A Not-So-Nobel Prize for Growth Economists

William Nordhaus shaping vulnerable minds in his Yale classroom – Oct. 8, 2018.  (Photo credit: Yale/ ©Mara Lavitt)

by Brian Czech

How ironic for the Washington Post to opine “Earth may have no tomorrow” and, two pages later, offer up the mini-bios of William Nordhaus and Paul Romer, described as Nobel Prize winners.

Without more rigorous news coverage, few indeed will know that Nordhaus and Romer are epitomes of neoclassical economics, that 20th century occupation isolated from the realities of natural science. Nordhaus and Romer may deserve their prizes for economic modeling, but each gets an F in advanced sustainability.

Nordhaus won his prize (actually the “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel”— not the Nobel Prize per se) for his mastery of mathematical modeling. He applied his skills to carbon taxes for lowering greenhouse gas emissions. All along he prescribed economic growth – the key driver in greenhouse gas emissions—as the way to afford such taxes!

In 1991 Nordhaus uttered one of the most iconic sentences in the history of unsustainability: “Agriculture, the part of the economy that is sensitive to climate change, accounts for just 3% of national output. That means that there is no way to get a very large effect on the US economy” (Science, September 14, 1991, p. 1206).  Think about that. He must have set a graveyard’s worth of classical economists (Adam Smith, David Ricardo, John Stuart Mill…) to rolling. They’d be rolling in laughter if the folly of Nordhaus wasn’t so dangerous.

No follow-up should be needed to expose the ludicrous nature of Nordhaus’s statement, but just in case: Agriculture is the very foundation of the economy. No agriculture, no anything else. Think about it. Any hit on agriculture—whether from climate change, bad luck, or stupid policies—has a magnified effect on the entire, integrated economy. Nordhaus’s “3%” statement was a classic case of ivory-tower cluelessness.

Too many trees for seeing the forest?

Romer, meanwhile, deserves some credit for his elegant theory of “endogenous technological change,” which took the work of Robert Solow (the father of economic growth theory) to the next level by describing in nuanced detail how R&D leads to technological progress. That said, there has never been a bigger forest missed for so many trees. For him, all that mattered was capital and labor; he said nothing about land, natural resources, or the environment.

Some readers may recall Julian Simon, the ultimate Pollyanna who claimed in the 1980s (and I paraphrase after thoroughly reviewing his 813 page Ultimate Resource II during my post-doc studies), “Sure, there are environmental problems caused by growth, but the more people we have, the more brains we have to solve the problems. Therefore, the more people we have the better, without limit forever.” Romer’s work amounted to a highly nuanced repetition of Simon’s self-christened “grand theory.”

Romer said in a nutshell: We have capital and labor. Part of the labor force is devoted to research and development (R&D). As limits arise, we get over them with more R&D. So we need ever more people, with ever more devoted to R&D, to keep raising the bar for GDP.

For Romer, it was as if ideas alone could overcome water shortages, biodiversity loss, mineral depletion, soil erosion, pollution, and climate change. As if ideas could be perpetually borne out of human minds struggling in a degrading environment, a warming climate, and an imperiled agricultural base (not to mention a crowded, noisy, and stressed out society). Romer was like a cook thinking up recipes with no idea where the ingredients would come from.

A generation and then some of economists and business students have been led to the exceedingly dangerous myth that there is no limit to either population or economic growth. Nordhaus and Romer have done as much as anyone to lead them into such a fallacy. Yet politicians and publics heed their advice, while the media regurgitates their fallacious notions.

Does Earth have “no tomorrow,” as the Washington Post wondered? One thing is for sure: Any hope for a happy tomorrow on Earth means rejecting the neoclassical economics of today. Even when such economics wins the “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.”

 


Gross Domestic Problem On World Animal Day

Nervous now, future worse: pronghorn antelope at the edge of a growing economy. (Photo Credit: Michael Shealy)

~Republished from The Daly News for World Animal Day 2018~

 

by Brian Czech

If you like animals, your feelings may have been nurtured by “Hedgehogs Being Adorable,” “Baby Hippo Has Won Our Hearts,” and other such gems. The Huffington Post, The Animal Blog, and various animal-lover media take a heartfelt approach to the appreciation of animals—wild as well as domesticated—reminding us of the needs and vulnerabilities of our fellow creatures. It’s a refreshing approach compared to the stodgy science and economics of conservation.

And it’s important. Mahatma Gandhi said, “The greatness of a nation and its moral progress can be measured by the way in which its animals are treated.” Abraham Lincoln said, “I care not much for a man’s religion whose dog and cat are not the better for it.” Animal welfare is a barometer of national “goodness” in a sense that resonates with our common sense.

Yet if we are serious about animal welfare, we have to get beyond the mere adoration of hedgehogs and hippos. We have to face up to the big-picture, systematic erosion of wild animal welfare. It’s all around us and getting worse by the day, and our public policies precipitate it.

The most prevalent source of animal suffering is habitat destruction. Habitat includes food, water, cover, and space. When any of these elements are destroyed or depleted, wild animals suffer and often die more miserable deaths than if killed by hunters or predators.

