Category Archives: Growth

Top 10 Policies for a Steady-State Economy by Herman Daly

A steady-state economy is one that develops qualitatively without growing quantitatively in physical dimensions.

A steady-state economy is one that develops qualitatively without growing quantitatively in physical dimensions.

Let’s get specific. Here are ten policies for ending un-economic growth and moving to a steady-state economy. A steady-state economy is one that develops qualitatively (by improvement in science, technology, art and ethics) without growing quantitatively in physical dimensions (getting bigger); it lives on a diet—a constant metabolic flow of resources from depletion to pollution (the entropic throughput) maintained at a level that is both sufficient for a good life and within the assimilative and regenerative capacities of the Earth’s ecosystem.

Ten is an arbitrary number—just a way to get specific and challenge others to suggest improvements. Although the whole package here discussed fits together in the sense that some policies supplement and balance others, most of them could be adopted singly and gradually.

1. Cap-auction-trade systems for basic resources.

Caps limit biophysical scale by quotas on depletion or pollution, whichever is more limiting. Auctioning the quotas captures scarcity rents for equitable redistribution. Trade allows efficient allocation to highest uses. This policy has the advantage of transparency. There is a limit to the amount and rate of depletion and pollution that the economy can be allowed to impose on the ecosystem. Caps are physical quotas, limits to the throughput of basic resources, especially fossil fuels. The quota usually should be applied at the input end because depletion is more spatially concentrated than pollution and hence easier to monitor. Also the higher price of basic resources will induce their more economical use at each upstream stage of production, as well as at the final stages of consumption and recycling. Ownership of the quotas is initially public—the government periodically auctions them to individuals and firms. There should be no “grandfathering” of quota rights to previous users, nor “offshoring” of quotas for new fossil fuel power plants in one place by credits from planting trees somewhere else. Reforestation is a good policy on its own. It is too late for self-canceling half measures—increased carbon sequestration and decreased emissions are both needed. The auction revenues go to the treasury and are used to replace regressive taxes, such as the payroll tax, and to reduce income tax on the lowest incomes. Once purchased at auction the quotas can be freely bought and sold by third parties, just as can the resources whose rate of depletion they limit. The cap serves the goal of sustainable scale; the auction serves the goal of fair distribution; and trading allows efficient allocation—three goals, three policy instruments. Although mainly applied to nonrenewable resources, the same logic works for limiting the off-take from renewable resources, such as fisheries and forests, with the quota level set to approximate a sustainable yield.

2. Ecological tax reform.

Shift the tax base from value added (labor and capital) to “that to which value is added,” namely the entropic throughput of resources extracted from nature (depletion), and returned to nature (pollution). Such a tax shift prices the scarce but previously un-priced contribution of nature. Value added to natural resources by labor and capital is something we want to encourage, so stop taxing it. Depletion and pollution are things we want to discourage, so tax them. Payment above necessary supply price is rent, unearned income, and most economists have long advocated taxing it, both for efficiency and equity reasons. Ecological tax reform can be an alternative or a supplement to cap-auction-trade systems.

3. Limit the range of inequality in income distribution with a minimum income and a maximum income.

Without aggregate growth poverty reduction requires redistribution. Unlimited inequality is unfair; complete equality is also unfair. Seek fair limits to the range of inequality. The civil service, the military, and the university manage with a range of inequality of a factor of 15 or 20. Corporate America has a range of 500 or more. Many industrial nations are below 25. Could we not limit the range to, say, 100, and see how it works? This might mean a minimum of 20 thousand dollars and a maximum of two million. Is that not more than enough to give incentive for hard work and compensate real differences? People who have reached the limit could either work for nothing at the margin if they enjoy their work, or devote their extra time to hobbies or public service. The demand left unmet by those at the top will be filled by those who are below the maximum. A sense of community, necessary for democracy, is hard to maintain across the vast income differences current in the United States. Rich and poor separated by a factor of 500 have few experiences or interests in common, and are increasingly likely to engage in violent conflict.

4. Free up the length of the working day, week, and year—allow greater option for part-time or personal work.

Full-time external employment for all is hard to provide without growth. Other industrial countries have much longer vacations and maternity leaves than the United States. For the classical economists the length of the working day was a key variable by which the worker (self-employed yeoman or artisan) balanced the marginal dis-utility of labor with the marginal utility of income and of leisure so as to maximize enjoyment of life. Under industrialism the length of the working day became a parameter rather than a variable (and for Karl Marx was the key determinant of the rate of exploitation). We need to make it more of a variable subject to choice by the worker. Milton Friedman wanted “freedom to choose.” OK, here is an important choice most of us are not allowed to make! And we should stop biasing the labor-leisure choice by advertising to stimulate more consumption and more labor to pay for it. At a minimum advertising should no longer be treated as a tax-deductible expense of production.

5. Re-regulate international commerce—move away from free trade, free capital mobility, and globalization.

Cap-auction-trade, ecological tax reform, and other national measures that internalize environmental costs will raise prices and put us at a competitive disadvantage in international trade with countries that do not internalize costs. We should adopt compensating tariffs to protect, not inefficient firms, but efficient national policies of cost internalization from standards-lowering competition with foreign firms that are not required to pay the social and environmental costs they inflict. This “new protectionism” is very different from the “old protectionism” that was designed to protect a truly inefficient domestic firm from a more efficient foreign firm. The first rule of efficiency is “count all the costs”—not “free trade,” which coupled with free capital mobility leads to a standards-lowering competition to count as few costs as possible. Tariffs are also a good source of public revenue. This will run afoul of the World Trade Organization/World Bank/International Monetary Fund, so….

