Center for the Advancement of the Steady State Economy
Regular Contributors:  Herman Daly, Brian Czech, Brent Blackwelder, James Magnus-Johnston, and Eric Zencey. Guest authors by invitation.

Paul Krugman on Limits to Growth: Beware the Bathwater

by Brian Czech

BrianCzechCongratulations to Paul Krugman, whose New York Times opinion on “Slow Steaming and the Supposed Limits to Growth” hit the bulls-eye of at least one balloon. Landing at Washington-National the very day his opinion column appeared was like crashing back into the growth fetish of the American Fourth Estate. Out came the fresh air of an Australian balloon; back to the polluted, cynical rhetoric that “there is no conflict between growing the economy and protecting the environment.”

Why the drama with Krugman’s column? Partly due to uncanny timing; partly due to the stark juxtaposition of opinions. Having delivered the keynote address–on limits to growth no less–at the Australian Academy of Science’s annual conference on environmental science, it struck me that decades of careful research could be undermined by the presumptuous pen of a well-placed economist. Something is wrong with that picture.

But only for so long, because those of us who recognize limits to growth have sound science, common sense, and burgeoning evidence on our side. The same cannot be said for Krugman’s opinion.

Krugman got off to a shaky start with the very title of his column. No matter what he could say about “slow steaming,” this was bound to be an article wrong-headed in using one sector (shipping) for drawing broad conclusions about a macroeconomic issue (economic growth). To extend a conclusion from the part to the whole is to commit the fallacy of composition. In this case, it’s a bit like Krugman saying, “Your fingernails keep growing; why not the rest of you too?”

The mistake is common and destructive. When this mistake is made by a highly acclaimed economist in a widely-read opinion, the potential for destruction is multiplied. Politicians hide behind such Pollyannaish opinions to pull out all the stops–fiscal and monetary–for economic growth. The casualties include not only environmental protection but the future economy and ultimately national security.

Next, in Krugman’s lead-in paragraph he laments the “unholy alliance on behalf of the proposition that reducing greenhouse gas emissions is incompatible with growing real GDP.” Already we have two more problems. First, the argument alluded to in the title–that is, refuting limits to growth–is reduced to refuting just one negative impact of growth (that is, climate change). What about all the other impacts and limitations of economic growth: liquidation of natural resources, pollution at large, habitat loss, biodiversity decline, and social side effects such as noise, congestion, and stress?

Second, in a maxed-out, over-stimulated, 90% fossil-fueled economy, Krugman wants us to believe we can grow the economy even more while reducing greenhouse gas emissions. No need to worry about little trends such as tar-sands mining in Canada, coal mining in China, and fracking in the USA. Slower steaming will save the day on climate change, and presumably for the rest of the planetary ecosystem.

Let’s not let Krugman delude us. “Growing real GDP” isn’t about an efficiency gain here and there. It means increasing production and consumption of goods and services in the aggregate. It entails a growing human population and/or per capita consumption. It means growing the whole, integrated economy: agriculture, extraction, manufacturing, services, and infrastructure. From the tailpipe of all this activity comes pollution.

Krugman seems to have fallen for the pixie dust of “dematerializing” and “green growth” in the “Information Economy.” He may want to revisit Chapter 4 of The Wealth of Nations, where Adam Smith pointed out that agricultural surplus is what frees the hands for the division of labor. In Smith’s day that included the likes of candle-making and pin manufacturing. Today it includes everything from auto-making to information processing, but the fundamentals haven’t changed. No agricultural surplus, no economic growth. And agriculture is hardly a low-energy sector.

Adam Smith was among the great, classical economists who readily recognized limits to growth, all the way until at least John Stuart Mill. After that and throughout the 20th century, things got murky for economists as they turned increasingly to microeconomics, losing the forest for the trees. Mr. Krugman appears to be yet another victim of the “neoclassical” evolution of economics. Look to him for insightful opinions on banking regulations, fiscal politics, and other such topics that fit naturally under the rubric of an economics columnist. These are his babies, but beware the bathwater. Take his opinion on limits to growth at your peril, and that of your grandkids.

The New Economy versus Today’s Flat Earthers

Editor’s Note: This article is presented as part of New Economy Week, five days of conversation around building an economy that works for everyone. 

by Eric Zencey

Eric Zencey

Only madmen and economists, Kenneth Boulding once said, believe exponential growth can go on forever.

Beyond all reason and evidence, standard economics remains dedicated to the idea of perpetual increase in our species’ stock of wealth, income, and material wellbeing. Their infinite planet thinking has a long pedigree: from John Locke toward the end of the 17th century to Adam Smith in in the middle of the 18th, the planet was obviously capable of supporting expansion of the human estate for untold generations to come. In their world, vast reaches of the globe had yet to be mapped by Europeans. Humans everywhere were relatively scarce, their powers not yet global in scale, not yet amplified by the extraordinary energies of coal and oil.

But the seven billion of us who are alive today live on a substantially different planet. It doesn’t have supposedly infinite tracts of untramelled, virgin land, ripe for being ravished by swaggering, overconfident exploiters. We need a new, steady state economy suited to the planet we have, not the one that economists thought we had two hundred years ago. We need a post-infinite-growth economy (and new breed of economist) respectful of the notion that there are ecological limits to economic activity. Absent that, our civilization is set to destroy its root in nature.

But the New Economy Movement is about more than ecological sanity. It seeks other practical and desirable solutions, like:

  • a living wage for workers;
  • a more equitable distribution of the fruits of production;
  • sharp limits to the political influence of corporations and the exceedingly rich; and
  • a relocalization and reduction in the scale of economic activity that will bring production into better relation with workers, customers, neighbors, and the planet.

We seek, in a word, economic justice.

That can seem a very different goal than sustainability, but it isn’t. Ironically enough, mainstream economists recognize the two goals are related. The remedy they offer for the injustice of poverty is the same remedy they offer for environmental problems: more economic growth. Only if we are wealthier, their argument goes, will we be able to afford environmental quality or solve the problem of poverty.

The New Economy Movement must show–must insist–that this is mistaken. It must show that the attempt to solve our ecological and social crises through economic growth is a fool’s task, because both crises have a common cause: an infinite-planet, perpetual-growth economy has met the limits of a finite planet.

