Saturday, June 30, 2012

Why Economic Growth is a Bad Idea – A Response to Andrew Leigh (my local labor MP)

Dear Andrew,

As my elected representative in parliament, I would like to respond to your recent emphatic argument in favour economic growth. You argue that continual economic growth has not only improved our well-being but is entirely compatible with sustainability. Andrew, I hope you will listen to the reasons why I think this is a terrible mistake.

For many years now there has been mounting evidence that affluent countries like Australia are producing and consuming in ways that cannot continue for long, or be extended to all the world people. Consider the widely recognised footprint indicator. This shows that we currently using energy and resources at a rate that would require 1.4 planet Earths to provide sustainably. We are in ‘overshoot’ because we are using renewable resources faster than they can regenerate and creating wastes (such as C02) faster than they can be absorbed....and this is the case despite the fact only around 1/5 of the world’s people live affluently!

Another way of expressing the overshoot is in terms of Australia’s per capita footprint. It takes 7.8 ha of productive land to provide water, energy, settlement area and food for an average person living in Australia. So, if the 9 billion people likely to be living in 2050 had this same footprint we would need around 70 billion ha of productive land...but that is about 8 times the amount of productive land globally available! In other-words, we are not just living in ways that are a little bit unsustainable we are grossly unsustainable (Trainer 2010)

Even at current rates of economic activity, it is likely, despite your scepticsm, that we will soon be running into severe resource and energy scarcities. Despite recent scepticism it remain the case that we are likely to soon hit a peak in oil supplies. The International Energy Agency recognised that conventional sources likely peaked in 2006 (though they may plateau for a while) and we are now learching for the hard to reach 'uncoventional' and dirty sources (i.e Canadian tar sands). Rising oil prices will be incredibly difficult for our societies to manage, given our huge reliance on oil for food, transport and industrial products, and the lack of any alternative abundant and cheap source of liquid fuel. Many other critical resources such as gas, gallium, indium, helium and silicon  are becoming scarce, and there are real worries about copper, zinc, silver, zinc, nickel and phosphorous. There are also major concerns about fresh water supplies, soil erosion, global fish stocks, and of course feeding the expected 9 billion people, particularly given the likely rise in fossil fuel prices, and impacts of climate change.

Of course achieving ‘sustainability’ becomes must harder when we factor in future Economic Growth. If Australia keeps growing at 3% p.a until 2050, and by then all the 9 billion people expected had risen to the material living standards Australians would have, the world would be producing and consuming almost 20 times as much as it does today! Yes, more of this will involve ‘service industries’ than manufacturing, but service industries such as tourism, food, education and marketing – either directly or indirectly – still depend on high levels of energy and resource consumption, so this won’t make a huge difference to overall levels of impact.

Andrew I know you think that technical advance will allow us to ‘decouple’ environmental impacts from economic growth. But given the above figures, do you understand the scale of the technological task? Let’s assume we need to reduce present levels of resource/energy use rates by half (and on several indices, such as carbon emissions, we need to go further). As we have seen, if 9 billion people live like we do in 2050 global economic output would expand by a multiple of 20. This means, to reduce our impact by half from current rates we would need to make technical advances/efficiency gains that deliver a factor 40 reduction in resource/energy consumption! Do you really think technical advance and/or efficiencies alone can do this? Oh and just in case you think all we need to do is convert to renewable energy, I suggest you read Ted Trainer’s very compelling case that renewables will not be able to run our energy intensive consumer societies at tolerable cost.

If we can ‘decouple’ economic growth from environmental impact when exactly is this decoupling going to start? It’s true we have managed to reduce air pollution and ozone impacts, but on many indicators the sheer scale of economic growth has outweighed efficiency gains. For example, even with an average annual fall in emissions intensity of 1.1 percent from 1999-2009, CO2 emissions rose at an average annual rate of 2.4 percent, largely as a result of continual GDP growth (Gareth Dale, 2012). Tim Jackson also points out that in the case of some key resources such as iron ore, bauxite, cement, resource productivity has been declining globally since 2000, as emerging economies such as India and China build up physical infrastructures, leading to accelerating resource throughput (Jackson, 2009).