Some animals survive an initial wave of habitat destruction only to be stranded in an unfamiliar, unforgiving environment. When a food or water source is destroyed, wild animals may starve, die of thirst, or suffer from malnutrition and the associated agonies. When thermal cover is lost, animals expend valuable time and energy trying to regulate body temperature. This lowers the time and energy available for feeding, playing, and mating. When hiding cover is lost, wild animals experience fear and stress, seeking cover from predators that may or may not be present.

What kind of a life does that sound like? It would be like getting thrown out of your home, into a perilous world with no social net, no health system, no Salvation Army, and no street corner to beg from. Yet it’s the life we’ve been forcing animals into by the millions. How can we stop?

We often hear of “human activity” being the cause of habitat loss. That’s a start, recognizing our basic role in the problem, but we have to dig deeper to detect precisely what type of human activity is problematic. After all, the habitat destruction caused by humans beings isn’t spiritual activity, or neighborhood activity, or political activity (at least not directly), but almost always economic activity.

The macroeconomic nature of the problem is evident when we consider the causes of species endangerment. These causes are essentially the sectors and byproducts of the whole, interwoven economy, starting with agricultural and extractive sectors such as mining, logging, and livestock production. These activities directly remove or degrade the habitat components required by wild animals.

Another major cause of endangerment is urbanization. Urbanization reflects the growth of the labor force and consumer population as well as a variety of light industrial and service sectors. Few types of habitat destruction are as complete as urbanization. While extractive activities can be a traumatic experience for the denizens of wildlands, logging, ranching, and even mining usually leaves some habitat components. But when an urban area expands, it does so with pavement, buildings, and infrastructure. These developments are devastating to most of the animals present.

The economic system extends far into the countryside, too. Roads, reservoirs, pipelines, power lines, solar arrays, and wind farms are examples.

It would be hard to conceive of a more prevalent danger to animals than roads. Roads and the cars upon them leave countless animals mangled and left, during their final hours, to be picked apart by wild and domestic scavengers. Power lines induce electrocution, a significant source of bird death and crippling. Power line collisions cause their share as well. Wind farms and solar arrays, thought to be the keys to “green growth,” are the latest hurdles for migratory birds.

Pollution is an inevitable byproduct of economic production. Pollution is an insidious and omnipresent threat to wild animals. Whether it’s nerve damage from pesticides, bone loss from lead poisoning, or one of the many other horrible symptoms of physiology gone wrong, pollutants ensure some of the most excruciating diseases and slowest deaths in the animal kingdom.

Climate change is another threat to species, although its mechanisms are less direct. Temperature is a key factor in the functioning of ecosystems and the welfare of the animals therein. Climate change is pushing polar bears and other polar species off the ends of the earth; at what point will this climate-controlled conveyor belt stop? Climate change, too, is a result of a growing (and fossil-fueled) economy.

We should give thanks for the Humane Society, International Fund for Animal Welfare, and Society for the Prevention of Cruelty to Animals. These and related organizations do the good work that Gandhi and Lincoln would have endorsed. Yet when is the last time you’ve heard these organizations give a hoot about economic growth, the single biggest threat to animal welfare?

And why does no one put in a word for our furry and feathered friends when Congress, the President, and the Fed pull out all the stops for GDP growth? Where are the advocates of humane treatment of animals, when the biggest decisions are made about the rate of habitat loss and therefore animal suffering? When a hundredth percentage point less in GDP growth could save hundreds of thousands of animals a year?

Why don’t we have a mainstream media, which isn’t afraid to expose nastiness to horses and chickens, talking about the millions of animals suffering at the cumulative hand of economic growth? Has economic growth become the inconvenient truth for animal welfare?

It’s definitely inconvenient—and that’s an understatement—for millions of animals.

 


The Poison Beer of GDP

 

By Herman Daly, CASSE Economist Emeritus – October 3, 2018

Disaggregating reported GDP growth to reveal the differences in growth by income class, as per the Schumer-Heinrich Bill, is a good idea. After all, telling us, say, that average income grew by 4% is not nearly as informative as telling us that the richest ten percent received the entire growth increment while the bottom ten percent suffered a decline in income. Average income and growth rates are like the famous recipe for “50% rabbit stew”—one rabbit, one horse. We already know the extreme inequality in the distribution of wealth, of income, and of the growth increment, even without the Schumer-Heinrich Bill. However, if that information is incorporated every time new GDP figures are reported it will be much harder to ignore. Of course, that is exactly why the bill will be opposed by those who want us to believe that we are all getting 4% better off every year or that “a rising tide lifts all boats”, when in fact a rising tide in one place means an ebbing tide somewhere else.

Once we correct GDP for ignoring distribution, then perhaps we can go on to correct other defects, such as the fact that it adds defensive expenditures made to protect ourselves from the unwanted costs of growth (pollution, depletion, congestion, crime, etc.) while failing to subtract as a cost the damages that made the defensive expenditures necessary in the first place. For example, damages caused by an oil spill are not deducted, but expenditures to clean up the spill are added; depletion of soil fertility is not deducted, but expenditure on fertilizer is added, etc.

In addition, the very concept of income in economics is defined as the maximum amount that a community can consume this year and still produce and consume the same amount again next year, and the years after. The income from a fishery is its sustainable catch; the income from a forest is its sustainable cut. Consuming more than that is capital consumption, not income. Yet, as far as GDP is concerned, we can cut the entire forest and catch every fish this year and count it all as income—there is no rule against counting consumption of natural capital as income in GDP accounting.

