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Five Myths About Economic Growth

by Brian Czech

Brian CzechMyth #1. It’s economic.

To be economic, something has to be worth more than it costs. Economic activity, per se, is more beneficial than detrimental. Technically speaking, “marginal utility is greater than marginal disutility.”

If you liked a rug, but liked your grandkids more, it wouldn’t be smart to grab the rug out from under them. That’s basic microeconomics. Yet if we look around and reflect a bit, doesn’t it seem like all that economic activity is pulling the Big Rug out from the grandkids at large? Water shortages, pollution, climate change, noise, congestion, endangered species… it’s not going to be a magic carpet ride for posterity.

Growth was probably economic for much of American history. But we have to know when times have changed and earlier policy goals are outdated. In the 21st century, when we’re mining tar sands, fracking far and wide and pouring crude oil by the ton into the world’s finest fisheries, trying to grow the economy even further is looking like a fool’s errand. That’s basic macroeconomics.

Myth #2. Economic growth is often miraculous.

Right now we’ve got the Chinese miracle. We’re supposed to be on the cusp of an Indian miracle. Seems like we already had a more general Asian miracle, having to do with “tigers.”

We’ve had Brazilian, Italian, Greek (yes Greek), Spanish and Nordic miracles. There’s been the Taiwan miracle, the miracle of Chile and even the Massachusetts miracle. Don’t forget the earlier Japanese miracle and more than one historic German miracle.

Let’s hope these aren’t the kinds of miracles they use to determine sainthood. Saint Dukakis, anyone?

No, economic growth was never, anywhere, a “miracle.” It’s never been more than increasing production and consumption of goods and services in the aggregate. It entails an increasing human population or per capita consumption; these go hand in hand in a growing economy. It’s measured with GDP.

Whoop-de-do, right? Maybe Wall Street investors and journalists are an excitable lot, and it’s easy enough to be surprised by a growth rate, but “miracle?”

Container ship.NOAA's National Ocean Service

Photo Credit: NOAA’s National Ocean Service

 

Myth #3. Growth isn’t a problem for the environment, because we’re dematerializing the economy.

Now that would be a miracle.

Let’s get one thing straight: The economy is all about materials. “Goods,” in other words. Oh sure, services matter too. But the vast majority of services are for purposes of procuring, managing or enjoying our goods.

The biggest service sector, transportation, is responsible for enormous environmental (and social) impacts. Transportation is instructive, too, about the relationship between goods and services. People don’t line up at cash registers demanding random acts of transportation. No, it’s all about moving materials—goods or people—from point A to point B, and moving them economically. Every form of transportation takes energy as well as copious supplies of materials (for vehicles and infrastructure) and space.

With all the talk of “de-materializing,” surely there must be services that transcend the physical, right? What about the Information Economy?

Myth #4. The human economy went from hunting and gathering through agriculture and on to manufacturing, and finally to the Information Economy.

Don’t forget our lesson from the transportation sector: no transportation for transportation’s sake. In the “Information Economy,” what’s all that information going to be used for? If it’s not going to be used in activities such as agriculture and manufacturing (and transportation) how is it going to matter for economic growth?

The fact is, there never was—or always was—an information economy. Pleistocene hunters needed to read mammoth tracks more than we need to read our Twitter feed.

Now when it comes to processing information, the computer was more or less a “revolutionary” invention, like the internal combustion engine was for transportation. But what’s less material about it? Just as today’s hunters have semi-automatic rifles with high-power scopes, they have (material) computers that help them gather information for buying more (material) guns, scouting more (material) terrain and shooting more (material) deer. Anything about that seem greener than before?

Information has proliferated alright, in lock step with the material goods and services it’s been used for. Yet to speak of the “Information Economy” seems like grabbing for some type of economic miracle, and we’ve all seen how cheap miracles are in economic rhetoric.

Myth #5. At least economic growth is egalitarian, because a rising tide lifts all boats.

Once upon a time the rising tide metaphor may have had some merit. In the 21st century—think resource wars, climate change, endang­ered species—it’s more like a rising tide flooding all houses. Which brings us back to Myth #1.

It seems like all the talk of economic growth was overblown, more the result of Wall Street excitement and political rhetoric than sober thought. Maybe what we really want is economic slenderizing.

 

 

Crossroads on Global Infrastructure

Massive Global Infrastructure Projects Could Prevent Achievement of a Sustainable Economy While Undermining Life Support Systems of the Earth

by Brent Blackwelder

BlackwelderPlans by the world’s most powerful countries are well underway to spend trillions of dollars for new mega-infrastructure projects to rejuvenate the global economy. The hope of the G-20 nations, the World Bank, China, and other powerful actors is that the infusion of several trillion dollars for infrastructure will boost the growth of GDP by 2.1% over current trends by 2018 and rescue a “sluggish” global economy.