6. Downgrade the WTO/WB/IMF.

Reform these organizations based on something like Keynes’s original plan for a multilateral payments clearing union, charging penalty rates on surplus as well as deficit balances with the union, and seek balance on current accounts, and thereby avoid large foreign debts and capital account transfers. For example, under Keynes’s plan the U.S. would pay a penalty charge to the clearing union for its large deficit with the rest of the world, and China would also pay a similar penalty for its surplus. Both sides of the imbalance would be pressured to balance their current accounts by financial penalties, and if need be by exchange rate adjustments relative to the clearing account unit, called the “bancor” by Keynes. The bancor would also serve as the world reserve currency, a privilege that should not be enjoyed by any national currency, including the U.S. dollar. Reserve currency status for the dollar is a benefit to the U.S.—rather like a truckload of free heroin is a benefit to an addict. The bancor would be like gold under the gold standard, only you would not have to tear up the Earth to dig it out. Alternatively a regime of freely fluctuating exchange rates is a viable possibility requiring less international cooperation.

7. Move away from fractional reserve banking toward a system of 100% reserve requirements.

This would put control of the money supply and seigniorage (profit made by the issuer of fiat money) in the hands of the government rather than private banks, which would no longer be able to live the alchemist’s dream by creating money out of nothing and lending it at interest. All quasi-bank financial institutions should be brought under this rule, regulated as commercial banks subject to 100% reserve requirements. Banks would earn their profit by financial intermediation only, lending savers’ money for them (charging a loan rate higher than the rate paid to savings or “time-account” depositors) and charging for checking, safekeeping, and other services. With 100% reserves every dollar loaned to a borrower would be a dollar previously saved by a depositor (and not available to him during the period of the loan), thereby re-establishing the classical balance between abstinence and investment. With credit limited by prior saving (abstinence from consumption) there will be less lending and borrowing and it will be done more carefully—no more easy credit to finance the massive purchase of “assets” that are nothing but bets on dodgy debts. To make up for the decline in bank-created, interest-bearing money the government can pay some of its expenses by issuing more non-interest-bearing fiat money. However, it can only do this up to a strict limit imposed by inflation. If the government issues more money than the public voluntarily wants to hold, the public will trade it for goods, driving the price level up. As soon as the price index begins to rise the government must print less and tax more. Thus a policy of maintaining a constant price index would govern the internal value of the dollar. The Treasury would replace the Fed, and the target policy variables would be the money supply and the price index, not the interest rate. The external value of the dollar could be left to freely fluctuating exchange rates (or preferably to the rate against the bancor in Keynes’s clearing union).

8. Stop treating the scarce as if it were free, and the free as if it were scarce.

Enclose the remaining open-access commons of rival natural capital (e.g., the atmosphere, the electromagnetic spectrum, and public lands) in public trusts, and price them by cap-auction-trade systems, or by taxes. At the same time, free from private enclosure and prices the non-rival commonwealth of knowledge and information. Knowledge, unlike the resource throughput, is not divided in the sharing, but multiplied. Once knowledge exists, the opportunity cost of sharing it is zero, and its allocative price should be zero. International development aid should more and more take the form of freely and actively shared knowledge, along with small grants, and less and less the form of large interest-bearing loans. Sharing knowledge costs little, does not create un-repayable debts, and increases the productivity of the truly rival and scarce factors of production. Patent monopolies (aka “intellectual property rights”) should be given for fewer “inventions,” and for fewer years. Costs of production of new knowledge should, more and more, be publicly financed and then the knowledge freely shared. Knowledge is a cumulative social product, and we have the discovery of the laws of thermodynamics, the double helix, polio vaccine, etc. without patent monopolies and royalties.

9. Stabilize population.

Work toward a balance in which births plus in-migrants equals deaths plus out-migrants. This is controversial and difficult, but as a start contraception should be made available for voluntary use everywhere. And while each nation can debate whether it should accept many or few immigrants, and who should get priority, such a debate is rendered moot if immigration laws are not enforced. We should support voluntary family planning and enforcement of reasonable immigration laws, democratically enacted.

10. Reform national accounts—separate GDP into a cost account and a benefits account.

Natural capital consumption and “regrettably necessary defensive expenditures” belong in the cost account. Compare costs and benefits of a growing throughput at the margin, and stop throughput growth when marginal costs equal marginal benefits. In addition to this objective approach, recognize the importance of the subjective studies that show that, beyond a threshold, further GDP growth does not increase self-evaluated happiness. Beyond a level already reached in many countries, GDP growth delivers no more happiness, but continues to generate depletion and pollution. At a minimum we must not just assume that GDP growth is economic growth, but prove that it is not uneconomic growth.

Currently these policies are beyond the pale politically. To the reader who has persevered this far, I thank you for your willing suspension of political disbelief. Only after a significant crash, a painful empirical demonstration of the failure of the growth economy, would this ten-fold program, or anything like it, stand a chance of being enacted.

To be sure, the conceptual change in vision from the norm of a growth economy to that of a steady-state economy is radical. Some of these proposals are rather technical and require more explanation and study. There is no escape from studying economics, even if, as Joan Robinson said, the main reason for it is to avoid being deceived by economists. Nevertheless, the policies required are far from revolutionary, and are subject to gradual application. For example, 100% reserve banking was advocated in the 1930s by the conservative Chicago School and can be approached gradually, the range of distributive inequality can be restricted gradually, caps can be adjusted gradually, etc. More importantly, these measures are based on the impeccably conservative institutions of private property and decentralized market allocation. The policies here advocated simply reaffirm forgotten pillars of those institutions, namely: (1) private property loses its legitimacy if too unequally distributed; (2) markets lose their legitimacy if prices do not tell the truth about opportunity costs; and as we have more recently learned (3) the macro-economy becomes an absurdity if its scale is required to grow beyond the biophysical limits of the Earth.

Well before reaching that radical biophysical limit, we are encountering the classical economic limit in which extra costs of growth become greater than the extra benefits, ushering in the era of uneconomic growth, whose very possibility is denied by the growthists.

