Posts

“Steady State Economy” — a Positive Vision in International Affairs

by Brian Czech

Before we think about the steady state economy, let’s think for a moment about economic growth. Economic growth still has such positive connotations in domestic politics, especially American politics, that the vast majority of citizens simply assume that whoever can do more for economic growth is the better statesman (man or woman), better Federal Reserve chair, better economic advisor, etc. That’s why the definition of economic growth bears repeating over and over again, to pull the magic cloak from a purely material process. Economic growth simply means increasing production and consumption of goods and services in the aggregate.

In other words, economic growth means increasing population, increasing per capita consumption, or both. There’s nothing magical about it. Economic growth means more and more “stuff” – green stuff, brown stuff, pink stuff — and it takes more “stuff” to make it happen. That’s pretty obvious for the agricultural, extractive, and manufacturing sectors. But service sectors, even the information sector, take more stuff to grow, too.

And stuff tends to run out. Peak Oil, Peak Water, Peak Everything as Richard Heinberg called it; Earth has only so much to go around. Earth is big, but so is 7 billion — the number of people in the global economy. More importantly, guess which one is still growing.

Economic growth is indicated by increasing GDP. In nations with big ecological footprints — the United States, Japan, Germany, China, Brazil — economic growth has long been maxed out within the borders. Huge economies have to reach across their borders for natural resources, and their pollutants go international too. Economic growth is increasingly questioned as a positive vision in international affairs.

Many if not most nations recognize that economic growth has become more of a problem than a solution from a global perspective. That’s why Herman Daly calls it “uneconomic growth.” Resource shortages, pollution, climate change, congestion, and biodiversity loss are all results and indicators of economic (or uneconomic) growth.

In other words economic growth, indicated by increasing GDP, has become a bad deal, at least at the global level. It was a good deal some decades ago when it cost us little in clean air, clean water, fish and wildlife, and peace and quiet. But now it’s a bad deal and we need to recognize it as bad.

Calling economic growth a bad thing doesn’t make the steady state economy a negative vision. Far from it. In fact, when economic growth is a bad thing, only an alternative to growth can be a good thing, right?

So what are the alternatives to economic growth? This is where sticking to the standard, textbook, policy-relevant definition of economic growth comes in handy. Again, economic growth is increasing production and consumption of goods and services in the aggregate, indicated by growing GDP. So we have only two basic alternatives: decreasing production and consumption of goods and services in the aggregate, or stabilized production and consumption of goods and services in the aggregate. The former results in declining GDP and the latter in stabilized GDP. The former is called “recession.” The latter is called a “steady state economy.”

Of these, which one sounds like the better deal? Which one evokes the more positive image? Which one should be advocated as the solution to the problem of economic growth?

I’ll go out on a limb and say it’s the steady state economy.

Fortunately, I had the opportunity to test this hypothesis at the 20th anniversary of the Earth Summit, otherwise known as “Rio+20,” from June 20-22. There in Rio de Janeiro I talked with dozens of delegates from countries ranging in GDP from the gargantuan United States to the diminutive Comoros. Here’s what I found: nearly all favored the steady state economy as the positive solution to the problem of economic growth. Nearly all saw continuous economic growth as bad and the steady state economy as good.

That’s right, nearly all!

Doubt it? Think again. These diplomats ain’t no dummies. They know full well the planet is filling up with people and stuff, and that many national economies are beyond their sustainable levels.

Of course, there are exceptions. Some diplomats have the intellectual disadvantage of a background in neoclassical economics, leading them to believe there is no limit to economic growth. They can’t defend such a fallacious hypothesis, but they still believe it.

Then again, not all diplomats who agree about limits to economic growth will formally acknowledge such agreement. A distinct tendency was clear in Rio: wealthy-nation delegates were afraid to buck the party line of economic growth except in private conversation. The reasons should be obvious. In the United States, for example, we have Wall Street, the Federal Reserve System, and the Department of Commerce pushing hard for economic growth. No one should underestimate the power of these players to influence the language of statesmen, political appointees, and bureaucrats.

In small nations with widespread poverty, on the other hand, the general public, professional diplomats, and elected politicians have one thing in common: they’ve all experienced the unfairness of global economic growth and pro-growth policies. When it comes to natural resources, smaller countries tend to be deal takers, not deal makers, and the terms of trade are harsh.