If our main goal is to increase GDP rapidly, then we will not want to slow it down for concern about equity of distribution, or by correcting the asymmetric accounting of defensive expenditures, or by correcting the fundamental economic error of counting capital drawdown as income.  Maximizing GDP growth will lead to less concern for distributional equity, more depletion and pollution, and more consumption of natural capital.

I am reminded of a story told by G. K. Chesterton. A pub was serving poison beer and customers were dying. Alert citizens petitioned the local magistrate to close down the offending establishment. The cautious magistrate said, “You have made a convincing case against the pub. But before we  can do something so drastic as closing it down, you must consider the question of what you propose to put in its place…”.  Contrary to the magistrate you don’t need to put anything in the pub’s place. Nor is it really necessary to put anything in the place of the poison beer of GDP. As it happens, however, there are in fact better things to put in its place, such as the Index of Sustainable Economic Welfare, National Welfare Index, and Genuine Progress Indicator.


Herman DalyHerman Daly is an emeritus professor at the University of Maryland School of Public Affairs and a member of the CASSE executive board. He is co-founder and associate editor of the journal Ecological Economics, and he was a senior economist with the World Bank from 1988 to 1994. His interests in economic development, population, resources and environment have resulted in more than 100 articles in professional journals and anthologies, as well as numerous books.


NGOs Challenged to Back Up Their Rhetoric

The following letter was sent to the top ten environmental NGOs today, challenging them to a debate on the topic, “Is there a conflict between economic growth and environmental protection?” Recipients included the National Wildlife Federation, Defenders of Wildlife, World Wildlife Fund, Sierra Club, Friends of the Earth, Environmental Defense Fund, Natural Resources Defense Council, The Nature Conservancy, National Audubon Society and the Izaak Walton League.

An Act of Congress for the Steady-State Timeline

By Brian Czech

Some years down the road—probably decades—we’ll pass the Full and Sustainable Employment Act, calling for a steady state economy in the USA. This is our vision at CASSE. When that day comes, scholars and commentators will construct a timeline demarcating the major steps along the way. On that timeline, August 28, 2018 will be duly noted. This was the day when the Measuring Real Income Growth Act, “MRIGA,” was introduced in the U.S. Senate by Chuck Schumer (D-NY) and Martin Heinrich (D-NM).

Even if MRIGA is never enacted, the Senate bill will belong on the timeline. It recognizes one crucial point on the way to a steady state economy: namely, that something is wrong with using GDP as an indicator of success. It represents an American paradigm shift, away from the bankrupt notion that “a rising tide lifts all boats” to the reality that some boats are falling to pieces while others are accruing new decks.

Now it’s true that MRIGA is far from a Full and Sustainable Employment Act. It’s all about a more equitable distribution of wealth, and says nothing about limits to growth. And that is precisely why it will be an early mark on the steady-state timeline, as opposed to the culmination of steady state economics.

Steady state economics centers around the themes of sustainability, distribution of wealth, and allocation of resources. When asked for advice, the steady state economist will prescribe stabilized GDP (for sustainability), an equitable distribution of wealth, and efficient allocation of resources using a variety of approaches. In contrast, conventional economics deals almost entirely with the allocation of resources by prescribing especially the “free market.”

Similarly, American political history has favored the free market. The American Constitution was conducive to the fast track of a capitalist economy. The founding fathers – and certainly subsequent politicians – emphasized economic freedom over issues of fairness and sustainability.

As we start bumping up against limits to growth in the 21st century, some cold hard facts reveal themselves. One is the accelerating pace of environmental deterioration. Another is that a rising tide no longer lifts all boats. When it takes drastic measures to grow the economy – including the revocation of longstanding environmental protections – the benefits accrue to fewer individuals, such as oil and chemical company executives.

Chuck Schumer explaining the bill on C-SPAN.

Environmental deterioration is noticed by ecologists and overlooked by most others, while the general inability to get ahead financially is experienced by the vast majority of individuals. Therefore we can expect political action on the distribution of wealth before any action on protecting the environment, much less any steady statesmanship to intentionally limit the size of the economy. And this is precisely what we are seeing in MRIGA: political action on the distribution of wealth, with no heed paid to sustainability (in the current bill at least).

So we suffer no illusions that Schumer and Heinrich are attacking GDP out of a concern for environmental protection or even long-term economic welfare. Even their apparent concern for the current distribution of wealth doesn’t hide the obvious fact that MRIGA is a political response to President Trump’s braggadocio over GDP growth rates. Nevertheless, the mere fact that Schumer and Heinrich focused in on GDP, rather than for example a progressive tax reform, will help us immensely as we raise awareness of the trade-off between GDP growth and environmental protection, economic sustainability, national security, and international stability.

Unfurling the Banner at the Steady State Herald

~Steady State Herald Premiere~

By Brian Czech

It’s been quite a run with our CASSE blog, the Daly News. Regular readers will recall a consistent weekly column from March 2010 through late 2015. Then for a couple years it was hit-or-miss, for reasons already explained (in a Daly News entry, naturally.) Now we’re back to blogging regularly under a new banner: the Steady State Herald!

Well, almost regularly. We do have a technical glitch to overcome first. The CASSE website has gotten bogged down with old plug-ins, programming bugs, and a generally creaky platform. We must fix it, thoroughly, and that process begins this week. This also means our blog (which happens to be at the center of the technical difficulties) will be static for the time being.