The inequality of wealth distribution has canceled out the traditional virtues of private property by bestowing nearly all benefits of growth to the top 1%, while generously sharing the costs of growth with the poor. Gross inequality, plus monopolies, subsidies, tax loopholes, false accounting, cost-externalizing globalization, and financial fraud have made market prices nearly meaningless as measures of opportunity cost. For example, a policy of near zero interest rates (quantitative easing) to push growth and bail out big banks has eliminated the interest rate as a measure of the opportunity cost of capital, thereby crippling the efficiency of investment.

Trying to maintain the present growth-based Ponzi system is far more unrealistic than moving to a steady-state economy by something like the policies here outlined. It is probably too late to avoid unrealism’s inevitable consequences. But while we are hunkered down and unemployed, enduring the crash, we might think about the principles that should guide reconstruction.

Herman Daly is an American economist recognized as one of the founders of the field of ecological economics and as a critic of standard economic growth theory. Daly’s worked centers on the relationship of the economy and the environment, and the relationship of the economy to ethics. In his proposal for a steady state economy, he argues that policies are needed to guide society towards a constant population, a constant material standard of living, and a equitable distribution of wealth. 

From our friends at the Center for a Steady State Economy (CASSE) Source: http://steadystate.org/top-10-policies-for-a-steady-state-economy/

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Must Growth Trump Climate Action? by Asher Miller and Rob Hopkins 

Climate stability is now a thing of the past.

Climate stability is now a thing of the past.

Why We Must Embrace Post-Growth Economics and Community Resilience NOW

The nearly ubiquitous belief of our elected officials is that addressing the climate crisis must come second to ensuring economic growth. This is wrongheaded—both because it underestimates the severity of the climate crisis, and because it presupposes that the old economic “normal” of robust growth can be revived. It can’t. In fact, we have entered an era of “new normals”—not only in our economy, but in our energy and climate systems, as well. The implications are profound.

The New Energy Normal

The era of cheap and easy fossil fuels is over, leading the industry to resort to extreme fossil fuel resources (tar sands, mountaintop removal coal mining, shale gas, tight oil, and deepwater oil) and fracking to meet demand. Unfortunately, these resources come with enormous environmental and economic costs, and in most instances provide far less net energy to the rest of society. They also require much higher prices to make production worthwhile, creating a drag effect on the economy. As a result, high energy prices and economic contraction are likely to continue a back-and-forth dance in the coming years.

The New Climate Normal

Climate stability is now a thing of the past. As extreme weather events grow in severity, communities are increasingly adopting strategies that build resilience against the effect of these and other climate shocks. At the same time, we must take dramatic steps if we hope to avoid raising global temperatures more than 2°C above pre-industrial levels. According to Kevin Anderson of the Tyndall Centre, this would require a 10% reduction in CO2 emissions per year, starting now—a rate so significant that it can only be achieved through dramatic reductions in energy use.

The New Economic Normal

We’ve reached the end of economic growth as we’ve known it in the U.S. Despite unprecedented interventions on the part of central banks and governments, the so-called economic recovery in the U.S. and Europe has failed to benefit the majority of citizens. The debate between stimulus and austerity is a distraction, as neither can fully address the factors that spell the end of economic growth—the end of the age of cheap oil, the vast mountains of debt that we have incurred, the diminishing economic impacts of new technologies, and the snowballing costs of climate change impacts.

About the Authors: Asher Miller is the Executive Director of Post Carbon Institute. Post Carbon Institute leads the transition to a more resilient, equitable, and sustainable world by providing individuals and communities with the resources needed to understand and respond to the interrelated economic, energy, and ecological crises of the 21st century. Its thirty Fellows are among the most well-respected sustainability experts in the world. Rob Hopkins is one of the UK’s most influential environmentalists. He is co-founder of Transition Network and a founder of the Transition movement, described by the BBC as “the biggest urban brainwave of the century.” Transition Network was set up in 2007 to promote and respond to the rapid spread of Transition initiatives around the world, which number more than 1,400 in 44 countries.

To access the full report go to: http://www.scribd.com/doc/171718124/Climate-After-Growth

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Sustainability and Complexity: Are We Doomed to Repeat History? by William Ophuls

The more complex a society, the more difficult it is to solve problems and avoid catastrophe. Sustainability advocates need to take a fresh look at the challenges if they are to plan effectively for real-world outcomes.

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Sustainability as usually understood is an oxymoron. Using the found wealth of the New World and the geological legacy of fossil hydrocarbons, we modern humans have created an anti-ecological Titanic. Every effort to “green” this monstrous vessel—making the deck chairs recyclable, feeding the boilers with biofuels, installing hybrid winches and windlasses, and the like—is doomed to fail in the long run, because what is required is a radical change in our thinking and way of life. There are many obstacles to such a transformation, but one in particular is under-appreciated: the challenge of complexity.

Civilization’s Vicious Circle

Civilizations are trapped in vicious circles. They must keep solving the problems of complexity, for that is the sine qua non of civilized existence; but every solution creates new, ever more difficult problems, which then require new, ever more demanding solutions.

Thus complexity breeds more of the same, and each increase in complexity makes it harder to cope, while at the same time escalating the penalty for failure. Breakdown becomes unavoidable in the long run. In effect, civilizations enact a tragedy in which their raison d’être –the use of energy to foster the complexity that raises them above the hunter-gatherer level of subsistence—becomes the agent of their ultimate downfall.

Unfortunately, beyond a certain point, growth leads to a fundamental, qualitative change in the nature of systems. Specifically, it leads to what scientists call “chaos,” meaning a system is characterized by so many feedback loops operating in a nonlinear fashion that its behavior becomes more and more impenetrable and unpredictable and therefore less and less manageable, because neither the timing nor the severity of specific events is foreseeable.

Complexity Leads to Unpredictability and Crisis

Complex adaptive systems can be more or less stable and robust, but in general, the greater the complexity, the greater the criticality. Thus increasing the complexity of a civilization inexorably pushes it toward the critical end of the spectrum, meaning that both the challenges and the risks of managing its systems begin to compound.