When a financial system designed for infinite growth hits a local or planetary limit, it becomes a pump that sucks money from those who have less and gives it to those who have more. On a finite planet, a perpetual-growth economy eventually encounters the source-and-sink limits of ecosystems, either transgressing them and causing species loss, climate change, and ecosystem failure, or crashing because the limit can’t physically be broken.

As absurd as this looks, it is no less absurd than an economic system designed for an infinite planet. Photo Credit: A Siegel

As absurd as this looks, it is no less absurd than an economic system designed for an infinite planet. Photo Credit: A Siegel

In the Infinite Planet Thinking of mainstream economics, human population growth is always a good thing: humans are “The Ultimate Resource,” capable of infinite imagination, infinite invention. But in the world as it is, human invention is limited by physical law: you’ll never have a car that you can push backwards and fill the gas tank. Ultimately, on a finite planet with a human economy operating at its ecological limit, any further growth in human population or the human economy degrades our quality of life, further increases our ecological footprint, and leads to the loss of democracy as we yield to technocracy–rule by environmental experts–or ignore ecological constraints and thereby condemn our civilization to collapse. Meanwhile, population growth produces an oversupply of labor that drives down wages, diminishing the middle class and dividing us into rich and poor, captains and serfs.

Economic growth and human population growth proceed as if the planet were infinite–and those who express concern are challenged with being anti-human, pessimistic, or “neo-Malthusian.” It’s time to change the discourse. With repeated and creative messaging, the phrase “Infinite Planet Thinker” will come to sound as outmoded and ridiculous as “Flat Earth Theorist.” And when that happens, the principles and programs that CASSE and the New Economy Movement seek to advance will be on their way to general acceptance. I think that when they see it framed this way, most people will choose the new, steady state economy. Imagining the possible, and working to make it real, is more realistic than continuing to assume the planet is impossibly infinite.

The Kingdom of God: A Steady State Economy?

Editor’s Note: the below has been modified and cross-posted from Mission Catalyst, Issue 4, 2014

by Brian Czezh

BrianCzechI’ll never forget the privilege, maybe five years ago, of addressing a small, interdenominational group of faith leaders in Washington, DC. They’d asked me to talk about limits to economic growth and to give a synopsis of the steady state economy as an alternative to growth. We then went around the group, perhaps eight in all, and discussed the issues. One pastor, deep in thought, summarily theologized, “The steady state economy; now that’s the Kingdom of God.” I can hear it like it was yesterday.

The rest of the conversation isn’t quite so vivid. As a long-time advocate of the steady state economy, maybe I got too excited to focus, thinking of the possibilities with God on our side! Also, it’s not like the pastor (Episcopal as I recall) had a full-fledged steady-state theology developed, at least at the time. Macroeconomics is not something he or the rest of the group had thought much about, but they’d definitely taken an interest in protecting the environment, or “caring for Creation” as some like to say.

And yet, if there is a place for common sense in theology, there is plenty to suggest the pastor was right on track. Would anyone be driving a Hummer in the Kingdom of God? Or building a McMansion? Wearing a fur coat? Presumably the trappings of conspicuous consumption would seem more befitting of…you know, that other place.

The pastor knew something was awry with the quest for ever more. Striving for more and more stuff isn’t caring for Creation. Think, for example, what it means to life on earth–all of Creation–with economic growth as the primary policy goal of so many nations. If you were to list the causes of species endangerment, it would read like a Who’s Who of the economy. A proliferation of all such activities is hardly wise husbandry.

But to really assess the relationship or relevance of economic growth to the Kingdom of God, and prior to any thorough theological assessment, we must have a solid grasp of exactly what economic growth is. It’s not enough to make vague references to Hummers or ask, “What would Jesus drive?”

In textbook terms, then, economic growth is increasing production and consumption of goods and services in the aggregate. It requires increasing human population and/or per capita consumption, and almost always entails both. The metric used to measure economic growth is GDP, or gross domestic product.

The phrase “in the aggregate” is actually quite important. Sometimes we hear confusing talk about “green jobs” and even “green growth.” It may well be that replacing oil wells with vast arrays of solar panels and wind towers provides different jobs than we had in the past and doesn’t result in as many carbon emissions. But that one development–replacing fossil fuels with renewable energy–is hardly economic growth. It’s a sectoral readjustment that may or may not accompany economic growth: increasing production and consumption of goods and services in the aggregate. If we do manage to generate enough power from renewable sources to have even more agriculture, mining, logging, ranching, milling, manufacturing, and service sectors all the way from transportation to entertainment, what happens to all the wildlife habitat?

The fact is, in the push for GDP growth, God’s creatures suffer. To put it in the technical terms of ecological economics, as the human economy grows, natural capital is reallocated out of the economy of nature and is converted into consumer goods and manufactured capital. How is that caring for Creation? The steady state economy–stabilized population and per capita consumption, in simplest terms–means a stable environment for all the other creatures.

A growing number of citizens and activists are taking note that pulling out all the stops for GDP growth isn’t making man any happier. It has even become popular in sustainability circles to discredit GDP, as if it’s a meaningless indicator. However, attacking GDP is like shooting the messenger, or shooting the metric to be more accurate. Yes, it is perfectly true and important to realize that GDP is not a measure of wellbeing, but GDP is a solid indicator of the size of an economy. Despite all the talk of “green growth,” real GDP (“real” meaning adjusted for inflation) cannot increase without more impact on the environment.

“All flesh is grass” in the Kingdom of God – and the human economy. Photo Credit: horizontal.integration

Here is where a bit of theology seems to dovetail nicely with biology. The Bible says, “All flesh is grass” (Isaiah 40:6). While the direct theological implication seems more about the insignificance of man on Earth, relative to God, this verse is more than mere metaphor. The fact is that the foundation of the “economy of nature,” or Creation, is indeed plants, or “grass” in the words of Isaiah. No plants, no animals: no grass, no flesh.

This truth happens to be a central pillar of ecology. Every good ecology textbook will have a thorough discussion of “trophic levels.” Living beings in nature start with the plants at the base, literally and figuratively. Plants are called “producers” because they produce their own food in the process of photosynthesis. All other beings are “consumers” of some type. Primary consumers eat plants directly; secondary consumers eat the primary consumers. Primary consumers are often called herbivores; secondary consumers are “predators.” These are the three basic trophic levels: producers, primary consumers, and secondary consumers.