We will notify our subscribers and signatories when we’re rolling again with the next article of the Steady State Herald, most likely before summer is officially upon us. Meanwhile it won’t be such a bad thing for readers, new and old, to reflect a bit on the topics and events we covered with the Daly News. This article should help us do just that.

So as we unfurl the new banner of the Steady State Herald, let’s toot the old horn one last time for the Daly News.

“Daly News” was a play on words for capitalizing on the good name of Herman Daly, the champion of steady state economics. The Daly News was the flagship communications tool for CASSE during our formative stages. We published approximately 246 Daly News articles, with Herman Daly and yours truly penning 60 apiece. Brent Blackwelder wrote 50 more, and Rob Dietz (serving concurrently as CASSE executive director) another 40. We’ve had dozens of guest authors and semi-regular contributions from James Magnus-Johnson (20) and Eric Zencey (15).

With the Daly News, we proved there is plenty of news – not to mention opinion – on limits to growth and/or the steady state economy. Even given that theme, our articles ranged far and wide in style and in substance. We came at our topics from philosophical, theological, ecological, economic, historical, political, sociological, and psychological angles.

We used every tenor from sober prescriptions for public policy to hyperbolic parody. We celebrated anniversaries and we posted obituaries. We covered the terrain from local to global. Through it all, we kept to the tenets of a 501(c)(3), non-profit educational organization. We never lobbied for a candidate, but we sure critiqued a number of them, all across the political spectrum.

We should all – producers and consumers of the Daly News – thank Herman Daly for the privilege of using his name. Those familiar with Herman’s modesty won’t be surprised that he was never comfortable with the moniker. But “Daly News” helped to put us – CASSE and our blog – on the map, especially in the field of ecological economics and in the surrounding, broader terrain of political economy.

With Herman’s name gracing our blog, each new article came out of the starting blocks with the traction of credibility. The name also compelled our authors to take their task seriously and to seek… if not perfection, the best of our abilities and perhaps a more civil discourse. The quality of articles was such that the Daly News was often cross-posted at the request of other organizations. It compelled or provoked many follow-ups; numerous articles still do. The Daly News helped CASSE win the 2011 Best Green Think Tank Award.

So yes, we did capitalize – in the best sense of the word – on Herman’s name. We also recognized some trade-offs from the beginning. One of them was the opportunity cost of not being able to send other valuable signals with the name of the blog. And so we come to the naming of the Steady State Herald.

Naming a blog is a bit like designing a logo. With a logo, you only have so much space, and the image must send a clear and instant message. Ideally it will also pique the curiosity required for further contemplation, and in the process convey additional nuance.

With a blog, you only have so many syllables, and they must send a clear and instant message. Ideally they will also pique the curiosity for further contemplation, and in the process convey additional nuance.

“Steady State Herald” has five syllables and readily rolls off the tongue. It’s a phrase that clearly conveys what our blog is about, especially with the subtitle, “Ushering in the Steady State Economy.” Now it’s true that “steady state economy” is not yet in the vernacular. So, just as some had to contemplate the meaning of “Daly News” (because not everyone knew of Herman), “steady state” won’t instantly connect with everyone. Yet the phrase remains the best thing we have going to convey, very quickly, the concept of a stabilized, sustainable economy. (See how quickly the syllables add up without using “steady state”?)

We’ve analyzed the rhetorical properties of “steady state economy,” as well as the technical and linguistic. We’re committed to using the phrase. We are, after all, the Center for the Advancement of the Steady State Economy. We remain confident the phrase “steady state economy” has the potential to be writ into public policy as well as implanted in the vernacular. We come a step closer, we think, by using the phrase as the very title of our blog.

That said, you can’t just call a blog “Steady State,” or even “Steady State Economy.” A blog is not a state (unless you really want to argue), nor is it an economy. So what else could you call it? We considered many examples, and among them were:

  • Steady State Times
  • Steady State Chronicles
  • Steady State Gazette
  • The Steady Statesman
  • The Steady Statement

You get the picture. We thought of the usual suspects; the news-papery nouns to couple with “Steady State.” We considered a few minor plays on words, too. We ultimately chose “Herald” as the proper coupling.

We’d all be happier if “Chronicles,” for example, was the appropriate coupling. Such would be the case if there was enough public awareness about limits to growth. Things would be happening toward steady-state policy reform and steady statesmanship in international diplomacy, and these happenings would warrant chronicling.

Unfortunately the vast majority of citizens haven’t connected the dots from biodiversity loss, pollution, climate change, noise, congestion – and many other indicators of illth– back to GDP growth. It may be the case that the majority doesn’t even recognize some of the indicators themselves. That seems to be true of climate change, for example, which happens so slowly (so far) as to escape the notice of casual citizens. The human race has become the frog in the metaphorical pot, oblivious to the perils of perpetual economic growth.

So we need a herald to awaken our fellow frogs from their slumber. This herald can’t be just another big mouth. He or she – or it, in the case of a blog – isn’t going to help matters by shouting oxymoronically for “green growth” or belting out a chorus of Kuznets Curve Kumbaya. Some people like to complain about “Cassandras,” but we think it worse to live in an age with so many Pollyannas. Certainly it’s a dangerous world when naïve notions of perpetual GDP growth prevail in the midst of melting ice caps, the Sixth Great Extinction, and the Anthropocene in general.

