[Update: Since this was posted, the CASSE site, including the FAQ, has been revamped. I encourage you to go there and have a look around!]
Administrator’s note: Though lots of actions play around the edges of helping address our environmental problems, very few get to the heart of the matter. One that does is the promotion of economic policy which rejects the notion of endless economic growth. In that vein, the “steady state economy” is a key alternative model, having grown out of the work of those in the field of ecological economics.
And no one works harder or more effectively to promote the steady state economy than Brian Czech, Ph.D. (and team!) and the Center for the Advancement of the Steady State Economy (CASSE). Trained as a conservation biologist, Brian is today an important contributor to our understanding of ecological economics, which he teaches as a visiting assistant professor at Virginia Tech. He is the author of Shoveling Fuel for a Runaway Train.
Here then, is the CASSE FAQ on economic growth. In few words, it says a great deal, touching on key points involved in the fundamental conflict between economic growth and environmental protection. My thanks to Brian for making it available! Find previous posts on Brian and CASSE here. In a related vein is this recent piece on ecological/steady state economics at Trinifar and this one at The Natural Patriot. — JF
By Brian Czech:
What is economic growth?
Economic growth is simply an increase in the production and consumption of goods and services. It entails increasing population and/or per capita production and consumption. It is measured or indicated by increasing GDP, or gross domestic product.
Why is economic growth a threat to the environment?
The economy exists within the ecosystem. This fact is overlooked in business and economics textbooks, where the economy is portrayed as a circular flow of money between firms and households:
The production of goods and services entails the conversion of natural resources, or “natural capital,” into consumer goods and manufactured capital. This explains why there is a fundamental conflict between economic growth and biodiversity conservation (pdf). Furthermore, pollution is an inevitable byproduct of economic production. The degradation of the environment as a result of economic growth occurs in many ways, but in general, economic growth leaves a larger ecological footprint.
Why is economic growth a threat to economic sustainability, national security, and international stability?
To grow, an economy requires more natural capital, including soil, water, minerals, timber, other raw materials and renewable energy sources. When the economy grows too fast or gets too big, this natural capital is depleted, or “liquidated.” To function smoothly, the economy also requires an environment that can absorb and recycle pollutants. When natural capital stocks are depleted, and/or the capacity of the environment to absorb pollutants is exceeded, the economy is forced to shrink.
National security, meanwhile, is always and everywhere a function of economic sustainability. The economic strife of a nation may result in insurrection or revolution, and eventually the nation-state may turn its agressions outward. From the Nazi doctrine of Lebensraum to the 21st century powder kegs, war invariably involves, and often revolves around, struggles for resources by nations that have exceeded their ecological capacities – or have had their capacities impacted by other states.
Can’t technology alleviate the threat of economic growth?
Some economists think that, because a particular production process can become more efficient (more output per unit of natural capital), there is no limit to economic growth. These economists and other “technological optimists” are forgetting the second law of thermodynamics, the entropy law, which tells us that we cannot achieve 100% efficiency in the economic production process. When the entropy law is applied across all economic sectors, or in other words when the limits to efficiency have been reached, the only remaining way to grow the economy is by using more natural capital (including energy).
Remember: To think there is no limit to growth on a finite planet is precisely, mathematically equivalent to thinking that you may have a stabilized, steady state economy on a perpetually shrinking planet. Both claims are precisely, equally ludicrous!
OK, so there is a limit to economic efficiency and growth. But don’t we have a long way to go to reach those limits? Can’t we grow a lot, meanwhile, without threatening the environment or the economy?
There are two crucial considerations here and, unfortunately, each one is subtle and consistently overlooked by economic policy makers. First, efficiency is not automatically selected for by consumers, firms or governments. In fact, when the goal is increasing production and consumption, moderate levels – not maximum levels – of efficiency are selected for. (Physicists and systems ecologists may recall the maximum power principle.) Getting serious about increasing efficiency requires a policy goal of something other than economic growth.