Meanwhile the book of Genesis says that God created mankind in his own image. It seems fitting, then, that the economy of man is like a microcosm of Creation, or the economy of nature. Man’s economy has producers (agricultural and extractive sectors), primary consumers (manufacturing), and secondary consumers including the purchasers of consumer goods and services in the market.

In order to have increasing production and consumption of goods and services in the aggregate, there must be more surplus produced at the base of the trophic structure. In other words, there must be more agricultural and extractive activity to free the hands for the division of labor into manufacturing, services, and “green” jobs. More and more money spent means more and more environmental impact; more erosion of the Creation.

Finally, no discussion of a steady state economy can be complete without the issue of population. Hopefully common sense suffices for understanding how we cannot have perpetual population growth on a finite planet. We humans aren’t like angels on the head of a pin. We have minimum material and energy requirements for survival.

My theology is amateurish at best, but isn’t the Kingdom of God supposed to lead to the final Kingdom of Heaven? It would seem that, at some stage, after life on Earth, the Kingdom of Heaven comes to its fruition of souls. So perhaps our good pastor was thinking ahead–way ahead–on the population front! Meanwhile, doing the best we can at caring for Creation entails serious efforts toward stabilizing our population as well as tempering our consumption.

It’s not easy advancing the steady state economy as the sustainable alternative to economic growth. If money is the root of all evil, we have a nasty force working against us: Big Money! The corporate forces in the world don’t want us talking about limits to growth or a steady state economy. They want governments pulling out all the stops for GDP growth.

On the other hand, they don’t exactly have the ultimate Commander in Chief on their side!

An Economics Fit for Purpose in a Finite World

by Herman Daly

Herman DalyCausation is both bottom-up and top-down: material cause from the bottom, and final cause from the top, as Aristotle might say. Economics, or as I prefer, “political economy,” is in between, and serves to balance desirability (the lure of right purpose) with possibility (the constraints of finitude). We need an economics fit for purpose in a finite and entropic world.

As a way to envision such an inclusive economics, consider the “ends-means pyramid” shown below. At the base of the pyramid are our ultimate means, low entropy matter-energy–that which we require to satisfy our purposes–which we cannot make, but only use up. We use these ultimate means, guided by technology, to produce intermediate means (artifacts, commodities, services, etc.) that directly satisfy our needs. These intermediate means are allocated by political economy to serve our intermediate ends (health, comfort, education, etc.), which are ranked ethically in a hierarchy by how strongly they contribute to our best perception of the Ultimate End. We can see the Ultimate End only dimly and vaguely, but in order to ethically rank our intermediate ends we must compare them to some ultimate criterion. We cannot avoid philosophical and theological inquiry into the Ultimate End just because it is difficult. To prioritize logically requires that something must go in first place.

Ultimate Political Economy

The ends-means pyramid or spectrum relates the basic physical precondition for usefulness (low entropy matter-energy) through technology, political economy, and ethics, to the service of the Ultimate End, dimly perceived but logically necessary. The goal is to unite the material of this world with our best vision of the good. Neoclassical economics, in neglecting the Ultimate End and ethics, has been too materialistic; in also neglecting ultimate means and technology, it has not been materialistic enough.

The middle position of economics is significant. Economics in its modern form deals with the allocation of given means to satisfy given ends. It takes the technological problem of converting ultimate means into intermediate means as solved. Likewise it takes the ethical problem of ranking intermediate ends with reference to a vision of the Ultimate End as also solved. So all economics has to do is efficiently allocate given means among a given hierarchy of ends. That is important, but not the whole problem. Scarcity dictates that not all intermediate ends can be attained, so a ranking is necessary for efficiency–to avoid wasting resources by satisfying lower ranked ends while leaving the higher ranked unsatisfied.

Ultimate political economy (stewardship) is the total problem of using ultimate means to best serve the Ultimate End, no longer taking technology and ethics as given, but as steps in the total problem to be solved. The total problem is too big to be tackled without breaking it down into its pieces. But without a vision of the total problem, the pieces do not add up or fit together.

The dark base of the pyramid is meant to represent the fact that we have relatively solid knowledge of our ultimate means, various sources of low entropy matter-energy. The light apex of the pyramid represents the fact that our knowledge of the Ultimate End is much less clear. The single apex will annoy pluralists who think that there are many “ultimate ends.” Grammatically and logically, however, “ultimate” requires the singular. Yet there is certainly room for plural perceptions of the nature of the singular Ultimate End, and much need for tolerance and patience in reasoning together about it. However, such reasoning together is short-circuited by a facile pluralism that avoids ethical ranking of ends by declaring them to be “equally ultimate.”

It is often the concrete bottom-up struggle to rank particular ends that gives us a clue or insight into what the Ultimate End must be to justify our proposed ranking.

As a starting point in that reasoning together, I suggest the proposition that the Ultimate End, whatever else it may be, cannot be growth in GDP! A better starting point for reasoning together is John Ruskin’s aphorism that “there is no wealth but life.” How might that insight be restated as an economic policy goal? For initiating discussion, I suggest: “maximizing the cumulative number of lives ever to be lived over time at a level of per capita wealth sufficient for a good life.” This leaves open the traditional ethical question of what is a good life, while conditioning its answer to the realities of economics and ecology. At a minimum, it seems a more convincing approximation to the Ultimate End than today’s impossible goal of “ever more things for ever more people forever.”

Spending on Preventing Climate Wars versus Spending to Secure Sources of Oil

by Dr. Brent Blackwelder

BlackwelderThis summer, my CASSE blog featured the pending Iraq War III and argued that a steady state, true-cost, sustainable economy cannot be achieved if the US in going to engage in perpetual warfare over Middle East oil. The wars in Iraq have cost trillions in the name of national security—trillions that could have been spent on putting the US on a clean energy basis, including electric cars charged by solar and other renewable sources.

I want to raise some questions about Obama’s new war to deal with the Islamic State (or ISIS or ISIL, depending on the news outlet). Question 1: Does ISIS pose a low, medium, or high security risk? If the answer is low, then it is difficult to see the basis for launching a new war. Suppose that the risk is medium or high; then a person might wonder how we as a nation just spent trillions on a decade-long Iraq war at the end of which we have a medium to high security problem. Question 2: Who would want to put money into another such inept endeavor whose result achieves the very opposite of what the public was told was the purpose? In reality, the prime objective of the Iraq wars centers on oil.