Let’s also recall that Cassandra was always right – never wrong – with her warnings to the Trojans. Her only curse was that no one believed her. If there were fools in this mix, Cassandra wasn’t one of them. The Pollyanna, on the other hand, is disastrously wrong. Her naïve “optimism” leads others astray, right down the path of least resistance.

So we eschew simplistic notions of “positive” messaging. We’re not optimists, pessimists, or notionists at all. We are, first and foremost, realists. We understand limits to growth, and we know we must do the yeoman work of rowing upstream in the river of political economy. We’re equal parts Cassandra, David, and Paul Revere. We won’t suffer Pollyannas, we’ll fight Goliath, and we’ll awaken you with our warnings. We ask only that you spread them, because we long for the day the Herald may be aptly renamed the Chronicles, Times, or Gazette.

Stay tuned for the blogroll of the Steady State Herald…

 

 

Conflict of Interest at the U.S. Fish and Wildlife Service? A Deal Some Couldn’t Refuse

March 20, 2018

By Richard McCorkle, Guest Author

As a fish and wildlife biologist with the U.S. Fish and Wildlife Service, I’ve been concerned about global warming and climate change for more than a quarter century.  In the late 1990s, when I finally had the means to do so, I began privately investing in socially and environmentally screened mutual funds. I felt it was the right thing to do; I was putting my money where my mouth was.

With so many other people focusing on those high-return blue chip holdings, I guess I shouldn’t have been surprised when one fund after the other was sold and/or underwent major changes in portfolio.  In one such instance, I noticed a prominent coal corporation had been added to one of my funds! Trying to stay true to my principles, I bailed in each case, cashing in my remaining chips but not giving up on the idea.

I also opened a dialog with some colleagues about investment strategies more congruent with conservation. Some of them replied, “Well, where do you get your electricity from and how do you get from point A to point B?” I’d thought about it too, and by the time 2010 rolled around, I was driving a Prius and had a solar array on my roof. My home was a net electricity generator.

Today, the energy I do purchase is 100% renewable through Green Mountain Energy. I ride my bike or drive the Prius for my four-mile round-trip office commute.  I also contribute to Carbonfund.org to offset any flights I take.

But the challenge of being able to divest more completely from fossil fuels turned out to be vexing.  I wanted to walk the walk and live up to the ideals of one of the schools where I had earned a degree, Unity College, the first college in the United States to divest its endowment of fossil fuel interests.  I eventually discovered Green Century Funds, and have been investing in their fossil-free funds for several years now.

If only the federal government’s Thrift Savings Plan (TSP) funds – or at least a few of their funds – were also free of fossil fuel investments!  As an employee of the U.S. Fish & Wildlife Service, it seems like a clear case of hypocrisy that employees whose mission it is to “work with others to conserve, protect and enhance fish, wildlife and plants and their habitats for the continuing benefit of the American People,” wittingly or unwittingly invest in TSP funds that include stocks from the likes of Chevron, BP, Exxon Mobil, Peabody Coal, ConocoPhillips, Sunoco, Royal Dutch Shell and many other coal, oil and gas corporations, along with various drilling and pipeline-building companies.

At a time when Bill McKibben was doing his “Do the Math Tour,” and various higher learning institutions and even some cities were divesting, the managers of the TSP stock fund assets (Black Rock Institutional Trust Company), the Federal Thrift Investment Board, and the Employee Thrift Advisory Council showed no interest in divesting government employees’ retirement investment funds from fossil fuels.  I know, because I spoke with them.

I started a petition which I personally delivered to the Federal Thrift Investment Board. I brought the issue to higher levels within my agency. I encouraged fellow employees to join me in ending investment contributions to the various stock funds and instead diverting all contributions to the F and G funds (government securities and bonds). Every time someone signed my petition, a corresponding message was automatically sent to Black Rock.

Everything I tried was a dead end.  Granted, I don’t happen to have much spare time to devote to this cause. I did learn that Congress amended the Thrift Savings Plan Enhancement Act of 2009 and authorized the TSP to open a “window” during which government employees can invest a portion of their TSP contributions in outside, private funds.  However, I was also informed that the powers that be had reservations about implementation of this mutual fund window.

As Fish and Wildlife Service employees, we’re supposed to be protecting and enhancing fish and wildlife and their habitats. Therefore, we provide consultation on gas and oil pipeline projects, and try to get some short-term wins for threatened and endangered species. Yet many of us are investing in the very companies whose pipeline projects we’re reviewing. In other words, we are investing in the long-term demise of the species we’re entrusted by the public to protect!

Isn’t this a conflict of interest?  It certainly is hypocritical.

 

Where Does Inflation Hide?

By Herman Daly, CASSE Economist Emeritus – February 20, 2018

The talking heads on the media explain the recent fall in the stock market as follows:

A fall in unemployment leads to a tight labor market and the prospect of wage increases; wage increase leads to threat of inflation; which leads the Fed to likely raise interest rates; which would lead to less borrowing, and to less investment in stocks, and consequently to an expected fall in stock prices. Therefore investors (speculators) rush to sell before the expected fall in stock prices happens, bringing about the very fall expected. So the implicit conclusion is that rising wages of the bottom 90% are bad for “the economy”, while an increase in the unearned incomes (lightly taxed capital gains) of the top 10% is good for “the economy”. The financial news readers of the corporate media avoid making that grotesque conclusion explicit, but it is implicit in their explanation.