Second, technological progress is not a free lunch. In today’s computerized, competitive economies, technological progress comes from research and development, or “R&D.” Profits required for financing R&D are gained partly from economies of scale, which by definition entail increasing the size of the enterprise. This sets up a “chicken:egg spiral” between technological progress and economic growth at current levels of technology, or in other words, a zero-sum game between technological progress and environmental protection (pdf). (Economists and economic historians may recall “Jevon’s paradox.”)
But what about the “green growth” we hear about?
Some of the talk about green growth, and “smart growth” in general, is well-intended, but is more often a function of political expediency. Would we not expect politicians, who court industry while appeasing the public, to promote “green growth?” It’s handy political rhetoric, because “green” is too vague to be relevant to economic policy.
One thing is clear, however. If “green” means protecting the environment and conserving natural resources, then economic growth is fundamentally “brown.” Economists and politicians who speak loosely of “green growth” have no background in ecology, most notably trophic levels.
Trophic levels? What are those?
The “economy of nature” operates in trophic levels, and so does the human economy. In nature, the “producers” are plants, which literally produce their own food in the process of photosynthesis. Herbivores consume plants, and carnivores consume herbivores. Omnivores may eat plants or animals, and some species function as “service providers,” such as scavengers and decomposers.
The human economy follows the same natural laws. The producers are the agricultural and extractive sectors, such as logging, mining, and fishing. As Adam Smith wrote in The Wealth of Nations, it is the agricultural surplus that allows for the division of labor and economic growth.
Analogous to herbivores, we have economic sectors that consume the raw materials of the producers. These are manufacturers, and the higher level manufacturers are analogous to the carnivores in the economy of nature. We also have service providers, such as chefs, janitors, and bankers.
The key point is that he economy tends to grow as an integrated whole. More manufacturing and more services. requires more agricultural and extractive surplus, which frees the hands for the division of labor. In other words, economic growth, with limits to efficiency as described above, requires the use of more natural capital and results in more pollution. Through the lens of trophic theory, it is easy to recognize the fallacy of “green growth.”
But what about the Information Economy? Can’t we have growth in the information sectors without using more natural capital?
The fallaciousness of a “de-materialized” information economy becomes evident when we ask two questions. First, what do we do with the information? If the information is to be relevant to economic growth, it must be used by the “regular old sectors,” from agriculture to mining to manufacturing to electronics to banking.
Second, how does anyone come to afford the information? For, if no one can afford it, the information will not get past the invisible hand of the market, and it will not be relevant to economic growth. As Adam Smith and trophic theory tell us, the origins of money are in the agricultural and extractive surplus that free the hands for the division of labor.
So much for de-materializing the economy!
Why emphasize the phrase “economic growth” in discussions on the environment and national security? Why not just talk about “human activities?”
In recent decades, many publications have warned of the environmental perils of “human activities.” These warnings have been based on important scientific findings, but they have had little effect on public policy. Why? Imagine walking through the policy arena, searching for a policy table where “human activities” are handled. Your search will be fruitless, and so are the warnings.
To affect policy decisions, we will need to use language that points clearly to an established policy table. The biggest policy table in the domestic policy arena is devoted to economic growth.
When we use the phrase “economic growth” to describe the overall threat to the environment and national security, the relevant policy table is unmistakable. To the extent we are effective, policy reforms to stabilize the size of the economy will follow, with an inevitable stabilizing effect on population, per-capita consumption, and “human activities.”
What is CASSE’s position on economic growth?
CASSE advocates a carefully crafted, scientifically sound position on economic growth. Individuals are invited to support the position by e-signing (No contact information is requested, so no spamming results.) Professional societies, non-governmental organizations, and other organized groups are invited to join the growing list of organizations that have endorsed the CASSE position. CASSE also assists organizations in tailoring and developing their own positions on economic growth. Contact CASSE to offer an endorsement or for more details.
How can I help?
You can help support the goals of CASSE by e-signing the CASSE position on economic growth. (No contact information is requested, so no spamming results.) Professional societies, non-governmental organizations, and other organized groups are invited to join the growing list of organizations that have endorsed the CASSE position. An organizational endorsement is distinct from an individual signature; both are valuable resources in building the movement toward a steady state economy.
Numerous other activities may help lead to the establishment of a steady state economy. See the Action page for ideas and examples.