In fact, complex adaptive systems cannot be managed in the usual sense of that word. Just understanding system behavior, let alone controlling it, challenges the human mind. Our minds and language are linear and sequential, but in systems many causes routinely come together to produce many effects.

Thus systems tend to overwhelm us both intellectually and practically. Even highly sophisticated models are no match for the irreducible uncertainty characteristic of complex adaptive systems. In short, limited, fallible human beings are bound to bungle the job of managing such systems. What they can neither fully understand nor precisely predict, they cannot expect to control, so failure of some sort is inevitable at some point.

The tedious repetition of financial crises provides a perfect illustration. The financial system is the epitome of a chaotic system. Generation after generation of highly motivated, talented and well-capitalized individuals in both the public and private sectors have time and again failed to prevent intoxicating booms from becoming devastating busts—and this despite the lessons of economic history, which are quite well understood.

Efficiency, Connectivity Erode Resilience

Societies struggling with the dilemmas of complexity are vulnerable from two directions. First, systems that are too tightly coupled or too efficient are fragile; they lack resilience. Thus they risk being toppled by a cascade of failure. That is how region-wide electrical outages propagate. The failure of one sector brings down another and another until the grid itself fails, and once down it takes heroic effort to get it up and running again.

Second, they are exposed to simultaneous failure. When formerly separate problems coalesce into a problematique, a nexus of interlocking problems, the society does not face one or two discrete challenges, as in simpler times, but instead a swarm of simultaneous challenges that can overwhelm its capacity to respond, thereby provoking a general collapse.

Take climate change as a current example. To address this overall problem will require us to surmount a host of challenges in many different sectors (e.g., agriculture, forestry, public health, energy production, infrastructure and so on) not only in one country or economy but in every country—to varying degrees.

Can Civilization Be Reformed?

Dire implications follow directly from seeing civilizations as chaotic in the scientific sense. Complex adaptive systems are stable until they are overstressed. Then one perturbation too many, or one that arrives at the wrong moment, can tip the system into instability virtually overnight, with unpredictable and frequently distressing consequences.

The second implication is even more distressing to contemplate: there may be no way to reform an advanced civilization. Complex adaptive systems operate according to their own inner dynamic, which can only be imperfectly understood by the human mind or influenced by human conduct.

Once a civilization is plagued by numerous intractable problems, most attempts at reform will therefore either fail or make matters worse. Indeed, ironically, it may be the very effort to reform that precipitates a collapse. It was perestroika and glasnost that precipitated the implosion of the USSR. Similarly, it was Louis XVI’s convening of the Estates-General that triggered the revolution and regicide that liquidated the ancient régime.

As these examples suggest, planning to avoid breakdown or to make a gradual and controlled transition from one stable state to another may be next to impossible. In effect, chaos sets at naught the human pretension to mastery of the historical process.

That does not mean that planning and reform are useless. However, it does mean that our overdeveloped industrial civilization seems unlikely to achieve a gentle, painless and orderly transition to a state in which humanity peacefully coexists with nature.

About the author: “For decades, William Ophuls has been among the world’s most original thinkers about the implications of our global ecological crisis for freedom, democracy, and political order. In Plato’s Revenge, he goes to the essence of this crisis: the deep, tacit, and widespread beliefs that nature and society are nothing more than machines, that the state should play no role in cultivating citizens’ virtue, and that self-interested individuals should rely solely on reason to guide their lives. Ophuls weaves together the ideas of some of history’s greatest thinkers to argue that humankind’s future lies in small, simple republics that cultivate their citizens’ virtue through natural law. In doing so, he shreds conventional wisdom and invigorates our conversation about the kind of world we intend our grandchildren to inherit.”

—Thomas Homer-Dixon, author of The Upside of Down: Catastrophe, Creativity, and the Renewal of Civilization.

Source: http://www.csrwire.com/blog/posts/1116-sustainability-and-complexity-are-we-doomed-to-repeat-history

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Hedonism, Survivalism, and the Burden of Knowledge by James Magnus-Johnston

 

A Black Friday commentary event in Portland, Oregon. Photo by Michael Holdne.

A Black Friday commentary event in Portland, Oregon. Photo by Michael Holdne.

If human beings are naturally predisposed to deny the precarious reality of our planet’s health, that would help explain the undeserved endurance of the growth narrative. Self-imposed ignorance, in other words, is bliss. It absolves us from the responsibility of action.

What about the rest of us? For those of us that have ‘quit denial,’ so to speak, can conscious awareness be channeled to motivate positive action? Or is hope futile in the face of an enormous task?

A recent article by Madeline Thomas in Grist featured the headline, “Climate depression is for real. Just ask a scientist.” Scientists’ intimate understanding of climate change has led to depression, substance abuse, suicide, and post-traumatic stress disorder. Camillie Parmesan, who shared the Nobel Peace Prize for her work as a lead author of the Third IPCC Assessment Report, became “profoundly depressed” at the seeming futility of her work. She had been screaming from the scientific rooftops, yet the best we could offer in response was little more than a call for more carbon-intensive growth.

Evolutionary psychologists Ajit Varki and Danny Brower believe that some of the earliest humans fell into depression due to their awareness of mortality, while others were able to carry on without becoming crippled by this realization. Mind-over-reality became humanity’s defining characteristic, enabling us to maintain sanity in the face of danger. On a society-wide basis, anxiety and depression could cause an avoidance of procreation, which would be an evolutionary dead-end.

We’re now confronting not only our individual mortality, but perhaps even the mortality of our species, according to a few controversial voices. Ecologist Guy McPherson is among those who have suggested that near-term human extinction is inevitable. James Lovelock, author of the Gaia hypothesis, believes that climate catastrophe is inevitable within 20 years. With an awareness of the rate of species loss and climate change, among other symptoms of breakdown, it isn’t hard to fall into paralysis and despair.

But others seem able to carry on without being crippled by this realization. Proponents of the steady state economy are among those who remain optimistic in the face of long odds, and generally, I think we fall into one of three camps: survivalists, hedonists, and denialists.

