Economic Growth IS BAD for the environment

A few weeks ago, Scott alerted us to the anti-environment lies and drivel that Richard Pombo is spreading through the House Committee on Resources website.  The site is disgusting propaganda under the guise of official US policy.

Scott made one comment though which I cannot let pass without more discussion:

Last time I checked, "[e]conomic growth harms the environment" was not one of the chief claims being put forward by the environmental movement. Rather, it seems to me that the exact opposite claim has been repeatedly made by mainstream environmentalists, that development of new, more environmentally responsible technologies can help to grow the economy.

In fact, economic growth does harm the environment and this is beginning to be addressed by ecologists and environmentalists, including The Wildlife Society, for example.

It is first useful to review some definitions.  Economic growth is the increase in the production and consumption of goods and services.  Growth occurs by increasing population, per capita consumption, or both.  Economic development, on the other hand, refers to the rearrangement of economic sectors to improve the overall quality of the existing production.  Note that growth focusses on quantity and development on quality.  This is not unlike the distinction  between young (growth/quantity oriented) and old (quality/specializing) ecosystems as described by Eugene Odum in 1969 in Science.

Problem: Unlimited growth is an impossibility.

Before I continue, I should disclose that I am not an economist,  I am an ecologist.  You may quibble with my portrayal of economics, but only a rudimentary understanding of economics and ecology are necessary to identify the pitfalls of economic growth.

FALLACIES OF NEOCLASSICAL ECONOMICS

Neoclassical economics suggests that we can continually increase efficiency with technological advances, we can maintain continued growth in perpetuity, and we can substitute resources as necessary.  Technology certainly plays a role in economic growth and economic development.  Technology allows us to grow more food  and mine more ore than in the past. Technology also has helped us improve the development of our economy; that you are reading this on your computer is evidence to that.  Technology, however, cannot be a continual savior to our resource demands, because our natural resources are limited.  The resources we currently are using are limited and so are the ones we might use as substitutes in the future.  Solar power may be renewable, but how much of the earth can we cover with solar panels?

Because all human systems derive from natural systems and natural laws, it follows that at some point we will also experience natural limits.  We will eventually reach our carrying capacity on earth, just as every other species reaches a carrying capacity.  As for all other forms of life, we will reach the limits of some resource if we maintain a policy of unlimited economic growth.  The resource may be energy, clean water, or arable land.  In many places in the world, we have already reached or surpassed the limits of our natural resource base and are experiencing serious decreases in productivity (except that we call it famine in East Africa, water pollution in Love Canal, etc.).  The empirical evidence which supports this claim is massive and the two examples cited above are a tiny fraction that could be mentioned.  The presumption that continual economic growth is possible directly contradicts ecological theory.  This is not doom and gloom.  I'll explain why below.

Economists tell us that liquidating capital does not increase income.  Income is the amount of consumption possible over a period of time without harming future productive capacity.  A pizza delivery person may increase liquid assets by selling his car and buying a new pair of tennis shoes, but this will hurt his future productive capacity as he will be unable to deliver as many pizzas.  Liquidating his capital does not lead to him increasing his income.  Nor does liquidating our natural resource base increase our national/global income in the long term, yet that is what neoclassical economics teaches us to do by emphasizing economic growth.

A STEADY STATE ECONOMY

What then, is the option?  It is to stop focussing on economic growth and to recognize that we can improve our economic development (a quality argument) by entering into a steady state economy.  A mature ecosystem eventually reaches the point of dynamic equilibrium.  At this point, the ecosystem is not unchanging (far from it) but production ceases to increase.  Production does not cease, it just remains fluctuating around an equilibrium point.  In mature ecosystems, quality increases and you typically find greater specialization (diversity) and more efficient use and apportionment of resources.  A steady state economy would work in a similar way.  Quality of the economy would increase as it became more diversified and predictable.  Resource use would continue at sustainable levels which would not harm future productive capacity, maintaining income.  This is hopeful.  It provides us with a way to live within our limits and to know that the future is secure.

What would this system look like?  Is it socialist?  Partly, perhaps, but not as far from our current system as we might suppose.  You could still get rich (or poor) as you participate in economic sectors that improve the quality of the overall economy (e.g. biotech, computers, etc.).  Companies with good business models and products would continue to prosper, while those with poor business models or products would decline (e.g. Toyota & General Motors).  The farmer who grows the best apples will continue to thrive while the farmer who neglects his orchard  struggles.  The steady state economy does call for a target level of steadiness to be reached.  This can be done in one of two ways.  The hard way is to wait until nature imposes its limits and we struggle to adapt to resource shortages and rising prices and demand for scarce necessities.  The easier way is to pick a target below that level and plan our economy to fluctuate around it.  On the surface, this sounds like socialism or communism--a planned economy.  But consider this:  The  federal reserve governs monetary policy to guide our economy.  We Americans think that monetary policy, and its relationship to economic development (and growth) is so important that we have made the Fed chairman an autonomous position with the responsibility to choose and guide us to targets in inflation and national production.  It would not be that much more difficult or intrusive to add a few more targets.  We created the Fed to help maintain predictability in our economy, yet, as resource limitation increases, our economy will become less predictable.  The current gas price situation illustrates this conclusion.  A democratic government can certainly manage a steady state economy, but perhaps it will look a little more European, like Switzerland or the UK.

We might consider when the best time would be to transition into a steady state economy.  The answer would seem to be as soon as practical.  The nature-imposed steady state economy will occur after much more population growth.  At that point, there will be much less of a resource base to spread around.  With some 12 billion people on earth by 2050, we will each have a smaller piece of the pie.  Wealth would actually be greater if we entered a steady state economy sooner. With a fixed amount of natural resources providing the base for all economic production, individual wealth would be higher on average with a smaller population.

Finally, Scott refers to the Apollo Project as an example of an environment group that makes the opposite claim to "economic growth harms the environment." Actually, they do not address this point at all, although it may be because many people use economic growth and economic development interchangeably.  If you look at the Apollo project website, they promote new technology as a way to help us improve our economy, provide high quality jobs, and reduce our dependence on oil.  Much of their argument centers on developing the quality of our economy by expanding our participation in the alternative energy sector, which suggests that they might be considering economic development.  On the other hand, their economic impact study states (pdf):

Moreover, the research, technologies, products, and methods represent a unique fit in the American economy. They involve higher value-added and, hence, higher paying employment. These top-quality jobs are necessary to offset the inevitable loss of manufacturing jobs in lower technology segments and to create opportunities for a new era of expanding production capacity.

This last part suggests they are focussed on growth.  Honestly, I don't think they address what the future economy should be in any coherent manner.  This is probably not intentional, but the result of their focus not so much on the environment, but on jobs and energy security.  Aside from the Wildlife Society, other organizations have adopted position statements on the harms of economic growth and the benefits of emphasizing economic development within a steady state economy, including the North American section of the Society for Conservation Biology.  Support for a steady state economy is currently being considered by the Ecological Society of America and the Soil and Water Conservation Society.  It is interesting that the professional societies are leading the way on this subject, hoping that the environmental NGOs will follow the lead.

More information on steady state economies can be found at the Center for the Advancement of the Steady State Economy.  I also recommend the writings of Brian Czech. (I am not him, nor am I associated with CASSE.)

While I do not expect everyone will be thrilled with the idea of a steady state economy.  It is a debate we should engage in, because the limits to economic growth will eventually show themselves.

PS:  I am not able to read/respond to MyDD constantly, but I will check back tomorrow night.

Tags: Economy, Environment, Natural Resources, Richard Pombo, sustainability (all tags)

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