Population and the Steady State Economy

(Image credit: Sérgio Valle Duarte, Wikimedia Commons)

By Max Kummerow

Sir David Attenborough remarked in a 2011 presidential lecture to the Royal Society that “every environmental and social problem is made more difficult and ultimately impossible to solve with ever more people.” Wherever women’s status has improved and societies modernized, he said, birth rates have fallen. He begged his audience to “talk about population.”

We often hear politicians call for “more jobs.” Growing populations require a bigger economy to prevent unemployment. So if you assume population growth is good and/or unavoidable, you probably favor economic growth to prevent unemployment. And even if there was a steady-state population, the world desires (and some of it needs) higher incomes, more consumption, and more wealth.

Many regard growth as a moral imperative to alleviate extreme poverty. Two billion people still live on two dollars a day. How can their lives improve without economic growth? Attention is focused almost exclusively on economic growth as the path to supporting more people at higher living standards. But there is another path.

A conventional measure of economic well-being is Y/P, or output divided by population (that is, per capita income). Y in this equation represents GDP (gross domestic product). We can acknowledge that a growing GDP per capita may increase wellbeing, but only when GDP is not beyond the optimum level. A growing GDP causes environmental, economic, and social problems. Various measures of well-being (such as the Genuine Progress Indicator, the Happiness Index, and the Human Development Index) help us determine when GDP is beyond optimum. Indeed, numerous analysts inside and out of the CASSE network believe that is now the case – that GDP is beyond the optimum – and perhaps has been so since the mid-late 20th century.

(Graph created from UN World Population Prospects 2017 data.)

 

In a crowded world facing physical limits to growth, then, why not think more about reducing the denominator? If population falls, we can get by with fewer jobs. There will be more land per family for poor subsistence farmers. Wages will tend to rise and the prices of commodities—housing, fuel, food, etc.—will tend to fall.

To examine the problem if we do not reduce population, let us consider a simple equation comparing the Earth’s carrying capacity—or its ability to provide all that we need from it—with our use of the supply. When we exceed carrying capacity, we also reduce it. Carrying capacity is the Earth interest generated by Earth principal (natural capital, in other words). When we use more in a year than the Earth interest generated that year, we use up some Earth principal, so next year less interest can be generated. Many ecological economists and sustainability scholars have described in theoretical and empirical terms how we are currently over long-run carrying capacity, and we are using up Earth principal (biodiversity, for example). So every year there is less interest and less long-term capacity.

Before family planning, most women bore many children, and infant and maternal mortality rates were extremely high. In The Wealth of Nations Adam Smith wrote, “It is not uncommon… in the Highlands of Scotland, I have been frequently told, for a mother who has borne twenty children not to have two alive” (Book 1, Chapter 8).

In 1970, global fertility still averaged five children per woman. Now the global average fertility rate has fallen to 2.4 children per woman. In about 90 countries, women currently average less than 2.1 children each, which is the replacement fertility rate (two children reaching adulthood for every couple equals replacement). When fertility falls, it takes about 50 years for “demographic momentum” to play out so that growth stops. Young populations have to grow up, have children and age before death rates exceed birth rates. That has finally happened in a handful of countries. Germany and Japan, with declining populations, are doing much better than high fertility countries. Scarcity caused by growth is not alleviated by more growth. Growth is the problem, not the solution.

Country average fertility rates currently range from about 1.1 (Singapore, now one of the richest per capita) to 7 (Niger, one of the poorest). Europe’s fertility averages about 1.7. Sub-Saharan Africa’s fertility rate of 5 children/woman is falling slowly. But death rates by country are falling faster, so natural increase (births minus deaths) is higher now than in 1960 (the current rate is about 2.7% population growth per year).

Globally, annual population growth fell from 2% in 1970 to 1.1% in 2010. Meanwhile, world population doubled from 3.5 billion to 7 billion. World population is therefore growing as fast as ever (2% x 3.5 =1% x 7) and increasing by about one billion every 12 years, which means it is headed from 3 billion in 1960 to 10 billion by 2050.

(Graph created from UN 2017 population prospects data.)

Completing the fertility transition in places with corrupt governments and poor people will be difficult. Fundamentalists in all religions have more children. But modernization helps fertility rates fall, especially education and improving the status of women. Low fertility rates in Cuba, Iran, Brazil, Botswana, Thailand, and about 85 other countries shows that fertility transitions are possible anywhere. There are trade-offs, but countries with small families are usually better off economically and their children tend to be better educated.

Lower fertility rates have numerous benefits for individuals, families and societies. It is possible to stabilize world population and to reduce population back down toward global carrying capacity. Education can help change family size norms to reflect the reality that we live on a small planet that doesn’t get bigger when we add more people.

With declining population, the strongest arguments for economic growth disappear, and a steady state economy with universal prosperity becomes both physically and politically more feasible.

Max Kummerow is a retired Real Estate professor. He has presented a dozen papers at the Ecological Society and Population Association and other meetings advocating completing the global demographic transition.

 


 

The Pope Francis Encyclical And Its Economics

By Brent Blackwelder

Brent BlackwelderThe Encyclical Letter of Pope Francis is attracting extraordinary attention for its message on global warming, deforestation, loss of biological diversity, and other pressing environmental issues. What is less well known is the extensive critique of the global economy found in his 184-page Encyclical. This blog highlights some of the significant points that Pope Francis makes about the need for systemic economic change.

Although the Pope does not use the phrase “steady state economy” or “true-cost economy” his message provides a comprehensive moral argument for a systemicshift to a new economy.

2014 Pastoral Visit of Pope Francis to Korea Closing Mass for Asian Youth Day  August 17, 2014  Haemi Castle, Seosan-si, Chungcheongnam-do  Ministry of Culture, Sports and Tourism Korean Culture and Information Service Korea.net (www.korea.net)  Official Photographer : Jeon Han This official Republic of Korea photograph is being made available only for publication by news organizations and/or for personal printing by the subject(s) of the photograph. The photograph may not be manipulated in any way. Also, it may not be used in any type of commercial, advertisement, product or promotion that in any way suggests approval or endorsement from the government of the Republic of Korea. If you require a photograph without a watermark, please contact us via Flickr e-mail. --------------------------------------------------------------- 교황 프란치스코 방한 제6회 아시아 청년대회 폐막미사 2014-08-17 충청남도 서산시 해미읍성 문화체육관광부 해외문화홍보원 코리아넷  전한

Pope Francis. Photo Credit: Korean Ministry of Culture, Sports and Tourism

I present a series of quotations to illustrate portions of the Pope’s forceful arguments. If we are to obtain systemic economic change, we need new, motivated allies. The Encyclical is a key tool to motivate religious congregations to be front and center in this economic debate to counter the greed and rapacious behavior of numerous governments and large corporations.

In Section 54 the Pope takes sharp aim at the control of politics and finance that prevent urgent changes from being made:

The failure of global summits on the environment make it plain that our politics are subject to technology and finance. There are too many special interests, and economic interests easily end up trumping the common good and manipulating information so that their own plans will not be affected. The alliance between the economy and technology ends up sidelining anything unrelated to its immediate interests. Consequently the most one can expect is superficial rhetoric, sporadic acts of philanthropy and perfunctory expressions of concern for the environment, whereas any genuine attempt by groups within society to introduce change is viewed as a nuisance based on romantic illusions or an obstacle to be circumvented.