The Survivalists among us are easiest to spot. We all know the survivalists among us. They’re the lot that want to voluntarily extricate themselves from known civilization before the imagined ‘$h!t’ hits the fan in some kind of imagined catastrophic event. They dream of a semi-pastoral existence in the agrarian hinterlands, far from the commercialized zombies who wouldn’t know how to take care of themselves without the convenience of a department store. They’re hard workers who romantically hope to re-kindle the low-carbon self-sufficiency of generations past.

Then there are the Hedonists, and I’d be willing to wager that a great many well-educated millennials fall into this category, sometimes by accident. Hedonists might accept the ecological challenges we face and withdraw from the growth-obsessed formal economy. But rather than heading for the hills, they do what they love. I think these are many of the artists, dumpster-divers, and coffee-enthusiasts among us. You can’t measure their contribution to change in terms of GDP. Both McPherson and Lovelock seem to prescribe hedonism, with Lovelock calling for us to “enjoy life while we can” because “in 20 years, global warming will hit the fan.” McPherson, for his part, calls upon us to “passionately pursue a life of excellence,” and practice the radical generosity associated with hospice care. For the hedonist, “carpe diem” is the modus operandi. They’re always asking themselves: what must we do, knowing that we only have a little bit of time left?

And finally, the Denialist. A little bit of overconfidence and denial can come in pretty handy from an evolutionary perspective, because it keeps us from obsessing about the abysmal end. In this case, I’m not referring to outright denial of climate change–the “climate deniers.” I’m referring to those of us who accept planetary life support breakdown, but hope that maybe—just maybe—human civilization has enough wiggle room to squeak by. Just enough methodological uncertainty to restore this blue dot to health. After all, careful skepticism is the essence of good science. Hydrogeologist Scott Johnson, for instance, has written a long rebuttal to the claims of Guy McPherson. Denialists would be more inclined to lean on the kind of methodological uncertainty emphasized by Mr. Johnson, and reject the kind of claims offered by McPherson and Lovelock.

I fall into each of these camps from time to time. As a survivalist, I hope to learn how to garden a little bit every summer and support the DIY economy. As a hedonist, I will do what I love and passionately engage in conversations about catalyzing the steady state economy, because I believe it sets a new standard of excellence for the 21st century. In fact, all things considered, I believe the steady state economy represents a balanced “middle way” between ignorance and paralysis. And with a healthy dose of denial, I will continue to hope that somehow, the margin of error is just wide enough to turn Spaceship Earth around.

Source: The Daly News, Posted: 27 Nov 2014, from CASSE <http://steadystate.org/&gt;

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Water and Population by Lester Brown and the Earth Policy Institute

Water scarcity may be the most underrated resource issue the world is facing today.

Water scarcity may be the most underrated resource issue the world is facing today.

It took all of human history (thousands of years) until 1920 for the Earth to have 2 billion people. Now, in only 94 years, the Earth holds more than 7.2 billion people. Each person needs fresh water and food every day. According to Lester Brown, “Each day we drink nearly 4 liters of water, but it takes some 2,000 liters of water—500 times as much—to produce the food we consume.” More people, more water consumption. Water scarcity may be the most underrated resource issue the world is facing today.

Water Resources Fact Sheet from Lester Brown, Earth Policy Institute

• Seventy percent of world water use is for irrigation.

• 1,000 tons of water is used to produce 1 ton of grain.

• Between 1950 and 2000, the world’s irrigated area tripled to roughly 700 million acres. After several decades of rapid increase, however, the growth has slowed dramatically, expanding only 9 percent from 2000 to 2009. Given that governments are much more likely to report increases than decreases, the recent net growth may be even smaller.

• The dramatic loss of momentum in irrigation expansion coupled with the depletion of underground water resources suggests that peak water may now be on our doorstep. Add to this the continuing growth of human population.

• Failing aquifers: Today some 18 countries, containing half the world’s people, are overpumping their aquifers. Among these are the big three grain producers—China, India, and the United States. Important: these are also the 3 most populous countries in the world.

• Saudi Arabia is the first country to publicly predict how aquifer depletion will reduce its grain harvest. It will soon be totally dependent on imports from the world market or overseas farming projects for its grain.

• Rivers now run dry: While falling water tables are largely hidden, rivers that run dry or are reduced to a trickle before reaching the sea are highly visible. Among this group that has limited outflow during at least part of the year are the Colorado, the major river in the southwestern United States; the Yellow, the largest river in northern China; the Nile, the lifeline of Egypt; the Indus, which supplies most of Pakistan’s irrigation water; and the Ganges in India’s densely populated Gangetic basin.

• Many smaller rivers and lakes have disappeared entirely as water demands have increased.

• Overseas “land grabs” for farming are also water grabs. Among the prime targets for overseas land acquisitions are Ethiopia and the Sudans, which together occupy three-fourths of the Nile River Basin, adding to the competition with Egypt for the river’s water.

• Future wars will more likely be fought over water than oil, but in reality the competition for water is taking place in world grain markets. The countries that are financially the strongest, not necessarily those that are militarily the strongest, will fare best in this competition.

Climate change is hydrological change. Higher global average temperatures will mean more droughts in some areas, more flooding in others, and less predictability overall.

 

Posted on July 30, 2014. Data and additional resources available at www.earth-policy.org. Feel free to pass this information along to friends, family members, and colleagues!

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Top 10 Policies for a Steady-State Economy by Herman Daly

Well before reaching that radical biophysical limit, we are encountering the classical economic limit in which extra costs of growth become greater than the extra benefits, ushering in the era of uneconomic growth, whose very possibility is denied by the growthists.

Well before reaching that radical biophysical limit, we are encountering the classical economic limit in which extra costs of growth become greater than the extra benefits, ushering in the era of uneconomic growth, whose very possibility is denied by the growthists.