That’s why the CASSE position on economic growth has garnered signatures from numerous small-country diplomats, ministers, and other delegates in international affairs. In Rio, I found delegate after delegate supportive of steady state economics for international diplomacy. Many were from African, South American, and Asian countries far removed from Wall Street and wary of international pro-growth institutions such as the World Bank, International Monetary Fund, and World Trade Organization. I got the succinct impression that, if only we had the time and access to all diplomats of the world, and even to heads of state, we would find the vast majority of them calling for steady state economics just as the CASSE position describes. That means starting in large, wealthy countries and gradually expanding to other nations after an opportunity to catch up in per capita consumption, at least to a reasonable degree.

Yet many activists, scholars, and ‘think-tankers’ are afraid to talk openly in public about the steady state economy, much less to go on record as supporting it. They think the phrase “steady state economy” has negative connotations. They think this makes the steady state economy too difficult to promote.

The fact is that any macroeconomic goal (growth, steady state, recession) has negative connotations. It’s time to pick your negative connotations!

Some may think that negative connotations can be avoided by the use of feel-good rhetoric such as “green,” “blue,” or “new” economics. I hate to burst the bluegreen bubblegum, but these too have plenty of negative connotations. This was evident in Rio. “Green,” “blue,” and “new” are seen by diplomats for what they are: rhetorical ploys to skirt the tough issues we face in the real world.

Long-time explicit advocates of the steady state economy could, I suppose, be accused of a biased opinion. But I know what I saw in Rio: delegates almost invariably connected quickly with the phrase “steady state economy.” Although it’s a phrase that requires some thought for translation to other languages, it makes so much common sense that the translation occurs alright. For example, the CASSE position on economic growth is already posted in 19 languages. After all the followups from Rio+20, it will also be posted in Chinese, Turkish, Hindi, Bangladeshi, Japanese, and Hungarian.

In political science, a central principle is name recognition. All else equal, the name recognized is the name favored. This applies to politicians, policies, and platforms. That’s why it matters when a professor, activist, diplomat, minister, or head of state chooses a label for a particular economic goal. “Green” has name recognition, but its meaning is fuzzy. “New” has little recognition or meaning, at least as applied to economics. “Steady state economy” has modest recognition, so far, but it clearly expresses the primary principle; a stabilized economy that is neither growing nor shrinking, but fluctuating around a sustainable level.

“Steady state economy” is a positive, proactive phrase that’s productive in international affairs. It has decades of academic reputation from the work of Herman Daly and others. It speaks clearly of the need to stabilize the size of the human economy. It has plenty of backing by dignitaries in sustainability science, policy, and diplomacy, and the list of dignitaries (not yet updated from Rio) is growing fast. We should encourage the purveyors of “green,” “blue”, and “new” economics to adopt it.

Aren’t there reasons enough?

Finding Real Economic Leadership in the Wake of Rio+20

by Brent Blackwelder

Twenty years after the seminal “Earth Summit” on sustainable development in Rio de Janeiro, Brazil once again has hosted a “fate-of-the-earth” meeting (Rio+20) focused on the themes of a green economy and institutional change.  In the aftermath of the 1992 meeting, too many nations, including the United States in particular, failed to reverse the downward trend in planetary ecosystem health. Today, with a global population of 7 billion consuming resources beyond the ability of the earth to replenish itself, we’d better hope there’s a better attempt at the transition to a sustainable economy after this meeting.

Change must begin with the structure of the economy because a nation’s economic policy is also its social and environmental policy. National economies all over the world are failing — failing to provide economic stability, failing to secure resources for future generations, failing to protect ecosystems and non-human species, and failing to achieve social justice.

In anticipation of the Rio+20 summit, Foundation Earth published a report called “The Economic Rethink: Who Does It Well?.” It challenges leaders to adopt big changes and gives them examples to follow from a variety of nations.  In preparing the report, Randy Hayes, founder of the Rainforest Action Network, and I reviewed over a dozen scorecards that grade nations on their performance — some focus on corruption, others on empowerment of women, still others on environmental protection.

In our 16-category analysis, Brazil, the host of the Rio+20 meeting, receives a failing grade, missing the boat in 13 categories of action toward a sustainable economy. Brazil’s political leadership is intending to make the nation a global powerhouse in agricultural exports, an intention that would mean sacrificing the world’s greatest tropical rainforest, the Amazon, to accommodate industrial plantations for food and biofuel exports.