Pope Francis repeatedly questions whether the global economy is furthering the common good. In Section 109 he writes:

The economy accepts every advance in technology with a view to profit, without concern for its potentially negative impact on human beings. Finance overwhelms the real economy. The lessons of the global financial crisis have not been assimilated…” In Section 189 he looks again at the financial collapse of 2008: “Politics must not be subject to the economy, nor should the economy be subject to the dictates of an efficiency-driven paradigm of technocracy. Today, in view of the common good, there is urgent need for politics and economics to enter into a frank dialogue in the service of life, especially human life. Saving banks at any cost, making the public pay the price, foregoing a firm commitment to reviewing and reforming the entire system, only reaffirms the absolute power of a financial system, a power which has no future and will only give rise to new crises after a slow, costly and only apparent recovery. The financial crisis of 2007-08 provided an opportunity to develop a new economy, more attentive to ethical principles, and new ways of regulating speculative financial practices and virtual wealth. But the response to the crisis did not include rethinking the outdated criteria which continue to rule the world.

Pope Francis waxes eloquent on the subject of externalities in Section 195:

The principle of the maximization of profits, frequently isolated from other considerations, reflects a misunderstanding of the very concept of the economy. As long as production is increased, little concern is given to whether it is at the cost of future resources or the health of the environment; as long as the clearing of a forest increases production, no one calculates the losses entailed in the desertification of the land, the harm done to biodiversity, or the increased pollution. In a word, businesses profit by calculating and paying only a fraction of the costs involved. ‘Yet only when the economic and social costs of using up shared environmental resources are recognized with transparency and fully borne by those who incur them, not by other peoples or future generations,’ can those actions be considered ethical. An instrumental way of reasoning, which provides a purely static analysis of realities in the service of present needs, is at work whether resources are allocated by the market or by state central planning.

Pope Francis talks about product diversification and consumerism; in Section 129 he extols the virtues of the “great variety of small-scale food production systems which feed the greater part of the world’s peoples.”

As Pope Francis points out, he is building on the messages that popes such as John XXIII, Paul VI, John Paul II, and Benedict XVI have given on these problems. For example, Pope Benedict XVI proposed “eliminating the structural causes of the dysfunctions of the world economy and correcting models of growth which have proved incapable of ensuring respect for the environment.” Pope Paul VI wrote: “the most extraordinary scientific advances, the most amazing technical abilities, the most astonishing economic growth, unless they are accompanied by authentic social and moral progress will definitively turn against man.”

My hope is that the Pope’s message will be translated by religious congregations into tangible actions to make substantive changes in the economic drivers of environmental destruction. New allies are urgently needed.

One good place for tangible action is to go after the cheater economics being used by the G 20 nations to push tens of trillions of dollars into mega-infrastructure projects without regard to social, environmental, or climate impacts. (See my January 2015 blog for details on this subject.)

 

Thoughts on Pope Francis’ Laudato Si

by Herman Daly

Herman DalyAs a Protestant Christian my devotion to the Catholic Church has been rather minimal, based largely on respect for early church history, and for love of an aunt who was a nun. In recent times the Catholic Church’s opposition to birth control, plus the pedophile and cover-up scandals, further alienated me. Like many others I first viewed Pope Francis as perhaps a breath of fresh air, but little more. After reading his encyclical on environment and justice, dare I hope that what I considered merely “fresh air” could actually be the wind of Pentecost filling the Church anew with the Spirit? Maybe. At a minimum he has given us a more truthful, informed, and courageous analysis of the environmental and moral crisis than have our secular political leaders.

True, the important question of population was conspicuous by its near absence. In an earlier offhand remark, however, Francis said that Catholics don’t need to breed “like rabbits,” and pointed to the Church’s doctrine of responsible parenthood. Perhaps he will follow up on that in a future encyclical. In any case, most lay Catholics have for some time stopped listening to Popes on contraception. The popular attitude is expressed in a cartoon showing an Italian mamma wagging her finger at the Pontiff and saying, You no playa da game; you no maka da rules.” Discussing population would not have changed realities, and would have aroused official opposition and distracted attention from the major points of the encyclical. So I will follow Francis’ politic example and put the population question aside, but with a reference to historian John T. Noonan, Jr.’s classic book, Contraception,1 which sorts out the history of doctrine on this issue.

The big ideas of the encyclical are Creation care and justice, and the failure of our technocratic growth economy to provide either justice or care for Creation. Also discussed was the integration of science and religion as necessary, though different, avenues to truth. And yes, the Pope supports the scientific consensus on the reality of climate change, but, media monomania to the contrary, the encyclical is about far more than that.2

Pope Francis.aletela.org

Pope Francis’ environmental encyclical “Laudato Si, On Care for our Common Home” was released on June 18. Photo credit: Aletela.org

Francis’ voice is of course not the first to come from Christians in defense of Creation. In addition to his ancient namesake from Assisi, Francis also recognized Ecumenical Patriarch Bartholomew of the Eastern Orthodox Church, who has for two decades now been organizing conferences and speaking out in defense of rivers and oceans, including the Black Sea. The Orthodox Church lost a generation of believers to Communistic atheism, but is gaining back many young people attracted to the theology of Creation and the actions it inspires. Liberal mainline Protestant Christians, and more recently, conservative Evangelicals, have also found their ecological conscience. So Francis’ encyclical would seem to be a capstone that unifies the main divisions of Christianity on at least the fundamental recognition that we have a shamefully neglected duty to care for the Earth out of which we evolved, and to share the Earth’s life support more equitably with each other, with the future, and with other creatures. Many atheists also agree, while claiming that their agreement owes nothing to Judeo-Christian tradition. That is historically questionable, but their support is welcome nonetheless.

This theology of Creation should not be confused with the evolution-denying, anti-science views of some Christian biblical literalists (confusingly called “Creationists” rather than “literalists”). Mankind’s duty to care for Creation, through which humans have evolved to reflect at least the faint image of their Creator, conflicts headlong with the current dominant idolatry of growthism and technological Gnosticism. The idea of duty to care for Creation also conflicts with the materialist determinism of neo-Darwinist fundamentalists who see “Creation” as the random result of multiplying infinitesimal probabilities by an infinite number of trials. The policy implication of determinism (even if stochastic) is that purposeful policy is illusory, both practically and morally. Creation care is also incompatible with the big lie that sharing the Earth’s limited resources is unnecessary because economic growth will make us all rich. Francis calls this magical thinking. He skates fairly close to the idea of steady-state economics, of qualitative development without quantitative growth in scale, although this concept is not specifically considered. Consider his paragraph 193:

In any event, if in some cases sustainable development were to involve new forms of growth, then in other cases, given the insatiable and irresponsible growth produced over many decades, we need also to think of containing growth by setting some reasonable limits and even retracing our steps before it is too late. We know how unsustainable is the behaviour of those who constantly consume and destroy, while others are not yet able to live in a way worthy of their human dignity. That is why the time has come to accept decreased growth in some parts of the world, in order to provide resources for other places to experience healthy growth.

In the last sentence “decreased growth” seems an inexact English translation from the Spanish version “decrecimiento,” or the Italian version “decrescita” (likely the original languages of the document), which should be translated as “degrowth” or negative growth, which is of course stronger than “decreased growth.”3

Laudato Si is already receiving both strong support and resistance. The resistance testifies to the radical nature of Francis’ renewal of the basic doctrine of the Earth and cosmos as God’s Creation. Pope Francis will be known by the enemies this encyclical makes for him, and these enemies may well be his strength. So far in the US they are not an impressive lot: the Heartland Institute, Jeb Bush, Senator James Inhofe, Rush Limbaugh, Rick Santorum, and others. Unfortunately they represent billions in special-interest money, and have a big corporate media megaphone. The encyclical calls out the opponents and forces them to defend themselves. To give them the benefit of the doubt, they may really think that Francis is rendering to God what actually belongs to Caesar’s oligarchy. But neither Caesar, nor the market, nor technology created us, or the earth that sustains us. Thanks to Francis for making that very clear when so many are denying it, either explicitly or implicitly.