Let’s get specific. Here are ten policies for ending un-economic growth and moving to a steady-state economy. A steady-state economy is one that develops qualitatively (by improvement in science, technology, and ethics) without growing quantitatively in physical dimensions; it lives on a diet – a constant metabolic flow of resources from depletion to pollution (the entropic throughput) maintained at a level that is both sufficient for a good life and within the assimilative and regenerative capacities of the containing ecosystem.

Ten is an arbitrary number – just a way to get specific and challenge others to suggest improvements. Although the whole package here discussed fits together in the sense that some policies supplement and balance others, most of them could be adopted singly and gradually.

1. Cap-auction-trade systems for basic resources. Caps limit biophysical scale by quotas on depletion or pollution, whichever is more limiting. Auctioning the quotas captures scarcity rents for equitable redistribution. Trade allows efficient allocation to highest uses. This policy has the advantage of transparency. There is a limit to the amount and rate of depletion and pollution that the economy can be allowed to impose on the ecosystem. Caps are physical quotas, limits to the throughput of basic resources, especially fossil fuels. The quota usually should be applied at the input end because depletion is more spatially concentrated than pollution and hence easier to monitor. Also the higher price of basic resources will induce their more economical use at each upstream stage of production, as well as at the final stages of consumption and recycling. Ownership of the quotas is initially public – the government periodically auctions them to individuals and firms. There should be no “grandfathering” of quota rights to previous users, nor “offshoring” of quotas for new fossil fuel power plants in one by place by credits from planting trees somewhere else. Reforestation is a good policy on its own. It is too late for self-canceling half measures – increased carbon sequestration and decreased emissions are both needed. The auction revenues go to the treasury and are used to replace regressive taxes, such as the payroll tax, and to reduce income tax on the lowest incomes. Once purchased at auction the quotas can be freely bought and sold by third parties, just as can the resources whose rate of depletion they limit. The cap serves the goal of sustainable scale; the auction serves the goal of fair distribution; and trading allows efficient allocation – three goals, three policy instruments. Although mainly applied to nonrenewable resources, the same logic works for limiting the off-take from renewable resources, such as fisheries and forests, with the quota level set to approximate a sustainable yield.

2. Ecological tax reform. Shift the tax base from value added (labor and capital) to “that to which value is added,” namely the entropic throughput of resources extracted from nature (depletion), and returned to nature (pollution). Such a tax shift prices the scarce but previously un-priced contribution of nature. Value added to natural resources by labor and capital is something we want to encourage, so stop taxing it. Depletion and pollution are things we want to discourage, so tax them. Payment above necessary supply price is rent, unearned income, and most economists have long advocated taxing it, both for efficiency and equity reasons. Ecological tax reform can be an alternative or a supplement to cap-auction-trade systems.

3. Limit the range of inequality in income distribution with a minimum income and a maximum income. Without aggregate growth poverty reduction requires redistribution. Unlimited inequality is unfair; complete equality is also unfair. Seek fair limits to the range of inequality. The civil service, the military, and the university manage with a range of inequality of a factor of 15 or 20. Corporate America has a range of 500 or more. Many industrial nations are below 25. Could we not limit the range to, say, 100, and see how it works? This might mean a minimum of 20 thousand dollars and a maximum of two million. Is that not more than enough to give incentive for hard work and compensate real differences? People who have reached the limit could either work for nothing at the margin if they enjoy their work, or devote their extra time to hobbies or public service. The demand left unmet by those at the top will be filled by those who are below the maximum. A sense of community, necessary for democracy, is hard to maintain across the vast income differences current in the United States. Rich and poor separated by a factor of 500 have few experiences or interests in common, and are increasingly likely to engage in violent conflict.

4. Free up the length of the working day, week, and year – allow greater option for part-time or personal work. Full-time external employment for all is hard to provide without growth. Other industrial countries have much longer vacations and maternity leaves than the United States. For the classical economists the length of the working day was a key variable by which the worker (self-employed yeoman or artisan) balanced the marginal disutility of labor with the marginal utility of income and of leisure so as to maximize enjoyment of life. Under industrialism the length of the working day became a parameter rather than a variable (and for Karl Marx was the key determinant of the rate of exploitation). We need to make it more of a variable subject to choice by the worker. Milton Friedman wanted “freedom to choose” – OK, here is an important choice most of us are not allowed to make! And we should stop biasing the labor-leisure choice by advertising to stimulate more consumption and more labor to pay for it. At a minimum advertising should no longer be treated as a tax-deductible expense of production.

5. Re-regulate international commerce – move away from free trade, free capital mobility, and globalization. Cap-auction-trade, ecological tax reform, and other national measures that internalize environmental costs will raise prices and put us at a competitive disadvantage in international trade with countries that do not internalize costs. We should adopt compensating tariffs to protect, not inefficient firms, but efficient national policies of cost internalization from standards-lowering competition with foreign firms that are not required to pay the social and environmental costs they inflict. This “new protectionism” is very different from the “old protectionism” that was designed to protect a truly inefficient domestic firm from a more efficient foreign firm. The first rule of efficiency is “count all the costs” – not “free trade,” which coupled with free capital mobility leads to a standards-lowering competition to count as few costs as possible. Tariffs are also a good source of public revenue. This will run afoul of the World Trade Organization/World Bank/International Monetary Fund, so….

6. Downgrade the WTO/WB/IMF. Reform these organizations based on something like Keynes’s original plan for a multilateral payments clearing union, charging penalty rates on surplus as well as deficit balances with the union – seek balance on current account, and thereby avoid large foreign debts and capital account transfers. For example, under Keynes’s plan the U.S. would pay a penalty charge to the clearing union for its large deficit with the rest of the world, and China would also pay a similar penalty for its surplus. Both sides of the imbalance would be pressured to balance their current accounts by financial penalties, and if need be by exchange rate adjustments relative to the clearing account unit, called the “bancor” by Keynes. The bancor would also serve as the world reserve currency, a privilege that should not be enjoyed by any national currency, including the U.S. dollar. Reserve currency status for the dollar is a benefit to the U.S. – rather like a truckload of free heroin is a benefit to an addict. The bancor would be like gold under the gold standard, only you would not have to tear up the earth to dig it out. Alternatively a regime of freely fluctuating exchange rates is a viable possibility requiring less international cooperation.