But ‘won’t economic growth allow rich world governments (via tax transfers etc) to plunge more dollars into environmental care?’ The problem with this argument is simple: if we don’t reduce “wealth” production dramatically and quickly the environmental consequences will soon eliminate our capacity to produce any wealth at all (Trainer 2011)!

Putting sustainability concerns aside, surely EC is vital for our well-being, correct? Well actually no, the evidence does not suggest this. You cite Stevenson and Wolfers’ critique of Easterlin, but neglect to mention that Easterlin (and others) have replied and the debate is a live one. Easterlin critiques Stevenson and Wolfers findings, on the basis that they only take into account short terms fluctuations in reported happiness over the business cycle, rather than the long-term trends. The evidence clearly shows that since the 1950s levels of reported happiness have not increased much, if at all, in most rich countries despite continual economic growth (Layard, 2005). This is not to deny that happiness levels are higher in rich countries than poor countries. The point is rather than economic growth is no longer contributing to happiness in rich countries, and hasn't been for a long time. If instead we take the Genuine Progress Indicator (GPI). improvements have stagnated or declined in most rich countries since the 1970s (Eckersley, 1997). In addition, the weight of evidence suggests social problems such as crime, severe depression, drug use and suicide have increased over the last 50 years (Layard, 2005). How do you explain this large body evidence Andrew, if economic growth is so vital to our well-being?

The other thing you fail to realise is that our growth economies are predicated on the gross mal-distribution of world resources. As I mentioned above, we are part of that 1/5 of humanity who, according to World Bank statistics, is responsible for around 76% of world private consumption. This does not happen by luck; it has to be organised. By far the most important cause is that we have a global market economy, in which scarce resources are ‘automatically’ allocated to those who pay the most (i.e have ‘effective demand). We – the affluent rich – are able to outbid the poor and therefore it is we, not the global poor majority who get the baulk of the resources. And so we have the horrible reality of 850 million people lacking sufficient food – which might require only 40 millions tonnes of gain p.a. to remedy – while over 600 million tonnes of grain are fed to animals in rich countries each year (Trainer, 2010). What would happen Andrew, if we in Australia had to get by on something like our fair share of oil, coal, grain, fish, timber and coffee? I think you would find our affluent/growth economies might be in serious trouble....

Once one accepts these ‘limits to growth’ arguments, it is obvious we in rich countries do not only need to move to a ‘steady state economy’ without the current growth madness, we need to go much further. Indeed I think we need a planned egalitarian economic contraction to levels of production & consumption that all the world’s people could sustainably and equitably enjoy. This emphatically does not mean a return to deprivation, poverty and poor health that prevailed, as you point out, in the 1800s. Many of us are quite confident we can build alternative social forms – in both rich and poor countries alike - that deliver an even higher quality of life than most have now, but with greatly reduced per-capita incomes and ecological footprints. It would probably involve GDP levels similar to those we had in the 1950s, with the addition of some sensible forms of modern technology (internet, health care etc) and – crucially – far more caring and co-operative social arrangements. The alternative has been well described by the academic Ted Trainer as a ‘Simpler (but richer) Way’.

 Now I know Andrew, that even if you wanted to move towards these types of arrangements – which you clearly don’t – you couldn’t deliver them today from parliament. You have to ensure that Australia remains competitive in the global economy, and that of course means pursuing market lead economic growth at all costs, even if this means pushing us further down the road towards ecological collapse, generates increasing inequalities and involves us taking more than our fair share of global resources...all while failing to make us happy! You are prevented from taking a sane path not just because you believe in the benefits of a ‘prosperous Australia’ but because if you tried, you would incur vast wrath of the corporates, the media, academics and, most powerfully, the voting public. We in the alternative movement have a lot of 'consciousness raising' to do!

That said, many are now starting to see through the illusions of our greed and growth society, and are slowly trying to spread the attractive vision in the towns and suburbs where we live. There is now, for example,  thriving Transition Towns and Eco-Village movements worldwide. People are starting to realise we need to live more simply and locally and (most difficult) develop very new economies to our current market driven forms. Andrew - feel free to join us down in the veggie gardens!

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