 


Notes:

1. John T. Noonan, Jr., Contraception: A History of its Treatment by the Catholic Theologians and Canonists, Belknap Press, 1986. Noonan demonstrates the lack of a biblical basis for opposition to contraception, as well as the origins of church doctrine in secular Roman law, which was absorbed into canon law. The ancient Roman meaning of “proletariat” was “the lowest class, poor and exempt from taxes, and useful to the republic mainly for the procreation of children.” Clearly contraception was not indicated for them, although tolerated for patricians. This literal meaning of proletariat as the prolific class was lost when Marx redefined the word to mean “non owners of the means of production.” But the Malthusian connection with overpopulation and cheap labor has remained real, even if downplayed by Marxists as well as Catholics.

2. The Pope’s condemnation of carbon trading reflects a common misunderstanding of the cap-auction-trade policy, unfortunately shared by some leading climate scientists. See Joseph Heath, “Pope Francis’ Climate Error,” New York Times, June 19, 2015.

3. Thanks to Joan Martinez-Alier for pointing this out.

 

Biocultural Heritage: The Foundation of a Sustainable Economy

by Claudia Múnera

Claudia_MuneraPorta Palazzo in the city of Turin, Italy, is recognized as the largest open air market in Europe. Visiting this market provides a unique experience: vendors in all directions offer a seemingly endless supply of breads, pastas, meats, poultry, fish, vegetables, herbs, and olives. The kaleidoscope of colors and jumble of aromas threaten to overload the senses. Italians and foreigners alike gather here to find the foods they want – whether it’s a local ingredient for a traditional Italian dish or something exotic to summon the tastes of a faraway home.

Even though there’s such diversity, all the foods at Porta Palazzo share something in common. You can trace each type of food to a particular ecosystem and a particular way of life for the people who inhabit (or once inhabited) that ecosystem. Each food product in the market comes with its own biocultural heritage. Among all the products we buy and sell in today’s economy, food is probably the easiest to connect to biocultural heritage (assuming we’re not talking about a pre-packaged, frozen microwave dinner). For instance Colombians crave bocadillo veleños, the traditional confection made from guava and sugarcane. And Salvadorians keep an eye out for pupusas, which are made from a cornmeal dough that redefines the phrase “comfort food.” When living abroad, people from a given region often organize festivals in which traditional foods play a central role.

Biocultural heritage wraps a lot of concepts into one term. It’s about relationships between people and the natural environment. It consists of biological resources, from genes to landscapes. But biological heritage also consists of human history, from practices to pools of knowledge and the way humans shape their surroundings and vice versa. According to the International Institute for Environment and Development, some 370 million indigenous people in the world depend directly on natural resources — they rely on their biocultural heritage for survival. Biocultural heritage also influences religious beliefs, sense of place (especially sacred places), and sense of self. It’s easy to be overwhelmed by the tangle of connections when considering the biocultural heritage of a good or a service — maybe that’s why food is a good place to start when trying to get a feel for it. But an astute observer can recognize that other goods and services, such as medicinal plants, tourism, or even health services, also flow from a rich biocultural heritage.

Scenes from Porta Palazza

Colorful vegetables, colorful meats, and even more colorful characters make up the scene at Porta Palazza (photo credit: Claudia Munera).

Throughout my career, it has become increasingly clear that conservation of biocultural heritage is the long-term key to maintaining both healthy ecosystems and healthy economies. As a conservation biologist, I could probably be accused of having a biased viewpoint — I have always believed that endangered species, tracts of wilderness, and other aspects of biodiversity are intrinsically valuable and worthy of conservation. As a result, I have spent a lot of time and effort on projects aimed at protecting ecosystems and the species they contain. I believe that maintaining parks and protected areas is a worthy endeavor, but it’s not enough. Drawing boundaries around biodiversity hotspots or cherished scenic areas will fail in the face of ongoing exponential economic growth and mounting pressure to turn protected areas into commodities.

My research on biocultural heritage at the Rio San Juan Biosphere Reserve in southeastern Nicaragua aims to illustrate the point. Nicaragua is changing at a fast pace, trying to follow a European or North American model of economic growth at the expense of its rich natural capital. Deforestation is on the rise with forest cover diminishing from 42,340 square kilometers in 1994 to 30,440 in 2011. There are several causes, but the main one is to meet the demands of markets: cattle for dairy and meat, hardwood lumber, and crops such as palm oil, sugarcane, and peanuts. In short, forests are being transformed into commodity landscapes.

Poster for Chocolate Tours

Biocultural services: chocolate tours in Rio San Juan Biosphere Reserve (photo credit: Claudia Munera).

The intense pressure applied by economic growth is threatening flagship species such as the jaguar and tapir, internationally significant wetlands, and the species-rich (not to mention carbon-sequestering) forests of this region in Nicaragua. In light of such pressure, the best way to conserve the natural areas is to recognize the value of the biocultural heritage of these areas. Local communities and indigenous populations are making a living and thriving by growing traditional crops, creating handcrafts, and preparing traditional foods that are founded on the local environment and framed in Nicaraguan history and culture. Several communities are embracing ecotourism (it’s a lot easier to entice a tourist to visit the Rio San Juan, Bosawas, or Ometepe Biosphere Reserves if they haven’t been converted to palm oil plantations or cattle farms). Farmers are also having a go at organic cocoa production. A certain amount and certain types of economic activity are compatible with the natural resources of the region, but if we fail to conserve the biocultural heritage of the region, the natural resources will eventually become commodities in economic activities that are incompatible with the landscape.

Other places around the world also demonstrate how championing biocultural heritage can produce desirable results for people and ecosystems. For example, the provinces of Guangxi and Yunnan, China, contain rice terraces, mountain agriculture, and forests that have provided people with livelihoods for centuries. During the last three years, however, droughts have threatened the economy and local food security. Farmers have relied on their biocultural heritage to cope — planting traditional drought-resistant maize varieties and raising ducks in the rice fields as a pest control strategy. Farmers have accrued health benefits by eliminating pesticides and earned profits by selling their products in niche organic markets.

In Tuscany, Italy, the landscape has been shaped and preserved by centuries of human influence, but in recent times, the people have been engineering the landscape into a homogenized agricultural landscape of mechanized monocultures with no consideration of traditional farming and forestry practices. Consequences include biodiversity loss, erosion, and deteriorating quality of life for residents who have strong ties to their landscape. According to UNESCO, “Cultural landscapes originated by human action, as well as biodiversity connected to them, can only be maintained by preserving local cultural heritage. Abandonment of traditional practices can lead to reduction of landscape diversity with impacts on biodiversity, economy, and quality of life of rural communities. To overcome these problems, parts of the landscape have been included in the World Heritage Sites list (Medici Villas and Gardens). At the same time, ecological restoration of agricultural and natural areas has spurred tourism, revitalized local foods production, and led to the creation of markets for locally grown food that help preserve Tuscan culture.

Protecting the biosphere comes down to making sure enough ecosystems around the globe maintain their structures and functions. A strong appreciation of biocultural heritage is a key to doing this job, especially in the face of pressures from ongoing economic growth. Local economies in which people maintain a sense of place and a sense of their ecological and cultural limits provide an alternative, resilient model to the infinite growth paradigm.

Claudia Múnera is a conservation biologist and the director of CASSE’s Colombia Chapter.

How Studying in Asia Made Me See the Need for a Steady State Economy

by Jan de Graaf

Crossing the border from Singapore to Malaysia allows anyone to see the real-life benefits that can come with economic growth. Singapore is modern, prosperous, organized, clean, safe and efficient. Malaysia less so. On Malaysia’s side of the border the roads aren’t as good, the traffic signs not as clear, the sidewalks not as clean and the greenery not as well maintained. Singapore’s transformation looks impressive, especially since it was expelled from Malaysia only in 1965.