The new feature of this approach to infrastructure involves expanded use of public money (taxes, pension funds, and aid) to offset the risks involved in huge projects. The approach also relies heavily on public-private partnerships, where the issue of accountability and failed projects has been a serious concern.

Those seeking a sustainable, true-cost, steady state economy should be alarmed at the new approach to global infrastructure because trillions of dollars spent on mega-projects in the energy, transportation, agriculture, and water sectors could put a sustainable, true cost economy further out of reach. Reviews of completed projects in these sectors have raised questions about corruption, cost overruns, fiscal accountability, human rights abuse, and the alarming destruction of natural resources.

Who are the Major Players?

The primary mover of a global infrastructure plan has been the G-20 nations (see here for the list of member countries). Afraid of being marginalized by the G-20, the World Bank has jumped into the scramble. In October of 2014, the World Bank launched a new Global Infrastructure Facility to reclaim the leadership on global infrastructure from the G-20. Just before the G-20 Summit last November, the World Bank and the IMF, along with seven multilateral development banks, issued a press release announcing their intention to provide $130 billion annually for infrastructure financing.

In 2014, China launched the Asian Infrastructure Investment Bank with 21 Asian countries as founding members, along with $100 billion in capital.

The Crossroads

A momentous choice is before us. On the one hand, the G-20, the World Bank, and other international lending institutions want more mega-highway projects, more centralized electric power plants and electricity grids, more mega-dams and gigantic irrigation schemes with huge water transfers, and the like.

On the other hand, an entirely new approach to infrastructure is possible. An approach that, for example, eschews big central electric power plants and relies more and more on decentralized wind and solar investments and avoids the horrendous mistakes made in the past in transportation, energy, water, and agriculture. Those interested in a true cost, steady state economy should advocate change in the massive new infrastructure lending so as to support projects that enable society to stay within the carrying capacity of planet earth. Such projects could lead the way toward a different type of global economy as they shift away from the business-as-usual approach in energy, transportation, water, and agriculture.

We know the impact of too many of these schemes is the destruction of ecosystems and undermining of the life support systems of the earth. They are pushed by the economic or finance ministries that have little understanding of the limits to growth, the significance of biodiversity, and the functioning of ecosystems that make life on earth possible. Environmental ministries are likely to have little influence in the choice of mega-projects.

There is not enough time to present the infrastructure investment choices in energy, agriculture, water, and transportation that would be made in a steady state economy, so I will mention a couple of examples in the transportation sector.

Freight Trucks - futureatlas dot com

We need infrastructure projects that don’t rely on highways at the expense of public transportation and rail. Photo Credit: futureatlas.com

Consider the unsustainability of the US transportation system that has focused almost entirely on highways to the neglect of passenger and freight rail and public transportation. The US is a poor transportation model for the world. Even with state and federal gasoline taxes, the revenues are insufficient to halt the massive deterioration of road and bridge networks, to say nothing of billions of dollars of backlog in deferred maintenance. The United States let passenger railroads go to hell and allowed the movement of more and more freight by trucks rather than trains (which are three to four times more energy efficient than trucks). This proved to be the wrong infrastructure choice.

Decades ago, some US bankers were questioning the viability of maintaining the infrastructure to support sprawling suburbs. A Bank of America report likened the servicing of sprawling suburbs to the nightmare that a military commander would face in trying to keep a 1,000-mile-long battlefront line supplied with food and ammunition.

Take a look, for example, at transportation required to supply our food. One study in Germany focused on a container of yogurt on a grocery store shelf where all of the ingredients were available locally, but in this case had traveled over 1,000 kilometers to reach the distribution center. A greater emphasis on local food production could result in dramatically reduced “food miles” and utilize a much smaller transportation network–an affordable network that could be maintained.

We are at a critical moment where two approaches to infrastructure are diverging. The infrastructure path of a true cost economy can lead to smaller-scale, smarter infrastructure and a healthier earth. The proposed path of the G-20 and World Bank, on the other hand, will replicate and intensify numerous unsustainable projects and cause human civilization to exceed the carrying capacity of the earth. Scientists point out that we are already consuming about one-and-a-half planets’ worth of resources. Infrastructure choices need to be made to alleviate rather than exacerbate this situation.

Note: For more information see the report by Nancy Alexander, “The Emerging Multi-Polar World Order: Its Unprecedented Consensus on a New Model for Financing Infrastructure Investment and Development,” Heinrich Böll Foundation.