In terms of war and national security, a much more serious long-term threat is that of climate wars. Money being spent on oil wars ought to be shifted to strategies to prevent climate wars by getting at the root causes of climate disruption.

In his book Collapse, Jared Diamond examines the environmental factors contributing to the collapse of advanced societies around the world, such as the Mayans in Central America and the Polynesians on Easter Island. The Mayans had a calendar dating back to 3114 B.C., built magnificent temples, and did sophisticated astronomy. But their population grew to an estimated 5 million, well beyond what the land could sustain, while huge amounts of resources were spent by chiefs trying to surpass other chiefs in building even bigger monuments. The leadership continued to misjudge the land stewardship and the food resource needs, and as a result several smaller collapses occurred before a large collapse around 900 AD, due in part to a severe drought. When Spaniards reached Mayan territory after 1500 AD, the temples had been abandoned and the Mayans scattered.

Easter Island - Christian Bobadilla

As we fail to adequately address climate change and its root cause, will our society face a similar collapse? Photo Credit: Christian Bobadilla

The peoples settling the isolated Easter Island around 900 AD met a similar fate after several hundred years of expanding their population and quarrying gigantic stone statues (weighing up to 270 tonnes) which they then moved to the perimeter of the island. They deforested the island and the surrounding waters filled with silt, while at the same time vast energies were occupied on rivalries over which clan could build the biggest stone head. When Captain Cook arrived at the island in 1774, he found a tiny population (down perhaps from a peak of 20,000) that he described as “small, lean, timid, and miserable.” The civilization had collapsed in a cannibalistic endgame.

Common causal factors include population growth beyond the capacity of the land to support it, destruction of good farmland, and the use of resources in tribal conflict and monument building. Leadership in both societies failed to respond to the handwriting on the wall.

There is an eerie resemblance to the actions of the United States in spending trillions on wars to secure oil supplies instead of investing in a clean energy economy. Germany, in contrast, put over $100 billion into solar and wind energy installations and became for a while the number one country in both solar and wind. Today, Germany (about the size of Montana) has triple the roof-top solar (36,000 MW) of the U.S., even though its physical area is small by comparison with the lower 48 states.

We are looking at a “perfect storm” of conditions around the world that will lead to major conflicts and wars: growing populations, reduced food resource base, destruction of fisheries with dead zones and acidification, enormous deforestation, and the like.

Already we see serious problems with ecological refugees trying to escape unlivable conditions in their homelands and get to Europe or North America. In Asia, India is building a huge fence along its border with Bangladesh, fearing massive fluxes of refugees as Bangladesh gets swamped by sea level rise and major storms.

In Climate Wars, Harald Welzer writes “nearly all academic studies, models and prognoses regarding the phenomena and consequences of climate change have been in the natural sciences” whereas “such things as social breakdown, resource conflict, mass migration, safety threats, widespread fears, radicalization and militarized or violence-governed economies” fall directly in the purview of the social sciences. Those in the natural sciences generally do not have knowledge or capability of fashioning solutions that involve key aspects of human behavior and motivation.

The same concerns arise as we try to move toward a steady state, true-cost economy: we need expertise from the social sciences.

Three Limits to Growth

by Herman Daly

Herman DalyAs production (real GDP) grows, its marginal utility declines, because we satisfy our most important needs first. Likewise, the marginal disutilitiy inflicted by growth increases, because as the economy expands into the ecosphere we sacrifice our least important ecological services first (to the extent we know them). These rising costs and declining benefits of growth at the margin are depicted in the diagram below.

3 Limits Graph

From the diagram we can distinguish three concepts of limits to growth.

1. The “futility limit” occurs when marginal utility of production falls to zero. Even with no cost of production, there is a limit to how much we can consume and still enjoy it. There is a limit to how many goods we can enjoy in a given time period, as well as a limit to our stomachs and to the sensory capacity of our nervous systems. In a world with considerable poverty, and in which the poor observe the rich apparently still enjoying their extra wealth, this futility limit is thought to be far away, not only for the poor, but for everyone. By its “non satiety” postulate, neoclassical economics formally denies the concept of the futility limit. However, studies showing that beyond a threshold self-evaluated happiness (total utility) ceases to increase with GDP, strengthen the relevance of the futility limit.

2. The “ecological catastrophe limit” is represented by a sharp increase to the vertical of the marginal cost curve. Some human activity, or novel combination of activities, may induce a chain reaction, or tipping point, and collapse our ecological niche. The leading candidate for the catastrophe limit at present is runaway climate change induced by greenhouse gasses emitted in pursuit of economic growth. Where along the horizontal axis it might occur is uncertain. I should note that the assumption of a continuously and smoothly increasing marginal cost (disutility) curve is quite optimistic. Given our limited understanding of how the ecosystem functions, we cannot be sure that we have correctly sequenced our growth-imposed sacrifices of ecological services from least to most important. In making way for growth, we may ignorantly sacrifice a vital ecosystem service ahead of a trivial one. Thus the marginal cost curve might in reality zig-zag up and down discontinuously, making it difficult to separate the catastrophe limit from the third and most important limit, namely the economic limit.

3. The “economic limit” is defined by marginal cost equal to marginal benefit and the consequent maximization of net benefit. The good thing about the economic limit is that it would appear to be the first limit encountered. It certainly occurs before the futility limit, and likely before the catastrophe limit, although as just noted that is uncertain. At worst the catastrophe limit might coincide with and discontinuously determine the economic limit. Therefore it is very important to estimate the risks of catastrophe and include them as costs counted in the disutility curve, as far as possible.

From the graph it is evident that increasing production and consumption is rightly called economic growth only up to the economic limit. Beyond that point it becomes uneconomic growth because it increases costs by more than benefits, making us poorer, not richer. Unfortunately it seems that we perversely continue to call it economic growth! Indeed, you will not find the term “uneconomic growth” in any textbook in macroeconomics. Any increase in real GDP is called “economic growth” even if it increases costs faster than benefits.