I noticed this cross-border difference during a two-year master’s program in public policy at the National University of Singapore. Soon I learned that Singapore’s rapid economic transformation came with considerable tradeoffs. A lack of political freedom is one of them. Singapore’s political system — dominated by one ruling party since independence — has yet to prove its resilience. But Singapore’s economic growth has provided obvious benefits too; many citizens in southeast Asia would forego political freedoms for Singapore’s level of prosperity. Who wouldn’t want to raise children in a safe, efficient, tropical but air-conditioned country with little corruption and top-quality education and healthcare?

Paradoxically, the answer seems to be: Singaporeans themselves. Singapore has one of the lowest fertility rates in the world. The government is vigorously encouraging couples to have babies, though so far with little effect. The former prime-minister Lee Kuan Yew — one of Singapore’s founding fathers — stated last year that Singapore can “fold up” if citizens do not reproduce. He said, “The answer is very difficult but the problems, if we don’t find the answers, are enormous.” Like many other countries, Singapore is being blinded by fears of a shrinking population and ignoring an obvious fact: one of the tiniest countries in the world can’t grow its population forever. The optimal population size is likely less than what it is now, not more.

Singapore’s population has increased almost 280% since independence: from 1.9 million in 1965 to 5.3 million people today. Its land area, on the other hand, has increased by only 23% (it was 224 square miles at independence and after some reclamation of land from the sea, it is now 276 square miles — about the size of Chicago). The country is squeezed in between Malaysia, a narrow sea strait and Indonesia. Physical expansion in such a physically bounded space cannot continue indefinitely. It has to stop growing at some point, a principle that applies not just to the number of people, but also to economic production and consumption.

Singapore and Malaysian Slum

The glitz of Singapore (photo by C. Andersson) and the slums of Malaysia (photo by D. Nunuk) are different, but equally unsustainable results of continuous economic growth.

Singapore like any country, needs to achieve demographic, political, economic and environmental sustainability. Maintaining a healthy environment is often under-appreciated, even though it is just as important as (and directly related to) the other types of sustainability in this list. I recognized this when I lived in China during a semester abroad and traveled through other parts of Asia. I breathed the toxic air in Beijing and Shanghai, walked through piles of waste in India’s urban slums, and saw the vast palm-oil plantations that have replaced tropical forests in Malaysia and Indonesia. If all these countries were to emulate Singapore, which is in a state of ecological overshoot, the environmental impact would be disastrous.

China seems to be doing its best to follow in Singapore’s ecological footsteps. It has managed to lift more than 600 million people out of poverty in roughly thirty years, an unprecedented achievement. Real GDP growth averaged 10% per year from 1978 to 2011. Its economy is more than 30 times bigger than it was in the late 1970s. It will soon be the biggest economy in the world. At the same time, China is in absolute terms now also the world’s largest energy consumer, greenhouse-gas polluter, crop importer, cement consumer and potash consumer, to name only a few things. How many more examples of explosive growth like China’s can the planet withstand?

India, another Asian giant, cannot do the same thing China has done. India has about as many people as China (1.2 billion versus 1.35 billion; each country has about one-sixth of the world population). Yet, India’s economy is less than one-fourth the size of China’s as measured by GDP. What if India’s economy had already grown to the size of China’s economy, with similar physical inputs (e.g. minerals, food, coal, etc.) and outputs (e.g. air pollution, soil depletion, biodiversity loss, etc.)?

Clearly, we need to take steps to achieve sustainable and equitable prosperity around the world. But trying to achieve prosperity through ever more growth — a method that irreversibly damages the planet, depletes natural resources and destabilizes societies over the long term — is not the way. The elephant in the room, the global problem that needs to be solved is “us” — the rich, industrialized part of the world that generates an unsustainable ecological footprint. “We” have only been able to live beyond our means because enough other people don’t. Communities in rural India, Namibia or Costa Rica could continue living their lives, with modest ecological footprints, for centuries without being a threat to global civilization and the planet. “We” in Europe, North America, Singapore, Shanghai and other rich parts of the world, on the other hand, cannot.

Still, many people in the world aspire to the lifestyles of Singapore, coastal China and the West. What if more and more people demand their fair share? Aside from the energy received from the sun, the Earth is a closed system with finite resources, so “we” the over-consumers have to get used to living with a much more modest ecological footprint. The predicament of the over-consuming countries raises some fundamental questions: how can we call our current economic growth “progress” if it can never be attained by all? And how can we call our current economic growth “progress” if it is based on depleting precious nonrenewable resources?

Real progress would take the form of new political and economic models that achieve a sustainable and resilient equilibrium. Unfortunately, as my home country (the Netherlands) and the nations I visited in Asia are demonstrating, we are far from it. That’s why I volunteer with CASSE to promote the concept of a steady-state economy. The over-consuming nations of the world are teaching an important lesson: the current spoils of continued economic growth come with a spoiled foundation for achieving continued prosperity in the future. Are we smart enough to heed the lesson?

Since graduation in Singapore, Jan de Graaf has been an intern at the United Nations headquarters and a trainee at the European Commission. He now works in the clean energy sector in Africa for an American start-up company.

Top 10 Policies for a Steady-State Economy

by Herman Daly

Herman DalyLet’s get specific. Here are ten policies for ending uneconomic 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….

Ten pieces of the policy puzzle for an earth-centric economy

Ten pieces of the policy puzzle for an earth-centric economy

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.

The Daly-Correa Tax: Background and Explanation

by Herman Daly

Under the heading, “Oil nations asked to consider carbon tax on exports,” John Vidal writes in The Guardian:

The Ecuadorean president, Rafael Correa, proposed a carbon tax at a summit of Arab and South American countries in October in Peru which included the heads of state and energy ministers of nine of Opec’s 12 countries. The Guardian understands the proposal was taken seriously and not dismissed out of hand. The idea was first mooted in 2001 by former World Bank senior economist Herman Daly — leading it to be dubbed the “Daly-Correa tax” — and will be further discussed by Opec countries at the UN climate talks which open on Monday in Doha.

Whether or not it will be discussed at Doha, I think it is worthwhile to explain the idea as it was presented to an OPEC Conference in Vienna in 2001. It elicited little interest on that occasion, but in 2007 was in large part adopted by President Rafael Correa of Ecuador, after being presented to him and his minister of planning, Fander Falconi, by ecological economist Professor Joan Martinez-Alier. Below is the relevant part of my speech at the OPEC conference.*

How might OPEC fit into the emerging vision of sustainable development? Permit me to speculate.

Sources of petroleum throughput derive from private or public (national) property; sinks are in an open access regime and treated as a free good. Therefore, rents are collected on source scarcity, but not on sink scarcity. Different countries or jurisdictions collect scarcity rents in different ways. In the U.S., for example, Alaska has a social collection and sharing of source rents, institutionalized in the Alaska Permanent Fund whose annual earnings are distributed equally to all citizens of Alaska. Other states in the U.S. allow private ownership of sources and private appropriation of source rents.

New institutions are being designed to take the sink function out of the open access regime and recognize its scarcity (Kyoto). Tradable rights to emit carbon dioxide, requiring first the collective fixing of scale and distribution of total emission rights, are actively being discussed. Ownership of the new scarce asset (emission rights) could be distributed in the first instance to the state, which would then redistribute the asset by gift or auctioned lease.

Ideally sink capacity would be defined as a separate asset with its own market. This would require a big change in institutions. Assuming it were done, the source and sink markets for petroleum throughput, though separate, would be highly interdependent. Sink limits would certainly reduce the demand for the source, and vice versa. The distribution of total scarcity rent on the petroleum throughput between source and sink functions would seem to be determined by the relative scarcity of these two functions, even with separate markets. Alternatively, sink scarcity rent could also be captured by a monopoly on the source side, or source scarcity rent could also be captured by a monopoly on the sink side.