But the report goes beyond the question of accountability for Brazil. It highlights significant positive steps that some nations are taking to shift to a new economy. In most of the 16 categories, at least a few nations are taking leadership roles. The twin goals of an environmentally restored earth and a socially just civilization are not part of a utopian fantasy: people have adopted inspiring policies and taken forward-looking actions in real places around the globe. The challenge is to make sure that the following examples become the rule rather than the exception:

  • Bhutan is leading the way in development of new indicators of progress. The “gross national happiness” measures deeper values that cannot be captured by GDP.
  • The Dominican Republic, which shares the island of Hispaniola with deforested Haiti, is demonstrating leadership forest restoration. Since 2003, forest cover in the Dominican Republic has increased from 32% to almost 40%.
  • In the energy sector, several leaders are stepping forward. Sweden, Costa Rica, and British Columbia (Canada) have instituted carbon taxes to include the ecological cost of energy use in its price. And Germany has blazed a clean energy trail with outstanding results in solar and wind power.
  • Cuba is an innovator in organic community agriculture. Havana grows 50% of its fresh produce within the city limits.
  • In a world awash with financial scandals and offshore tax havens, New Zealand has become the “least corrupt nation” because of its effective legal framework, fiscal transparency, and accountability.
  • Bolivia and Ecuador have put a rights-of-nature provision in their legal codes as have several cities and towns in the United States.
  • Iceland, number one on the Global Gender Gap rankings, is a nation of empowered women. Women in the Land of Fire and Ice hold the majority of jobs in university education and have nearly equal representation in parliament.
  • In contrast to Brazil’s determination to fill the Amazon with massive dams, the United States has led the world in one category: restoration and protection of rivers. Over 1,000 dams have now been removed in the U.S. to restore fisheries and water quality. Furthermore, more than 250 rivers have been safeguarded in the National Wild and Scenic Rivers System.
  • In the Netherlands, “repair cafes” are beginning to address the problem of over-consumption. Such cafes encourage reuse of broken and weathered possessions, providing free repair services.

These examples of leadership are well worth celebrating, but many challenges remain along the path to a sustainable economy. The biggest challenge is that no nation adequately addresses carrying capacity, planetary limits to growth, or sustainable economic scale. All nations must overcome this challenge to ensure a healthy planet and flourishing civilization for future generations.

It remains to be seen what progress will flow out of the Rio+20 meeting, but examples of real leadership in “The Economic Rethink” offer hope that we can dispose of the “disposable economy.”   There’s no longer room for an economy that treats the earth like it’s the site of a liquidation sale.

What’s “Rio+20” and Why Should We Care?

by Brian Czech

For those of us working in ecological and economic sustainability, Rio+20 is a big deal, and in our circles, just about everyone knows about it. Yet we have to wonder, what proportion of the general public has even heard of Rio+20, much less knows what it is? It’s a big question for a forum like the Daly News, where we’re all about mainstreaming sustainability. When we mention Rio+20, do we quickly lose readers who vaguely assume it’s some international, esoteric event with little relevance to mainstream society?

Rio+20 is short for the United Nations Conference on Sustainable Development. It’s a follow-up to the 1992 Earth Summit, which also was held in Rio de Janiero. The biggest environmental conference of all time, the Earth Summit produced the Convention on Biological Diversity, the Framework Convention on Climate Change, and Agenda 21. It was a beacon of hope on a planet in peril.

On the other hand, anarchists, nationalist extremists, and paranoid conspiracy theorists (and Sarah Palin, who warrants her own category) rue the Earth Summit because it evoked a certain level of international governance. It threatened the free world with that S word: sustainability.

The Earth Summit was also memorable for President George H. W. Bush snubbing his nose at the Convention on Biological Diversity, despite its signing by 150 countries and the European Union. He did sign the Framework Convention on Climate Change, but only after it lost its teeth by calling for voluntary instead of mandatory cuts in greenhouse gas emissions. In general, Bush dampened spirits and hampered diplomatic progress. “The American way of life is not up for negotiation,” he iconically announced, and he pitched that classic 90’s win-win rhetoric: “Economic growth provides the resources for environmental protection, and environmental protection ensures that growth is sustainable.”

I am quick to add that, despite explicitly identifying two prominent Republicans above, the win-win rhetoric was far from a partisan project. The Clintons, for example, were fond of win-winning with, “There is no conflict between growing the economy and protecting the environment.”