Earth -

The macro-economy is not the Whole, but rather Part of the finite Whole. Photo Credit: Beth Scupham

Economists will note that the logic just employed is familiar in microeconomics—marginal cost equal to marginal benefit defines the optimal size of a microeconomic unit, be it a firm or household. That logic is not usually applied to the macro-economy, however, because the latter is thought to be the Whole rather than a Part. When a Part expands into the finite Whole, it imposes an opportunity cost on other Parts that must shrink to make room for it. When the Whole itself expands, it is thought to impose no opportunity cost because it displaces nothing, presumably expanding into the void. But the macro-economy is not the Whole. It too is a Part, a part of the larger natural economy, the ecosphere, and its growth does inflict opportunity costs on the finite Whole that must be counted. Ignoring this fact leads many economists to believe that growth in GDP could never be uneconomic.

Standard economists might accept this diagram as a static picture, but argue that in a dynamic world technology will shift the marginal benefit curve upward and the marginal cost curve downward, moving their intersection (economic limit) ever to the right, so that continual growth remains both desirable and possible. However, the macroeconomic curve-shifters need to remember three things. First, the physically growing macro-economy is still limited by its displacement of the finite ecosphere, and by the entropic nature of its maintenance throughput. Second, the timing of new technology is uncertain. The expected technology may not be invented or come on line until after we have passed the economic limit. Do we then endure uneconomic growth while waiting and hoping for the curves to shift? Third, let us remember that the curves can also shift in the wrong directions, moving the economic limit back to the left. Did the technological advances of tetraethyl lead and chlorofluorocarbons shift the cost curve down or up? How about nuclear power? Adopting a steady state economy allows us to avoid being shoved past the economic limit. We could take our time to evaluate new technology rather than letting it blindly push growth that may well be uneconomic. And the steady state gives us some insurance against the risks of ecological catastrophe that increase with growthism and technological impatience.

Building a Local Movement: Transition Winnipeg Embraces the Steady State Economy

by James Magnus-Johnston

Johnston_photoWhen activists, teachers, and thought-leaders talk about the steady state economy (SSE), we often refer to macroeconomic state-oriented policy. Not always fodder for dinner conversation. If we’re going to mainstream the SSE, efforts have to be reflected in the local community to show what a steady state economy feels like in the real world. To that end, I believe that a strategic partnership between the transition movement and steady state advocates would be mutually beneficial. Transition initiatives are in need of a lexicon that articulates what we’re transitioning to—that is, the degrowth transition to a steady state economy—and the steady state movement would be able to foster greater collaboration with proponents of community economic development and grassroots change. In collaboration with a number of local teachers and practitioners, I tested a strategic partnership over the last two years, with positive early results in a city that isn’t generally known for leading the charge to be green.

Sometimes, steady state advocates simply fall into the trap of preaching to the wrong audience. We want to celebrate the adoption of SSE policy by governments—things like the reduction of the work week, a basic income, and an increase in the fractional reserve requirement. So rather than having conversations with our neighbours, we jet-set to cosmopolitan centres only to argue with neoclassical macroeconomists over the feasibility of embracing a new set of norms. The response is almost inevitably “one day…but not now.” Among audiences where competitive overconsumption and entitlement are accepted as prime motivators, the steady state economy could not possibly be an easy sell. The culture shift is happening elsewhere.

In fact, the culture shift is likely occurring among a sizeable number of citizens in your own community, where steady state policies are an easy sell indeed. Perhaps post-growth thinkers need to embrace a both/and strategy—both policy reform and grassroots change—rather than privileging one over the other or wasting energy on the wrong audience.

Enter the transition movement, a neighbourhood-based movement for low-carbon, climate-resilient action and reform.

When bicycling isn’t enough, and policy reform is too slow, perhaps what we need is a community-based movement. Photo Credit: Daniel Lee

The transition movement has adopted the notion that “If we try and do it on our own it will be too little, if we wait for government to do it it will be too late, but if we can gather together those around us—our street, our neighborhood, our community—it might just be enough, and it might just be in time.” This likely resonates just as well with proponents of degrowth towards a steady state economy: clearly, if we wait for government, it will be too late. If we act as individuals by embracing materially simpler lifestyles, we may just be branded “weird” by friends and family. Too little. But if we foster a community of like-minded partners, our efforts may be just enough, just in time. Community gardens appear, a can-do entrepreneurial culture leaps ahead of nervous or fickle legislators, bottom-up pressure is exerted on bureaucrats, and simpler low-carbon lifestyles become almost cool—perhaps even hip(ster). More than anything else, the transition becomes something that people can feel. It’s achievable, and it’s fun.

Can it happen in your community? I think Transition Winnipeg’s early experience demonstrates that it can happen just about anywhere. Over the past two years, I inflicted my enthusiasm for post-growth economic change upon the organization’s initiating committee. What I found was that grassroots activists and practitioners were craving a word that described an economy that functions within ecological limits. Often the only word we use to describe the present state of affairs is “capitalism,” but popular alternatives (“socialism”) aren’t universally designed to function within ecological limits. Attractively, perhaps, the word “steady state” can be used to describe both.

Transition Winnipeg’s first pass at imagining Winnipeg as a thriving post-growth community and steady state economy is entitled Winnipeg’s Great Transition: Ideas and Actions for a Climate-Resilient, Low-Carbon City. The document is not all that unique among transition initiatives. In fact, there are plenty of vision documents among transition towns, often called “energy descent action plans,” that outline how energy and climate constraints will shape communities in the years to come. What is perhaps unique about Winnipeg’s Great Transition is its explicit use of the post-growth paradigm and steady state economy as organizing principles. After all, energy use and economic growth have historically been extremely closely linked; it is accepted among ecological economists that you can’t have much of one without the other. On many transition websites, including that of the REconomy Project, “growth” was widely used at first. While the term seems to have been phased out, “steady state” has not been embraced as an alternative. Would it not be meaningful for transition groups to state the explicit goal of aggregate degrowth towards a steady state economy?

The release of Winnipeg’s Great Transition was something of a one-day sensation in the local media for a city where ecological resilience and post-growth planning almost never makes the headlines. We timed the release to coincide with the middle of the civic election and invited a number of mayoral candidates to attend. Three candidates joined us for a sincere dialogue and were receptive to the strategy. The authors of the report were invited by some of the candidates to provide a workshop to the new city council to explain why post-growth planning is important, and how it improves resilience. The report may even have made conversation around the dinner table.