To give an analogy, municipal governments, in charging for water, frequently price the source function (water supply) separately from the sink function (sewerage), thus charging different prices for inflow and outflow services related to the same throughput of water. In deciding their water usage, consumers take both prices into account. To them it is as if there were one price for water, the sum of the input and output charges. Likewise the petroleum throughput charge would be the sum of the price of a barrel of crude oil input from the source and the price of carbon dioxide output to the sink from burning a barrel of petroleum. One could consolidate the two charges and levy them at either end, since they are but two ends of the same throughput. This would be a matter of convenience. Since depletion of sources is a much more spatially concentrated activity than pollution of sinks, it would seem that the advantage lies with levying the total source and sink charge at the source end. This is especially so since the sink has traditionally been treated as an open access free good, and changing that requires larger institutional rearrangements than would a sink-based surcharge on the source price. OPEC, given sufficient monopoly power over the source, would be well positioned to function as an efficient collector of sink rents for the world community.

Could it also serve as a global fiduciary for ethically distributing those rents in the interests of sustainable development, especially for the poor? OPEC, assuming it could increase its degree of monopoly of the source, may be in a position to preempt the function of the failing Kyoto accord by incorporating sink rents (and even externalities) into prices at the source end of the petroleum throughput.

Of course OPEC does not have a monopoly on petroleum, much less on fossil fuels. It does not, even indirectly, control non-petroleum sources of carbon dioxide. So it would be easy to overestimate OPEC’s monopoly power, and the scheme suggested here does require an increase in its monopoly power. However, modern mass consumption nations such as the U.S. apparently do not have the discipline to internalize either externalities or scarcity rents into the price of petroleum. Exclusion of developing countries from the Kyoto accord, while understandable on grounds of historical fairness, undermines the prospects for accomplishing the goal of the treaty, namely limitation of global greenhouse gas emissions to a sustainable level. OPEC, assuming it had sufficient monopoly power, might be able to provide this discipline for both North and South.

The South, as well as the North, would have to face the discipline of higher petroleum prices in the name of efficiency, but would, in the name of fairness receive a disproportionate share of the sink rents. There would be a net flow of sink rents from North to South. The size of those rents would depend on OPEC’s degree of monopoly power. The distribution of the rents would be in large part decided by OPEC — a large ethical responsibility which many would be unwilling to cede to OPEC, and which OPEC itself may not want. The obvious alternative to such a global fiduciary authority, however, has already failed. The inability to reach an agreement on international distribution of carbon dioxide emission rights was the rock on which Kyoto foundered. It is hard to see how such an agreement could be reached, either as a first step toward emissions trading, or as a fixed non-tradable allocation.

It is in OPEC’s self-interest to preempt the emergence of a separate market for sink capacity, which could surely lower source demand and prices. While this gives OPEC a motivation, it also calls into question the legitimacy of the motivation as pure monopolistic exploitation. A legitimating compromise, as indicated above, would be for OPEC to behave as a self-interested monopolist on the source side, but as a global fiduciary on the sink side — that is, as an efficient collector and ethical distributor of scarcity rents from pricing the sink function. OPEC countries own petroleum deposits, but not the atmosphere. OPEC has a right to its source rents, but no exclusive right to sink rents. However, it may well have the power to charge and redistribute sink rents as a global fiduciary — exactly what Kyoto wants to do, but lacks the power to do. In addition to effecting this transfer, the expanded role of OPEC as global fiduciary might increase the willingness of other petroleum producers (e.g., Norway) to join OPEC, thus increasing its monopoly power and ability to function as here envisioned. In addition, the fiduciary role might provide ethical reasons for OPEC members to adhere to the cartel, when tempted by short-term profit opportunities to cheat.

Actually the existing OPEC Development Fund is already a step in this direction. Expansion of this fund into a global fiduciary institution for collecting and distributing sink rents, as well as the existing source rent contributions generously made by OPEC countries, is what is envisaged in this suggestion.

Just how total rents are determined and divided between source scarcity and sink scarcity is a technical problem that economists have not tackled because they have not framed the problem this way. Economists have focused on capturing source rents through property rights, and then internalizing the external sink costs of pollution through taxes. Only recently has there emerged a theoretical discussion of property rights in atmospheric sink capacity — whether these should be public or private, the extent to which trade in such rights should be allowed, and so on. As an initial rule of thumb we might assume that, since the sink side is now the more limiting function, it should be accorded half or more of the total throughput scarcity rents. In other words, sink rents should be at least as much as source rents.

Sink rents would go to an expanded OPEC Development Fund dedicated entirely to global sustainable development in poor countries (especially investments in renewable energy and energy efficiency). Source rents would continue to accrue to the country that owns the deposits, and presumably be devoted to national sustainable development. The focus here is on a new public service function for OPEC of efficiently collecting and ethically distributing sink rents in the interest of global sustainable development. Where Kyoto has failed, OPEC might succeed as a stronger power base on which to build the fiduciary role — a power base that sidesteps the inability of nations to agree on the distribution of carbon dioxide emission rights among themselves.

Although any exercise of monopoly power is frequently lamented by economists, the early American economist John Ise had a different view in the case of natural resources: “Preposterous as it may seem at first blush, it is probably true that, even if all the timber in the United States, or all the oil, or gas, or anthracite, were owned by an absolute monopoly, entirely free of public control, prices to consumers would be fixed lower than the long-run interests of the public would justify.” Ise was referring only to the source function. The emerging scarcity of the sinks adds strength to his view. The reasonableness of Ise’s view is enhanced when we remember that for a market to reflect the true price, all interested parties must be allowed to bid. In the case of natural resources the largest interested party, future generations, cannot bid. Neither can our fellow non-human creatures, with whom we also share God’s creation, now and in the future, bid in markets to preserve their habitats. Therefore resource prices are almost certainly going to be too low, and anything that would raise the price, including monopoly, can claim some justification. Nor did Ise believe that the resource monopolist had a right to keep the entire rent, even though the rent should be charged in the interest of the future.

The measurement of the two different rents presents conceptual problems. The source rents are in the nature of user cost — the opportunity cost of non-availability in the future of a non-renewable resource used up today. Assuming that atmospheric absorptive capacity is a renewable resource, the sink rent would be the price of the previously free service when the supply of that service is limited to a sustainable level. If we assume separate markets in both source and sink functions we would theoretically have a market price determined for each function. Since the functions are related as the two ends of the same throughput, the source and sink markets would be quite closely interdependent. The separate markets could be competitive or monopolistic, and differing market power would largely determine the division of total throughput rent between the source and sink functions. For example, if, following a Kyoto agreement, the total supply of sink permits were to be determined by a global monopoly, that monopoly would be in a stronger position to capture total throughput rent on petroleum than would a weak cartel that controls the source. OPEC is surely aware of this.

What might the WTO and the World Bank think of such a suggestion? Since these two institutions are well represented at this conference, this question is more than just rhetorical. So far the WTO and the World Bank have been dedicated to the ideology of globalization — free trade, free capital mobility, and maximum cheapness of resources in the interest of GDP growth for the world as a whole, including mass-consumption societies. In their view maximum competition among oil-exporting countries resulting in a low price for petroleum is the goal. Trickle down from growth for the rich will, it is hoped, someday reach the poor. I suspect the free-trading globalizers consider themselves morally superior to the OPEC monopolists. But which alternative is worse:

  1. Price- and standards-lowering competition in the interest of maximizing mass consumption by oil-importing countries by minimizing the internalization of environmental and social costs with consequent destruction of the atmosphere, and ruination of local self-reliance by a cheap-energy transport subsidy to the forces of global economic integration, or
  2. Monopoly restraints on the global overuse of both a basic resource and a basic life-support service of the environment, with automatic protection of local production and self-reliance provided by higher (full-cost) energy and transport prices, and with sink rents redistributed to the poor?