And the rest is history: decades lost, for the most part, in win-win one-upsmanship when we could have been preparing smartly for limits to growth and the sustainable alternative, the steady state economy. But that’s enough about history. What does Rio+20 offer in its wake? I think it offers perhaps the single biggest opportunity yet for “steady statesmanship” in international diplomacy.

Signs are abounding that the win-win rhetoric is giving way to common sense and sound science. No clearer sign exists than the CASSE position on economic growth and its growing list of signatories and commenters. One long-time conservation leader who recently signed the CASSE position noted, “I’ve been waiting for you for 40 years.” The time is ripe for steady state economics in academia, non-governmental organizations, and public policy.

But it’s not just we at CASSE and our list of signatories who signify a paradigm shift away from the obsession with economic growth. Why, just today the Huffington Post published an interview with Jeff Rubin about his new book, The End of Growth. The title is less noteworthy than the fact that Rubin was chief economist with CIBC World Markets. It seems like almost every day another well-known economist or ex-Wall Streeter is looking limits to growth square in the eye and not flinching. Rubin sees the end of growth as an opportunity for the planet to recover from the destruction inevitably wrought be growth.

These folks have a lesson for mainstream environmental and conservation organizations who can’t kick the win-win growth habit: Better get out of the way as real conservation leadership is coming from elsewhere. History will show that the big conservation NGOs have done us a major disservice by failing to raise awareness sooner — much sooner — of the trade-off between economic growth and environmental protection. To the degree they actively propagated the win-win rhetoric, their legacies will suffer.

I’ve digressed slightly from Rio+20, but only for some context. The proceedings of massive, bureaucratic UN conferences are not always unhitched from reality or relevance. What the various statesmen and women, ambassadors and diplomats are cogitating is the same thing we are: How can we all get along in the world when we know that many countries are consuming resources at a rate that is unsustainable and threatening to others on the planet? And yet those same countries continue calling for economic growth? There’s got to be a better way. Let’s hope the better way is achieved through diplomatic means, and not less peaceably.

Several weeks ago I moderated a session of the UN General Council in New York called “Harmony With Nature.” The session was sponsored by the Bolivian government, whose diplomats were completely understanding of limits to growth, and of the alternative policy goal of the steady state economy. My fellow panelists (including Joshua Farley, Herman Daly’s co-author of Ecological Economics) were aligned on the matter, and I daresay we literally brought “steady statesmanship” into the UN lexicon, or at least the proceedings. The tired old win-win rhetoric was debunked, and the feedback was enthusiastic.

This experience mirrored one from the Eastern Economic Association conference a few years ago, but on a much larger scale. The economists at the EEA conference were very unlike the neoclassical economists that pander to politicians with perpetual growth theories. They got it about limits to growth and the need for a steady state economy. So too with the diplomats from countries not so raveled up with Wall Street. The days of the win-win rhetoric are waning; the world at large is moving on, ready for steady statesmanship.

Are you?

There’s Hope for a New Economy in the New Year

by Brent Blackwelder

Early in 2011 UN Secretary General Ban Ki-Moon issued a profound condemnation of the global economy’s ill-conceived pattern of growth: “For most of the past century, economic growth was fueled by what seemed to be a certain truth: the abundance of natural resources. We mined our way to growth. We burned our way to prosperity. We believed in consumption without consequences. These days are gone… Over time, that model is a recipe for national disaster. It is a global suicide pact.” (Spoken at the World Economic Forum in Davos, Switzerland, January 2011).

That’s a somber statement, but there’s hope that the U.S. will break free from this “global suicide pact” and develop a fundamentally different economy.  My prediction for 2012:  decentralized forces, formed in response to the unsustainable and unfair economic situation, will begin to fundamentally change how our national economy works. People in the Occupy Wall Street movement and groups working on human rights, public health, clean energy, and social and tax justice are laying the groundwork for a shift to a steady state — a dynamic and sustainable economy that pursues prosperity and full employment without GDP growth.

The grassroots mobilization to support clean energy and a healthy environment is a sign of the shift to come. The work of diverse groups protesting the dirty tar sands pipeline from Canada to Texas motivated a huge turnout at the White House, with over 1,000 people being arrested. These protests were strong enough to get President Obama’s attention.  He delayed a decision on the pipeline and elevated the issue to center stage on the Republican agenda.