Are small, local initiatives like ours going to move us toward a steady state economy overnight? No. Are they going to create the kind of on-the-ground connections and enthusiasm that a full-scale political and economic movement requires? With time, I believe they will.

Winnipeg provides a great site to test a strategic partnership between the transition movement and CASSE, but that’s not because the city is a shining beacon of change! One mayoral candidate recently announced that he would cancel rapid transit and focus on filling potholes instead (full-cost accounting be damned). Rather, Winnipeg provides a great example of change precisely because the city sometimes fails to embrace the leading edge. If a grassroots partnership can work here, it can work just about anywhere.

Giant Mats of Green Slime in Lake Erie Signal a Need for New Economic Approaches to Pollution

by Brent Blackwelder

BlackwelderFor the past 40 years, I have spent family summer vacations in Northern Michigan to enjoy a fresh water paradise of small lakes and rivers, along with the Great Lake Michigan.

Ghanbani, Slimeade

What does this have to do with economic growth? Photo Credit: Haraz N. Ghanbari of AP

This year, not all of the Great Lakes turned out to be great: Lake Erie was covered with massive algal mats at its western end, forcing the closure of Toledo’s water supply that serves 400,000 people. A sample of the intake water for Toledo looked like a glass of thick green slimeade.

So, what is the link between this latest water pollution debacle, economic growth, and a true-cost economy? I will argue that in a steady state, true-cost economy, there would be much less reliance on pollution regulations. The chief tool would be bans, along with significant harm charges, on those products and processes that threatened public health or jeopardized the functioning of life support systems for the earth.

What causes me to advocate such a major change in the U.S. approach to pollution can be seen in three big water pollution events this year. My CASSE blog in March dealt with two significant water pollution events earlier this year–the coal-processing spill that shut down the water supply to Charleston, West Virginia, and the bursting of a coal waste storage pond in North Carolina, sending toxic sludge 70 miles downstream in the Dan River.

In my March blog, I discussed better economic approaches to pollution that would be pursued in a true-cost, steady state economy.  Before going into these approaches, it is important to understand the huge frustration that the American public was experiencing in the 1960s from hundreds of water pollution incidents and the failure of governmental bodies to put a halt to this.

In the early 1970s, many of us worked to obtain the 1972 Clean Water Act that featured the promise of making waters of our nation fishable and swimmable by 1986. Two remarkable examples helped drive public awareness and force Congress to enact this law: the Cayahoga River catching on fire and Lake Erie becoming a dead lake.

If someone had told us that 40 years later Lake Erie would experience massive green slime algal mats, we would have said, “No thanks, we need a truly strong law that would bring back Lake Erie from the dead, not a law so permissive that four decades later we would have a monster slime blob in 2011 stretching 120 miles from Cleveland to Toledo, followed by yet another huge slime mass in 2014.”

So now we are confronted with the abysmal failures of the regulatory system at the state and federal level, along with the tepid responses to the latest pollution disaster in Lake Erie. The time has come to demand a change to our economic approaches to pollution and begin the transition to a true-cost, sustainable economy.

To get down to brass tacks on the Lake Erie green slime, we must recognize that the chief cause is agricultural runoff. According to Don Scavia, director of the Graham Sustainability Institute at the University of Michigan, “the primary driver is the amount of phosphorus entering Lake Erie from agriculturally dominated watersheds.” The state of Ohio reports that two thirds of the phosphorus comes from farm lands.

So let’s start calling for a national ban on gigantic animal factory farms with hundreds and hundreds of animals crowded together. Such factory slum operations would not occur in a steady state economy. They are a microcosm of what happens with too much growth in numbers and pollution. When any population of animals or people get into overly crowded conditions, pollution overwhelms the carrying capacity of the land and water, disease increases, and violence breaks out.  Today, industrial agriculture is increasing in size and adverse impacts, although organic farming is making inroads.

While pushing for bans, we should also demand harm charges for the damages bad agricultural practices have on lakes. Look at the cost of losing a city’s water supply, the health costs, and the costs to the recreation economy in the region. Today animal factory operations and industrial agriculture escape monetary responsibility for the many harms they cause.

The Securities and Exchange Commission (SEC) could require businesses to disclose their pollution externalities when they file their annual financial reports. The Dodd-Frank Act requires companies to disclose conflict minerals in their supply chains, thus setting a precedent for the SEC to act. Revelation of these pollution externalities would constitute the first step in forcing the creators to cover their true costs of production.

My argument runs counter to the major thrust taken to deal with air, land, and water pollution since Earth Day 1970, which was primarily a regulatory approach. Some of the pollution laws have worked quite well, providing crucial health benefits and safeguarding ecosystems, but many are not set to deal with the magnitude of the pollution issues of the 21st century. For example, powerful bee-killing pesticides are causing collapses of bee colonies nationwide. Such pesticides should be banned since they threaten human food supply, about two thirds of which depends on the pollinators. Other pesticides and herbicides kill vegetation relied upon by butterflies such as the monarch that needs milkweed to lay its eggs on.  Bans are possible. Several European countries banned the powerful herbicide atrazine in the early 1990s, but this poison is widely used in the United States despite substantial scientific evidence about its health impacts.

The response taken by environmental groups and official state and federal agencies to the grotesque pollution of Lake Erie has been primarily to call for better regulation, which leads to more bureaucratic procrastination and few results. No one has called for a ban on bad practices of industrial agriculture or called for a shutdown of the big, filthy animal feedlots that are a cesspool of pollution and disease. These should be outlawed! It is not impossible. The Michigan legislature did ban phosphorus in lawn fertilizer.

The industrial agriculture system has grown so large in the United States that it is transgressing planetary boundaries, causing algal blooms and dead zones in lakes, bays, and estuaries. Certain parts of the economy, like those associated with industrial animal slums, need to shrink. Bans and harm charges must become frequently used economic tools.

Transformative Common Sense in Vermont

by Eric Zencey

Eric ZenceyChances are that when you hear the phrase “Comprehensive Economic Development Strategy,” you don’t immediately think of dramatic change in the established political-economic order of things. The words don’t seem revolutionary. They certainly don’t call to mind images of furtive guerillas toting rifles or of throngs in public squares using chains and ropes to topple statues. Chances are equally good that unless you hang out with economic development officers or land use planners, you’d have a hard time rounding up a dozen people who’d sit still long enough to hear what a CEDS is, let alone why it might be of interest to them. But despite the dry name, the document recently released by Vermont’s Department of Commerce and Community Development portends a quiet, far-reaching revolution in governance in the Green Mountain State–and perhaps on a larger stage.