Monopoly restraint results not only in conservation and reduced pollution, but also in a price incentive to develop new petroleum-saving, and sink-enhancing, technologies, as well as renewable energy substitutes. Unfortunately there would also be an incentive to use non-petroleum fossil fuels such as coal, which would be a very negative effect from the point of view of controlling carbon dioxide. Independent national legislation limiting emissions from coal (and natural gas) may well be a necessary complement.

Ideally most of us would prefer a genuine international agreement to limit fossil fuel throughput, rather than a monopoly-based restriction imposed as a discipline by a minority of countries only on petroleum. But the Western high consumers, especially the U.S. as resoundingly reconfirmed in its recent election, have conclusively demonstrated their inability to accept any restrictions that might reduce their GDP growth rates, even in the likely event that GDP growth has itself become uneconomic. The conceptual clarity and moral resources are simply lacking in the leadership of these countries. Perhaps the leadership reflects the citizenry. But perhaps not. The global corporate “growth forever” ideology is pushed by the corporate-owned media, and rehearsed by corporate-financed candidates in quadrennial television-dominated elections.

A lack of moral clarity and leadership in the mass-consumption societies does not necessarily imply the presence of these virtues in the OPEC countries. Do there exist sufficient clarity, morality, restraint, and leadership in the OPEC countries to undertake this fiduciary function of being an efficient collector and an ethical distributor of sink scarcity rents? As argued above, there is surely an element of self-interest for OPEC, but to gain general support OPEC would have to take on a fiduciary trusteeship role that would go far beyond its interests as a profit-maximizing cartel. But a strong moral position might be just what OPEC needs to gain the legitimacy necessary to increase and solidify its power as a cartel. Could such a plan, put forward by OPEC, provide a stronger power base for the goals that Kyoto tried and failed to institutionalize? Might the WTO and World Bank recognize that sustainable development is a more basic value than free trade, and lend their support? I do not know. Maybe the whole idea is just a utopian speculation. But given the post-Kyoto state of disarray and the paucity of policy suggestions, I do believe that it is worth initiating a discussion of this possibility.

If sustainability is to be more than an empty word we have to evolve mechanisms for constraining throughput flows within environmental source and sink capacities. Petroleum is the logical place to begin. And OPEC is the major institution in a position to influence the global throughput of petroleum.

* “Sustainable Development and OPEC,” Chapter 15 in Herman E. Daly, Ecological Economics and Sustainable Development, Edward Elgar Publishers, Cheltenham, UK, 2007.

Population and a Dose of Common Sense

by Blake Alcott

It isn’t true that population size (relative to the size of the earth and its resources) is the “main cause” of unsustainable environmental impact, or the “main problem” when it comes to depletion, pollution, and other concerns over health and happiness for people today and in the future. It also isn’t true that “the real problem” is too much consumption per person by rich people. It is both. It is P x A in the formula:

Impact = f(Population, Affluence, Technology), or simply IPAT.

Many researchers have measured the relative contributions of population and affluence to various kinds of impact. However, since decreases in population can be offset by increases in affluence, and vice versa, changes in either factor do not necessarily lower impact.

Can we be complacent about population size? Can we count on declining birth rates to stabilize or even lower population, now over 7 billion and increasing by 80 million per year (the size of Ethiopia’s population)? We are also, after all, experiencing declining death rates, and rising life expectancy counterbalances declining fertility to some extent. The deeper question is whether a population of 7 billion — or 8 billion or even 11 billion (low and high projections) — exceeds the earth’s carrying capacity.

The number of people that can live on earth obviously depends on how much food we can produce now and over the long term. The evidence suggests that we cannot count on food production to keep pace with population growth:

  • Very little land remains to be converted into agricultural hectares;
  • Such land conversion incurs high costs;
  • Yields per hectare can rise significantly only in Africa and South America;
  • Soil degradation and groundwater depletion curtail production;
  • Petroleum scarcity will increasingly constrain food production because agriculture requires fuel for machinery, water-pumping, and transport as well as oil-derived fertilizers and plastics.

A population’s sustainability depends on its affluence. Therefore, before any society can compute its carrying capacity, it must first decide what material lifestyle it wants — how much it wants to consume. Does it want to eat meat (and not just grain), or use land for sports and entertainment (and not just agriculture), and does it want wilderness for other species? If so, its maximum population is proportionally lower. Once a society has politically decided its desired level of affluence, it can assess appropriate technologies for producing its goods and services most efficiently. Only then can a number be calculated for a desirable and sustainable population size.

Population and affluence are both components of overall environmental impact.  Credit: www.TheEnvironmentalBlog.org

Many countries, if they were to estimate these parameters, would conclude that they are overpopulated, especially if they remember that sustainable size takes into account the rights of future generations and the desirability (on either utilitarian or ethical grounds) of leaving room and resources for non-humans.

Once overpopulation has been recognized, the search for appropriate population policies begins. In the rich countries (the ecological footprint of a rich child, ceteris paribus, will be greater than that of one born in poverty) one could end subsidies for child-bearing, including tax breaks, salary bonuses, parental leave from work and even one-off payments for having a child. Any policy change must consider the rights of already-born children and the goal of gender equality. In poorer societies there is unmet demand for the means of preventing pregnancy. Birth control “technology,” if available to all who want it, would cut today’s 80 million excess of births over deaths by perhaps two-thirds.

Whether rich or poor, a country could also choose to adopt direct policies. Some possibilities, as promoted by many ecological economists, are:

  • Ending subsidies after a couple’s second child;
  • Offering payments for sterilization;
  • Imposing tax penalties for large families; and
  • Setting quotas for child-bearing.

These measures however raise the question of whether a society has the right to legislate how many children its members can have. On this issue, two questions are often confused: (1) the legitimacy of restrictions on individual procreative freedom itself, and (2) the legitimacy of the political process deciding them. If it is an inalienable right to have as many children as one wants, then quotas and other constraining policies would be out of bounds. Treating procreation in this way fits well with the laissez-faire, individualist philosophy of our time. The opposing view holds that reproductive freedom has limits, that at some population level, the interests of society are harmed, and restrictions that support the common good are acceptable and even desirable. Population size, moreover, is one of many issues affecting living beings without a vote, namely other animals and future humans. Concrete proposals have included the right to one child, with permits being transferable (for free or for a price) to someone else.

Such direct policies can be decided democratically or autocratically, and it is the latter that leads many to think immediately of “compulsion” or “coercion” when imagining them. However, every law, by definition, coerces us, so let us just agree to use a democratic process and reject the option of an authoritarian eco-regime. The question then becomes: is it legitimate for a majority — say, 51 or 60 or 66% of the voters — to restrict everybody’s procreative activity? A majority cannot, after all, legitimately legislate the incarceration or death of all red-heads.  But red-heads don’t pose the same problems that overpopulation does.

There is truth in the statement, attributed to David Attenborough, that one cannot conceive of an ecological problem that wouldn’t be easier to solve with fewer people. For example, in poorer countries, hunger and environmental degradation could immediately be mitigated if there were less demand for resources. The issue is to figure out first how many fewer people we’re aiming for, and second how to make a transition that is democratic, compassionate, and fair.

For more details on this topic, see the full paper, which raises more questions and offers many references for further reading.

Alcott, Blake, 2012, “Population matters in ecological economics,” Ecological Economics 80: 109-120. (accessible at www.blakealcott.org > Publications)

Toward a New Bretton Woods and a Sustainable Civilization

by Eric Zencey

Early in April, an international community of sustainability theorists and practitioners gathered in New York City at a special High Level Meeting at the United Nations.