Statistics give us another hint that we’re headed in the right direction toward a steady state economy in 2012. Despite efforts by the Republican Congressional Leadership to undermine environmental protections (e.g., ongoing denial of climate change and attempts to gut EPA regulations), U.S. emissions have dropped by 7% in the last four years and are in line to drop further. Vehicle miles driven have declined, and ridership of public transportation is up 2%.

A cynic might say that the reason is simply the recession, but that’s only a small part of the story. Important actions such as renewable energy standards at the city and state levels are helping. Religious congregations participating in the Interfaith Power and Light initiative are reducing their carbon footprints. The campaign to shut down coal power plants and the substitution of natural gas for coal are also significant. Coal used to be the source of over half of U.S. electricity, but its share dropped to 43% in the first half of 2011 and is scheduled to drop even further.

As we enter 2012, we should redouble our support of those groups pushing for an economic paradigm shift based on sound governance and the principles of a just democracy. And it’s time to build a broad coalition of such groups to include those working on clean energy, public health, climate stabilization, financial reform, and other pieces of a sustainable economic system. Growing support for these groups and mutual reinforcement among them will provide the necessary spark to ignite the economic shift.

As we push for a just, environmentally sustainable world, we must continue to highlight the unabashed attempts by the richest one percent to continue fleecing the rest of us. December has featured a full array of proposed new financial gimmicks and tax breaks to benefit the very rich. For example, corporations with billions stashed in offshore tax havens are now seeking to bring these funds back to the U.S. with minimal tax under a so-called “Repatriation Act.”  They’re angling for a repeat of their lucrative repatriation flim-flam in 2004, a plan that saw 15 corporations bring back $150 billion at a 5 and ¼% tax rate instead of 35%. The Senate Permanent Subcommittee on Investigations found that these 15 companies did not add jobs or increase research expenditures, but rather increased spending on executive pay and stock buybacks. Now more companies are petitioning Congress to allow them once again to bring the loot back home with the same tax break.

Although the U.S. Chamber of Commerce strongly supports such repatriation, the Women’s Chamber of Commerce, with 500,000 dues-paying members, opposes it. The members of the Women’s Chamber of Commerce aren’t benefiting from the offshore tax havens or the repatriation scams.

As 2011 gives way to 2012, outrage is in the air.  But that can be useful for uniting and motivating people of conscience across the political spectrum to work for change — to break free of the suicide pact described by Ban Ki-Moon. Mr. Ban has called on governments to supply “visionary recommendations” for the upcoming Rio+20 UN Conference on Sustainable Development in June of 2012. Here are two recommendations that, at this point in history, seem obvious, but would certainly be radical in the business-as-usual economy:

  1. Stop pursuing the ruinous pipe dream of continuous economic growth and work toward a steady state economy.
  2. Take power back from the oligarchy of the 1% to reclaim our democracy.

Best wishes for the new year.

Rio+20 Needs to Address the Downsides of Growth

by Herman Daly

Note from the editor:  The Natural Resources Forum (vol. 35, no. 4) asked 29 experts, including Herman Daly, “What do you think should be the two or three highest priority political outcomes of the United Nations Conference on Sustainable Development (Rio+20), scheduled for Rio de Janeiro in June 2012?”  His answer succinctly sums up the steady-state perspective.

Herman DalyThe conclusion of the 1972 Limits to Growth study by the Club of Rome still stands 40 years later. Even though economies are still growing, and still put growth in first place, it is no longer economic growth, at least in wealthy countries, but has become uneconomic growth. In other words, the environmental and social costs of increased production are growing faster than the benefits, increasing “illth” faster than wealth, thereby making us poorer, not richer. We hide the uneconomic nature of growth from ourselves by faulty national accounting because growth is our panacea, indeed our idol, and we are very afraid of the idea of a steady-state economy. The increasing illth is evident in exploding financial debt, in biodiversity loss, and in destruction of natural services, most notably climate regulation. The major job of the United Nations Conference on Sustainable Development is to help us overcome this denial and shift the path of progress from quantitative growth to qualitative development, from bigger to better. Specifically this will mean working toward a steady-state economy at a sustainable (smaller than present) scale relative to the containing ecosystem that is finite and already overstressed. Since growth now makes us poorer, not richer, poverty reduction will require sharing in the present, not the empty promise of growth in the future.