The potential for this enormous change is signaled in a short, clear statement from the report’s Executive Summary:

…This CEDS sets out a unique, overarching goal: it proposes to not only grow jobs and wages and increase our Gross Domestic Product, but also to improve the Genuine Progress Indicator (GPI)…by 5% over baseline over the next five years.

With this language, Vermont becomes the first state to make explicit use of an alternative indicator in setting goals for economic development. The commitment to use the GPI in this way places Vermont in the forefront of a growing national movement to integrate the GPI into social and economic policy. Because GDP-based economic development is so wrong-headed, this commitment is a matter of common sense; and yet, because GDP-based economic development is so deeply woven into the substance and texture of our political economy, using basic common sense here is a powerfully transformative act.

The faults and flaws of GDP as a measure of economic progress are well known and don’t need to be repeated in detail here. It was never intended to serve as a measure of economic wellbeing, and one of the largest problems in using it for that purpose is that it doesn’t subtract environmental damage as a cost of economic development. Instead, it simply ignores these losses as externalities–until and unless money is spent to correct them, at which time the remediation of the cost is transformed, as if magically, into an apparent economic benefit. (This is a macroeconomic instance of what is generally called the broken window fallacy.) Negative environmental externalities occur when economic activity exceeds one of the planet’s local, regional, or global source-and-sink limits and thereby imposes harm, damage, cost or loss on innocent third parties–people who neither produce nor consume the goods whose production damages the environment. (Traditional economists don’t talk of “innocent” third parties when they discuss externalities, but the morally charged language is appropriate. Why should it be acceptable for profit-seekers to impose uncompensated loss on the general public?)

Because these externalities have their origin in ecosystem limits, and GDP treats the externalities as if they didn’t exist, it’s fair to call GDP an infinite planet statistic. Brian Czech has argued recently that what GDP measures best is environmental impact. While GDP isn’t a perfect measure of environmental impact—some of the things we consume cause less environmental damage per dollar than others—it seems a decent proxy, since in general it’s true that the larger the economy in GDP terms, the larger its environmental impact.

In contrast, the Genuine Progress Indicator subtracts environmental and other costs from the ledger, giving a more accurate bottom line. In doing so, GPI applies the principles of double-entry bookkeeping to the economy as a whole. The invention of double entry bookkeeping was a crucial to the growth of capitalism; a business can’t stay in business for long if its managers have no idea how its debits stack up against its credits, how its costs compare to revenues. And what’s true at the micro scale is true, in this instance, at the macro scale: because GDP systematically miscounts costs as benefits, we’re about to go environmentally broke–the entire economy may go out of business as climate change and loss of biodiversity bring dramatic, civilization-threatening change.

Mushroom Ecosystem

Economic growth will eventually cost more in ecosystem damage than it brings in economic gains. Photo Credit: Scott McCracken, Cambridge, VT

There is nothing in the Genuine Progress Indicator that says, explicitly, “there are ecological limits to economic growth.” But because it subtracts environmental costs from economic benefits, the GPI is a finite planet indicator that will, if implemented accurately, lead policy makers to this realization. Consistent, accurate compilation of the GPI will make clear that for any given ecosystem, at some point economic growth that is rooted in that system costs more in ecosystem service losses than it brings in economic gains.

This means that there are limits to the amount of economic production the planet’s ecosystems can support. Obviously, that fact has implications for economic development and the policies that promote it. Foremost among those implications is the necessity of abandoning the traditional “jobs and GDP” focus of development policy. As noble as it may be to aim to assure every aspiring worker the dignity of useful work, and as comforting as it is to think that we can continually add to our national stock of wealth by perpetually growing our national income, neither goal can be accomplished forever (or even, arguably, in the near term) through policies that take GDP growth or job growth as their sole and solitary focus. A commitment to perpetual full employment that is not also connected to an effort to limit population growth is at bottom a commitment to perpetual economic growth, a chimerical ideal. And because GDP so badly miscounts costs and benefits, failing to keep them separate, any policy effort that aims solely at increasing GDP is destined to be fatuous.

In announcing a development goal that is couched in terms of the GPI, Vermont has put itself on a path that will lead away from traditional “jobs and GDP” thinking–though the divergence of the two paths is not yet fully clear to policy makers. (Recall that the CEDS document aims not only at improving the GPI but also to “grow jobs and wages and increase…GDP.”) No doubt many of the legislators and policy makers who supported the state’s adoption of GPI as a better accounting system did not and would not embrace the notion that there are limits to economic growth. But the contrast between new-think and old-think, between finite and infinite planet thinking, between promoting sustainable economic activity and continuing the “growth forever, business-as-usual” mindset can only become clearer with time. As awareness of the GPI and its precepts filters into state decision-making processes, Vermont will find itself increasingly led to develop in ways that are sustainable and that do not damage the delivery of ecosystem services to its citizens. That kind of development will give the state a competitive edge in the region and nation, as it lays a foundation for the sustainable, post-petroleum, post-perpetual-growth economy that must come to the entire planet, in one version or another, sooner or later. (After all, the one thing you can know about an unsustainable system is that it won’t last.) Vermont’s policy use of the GPI is transformative common sense that will make that inevitable transition smoother and less disruptive for all Vermonters.

The Overlooked Anniversary: Forty Years Ago Congress and the President Called for a Steady State Economy

by Brian Czech

BrianCzechYou read that right. Pursuant to an act of the 93rd Congress, President Richard M. Nixon signed into law the establishment of a steady state economy. That law was called the “Endangered Species Act.”

Technically it’s true that we are closer to the ESA’s 41st anniversary (Nixon signed it on December 28, 1973), but to say we are still within the 40th anniversary of ESA is good enough for government work. Plus it seems more befitting when 2014 happens to be the 100th anniversary of the passing of the passenger pigeon. Martha, the last known passenger pigeon, died at the Cincinnati Zoo on September 1, 1914.

Too bad the passenger pigeon didn’t have the “opportunity” to be listed as endangered pursuant to the ESA. It would have been protected and it may have survived, if only on life support. The American economy wouldn’t have left it a lot of room; rather, just enough.