Titled “Happiness and Wellbeing: Defining a New Economic Paradigm,” the High Level Meeting brought together 600 participants for the plenary session on Monday, April 2, with 200 invited experts staying an additional two days to form working groups to address key elements of the new economic paradigm. The meeting was called to begin the implementation of UN General Assembly Resolution 65/309, passed last year on unanimous voice vote. That resolution, brought forward by the tiny mountain kingdom of Bhutan and sixty-eight co-sponsoring nations, called for implementation of a dramatically different, more “holistic” understanding of economic development. It specifically rejected the GDP-based approach taken in the past and called for the creation and use of an alternative set of indicators that would more accurately measure human wellbeing. It also authorized Bhutan to call the High Level Meeting to articulate that indicator set, and to create a path toward its adoption.

But the meeting was about more than an indicator set. To decide what you’re going to measure, you have to know what you want to measure, and discussion of that — the ultimate purpose of an economy — subverts a great deal of traditional economic thought. And so the larger purpose of the meeting was to articulate the elements of a new economic paradigm, and to issue a call to world leaders to adopt its fundamental precepts.

The linking of development policy, pursuit of wellbeing, and alternative indicators in a new economic paradigm is a strong step toward establishing a sane and sustainable civilization that focuses on meeting human needs with ecological efficiency. To get there, centuries of infinite-planet economic thinking have to be swept aside. Traditional development theory begins with the idea that some nations are underdeveloped — nations that don’t have a western, industrial, consumerist economy. It also supposes that all the nations of the world want that kind of economy and that they can have it. But all three presumptions are false. No nation on the planet has an ecologically sustainable economy, which means that every nation, without exception, faces a major development problem. Consistent with the principles and practice of traditional neoclassical economics, western-style consumerist development has been predicated on an enormous drawdown of the planet’s stock of stored antique sunlight — oil and coal — which is a finite resource; and it has completely ignored the fact that the planet’s “sink” services — its ability to absorb our effluents, including greenhouse gases, without ill effect — are fixed and finite.

Together these flaws in neoclassical theory mean that development on the traditional model simply isn’t sustainable. America, with just 6% of the world’s population, uses 24% of the world’s annual production of fossil fuels, and similar proportions of other resources, both renewable and non-renewable. A nodding acquaintance with arithmetic is all you need to see that the western model isn’t scalable to the entire planet.

The traditional model of economic development presumes that raising GDP (gross domestic product) is the central purpose of economic policy. Increasingly, world leaders are recognizing that GDP is a poor measure of economic wellbeing, which is itself just part of overall wellbeing. Thus, the High Level Meeting to explore, articulate, and adopt an alternative. Bhutan’s leadership of this movement traces back to its adoption of gross national happiness as a way of measuring economic and social progress. Their use of this broader, more accurate indicator set led them to reject western style development. Faced with a decision about joining the World Trade Organization, government officials did a kind of “GNH Impact Assessment” and found that joining the WTO would diminish, not increase, their country’s wellbeing. The Bhutanese propose that their indicator set could serve as a model for the development of alternative indicators in other countries.

The 600-strong turnout for the plenary session, with many attendees from the UN delegations of member nations, shows that other nations are inclined to agree. What was new and impressive about the meeting wasn’t so much the content of what was said in the plenary speeches; many of us have heard, and have been saying, these things for years. What was new and different was who was saying them. The call for an ecologically sustainable economy that meets human needs is now being issued by prime ministers and former prime ministers, by presidents and secretaries of the interior, by directors of environmental agencies, by high-ranking officials the world over. And UN member nations are listening.

I took to the meeting a white paper on a project I’m involved with in Vermont, where, as a Fellow of the Gund Institute for Ecological Economics at the University of Vermont, I serve as coordinator of the Vermont Genuine Progress Indicator Project. The project brings together stakeholders — state and local officials, academics, leaders of non-profits, community leaders and interested citizens — to develop, articulate, and implement “GPI Plus,” a blending of the genuine progress indicator (one emergent standard among alternative indicator sets) and elements inspired by gross national happiness. The two complement each other. GPI is based on very clear, objective data, and measures physical things like net deforestation, net changes to air and water quality, net change in fertile farmland, and the costs of climate change. GNH is survey-driven and measures satisfaction with life in nine broad categories. Combining the two — using hard data about economic and ecological reality and survey research data about people’s experience — gives a fuller, more accurate picture of the economy’s sustainable, delivered wellbeing.

The Vermont project is moving forward, with a Data Inventory Meeting set for late May. (The first step in building the alternative indicator set is to convene producers and users of relevant data to see what we’ve got, what we can start with.) And a GPI Plus bill is making its way through the state legislature, having gained approval in both houses with minor differences; the Governor has indicated he’ll sign it. The bill commissions the GPI VT project as a state effort, identifies the Gund Institute as the leader, and would guarantee the participation of state agency heads and other officials in the process of development.

At the UN, the working groups that met April 3rd and 4th were tasked with laying the groundwork for a major international summit to be held in the summer of 2014. That meeting, UN officials hope, will result in a “New Bretton Woods Agreement,” a major rethinking and major reorganization of the economic and financial institutions that support the global economy. The Bretton Woods Agreement, signed in 1944, has been modified a bit — gone are the fixed exchange rates of the post-war era, just as Frederick Soddy advised — but it continues to embody an “infinite planet” model of economic development. With this High Level Meeting, the UN has acknowledged that it’s time to revamp our economic thinking and our institutional arrangements in light of the reality that the planet is, in fact, finite.

During the plenary sessions, there was little talk of steady-state economics or limits to growth from the keynote speakers, though the majority of the experts who participated in the working groups are well aware that the only sustainable foundation for the economy is a steady-state throughput that doesn’t increase (and indeed, will need to decrease) ecological footprints. I was part of a working group in which infinite-planet financing — debt-based money — was discussed. We tagged it as a driver of uneconomic, resource-destroying growth and marked it for change. Other groups entertained even more ambitious ideas: one proposal would simply do away with the $72-billion-a-year advertising industry, on the grounds that its reason for being is morally indefensible and, by the light of any appropriate indicator of well-being, economically dysfunctional: it encourages the planet’s wealthiest consumers to pursue whims and to feel idle wants as crucial needs, while the basic needs of a vast number of humans on the planet go unfulfilled.

Whether and how a New Bretton Woods Agreement will address the monetary system as a driver of uneconomic growth and environmental degradation remains to be seen. The nations of the world are on a learning curve, and how far along that curve they can be brought in two years will depend on how well the message is communicated — and on the kind of resistance that’s raised by beneficiaries of the current system, who can be expected to throw their considerable financial resources into an effort to stymie change. Ultimately our unsustainable global economy harms all humans, everywhere, now and yet to be born; but in the short term the harms do not fall equally. As I’ve argued elsewhere, on a finite planet, an infinite-planet financial system works as a pump, sucking money, wealth, and quality of life from the middle and lower classes and delivering it to the well-to-do. Kleptocracy — rule by thieves — is the technical name for it. History offers no examples of kleptocracies that withered away of their own accord.

No, success in bringing about a sustainable economic system won’t come simply as a result of the real-world lessons the planet will continue to offer us, as our infinite-planet system repeatedly crashes into non-negotiable, physical limits. It will come from a successful reframing of crisis as symptomatic of a need for dramatic and far-reaching change, and from mustering enough political power to implement that change.

Stay tuned.

Eric Zencey is a Fellow at the Gund Institute for Ecological Economics at the University of Vermont, visiting faculty in architecture and urban planning at the Sam Fox School of Design and Visual Arts at Washington University in St. Louis, and Visiting Associate Professor of Historical and Political Studies in the International Programs of SUNY Empire State College.

A best-selling novelist, he is also the author of Virgin Forest: Meditations on History, Ecology, and Culture and the forthcoming The Other Road to Serfdom and the Path to Sustainable Democracy, to be published this fall by the University Press of New England.

Sir Thomas Enough: Utopia and the Steady State

by Christian Williams

Editor’s note:  The connotation of utopia has become somewhat negative over time.  Utopians are often labeled as being overly idealistic or impractical.  Yet the very point of formulating policy or running an economy is to strive for a better society – to move in the direction of utopia.  This essay was first published on Smacademia.