Approaching a Steady State Economy, Part 1 — Getting Around

by Rob Dietz

Dietz_Author_PhotoSuppose you’re suspicious of the idea of pursuing continuous economic growth on our finite planet. What if you’ve even concluded that an obsession with increasing production and consumption might be a bad thing, especially in the wealthy nations (apparently you’ve been connecting some dots between economic growth and the calamitous combination of climate change, resource depletion, poverty, and inequality)? Having come to such a conclusion leads to a critical question: how would a non-growing economy function? I’ve been thinking about steady state economics most days for the last six years, and I’ve even written a book on the subject, but I still struggle with this question. When in doubt, consult Herman Daly.

Daly has articulated three logical rules that a steady state economy would live by:

  1. Exploit renewable resources no faster than they can be regenerated.
  2. Deplete non-renewable resources no faster than the rate at which renewable substitutes can be developed.
  3. Emit wastes no faster than they can be safely assimilated by ecosystems.

Presuming we can accurately determine depletion and regeneration rates, as well as the resilience of ecosystems, we can use two basic strategies to follow the steady state rules: (1) economizing and (2) innovating. Economizing boils down to reducing the inputs used in economic activities and minimizing the waste outputs. It entails conserving, re-using, maintaining, and generally embracing the wisdom of enough rather than succumbing to the madness of more. Innovating entails doing things more efficiently. It means learning, inventing, adapting, and using appropriate technologies to achieve desired ends. Note that innovation (and the increased efficiency it engenders) is a double-edged sword. In a non-growing economy, increased efficiency can reduce environmental impacts, but in a growing economy, increasing efficiency tends to cause a rebound effect that actually increases environmental impacts. A steady state economy, therefore, will adopt some combination of economizing and innovating to achieve sustainability.

This is all well and good, but terms like “economizing” and “innovating” fall short of painting a detailed picture of day-to-day life in a steady state economy. To paint such a picture, it’s helpful to start with a smaller canvas — that is, focus on a specific sector rather than the entire economy.

The transportation sector of the U.S. economy accounts for about 3% of gross domestic product. The purpose of this sector is to move people and goods to desired destinations. To accomplish this purpose while abiding by the steady state rules requires:

  • Reducing inputs (e.g., using less steel and oil);
  • Developing renewable infrastructure (e.g., using renewable energy sources to power vehicles and renewable resources to construct transportation corridors); and
  • Reducing waste emissions (e.g., decreasing the quantity of carbon dioxide and other pollutants emitted by transport activities).
Wouldn't it be easier (and more practical) to construct some decent bike lanes?

Wouldn’t it be easier (and more practical) to construct some decent bike lanes?

Think tanks like the Post Carbon Institute and the Transition Towns Network provide “economizing” strategies for doing these sorts of things. One of the big ideas is economic localization, which diminishes the need for long-distance transportation by eliminating unnecessary trade. As Daly has pointed out, “Americans import Danish sugar cookies, and Danes import American sugar cookies. Exchanging recipes would surely be more efficient.” The more a community can produce goods and services locally, the less it has to rely on long supply chains and importation of goods from afar. As a bonus, localization curtails the need for workers to undertake long-distance commutes, since the local economy would provide more employment opportunities. Other ideas for economizing in the transportation network include deemphasizing the automobile (World Carfree Day is coming up soon) while promoting walking, bicycling, and transit; paying more attention to neighborhood design; implementing car share programs; and even making more use of sailboats. High parking fees and gasoline taxes are also tools that can curtail the quantity of resources consumed for getting around.

Think tanks also promote plenty of ideas that take the “innovating” approach. The Rocky Mountain Institute suggests constructing ultra-light, low-drag autos and superefficient trucks and planes. The Sustainable Transportation Center at the University of California, Davis conducts research on hydrogen, biofuels, and other energy pathways toward a sustainable transportation infrastructure. And for science fiction fans, ideas about conveyor belt systems first put to paper by writers like H.G. Wells and Isaac Asimov can now be perused in patent descriptions. Even vacuum tubes are entering the discussion… transporter beams can’t be far behind!

It seems, then, that a transportation network in a steady state economy would involve a mix of infrastructure changes, technology changes, and behavioral changes that, in turn, would stem from a selection of policy changes. Given the scope of changes required, it’s still hard to get a handle on how things would turn out (and this is only one sector that represents 3% of the broader economy). Perhaps drilling down further would help.  Part 2 will give it a try.

Steady State Transportation: Closing the Door on the Dirty Oil Era

by Brent Blackwelder

If human civilization is to make the move to a steady state economy that provides prosperity without growth, it must meet people’s basic mobility needs without reliance on fossil fuels. The U.S. requires a revolutionary transformation of its transportation systems, and recent experience with the downsides of oil provides a potent political push to overcome inertia.