7. Move away from fractional reserve banking toward a system of 100% reserve requirements. This would put control of the money supply and seigniorage (profit made by the issuer of fiat money) in the hands of the government rather than private banks, which would no longer be able to live the alchemist’s dream by creating money out of nothing and lending it at interest. All quasi-bank financial institutions should be brought under this rule, regulated as commercial banks subject to 100% reserve requirements. Banks would earn their profit by financial intermediation only, lending savers’ money for them (charging a loan rate higher than the rate paid to savings or “time-account” depositors) and charging for checking, safekeeping, and other services. With 100% reserves every dollar loaned to a borrower would be a dollar previously saved by a depositor (and not available to him during the period of the loan), thereby re-establishing the classical balance between abstinence and investment. With credit limited by prior saving (abstinence from consumption) there will be less lending and borrowing and it will be done more carefully – no more easy credit to finance the massive purchase of “assets” that are nothing but bets on dodgy debts. To make up for the decline in bank-created, interest-bearing money the government can pay some of its expenses by issuing more non-interest-bearing fiat money. However, it can only do this up to a strict limit imposed by inflation. If the government issues more money than the public voluntarily wants to hold, the public will trade it for goods, driving the price level up. As soon as the price index begins to rise the government must print less and tax more. Thus a policy of maintaining a constant price index would govern the internal value of the dollar. The Treasury would replace the Fed, and the target policy variables would be the money supply and the price index, not the interest rate. The external value of the dollar could be left to freely fluctuating exchange rates (or preferably to the rate against the bancor in Keynes’s clearing union).

8. Stop treating the scarce as if it were free, and the free as if it were scarce. Enclose the remaining open-access commons of rival natural capital (e.g., the atmosphere, the electromagnetic spectrum, and public lands) in public trusts, and price them by cap-auction-trade systems, or by taxes. At the same time, free from private enclosure and prices the non-rival commonwealth of knowledge and information. Knowledge, unlike the resource throughput, is not divided in the sharing, but multiplied. Once knowledge exists, the opportunity cost of sharing it is zero, and its allocative price should be zero. International development aid should more and more take the form of freely and actively shared knowledge, along with small grants, and less and less the form of large interest-bearing loans. Sharing knowledge costs little, does not create un-repayable debts, and increases the productivity of the truly rival and scarce factors of production. Patent monopolies (aka “intellectual property rights”) should be given for fewer “inventions,” and for fewer years. Costs of production of new knowledge should, more and more, be publicly financed and then the knowledge freely shared. Knowledge is a cumulative social product, and we have the discovery of the laws of thermodynamics, the double helix, polio vaccine, etc. without patent monopolies and royalties.

9. Stabilize population. Work toward a balance in which births plus in-migrants equals deaths plus out-migrants. This is controversial and difficult, but as a start contraception should be made available for voluntary use everywhere. And while each nation can debate whether it should accept many or few immigrants, and who should get priority, such a debate is rendered moot if immigration laws are not enforced. We should support voluntary family planning and enforcement of reasonable immigration laws, democratically enacted.

10. Reform national accounts – separate GDP into a cost account and a benefits account. Natural capital consumption and “regrettably necessary defensive expenditures” belong in the cost account. Compare costs and benefits of a growing throughput at the margin, and stop throughput growth when marginal costs equal marginal benefits. In addition to this objective approach, recognize the importance of the subjective studies that show that, beyond a threshold, further GDP growth does not increase self-evaluated happiness. Beyond a level already reached in many countries, GDP growth delivers no more happiness, but continues to generate depletion and pollution. At a minimum we must not just assume that GDP growth is economic growth, but prove that it is not uneconomic growth.

Currently these policies are beyond the pale politically. To the reader who has persevered this far, I thank you for your willing suspension of political disbelief. Only after a significant crash, a painful empirical demonstration of the failure of the growth economy, would this ten-fold program, or anything like it, stand a chance of being enacted.

To be sure, the conceptual change in vision from the norm of a growth economy to that of a steady-state economy is radical. Some of these proposals are rather technical and require more explanation and study. There is no escape from studying economics, even if, as Joan Robinson said, the main reason for it is to avoid being deceived by economists. Nevertheless, the policies required are far from revolutionary, and are subject to gradual application. For example, 100% reserve banking was advocated in the 1930s by the conservative Chicago School and can be approached gradually, the range of distributive inequality can be restricted gradually, caps can be adjusted gradually, etc. More importantly, these measures are based on the impeccably conservative institutions of private property and decentralized market allocation. The policies here advocated simply reaffirm forgotten pillars of those institutions, namely that: (1) private property loses its legitimacy if too unequally distributed; (2) markets lose their legitimacy if prices do not tell the truth about opportunity costs; and as we have more recently learned (3) the macro-economy becomes an absurdity if its scale is required to grow beyond the biophysical limits of the Earth.

Well before reaching that radical biophysical limit, we are encountering the classical economic limit in which extra costs of growth become greater than the extra benefits, ushering in the era of uneconomic growth, whose very possibility is denied by the growthists. The inequality of wealth distribution has canceled out the traditional virtues of private property by bestowing nearly all benefits of growth to the top 1%, while generously sharing the costs of growth with the poor. Gross inequality, plus monopolies, subsidies, tax loopholes, false accounting, cost-externalizing globalization, and financial fraud have made market prices nearly meaningless as measures of opportunity cost. For example, a policy of near zero interest rates (quantitative easing) to push growth and bail out big banks has eliminated the interest rate as a measure of the opportunity cost of capital, thereby crippling the efficiency of investment. Trying to maintain the present growth-based Ponzi system is far more unrealistic than moving to a steady-state economy by something like the policies here outlined. It is probably too late to avoid unrealism’s inevitable consequences. But while we are hunkered down and unemployed, enduring the crash, we might think about the principles that should guide reconstruction.

