, maybe forever. Voter polls say that 83% of Americans have had enough of polarized politics. Yet, our Contentious Politicians refuse to let up. After all, 270 members of Congress have signed a no-tax “Taxpayer Protection Pledge” sponsored by the ATR – Americans for Tax Reform – led by Grover Norquist. And the ATR holds the lawmakers to their pledges, right or wrong, Constitutional or not. Compromise, a central core of effective Republican government, has tanked like the stock market. Thus, the American Debt Crisis is far from resolved. In the meantime, the European Debt Crisis continues to search for a solution, interrupted by blazing riots in London, triggered, it is said, by jobless, hopeless young men,’ writes Dick Jackobs in Global Naturalist. We do not have USA as one economic super power to look up to as a problem solver anymore. Its growth has dwindled down to almost nothing and you have Occupy Wall Street movement to vouch for the distrust the common people of America have for the financial institutions, supposedly its growth engines.

Europe is no better. The New Economic Foundation , a British Think Tank says, ‘The  financial  crisis  exposed  deep  flaws  in  the  approach  to  economics  that  has dominated  policy-making  for  a  generation.  It  turns  out  that  letting  markets  rip does  not  always  lead  to  the  best  outcomes  for  societies.  Government  intervention,  far from  being  inherently  inefficient,  turned  out  to  be  essential  to  prevent  system-wide collapse.  A  return  to  blind  faith  in  markets  to  deliver  a  future  of  endless,  rapid  growth is impossible to imagine now.’ I imagine no one will consider Africa as any indicator of growth and that leaves Asia with India and China – the countries chugging along with substantial GDP growth. However, the measure of such growth do not take into consideration loss of ecological resources in trillions of dollars so these growths are merely indicative of income surges and relative raising of life standards – they are not true indicators of development. The NEF report indicates that in the period to 2050 the cumulative cost  associated  with  climate  change  will  range  from  £1.6  and  £2.6  trillion,  while  the cost of addressing social problems related to inequality will reach £4.5 trillion.

The peak oil, climate change, ecosystem pressure and worldwide recession are dots one needs to connect to see the tip of a Malthusian ice-berg. That’s business-as-usual for you.

In 1944, in a war ravaged Europe, an Austro-Hungarian political economist, Karl Polanyi, wrote a book named The Great Transformation. In a way, this I think is the first warning and critique of the perils of a Market Society where markets are the paramount institution for the exchange of goods through price mechanisms. Polanyi argues that there are three general types of economic systems that existed before the rise of a society based on a free market economy:

  1. Redistributive: Trade and production is focused to a central entity such as a tribal leader or feudal lord and then redistributed to members of their society.
  2. Reciprocity: The exchange of goods is based on reciprocal exchanges between social entities. On a macro level this would include the production of goods to gift to other groups.
  3. House holding: Economies where production is centered around individual household production. Family units produce food, textile goods, and tools for their own consumption.

These three forms were not mutually exclusive nor were they mutually exclusive of markets for the exchange of goods. The main distinction is that these three forms of economic organization were based around the social aspects of the society they operated in and were explicitly tied to those social relationships. Polanyi argued that these economic forms depended on the social principles of Centricity and Symmetry and Autarky (Self-Sufficiency). Markets existed as an auxiliary avenue for the exchange of goods that were otherwise not obtainable. They relied on the social Principles of Centricity and Symmetry.

Polanyi’s stress on attaching market driven economy and its immediate fruits of development with the long term social goods (in 1944 there was not much awareness about ecosystem services) was largely ignored since such economic models helped Europe overcome the war debts rather quickly. But the warning was there.

As Meadows et al were writing The Limits to Growth, a portion of the project’s commissioner the Club of Rome and intellectuals such as Nicholas Georgescu-Roegen, Jean Baudrillard, André Gorz, Edward Goldsmith and Ivan Illich, whose ideas reflect those of earlier thinkers, such as the economist E. J. Mishan,[13] the industrial historian Tom Rolt,[14] and the radical socialist Tony Turner, offered a radical responsive concept of degrowth in a 1970 paper. Degrowth thinkers and activists advocated for the downscaling of production and consumption—the contraction of economies—as overconsumption lies at the root of long term environmental issues and social inequalities. Key to the concept of degrowth is that reducing consumption does not require individual martyring and a decrease in well-being. Rather, ‘degrowthists’ aim to maximize happiness and well-being through non-consumptive means—sharing work, consuming less, while devoting more time to art, music, family, culture and community. The contemporary degrowth movement can trace its roots back to the anti-industrialist trends of the 19th century, developed in Great Britain by John Ruskin, William Morris and the Arts and Crafts Movement (1819–1900), in the United States by Henry David Thoreau (1817–1862), and in Russia by Leo Tolstoy (1828–1911).