Image Credit: Neoporcupine


In the United States, the transportation sector consumes about 60% of the oil and is responsible for about one-third of greenhouse gas emissions. We use more gasoline than the next 20 nations combined. America has 2.6 million miles of paved roads with 3 cars for every 4 people in the country, and 88% of people get to work via automobile.

Concerns about global climate destabilization and dramatic water pollution have put the issue of oil usage front and center. The world has focused on the tragedy of the gigantic BP oil spill in the Gulf of Mexico that began on April 20. But numerous other spills, leakages, and pipeline breaks have occurred since April. For example, the Enbridge pipeline ruptured the last week in July and spilled over one million gallons of oil into the Kalamazoo River in Michigan. As with BP, this recent spill was not a unique mishap but rather one in a long series of accidents and violations in Enbridge’s history.

Over the past decade, there have been over 1,600 accidents with oil pipelines in the U.S. The year 2010 is not extraordinary for its mishaps, but merely business as usual in the oil industry. It is naïve to think that Congress or state legislative bodies can tighten regulatory and enforcement regimes to solve the problem. Friends of the Earth and other environmental groups have tried this route, but oil is inherently dirty. In addition, the oil industry is politically powerful, and well-intentioned protections often fail to curtail the massive amounts of leakage and spillage in the U.S. and around the word.

To achieve optimal economic scale and a true balance with nature in a steady state economy (i.e., healthy ecosystems and a healthy economy), boldness is required, and the transportation sector is a good place to start. Ending the use of oil to power vehicles, from planes to trains to automobiles, is a must. But the power of the highway lobby and the momentum of the global jet-setting economy’s demands make this objective appear improbable.

Some encouraging signs of change, however, provide the basis for making big demands on Congress, state legislatures, and the executive branch. For example, public support for spending the preponderance of federal transportation dollars on road construction (instead of public transportation) may be cracking significantly. On July 25th the Chicago Tribune reported that for the first time, both suburban and urban citizens in the Chicago metro area think that more money ought to be spent on transit than on highways.

Another promising sign is the growth in U.S. transit ridership. Since 1996 transit ridership has increased by an average of 2.6% annually, including a 3.3% increase in 2009.

Recent economic analyses highlight the costliness of oil and automobile usage, and evidence from these analyses can drive big shifts in policy. For instance, the U.K. Department of Transport has found that for each British pound spent to reduce car usage, there are £10 of benefits in the economy from fuel savings, reduced congestion costs, and lower pollution levels.

But America lags far behind other nations in rethinking transportation systems – a quick comparison of Atlanta to Amsterdam demonstrates the gap. In Atlanta 95% of residents commute to work by car. In Amsterdam 40% commute by car, 35% bike or walk, and 25% go by transit. The series of oil spills in the U.S. this year should energize efforts in city after city to revamp transportation and breathe new life into automobile alternatives.

My brother Brion Blackwelder, who is a law professor at Nova Southeastern University in Fort Lauderdale, Florida, suggests several standards that a modern 21st century transportation system should meet:

1. Zero tolerance for death and injury;

2. Congestion as a rarity rather than a daily occurrence;

3. Small footprint in terms of land use, energy use, air and water pollution, and wildlife impacts;

4. Provision of services for the young, the old, the disabled, and the poor.

Not surprisingly, the United States flunks the test of meeting these standards. Take, for example, the first. Highway accidents each year in the U.S. claim the lives of about 40,000 people, and several hundred thousand more are seriously injured. Contrast this tragic record with Japan’s bullet trains. The speedy 322-mile route from Tokyo to Osaka, completed in 1964, has not had a single passenger fatality. Today 1,360 miles of high-speed rail link all of Japan’s cities.

One way to confront the challenge posed by these standards would be to shift to mostly electric vehicles. Cars and trains could be run on electricity generated by wind, solar, and other renewable sources. For part of the 20th century, the Milwaukee Railroad operated 650 miles of electric rail over five Pacific Northwest mountain ranges on its Chicago to Seattle route.

It may come as a surprise that 100 years ago Henry Ford and Thomas Edison were so dissatisfied with the internal combustion engine that they were developing and selling all-electric cars from 1910 to 1914, when a mysterious fire burned almost all of Edison’s laboratories in December of 1914.

Now is the time to rekindle that vision, capitalize on the public’s awareness of the dirty consequences that consistently accompany our oil usage, reinforce the growing sentiment to invest in public transportation, and begin serious debate on a sustainable transportation system.