A wage increase, in addition to cutting into profits, is considered inflationary, and that leads the Fed to raise interest rates and choke off the new money feeding the stock market boom and related growth euphoria. But higher interest rates serve other functions, most notably to keep capital from being wasted on uneconomic projects that are financially lucrative only at zero or negative interest rates. Furthermore, positive interest rates reward savers, provide for retirement and emergencies, and even reduce the inflationary effect of consumer spending.

As long as officially measured inflation is low the Fed can keep on pushing money into the economy to finance the asset boom. But why, with so much added money has there apparently been so little measured inflation? In truth there has been a lot of inflation, but it has simply not been measured by the Consumer Price Index (CPI). Why is that? Because the new money is borrowed into existence by investors who use it mainly to buy existing assets (stocks, bonds, real estate, art, crypto-currencies, etc.) . The price of assets goes up; we have asset price inflation, but asset prices are not part of the CPI and go uncounted. Inflation occurs in asset prices rather that in consumer goods prices, leading to boom and bust cycles.

Also some inflationary pressure spills into the goods markets, but does not register directly as a price increase and thus goes uncounted. Examples are numerous. At the supermarket the price stays the same while the box of raisins gets smaller, the block of cheese shrinks, the cup of yogurt is less full, the self-checkout line becomes the only option, etc. Air fares may not go up, but seat space declines, “miles” become ever more difficult to redeem, and quality of service becomes aggressively bad. Everywhere customer service declines as recorded “answers” replace real people (“your call is important to us—please stay on the line”). Our premier newspaper, the NYT, may not raise its price but it repeats the identical articles over and over after day and in various sections of the same edition. The price to watch network TV is to endure the commercials, which keep getting longer and louder. In sum, quantitative easing has resulted in unmeasured inflation, mainly in the asset market, but also in the consumer goods market.

Economists at the Fed are not stupid – they know this. Why then do they not correctly measure inflation and stop quantitative easing and the resulting zero (or even negative) interest rates? Because increase of asset prices benefits the asset owners, the rich, while the smaller rise in the undercounted CPI hurts mainly the poor. Also, under our fractional reserve banking system new money (interest-bearing private debt) must be loaned into existence, and banks lend to those with collateral, those at the top. In a sovereign money system the new money (non interest-bearing public debt) could be spent by the Treasury into the economy at the bottom to finance public goods and real production and employment (for an explanation of sovereign money, see Positive Money. Giving private banks the right to create money, as does our fractional reserve system (that no one ever voted for), is a giant subsidy to the private banking sector. Incidentally, the Fed is owned by these member banks who profit from excessive money creation, even though it is supposed to act independently in the public interest.

Farewell to FWS – Goodbye to Gag Orders

Brian Czech, Arlington, Virginia

Open letter to FWS, sent directly to FWS employees on February 7, 2018.

Friends, colleagues, and past FWS co-workers,

I once considered the U.S. Fish and Wildlife Service to be the world leader in conservation, and was proud to sign on! But that was a long time ago: 1999 to be precise. Today, something is awry at FWS headquarters, and that’s what drove me to retire on October 31. Within the leadership ranks of the National Wildlife Refuge System, especially, ethical lapses have led to corrupt tendencies. The mission has suffered and careers have been impacted; none more than mine, which was perennially crippled by gag orders.

The prohibited topic? The trade-off between economic growth and wildlife conservation, also known as the “800-pound gorilla.” The trade-off was the focus of my Ph.D. research in the 1990’s, when I documented the causes of species endangerment as a who’s who of the American economy. I presented these causes in Science, elaborated in Bioscience, and detailed the sociopolitical context in a book on the Endangered Species Act.

The gag orders were ironic, because my background on the 800-pound gorilla was one of the reasons FWS hired me to begin with. As the first “conservation biologist” for the National Wildlife Refuge System, I was told to “think big,” “long term,” and “outside the box.” Beginning in 2001, though, I was strung along by Refuge System chiefs who said “It has to be talked about, but now is not the time.” I waited patiently for the right time to come, occasionally re-testing the waters and invariably getting re-gagged.

While the gag orders started in 2001, the harshest one was issued in 2011 while a previous director awaited his Senate confirmation hearings. I was prohibited from saying “anything having to do with economics.” Another ham-handed order was issued in 2016 as the presidential primaries heated up. All the orders – along with reprimands, suspensions, and various other forms of coercion – were designed to buffer appointees, chiefs, and deputies who were petrified by the politics of economic growth. Such abject fear belied the talents of one appointee who boasted, “I can drink politics with a firehose.”

Not all FWS or DOI programs are inclined to evade the topic. Rather, a clique of Refuge System chiefs has squashed every reasonable effort to raise public awareness of the trade-off between growth and conservation. Now we are paying for this lack of awareness across the landscape.

Lest anyone think the gag orders reflected a technical disagreement, I quote a long-time Refuge System chief: “Everybody knows there’s a conflict between economic growth and wildlife conservation. It’s just not our role to talk about it.” Thankfully such shirking doesn’t infect every agency. Imagine the Surgeon General acquiescing, “Everybody knows smoking causes cancer. It’s just not our role to talk about it.”

