Growth revisited

Martin Wolf — author of Why Globalisation Works — has written in his FT column what amounts to a cri de coeur article on the prospects of future economic growth and democracy.

We live in a positive-sum world economy and have done so for about two centuries. This, I believe, is why democracy has become a political norm, empires have largely vanished, legal slavery and serfdom have disappeared and measures of well-being have risen almost everywhere. What then do I mean by a positive-sum economy? It is one in which everybody can become better off. It is one in which real incomes per head are able to rise indefinitely.

Leaving aside some distinctly odd arguments on the emergence and nature of democracy, (and plainly crass comments about environmentalists and socialists), Wolf’s belated awakening to the dependence of the positive-sum world economy (his long hand for capitalism?) on intensive energy use is well illustrated by four charts:

Now climate change and future energy demands become a security and not least distributional issue, upon which Wolf takes unsurprisingly an apolitical middle path between optimists and pessimists on growth and concludes that the “condition for success is successful investment in human ingenuity”.
Whatever that means…

There are real physical limits to growth and the world’s capacity to sustain life (see an earlier post) — and foremost amongst the policy choices to achieve a steady-state international economic system is the need for redistribution within and between countries. It would be interesting to redraw these graphs according to class, which might show the extent to which the rich distort the world’s ecology. The turbo capitalism generated by today’s globalisation is undermining the ability of trade to pull people out of poverty and has created financial markets that have taken the world hostage.

Amazon dot con

Forest conservation is now big business. British Prime Ministers across the political spectrum from Margaret Thatcher to Gordon Brown have shown tremendous largesse with public funds to support forest programmes in tropical countries. Costa Rica is benefiting from a new round of debt-for-nature swaps which will provide more money for conservation. Corporations, conservation groups, celebrities or individuals are also channelling private funding. But when green consumers pay for the conservation of a rainforest, what are they actually getting, who benefits, and will it make a difference?

Cool Earth is a recent example. They use their sponsors’ contributions to buy forest land, passing the freehold to a local trust, and then to lease back the land to the communities affected. They contract local and international NGOs who in turn work with these communities to help their development. It is argued that the forests are thereby protected and we enjoy the environmental benefits too.

But some people are not happy at all about these sorts of scheme: “Buying up our forest makes me very sad,” said Davi Kopenawa, a leader of the Yanomami tribe, in a report in The Independent: “There is no money in the whole world that will buy the Amazon forest. You can’t buy land like you can buy meat or clothes. Land will always remain. We can use and use the earth and it will always be there. But money you can throw away in a river – it won’t last.” He calls for the land rights of indigenous communities to be recognised and respected.

He’s right – this rather than cash is often the key first step to conserving forests. Forests are cleared by farmers, cattle ranchers or loggers because the returns to them are higher than for conservation. Different countries face a range of different domestic market and policy failures, but without correcting these and providing the right mix of incentives for sustainable land uses, funding conservation is unlikely to have a widespread impact.

“There is no wealth but life”

Al Gore’s Nobel prize is well-deserved. He has done as much as any person to popularise environmental concerns. But does he really challenge current political views, which have now taken on-board most of his arguments, i.e. they have become mainstream.

For example, offsetting carbon is – albeit slowly -becoming a middle (and business) class habit. But it remains an option. And it does not come close to taking account of our total life-span ecological ‘footprint’.

The scantiness of the debate is endemic in the political elite in the United States and Britain, where economic growth remains the paramount consideration: in such an environment even progressive policies such as carbon trading run the danger of becoming political face-saving accounting exercises.

Herman Daly challenged the primacy of growth in his seminal book “Beyond Growth: the economics of sustainable development” (1996). His basic premise is that the economy is a subset of the environment and natural resources not vice versa as traditional economics assumes, and so there are real limits to its expansion and capacity to sustain human life. The key is to find the optimal use of material resources and energy for a ‘steady-state’ economy – whose aim is to create the “greatest good for an optimum number of people over the long run.” Daly stresses the need for development which equates to a qualitative improvement in our lives, whereby the economic benefits of increased consumption of good and services must be greater than their environmental costs.

Adapting to a steady state economy would of course take time given the extent of our current unsustainable economies. Perhaps gradually substituting income taxes with ecological taxes would be a step in the right direction, which could also form the basis of a fairer system where the poorest no longer pay a higher proportion of taxes than the rich.

Ruskin (quoted above) also said that: “When we build, let us think that we build for ever.”