See: http://steadystate.org/top-10-policies-for-a-steady-state-economy/

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Overpopulation and the Collapse of Civilization By Paul Ehrlich

Perpetual growth is unsustainable and will lead to collapse.  Photo by Chris Wevers.

Perpetual growth is unsustainable and will lead to collapse. Photo by Chris Wevers.

A major shared goal of the Millennium Alliance for Humanity and the Biosphere (MAHB) and Sustainability Central is reducing the odds that the “perfect storm” of environmental problems that threaten humanity will lead to a collapse of civilization. Those threats include climate disruption, loss of biodiversity (and thus ecosystem services), land-use change and resulting degradation, global toxification, ocean acidification, decay of the epidemiological environment, increasing depletion of important resources, and resource wars (which could go nuclear). This is not just a list of problems, it is an interconnected complex resulting from interactions within and between what can be thought of as two gigantic complex adaptive systems: the biosphere system and the human socio-economic system. The manifestations of this interaction are often referred to as “the human predicament.” That predicament is getting continually and rapidly worse, driven by overpopulation, overconsumption among the rich, and the use of environmentally malign technologies and socio-economic-political arrangements to service the consumption. 

All of the interconnected problems are caused in part by overpopulation, in part by overconsumption by the already rich. One would think that most educated people now understand that the larger the size of a human population, ceteris paribus, the more destructive its impact on the environment. The degree of overpopulation is best indicated (conservatively) by ecological footprint analysis, which shows that to support today’s population sustainably at current patterns of consumption would require roughly another half a planet, and to do so at the U.S. level would take four to five more Earths.

The seriousness of the situation can be seen in the prospects of Homo sapiens’ most important activity: producing and procuring food. Today, at least two billion people are hungry or badly in need of better diets, and most analysts think doubling food production would be required to feed a 35% bigger and still growing human population adequately by 2050. For any chance of success, humanity will need to stop expanding land area for agriculture (to preserve ecosystem services); raise yields where possible; increase efficiency in use of fertilizers, water, and energy; become more vegetarian; reduce food wastage; stop wrecking the oceans; significantly increase investment in sustainable agricultural research; and move feeding everyone to the very top of the policy agenda. All of these tasks will require changes in human behavior long recommended but thus far elusive. Perhaps more critical, there may be insurmountable biophysical barriers to increasing yields – indeed, to avoiding reductions in yields – in the face of climate disruption.

Most people fail to realize the urgency of the food situation because they don’t understand the agricultural system and its complex, non-linear connections to the drivers of environmental deterioration. The system itself, for example, is a major emitter of greenhouse gases and thus is an important driver of the climate disruption that seriously threatens food production. More than a millennium of change in temperature and precipitation patterns is now entrained, with the prospect of more crop-threatening severe storms, droughts, heat waves, and floods- all of which are already evident. Thus maintaining – let alone expanding – food production will be ever more difficult in decades ahead.

Furthermore, agriculture is a leading cause of losses of biodiversity and the critical ecosystem services supplied to agriculture itself and other human enterprises, as well as a major source of global toxification, both of which pose additional risks to food production. The threat to food production of climate disruption alone means that humanity’s entire system for mobilizing energy needs to be rapidly transformed in an effort to hold atmospheric warming well below a lethal 5o C rise in global average temperature. It also means we must alter much of our water-handling infrastructure to provide the necessary flexibility to bring water to crops in an environment of constantly changing precipitation patterns.

Food is just the most obvious area where overpopulation tends to darken the human future – virtually every other human problem from air pollution and brute overcrowding to resource shortages and declining democracy is exacerbated by further population growth. And, of course, one of our most serious problems is the failure of leadership on the population issue, in both the United States and Australia. The situation is worst in the U.S. where the government never mentions population because of fear of the Catholic hierarchy specifically and the religious right in general, and the media keep publishing ignorant pro-natalist articles, and in Australia even advertise on prime-time TV to have more kids.

A prime example was a ludicrous 2010 New York Times screed by David Brooks, calling on Americans to cheer up because “Over the next 40 years, the U.S. population will surge by an additional 100 million people, to 400 million.” Equal total ignorance of the population-resource-environment situation was shown in 2012 by an article also in the New York Times by one Ross Douthat “More Babies, Please” and one by a Rick Newman in the USNews “Why a falling birth rate is a big problem,” both additional signs of the utter failure of the US educational system.

A popular movement is needed to correct that failure and direct cultural evolution toward providing the “foresight intelligence” and the agricultural, environmental, and demographic planning that markets cannot supply. Then analysts (and society) might stop treating population growth as a “given” and consider the nutritional and health benefits of humanely ending growth well below 9 billion and starting a slow decline. In my view, the best way to accelerate the move toward such population shrinkage is to give full rights, education, and job opportunities to women everywhere, and provide all sexually active human beings with modern contraception and backup abortion. The degree to which that would reduce fertility rates is controversial, but it would be a win-win for society. Yet the critical importance of increasing the inadequate current action on the demographic driver can be seen in the decades required to change the size of the population humanely and sensibly. In contrast we know from such things as the World War II mobilizations that consumption patterns can be altered dramatically in less than a year, given appropriate incentives.

The movement should also highlight the consequences of such crazy ideas as growing an economy at 3-5% per year over decades (or forever) as most innumerate economists and politicians believe possible. Most “educated” people do not realize that in the real world a short history of exponential growth does not imply a long future of such growth. Developing foresight intelligence and mobilizing civil society for sustainability are central goals of the Millennium Alliance for Humanity and the Biosphere (“the MAHB” – mahb.stanford.edu), goals now also a major mission of the University of Technology, Sydney.

Source: http://mahb.stanford.edu/blog/overpopulation-and-the-collapse-of-civilization/

 

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Filed under Climate, Consumption, Ecological Footprint, Economy, Environment, Growth, Population, Sustainability