Furthermore, the chief was off-base with “everybody knows,” unless he considered “everybody” to be FWS, where we’ve all witnessed the growing economy usurping, eroding, or polluting habitats. He failed to acknowledge the widespread misinformation outside FWS. Politicians, seeking to appease, mislead the public with, “There is no conflict between growing the economy and protecting the environment.”

The gag orders weren’t politically affiliated, either. The win-win rhetoric of “no conflict” was common to Democratic and Republican administrations alike. It was patently false in a bipartisan way, “everybody knew it” (at least in FWS), and sound science had refuted it. Yet to this day the win-win rhetoric constantly re-appears in public forums from the local town hall to the halls of Congress. It attracts wishful followers of all kinds, enough of them to keep economic growth atop the pedestal of domestic policy.

If the gag orders stemmed from neither technical disagreement nor political fealty, then why were they issued? In my opinion the answer is an indictment of an agency gone astray.

Corruption isn’t always as cut and dried as, for example, nepotism or embezzlement. For 18 years I watched chiefs come and go at headquarters, and in recent years especially, the layers of chiefs have treated the Refuge System as their oyster, incessantly travelling to spectacular refuges, rendezvousing regularly at the National Conservation Training Center, and even jaunting overseas to “assist” foreign nations. Their travelogues would be the envy of National Geographic explorers (with lulls only at times of intense political scrutiny). These chiefs are unwilling to jeopardize their tax-paid perks on a heavy topic at the heart of conservation. Maybe it’s not corruption per se, but it’s certainly unethical, unsustainable, and irresponsible.

Our privileged chiefs need a reminder of what it means to be a leader. Theodore Roosevelt said, “Nothing in the world is worth having or worth doing unless it means effort, pain, and difficulty.” He didn’t mean the “effort” of airline travel, the “pain” of per diem paperwork, or the “difficulty” in skirting a challenge. In FWS, leadership at the national level means identifying the biggest challenges to wildlife conservation, then mustering the fortitude to address precisely those challenges.

In retrospect, after studying the relevant case law (Pickering v. Board of Education, Garcetti v. Ceballos, etc.) and speaking with First Amendment experts (including Ceballos), I am convinced my gag orders would have failed the test of constitutional jurisprudence. I only wish I’d had enough time left in my FWS career to challenge the gag orders in court, for I surely would have. Alas, I ran out of time as my next job beckoned.

But you might have the time! Pursuant to your First Amendment rights as private citizens who happen to work for the government, don’t allow anyone at FWS or DOI prohibit you from raising awareness of the trade-off between economic growth and wildlife conservation. As a private citizen, you do have the right to speak on issues of public concern, even in the workplace.

At the very least, you can talk about the 800-pound gorilla on lunch and coffee breaks: that’s First Amendment 101. But your rights are far greater. Most of you can broach the topic as part of your duties, as context for your program, or in many other creative venues such as DOI’s electronic “ideas box.” The idea is to get the topic flowing enough to reach an audience of critical mass. An example of a productive pathway would be: Your program → division chief → AD → Director → Secretary of the Interior → Cabinet/President. Yet the possibilities for participants in this dialog are endless: other FWS programs, other government agencies, non-profit organizations, professional scientific societies, Congressional committees and caucuses, to cite the most obvious examples.

Who’s to say these conversations won’t reach the Federal Reserve as it debates monetary policy, or the Council of Economic Advisors as it advises the president on fiscal policy? Even beleaguered by all the gag orders, I managed to meet with one of the Council of Economic Advisors, talk with heads of state at Rio+20, and address the UN General Assembly in New York (albeit on my own time). Imagine what a well-primed political appointee could do! But it’s up to you to do the priming.

The fact is, you never know when one of our fellow discussants might be in a position to affect the rate of GDP growth and change the national dialog. It wasn’t long ago when a U.S. Treasury Secretary (Henry Paulson) was a big-time birder serving on the board of The Nature Conservancy, having grown up on a farm in Illinois. I believe he could have been a game changer in the growth debate, but he needed more information from the experts (you!) on the trade-off between economic growth and biodiversity conservation. His business education didn’t suffice. Without our insights and input, he was hamstrung by the win-win rhetoric, conceptually and politically.

So let us challenge any gag orders on the topic. If you happen to get one, be sure to call me. I’ll do my best to help you. Better yet, call PEER (Public Employees for Environmental Responsibility). They’re the best in the business at protecting federal employees from unlawful or inappropriate censorship.

And don’t let anyone tell you it’s just talk, that we can’t actually do anything about it. That’s the logic of simpletons and cynics. Let’s face it, in government we don’t do anything without talking about it. And to some degree, that’s the way it should be. You don’t just adopt a new policy, budget, or interest rate hike without a thorough dialog about the consequences, good and bad. Yet, in direct contradiction to the goal of wildlife conservation, we have allowed economic growth to be treated as an unquestioned goal, to be pursued forever with no questions asked.

In the halls of FWS, I believe the topic of economic growth will once again spur rational, insightful, and courageous conversations. These conversations should occur at national wildlife refuges, ecological services offices, fish hatcheries, and especially in regional offices and headquarters. As the limiting factor for wildlife in the aggregate, economic growth should be the unifying issue for wildlife conservationists at all levels and in all locales.