Of course, when the ESA was passed, no one announced it in terms of a steady state economy, for at least three reasons. First, the ESA’s influence on the rate of economic growth would be very gradual as the listing of species prevented a dam here and a power line there. It would have been inaccurate for Nixon to say, for example, “By September 1, 1974, GDP will stabilize.” Establishment of the steady state economy would take decades as dozens, then hundreds, then thousands of species were driven to the brink, then saved in the nick of time through the designation of “critical habitat” and other ESA protections. But make no mistake: With the stroke of Nixon’s pen, the American economy was slated to move toward a balance with the “economy of nature” and all its species, assuming the law was implemented.

The second reason is that few in Congress (if any) actually realized the ESA would lead to a steady state economy. It’s highly unlikely that Nixon did either. If you read the profiles of elected officials in the House, Senate, and President’s Cabinet, you’ll see there was–and still is–virtually no ecological expertise to speak of. Without understanding the economy of nature, and what is required to maintain its natural capital, one cannot grasp the economic relationship between Homo sapiens and the rest of the species. Only in an ecological curriculum, or at least a course in ecological economics, will you learn in no uncertain terms that, “Due to the tremendous breadth of the human niche, the human economy grows at the competitive exclusion of nonhuman species in the aggregate.” Without that knowledge, which is rooted deeply in physics and biology, our politicians are susceptible to whimsical notions of “green growth” and “de-materializing the economy.”

Third, if there were any politicians involved in the passage of the ESA who sensed the implications for economic growth, they wouldn’t have had the courage or integrity to reveal such an inconvenient truth. If we have learned anything from our political leaders–from Nixon to Clinton–it’s the depth to which they’ll drown the truth in order to maintain their positions of power. They also leave the heavy lifting of legislation to be done by future politicians, political appointees, and bureaucrats. Meanwhile the teeth of such legislation are filed down by budget cuts and hostile amendments.

In any event, and whether our politicians knew it or not, the ESA was as sure a prescription for a steady state economy as the American constitution was for a democracy. Think that’s a stretch? Think again. The word “democracy” is nowhere in the constitution. Indeed our founding fathers argued the merits of that newfangled idea. But the principles put forth in the constitution are all about establishing a democratic system of government.

With the ESA, it’s all about establishing a stabilized economy of nature. That doesn’t mean a landscape filled to the brim with bison herds or passenger pigeons, much less snail darters or Wyoming toads. Far from it. What it means, however, is “no species left behind,” even if many of them are perilously perched on flimsy branches of a tree of life top-heavy with human economic activity. What it means, therefore, is a steady state economy with stabilized human population and consumption, at a level pushing the limits of sustainability. That’s what the ESA is ultimately all about, whether or not the phrase “steady state economy” is used therein.

The ESA was too late for many species, and way too late for the passenger pigeon. Now consider a somewhat chilling thought: Does anyone alive today have any idea what we’ve been missing? Let’s get a sense of the magnitude of our ecological debt from the great French-American naturalist John James Audubon:

The multitudes of Wild Pigeons in our woods are astonishing. Indeed, after having viewed them so often, and under so many circumstances, I even now feel inclined to pause, and assure myself that what I am going to relate is fact. Yet I have seen it all, and that too in the company of persons who, like myself, were struck with amazement. In the autumn of 1813… on the banks of the Ohio… I observed the Pigeons flying from north-east to south-west… the birds poured in in countless multitudes… I traveled on, and still met more the farther I proceeded. The air was literally filled with Pigeons; the light of noon-day was obscured as by an eclipse…

In the more evocative style of Aldo Leopold,

The pigeon was a biological storm. He was the lightning that played between two opposing potentials of intolerable intensity: the fat of the land and the oxygen of the air. Yearly the feathered tempest roared up, down and across the continent, sucking up the laden fruits of forest and prairie, burning them in a traveling blast of life.

One could get the uneasy feeling that all the wonder of the Internet would pale under a pulsating sky of passenger pigeons. What would you rather do, surf the web or watch the traveling blast of life?  Yet that’s the type of trade we’ve made, or been subjected to: a constant replacement of the biological with the manufactured, including in the age of the “information economy.”

Passenger Pigeon - Seabamirum

What have we given up, and what are we giving up, to pursue continuous economic growth? Photo Credit: Seabamirum

In the 60 years between the last passenger pigeon and passage of the ESA, GDP grew from well under a trillion dollars to well over five trillion (all in 2014 dollars). To put that in simple ecological terms, millions of acres of wildlife habitats were converted to cities, towns, plant, infrastructure, and landfills. In the countryside, agriculture dramatically intensified, losing its habitat value. Much of the remaining, wilder acreage was polluted to one degree or another with the byproducts of economic activity.

For the most part those trends continue and, as if what’s happened on the ground isn’t enough, today in a 90% fossil-fueled economy we also have relentlessly growing greenhouse gas emissions, despite all the talk of technological progress and green growth. To add insult to injury, politicians continue to tell us that “there is no conflict between growing the economy and protecting the environment,” with political appointees parroting such pap and gagging the scientists who would raise awareness of the conflict. It’s easy to understand why Leopold said, “To be an ecologist is to live in a world of wounds.” The wounds are to the environment, to species, and to human dignity.

Yet that’s what we get when the primary policy goal is economic growth and when so many other laws, policies, and programs are tailored to the pursuit of economic growth. While the language of the ESA is still prescriptive of a steady state economy–perennial efforts to gut it notwithstanding–the ESA has as much chance of implementation as Obamacare would have under Ted Cruz. You won’t see a Tellico Dam being stopped by a snail darter any time soon, whether your president is Obama or Cruz.

Congress and presidents have never been more hell-bent on economic growth. The “Washington Consensus” might as well be the “Wall Street Consensus.” The score is kept in terms of GDP, and the only thing that can change that is a widespread paradigm shift away from economic growth–increasing production and consumption of goods and services in the aggregate–toward the steady state economy.

As the days grow shorter on 2014, with the 41st anniversary of the ESA approaching and the extinction of the passenger pigeon surpassing 100 years, let us commemorate things in the way that matters most for species conservation. Let us recognize the ESA as a prescription for a steady state economy, in balance with the economy of nature and its non-human species. The ESA needs this wedding–a wedding with the truth–before its anniversary can be truly worth celebrating.