Sir Thomas More’s Utopia was written almost 500 years ago, in the early 16th century.[1] The book has since influenced many a philosopher interested in the concept of Utopia, in theory or in practice. It is an attempt to outline the workings of an ideal state – in this case a small island state in the New World. Written originally in Latin, the book was dangerous in that it directly challenged the authority and wisdom of the ruling Crown – a standpoint that later resulted in the author’s execution by King Henry VIII. As I began to read this book, I was startled by the early realization that this book is nothing short of a 500-year-old vision of a steady state economy. In this article, I will review the book and show the many parallel aspects between the two visions; comparing Utopia with the vision of a steady state economy as outlined recently in the report from the Steady State Economy Conference, Enough is Enough. [2] (The following headings are chapters from the report, followed by comparisons with material in Utopia).

Enough Throughput: Limiting Resource Use and Waste Production [2, pg 42]

The Utopians are careful not to be wasteful, thereby minimizing their consumption and waste. They live a non-materialistic way of life with a focus on simplicity and quality. For example, “among the Utopians… men very seldom build upon a new piece of ground; and are not only very quick in repairing their houses, but show their foresight in preventing their decay.” [1; pg 36]

Enough People: Stabilising Population Growth [2; pg 50]

Maintaining a stable population was a priority in Utopia. The way they achieved this, however, is only possible in an “empty world” rather than today’s “full world.” Their cities are limited to 6,000 families. [1; pg 37] To aid in maintaining this balance, “they supply cities that do not breed so fast, from others that breed faster; and if there is an increase over the whole island, then they draw out a number of their citizens… and send them over to the neighbouring continent”. In essence, they use fertile colonies where the land has spare capacity to house any excess people. They likewise recall people from the colonies in the event of plague or any other natural disaster that reduces the population. This would not work in the modern world where all spare productive regions of the world are now populated, yet the importance of a stable population is recognized by the Utopians, as it is within a steady state economy.

Enough Inequality: Distributing Income and Wealth [2; pg 57]

In Utopia, even their chiefs are barely distinguishable from the general population, and all are considered equal. “There is no man so much raised above the rest of mankind as to be the only favourite of Nature, who, on the contrary, seems to have placed on a level all those that belong to the same species. Upon this they confer that no man ought to seek his own conveniences so eagerly as to prejudice others”. [1; pg 48-49] In a “full world,” excessive wealth for one means taking opportunity from another (e.g., one of the one billion people who are not getting enough food).

Enough Debt: Reforming the Monetary System [2; pg 64]

In this respect, the Utopians go far further than the proposals of the modern steady state movement. These proposals aim for currencies issued by public institutions and without being created by debt as a loan from a bank. The Utopians live without any currency in an economy along the lines of a resource-based economy as proposed by Jacques Fresco, where resources are distributed freely among the population according to their needs.  There is no debt in Utopia. Furthermore, “since they content themselves with fewer things, it falls out that there is a great abundance of all things among them.” [1; pg 37]

Enough Poor Indicators: Changing the Way We Measure Progress [2; pg 34]

“We who measure all things by money, give rise to many tasks that are both vain and superfluous, and serve only to support riot and luxury.” [1; pg 34] Residents are not particularly concerned with measuring anything in Utopia, for there is little need for it, but this quote from the narrator’s perspective describes the folly and consequence of a poor indicator (GDP was still more than 400 years short of its invention).

Enough Job Losses: Securing Employment [2; pg 80]

In Utopia, they work little, yet almost everyone is employed. “[The chief] is to take care that no man may lie idle… yet they do not wear themselves out with perpetual toil, from morning to night, as if they were beasts of burden…” [1; pg 34] They appoint only six hours for work – sufficient because it is not wasteful. As is proposed within this chapter of the report, they use working time policy to moderate production and maintain full employment. “When no public undertaking is to be performed, the hours of work are lessened. The magistrates never engage the people in unnecessary labour, since the chief end of the constitution is to regulate labour by the necessities of the public, and to allow all the people as much time as is necessary for the improvement of their minds, in which they think the happiness of life consists” [1; pg 37]

Enough Excess Profits: Rethinking Business and Production [2; pg 87]

In Utopia, most production is done for the community, and is distributed freely to all. It is a society based on cooperation rather than competition, where people support those in need, yet demand an honest contribution from all, achieving this through strong social institutions. This is a vastly different model than our current society. “In all other places… while people talk of a commonwealth, every man only seeks his own wealth.” [1; pg 81]

Enough Unilateralism: Addressing Global Relationships [2; pg 95]

The Utopians are a peaceful society, yet they are still forced to deal with threats from abroad. They maintain close ties with their neighbors although they do not enter into formal leagues or alliances. “[They] believe that if the common ties of humanity do not knit men together, the faith of any promises will have no great effect.” [1; pg 62-63] The Utopians strive for peace, provide help to neighbors when needed, and require unassailable justification for entering into war. The steady state movement recognizes the importance of international cooperation, including the need for overly consumptive nations to enact reforms and support those nations where people are not consuming enough to meet their needs.

Enough Materialism: Changing Consumer Behaviour [2; pg 101]

The Utopians are an extremely non-materialistic society, a prerequisite for it to function without scarcity. There are many examples of this shown in the text. “They take care, by all possible means, to render gold and silver of no esteem.” [1; pg 44] “The Utopians wonder how any man should be so much taken with the glaring doubtful lustre of a jewel or a stone, that can look up to a star, or the sun himself; or how any should value himself because his cloth is made of a finer thread… as if he were a thing that belonged to his wealth.” [1; pg 45-46]

There are also many instances where the general principles of sustainability are visible, aside from those described above.  “They define virtue to be living according to Nature” [1; 48].  They shun short term benefits over long term costs, and think to the future: “No pleasure ought to be pursued that should draw a great deal of pain after it… They take great care that… pleasure may never bread pain.” [1; 47] Meeting all the needs of the population, without compromising future welfare is easily achieved.

Certainly some concepts in the book are less applicable and would be less readily accepted today. For example, it was a surprise to find mention of slaves within this egalitarian society, but after reading further, I realized that their slaves are what we call prisoners or criminals. Even in Utopia, some people in society break the laws and customs of the land, and punishments are handed down. In another example, the uniformity of Utopia – of its towns and its people – seems to under- value diversity. “He that knows one of their towns, knows them all, they are so like one another.” [1; pg 30]  And having “no taverns, no alehouses” [1; pg 42] may be hard to swallow for some.

Regardless of the details, it is hard to miss the similarities between Sir Thomas More’s vision of Utopia and modern recommendations for a steady state economy.  The question is whether it is achievable, and beyond this there are questions of whether it can exist without an opposite. Without hate, would there be love? Without sickness, could we feel healthy?  The Utopians could only appreciate their society through observing the follies of their neighbors. Maybe we can only appreciate the hopeful possibilities of a steady state economy once we’ve observed the profound ecological and economic problems of the growth paradigm.  All the same, both Utopia and Enough is Enough provide striking visions for achieving a better future.

[1] More, Sir Thomas (1997); Utopia. Published by Dover Publications Inc (Dover Thrift Editions), Toronto, Canada.

[2] O’Neill, D.W., Dietz, R., Jones, N. (Editors), 2010.  Enough is Enough: Ideas for a sustainable economy in a world of finite resources. The report of the Steady State Economy Conference. Center for the Advancement of the Steady State Economy and Economic Justice for All, Leeds, UK.
Available for download at: https://steadystate.org/enough-is-enough/

Christian Williams is a New Zealander working in Sweden on a master’s degree in sustainable development.  His thesis is about the benefits of a shorter working week, based partly on the need for a new, non-growing economic model.