Two interesting aspects of the degrowth movements are:

  1. At the individual level, it is proposed that, degrowth is achieved by voluntary simplicity, which is a simple and self sufficient life-style mostly inspired by M.K.Gandhi.
  2. Degrowth opposes sustainable development because, while sustainable development aims to address environmental concerns, it does so with the goal of promoting economic growth which has failed to improve the lives of people and inevitably leads to environmental degradation.

Degrowth stands in sharp contrast to current forms of productivist capitalism that consider the accumulation of capital and commodities a desirable end. It denies growth as measured through GDP conventionally and a modern proponent of degrowth, Serge Latouche, a professor of economics at the Paris-Sud 11 University, has noted that:

If you try to measure the reduction in the rate of growth by taking into account damages caused to the environment and its consequences on our natural and cultural patrimony, you will generally obtain a result of zero or even negative growth. In 1991, the United States spent 115 billion dollars, or 2.1% of the GDP on the protection of the environment. The Clean Air Act increased this cost by 45 or 55 million dollars per year. [...] The World Resources Institute tried to measure the rate of the growth taking into account the punishment exerted on the natural capital of the world, with an eye towards sustainable development. For Indonesia, it found that the rate of growth between 1971 and 1984 would be reduced from 7.1 to 4% annually, and that was by taking only three variables into consideration: deforestation, the reduction in the reserves of oil and natural gas, and soil erosion.

The problem seems to be the inherent inability of the neo-classical economics in the Capitalist models of Market Economy to account for the long term ecological costs on present economic activities. While ‘Degrowthists’ forsake such models altogether, Natural Capitalism seeks to account for such costs. Paul Hawken, Amory Lovins and Hunter Lovins in their 1999 book named Natural Capitalism: Creating the Next Industrial Revolution” said, (the traditional ‘Industrial’ Capitalism) “does not fully conform to its own accounting principles. It liquidates its capital and calls it income. It neglects to assign any value to the largest stocks of capital it employs- the natural resources and living systems, as well as the social and cultural systems that are the basis of human capital.”  They also asked fundamental questions like: What would our economy look like if it fully valued all forms of capital? What if our economy were organized not around the abstractions of neoclassical economics and accountancy but around the biological realities of nature? What if Generally Accepted Accounting Practice booked natural and human capital not as a free amenity in inexhaustible supply but as a finite and integrally valuable factor of production? What if in the absence of a rigorous way to practice such accounting, companies started to act as if such principles were in force? I wrote two blogs related to these issues which you can refer here and here.

The New Economics Foundation proposes the great transition in their working paper (free downloadable pdf here) where they propose a self regulating market (regulation via price-mechanism) that makes the social ‘bads’ too pricey to afford and social ‘goods’ universally affordable. The trasition is proposed to be working in 7 steps:

  1. The Great Revaluing – a paradigm shift towards a social value based decision making in both private and public sectors devising markets that depict true environmental costs and benefits of goods and services. Prices in such markets are truly proportional to the values of commodities in terms natural capital appropriation and price-mechanism controlling human behavior of spending and saving, ultimately restoring earth’s regenerative capacity to catch up with consumption.
  2. The Great  Redistribution – a  redistribution  of  both  income  and wealth  creating  value  as  resources  are  moved  from  those  who  do  not  need them  to  those  who  do. It proposes creation  of  Citizens’  Endowments  for  all  people  on  reaching  the  age  of  21  to  enable  them  to  invest  in  their future,  as  well  as  Community  Endowments  to  provide  commonly  owned  assets  to invest in our local neighborhoods. Both would be funded by a proposed increase in inheritance tax on all estates. Also proposed is  a  redistribution  of  ownership  to  create  a  form  of  ‘economic  democracy’, where  company  shares  are  progressively  transferred  to  employees  in  a  resurgence of  mutual  and  co-operative  ownership  forms.
  3. The Great Rebalancing – a  positive  case  for  markets,  but  only  once markets  have  been  set  up  in  such  a  way  that  prices  reflect  true  social  and environmental  costs  and  benefits,  and  when  those  markets  operate  within scientifically  defined  limits,  the  market  sphere  being more  tightly  drawn  and  rebalanced  alongside  the  public  sphere  and  the  ‘core economy’  –  people’s  ability  to  care,  teach,  learn,  empathize,  protest  and  the  social networks  these  capacities  create.
  4. The Great Localization – an  expanded  concept  of  ‘subsidiarity’  –  the  idea  that  decisions  are  best taken  at  as  local  a  scale  as  possible.  This  is  enshrined  in  the  principle,  if  not always  the  practice,  of  the  European  Union  with  regard  to  political  participation and  decision-making,  which  needs  to  be  made  more  genuinely  participatory  and democratic  but  also  more  meaningful.  By  this  we  mean  moving  real  power  away from  the  centre  to  devolved  democratic  bodies  and  giving  local  people  a  real  say in  how  this  power  is  exercised.
  5. The Great Reskilling – greater local production will require us to relearn many skills that have been forgotten.  From  agriculture  to  manufacturing  to  the  provision  of  local  finance, returning  to  appropriate  scale  means  equipping  ourselves  with  the  means  to  do so.  Becoming  less  passive  in  terms  of  consumption  and  production  we  would start  to  regain  our  autonomy,  which  would  extend  to  culture  and  arts,  where  we describe  the  beginning  of  a  life-enhancing  renaissance.  This  is  not  just  the  case for  the  economy  and  for  the  arts  however;  local  decision-making  based  on  active participation  will  be  most  effective  when  people  are  well  informed  about  what makes  their  local  economy  tick  and  what  makes  public  services  able  to  achieve the best outcomes. Achieving consensus requires as full an understanding of these issues as possible.  
  6. The Great Economic Irrigation - a  shift  from taxing  ‘goods’  such  as  work,  to  taxing  environmental  and  social  ‘bads’  such  as pollution,  consumption  and  short-term  speculation.    It is proposed that  new  variable consumption  taxes should be  replacing  income  tax  for  the  majority  of  the  population, reflecting  the  social  and  environmental  costs  of  goods.  For  private  finance  NEF  distinguishes  between  national  and  local,  arguing  that  large-scale  projects such  as  building  a  green  energy  and  transport  infrastructure  should  be  funded through national level environmental and ‘land’ taxes and the  creation of public money  where  appropriate.  This would be channeled through a national ‘Green Investment Bank’.    For  private  credit  we  suggest  linking  the  ability  of  banks  to create credit with the ability of borrowers to build social and environmental value, creating  a  ‘race  to  the  top’  and  reducing  damaging  credit  bubbles.
  7. The Great Interdependence – assumes a particular Global Deal, which addresses global inequalities from both a development and an environmental perspective. It is proposed that all developed countries pool money and a breather period for the developed countries to pull down emissions and developing countries utilizing the money to transform to cleaner forms of energy thereby converging on a global average.

In essence the great transition proposed by NEF foresees natural capital being valued, environmental costs factored in the prices of commodities, localization of consumption, community participation in decision making and a value based appreciation of life standards instead of accumulated wealth. It does not leave space for modern MNCs to grow.

I see a deep paradigm shift in how we see growth and prosperity in all these solutions. I do not imagine such reversal to be initiated from institutions or Governmental policies of nations but rather they seem to results of social reforms. Though radical, voluntary simplicity plays an important role for such solution to work. Moreover, the NEF model is very difficult to conceive to be working in isolation in national territories; rather it seems to me in its core it proposes a global village, a collection of self sufficient communities worldwide in perfect cohesion with each other. This indicates the lessening of importance of geopolitical borders with nation level politics and emergence of a new world order with environmental concerns as its reigning ‘ethos’.

May be my ideas were not that crazy after all.

1 Comment

  • I like the idea you once suggested, that we develop an ethical code about the number of children we have and how we use the environment. It seems like in the United States, sad as it may be, that most decisions are based upon money. We have for the time being postponed decision to build the XL pipeline, which will certainly cause great environmental damage. However, the tar sands are worth a lot of money and it looks like eventually someone will find a way to exploit them. It seems the world is addicted to oil.
    Using Nicholas Stern’s report and information from the EPA, I worked out that we are subsidizing fossil fuels by at least $74 per barrel of oil equivalent of energy by allowing emissions to be dumped into the environment. (See http://jcmooreonline.com/2012/01/13/who-wants-to-kill-the-electric-car/) And, that does not include the military cost involved in defending our oil supply. Perhaps if the world could agree on a system to charge fossil fuels their true cost, then we would see that it is economically unfeasible to continue to rely upon them for energy sources.

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