Economic growth is also a highly relevant issue at every societal level from local to national. Local discussions happen “where the rubber meets the road.” Community officials make local growth decisions. At the other end of the spectrum, national-level discussions are needed for influencing the fiscal policies of Congress and the monetary levers of the Federal Reserve. Headquarters staff getting paid the big bucks ought to be doing their part to spur these discussions.

Obviously you can’t go straight to the top. Hallway discussions are a modest start. That’s fine, because these discussions gradually permeate conference rooms, telephone lines, and the internet as well as reports, programs, and strategies.

As you talk about economic growth, you’ll discover it’s not the Holy Grail after all. Breaking it down to increasing population and per capita consumption – as measured by GDP – demystifies it and helps us recognize the inevitable impacts on wildlife. Thinking of the economy as integrated sectors – agriculture, extraction, manufacturing, and services – explains the geography of endangered species.

As the implications of this discussion come into focus, policy makers and consumers can take it from there. Once the discussion is widespread and thorough, policy makers will be less prone to pulling out all the stops for growth, while citizens will temper their consumption. The bulldozer will slow and younger generations will be encouraged to keep fighting for conservation.

Don’t think it’s impossible, either. Look no further than Europe, where a “de-growth” movement is afoot, making a difference already in many local scenarios. If they can handle the 800-pound gorilla, so can we.

I wish you the best. Maybe we’ll talk, but more importantly, hopefully you’ll talk, in particular about the fundamental conflict between economic growth and biodiversity conservation. The mission of the U.S. Fish and Wildlife Service depends upon it.

Sincerely,

Brian Czech, President

Center for the Advancement of the Steady State Economy

www.steadystate.org

brianczech@steadystate.org

@SteadyStateEcon

#GDPupNATUREdown

 

Democrats, Donald Trump, and the Dark Underbelly of Economic Growth

Brian Czech, Arlington, VA, 1/30/18  (photo credits: theduran.com)

Democrats are stunned by Donald Trump’s lack of culpability for racist rhetoric, Twitter tantrums, and international insults. They shouldn’t be. They’re the party of “It’s the Economy Stupid.” They should know that if a president inspires a bull market, creates a few jobs, and grows the GDP, he can “stand in the middle of 5th Avenue and shoot somebody” without losing voters.

Elected Dems can’t hold Trump accountable because they can’t break their own addiction to growth. They’re defenseless against a growth-mongering president. They want the credit for economic momentum from the Obama era, yet they just know that stock market boom is all about Trump.

Hearkening back to Obama’s economic performance makes the Democratic Party look like a Super Bowl loser taking credit for the half-time show. They’re in the process of being long-forgotten. Trump owns the Department of Commerce, the fiscal policy pen, and the printing presses for reports on growth. Not to mention the Twitter Feed from Hell.

There is a solution for Democrats, if they dare take it. It’s a simple solution but a real paradigm shifter: It’s a new outlook on growth. Ironically, Trump’s going to help them more than anyone in their own party. By the end of his term, economic growth will never look the same. Consider three ugly lessons:

1) Trump proves it doesn’t take a stable genius to grow the economy. Any old dummy can do it by trashing the planet. All you have to do is dismantle the Environmental Protection Agency, dispose of public lands, and generally run roughshod over the hard-won environmental institutions of earlier administrations and congresses. Don’t worry about offshore oil spills, the Arctic, or endangered species. Just drill baby drill, and grow the economy!

2) Trump doesn’t want his Americana – especially his American economy – saddled with poor and huddled masses from the “shithole countries.” He’d rather have the entrepreneurs, industrialists, and inheritors who bring instant big money to his hotels, golf resorts, and casinos. His personal financial obsession melds into a brutal economic philosophy: Keep the little money out, bring the big money in. That’s the quickest way to excite Wall Street, grow the GDP, and take credit for both!

3) Trump doesn’t view the international community as a precious outcome of creation, evolution, or civilization. To him it’s a collection of potential customers or, at best, business partners to skunk. Trump pulled us out of the Paris Climate Accords. He’s threatened multilateral obligations from NAFTA to NATO. He’s an insult to the United Nations. Rather than pursing goodwill among nations, Trump pursues the terms of trade most likely to bolster American GDP, regardless of what it does to the hopes and dreams of less advantaged nations who once revered the USA for its generosity and its democratic approach to capitalism. The United States is losing respect like never before; a doubly dangerous trend in an age of international instability.

Trump gets away with it all by hiding behind the goal of GDP growth. His minions at the White House collude. How many times have we heard them tell us that Trump does more for blacks than Obama ever did, because he’s growing the economy faster and providing jobs for all? And how is he providing these jobs? By “taking historic steps to lift the restrictions on American energy, to reverse government intrusion and to cancel job killing regulations,” as Trump’s EPA Administrator puts it. Meanwhile he justifies his international bullying with, “When the United States grows, so does the world.”

Right now, due to the bipartisan obsession with economic growth, Democrats look like losers at the GDP racetrack, racist sentiments are fair game again, and the rapacious pursuit of growth is liquidating the environment. Democrats, racial minorities, and environmentalists can pine independently, “Woe is me.” Or, they can unify and announce to the president and Republicans, “It’s not just GDP, stupid.”

As a bonus, they might get the Green Party vote, and we all know how that can change history.