Saturday, February 6, 2010

Environmental Vow: Part Five

Economic Growth

A second “sacred cow” that sabotages real environmental debate is the way that environmental destruction turns on the hinge of economic growth. As I mentioned above, our economy grows through the human activities that involve a financial transaction, and these almost invariably involve some sort of stress on the earth. It should be obvious, therefore, that if we are going to substantively deal with the environmental crisis we should be seriously questioning the current imperative that our society has towards unlimited exponential economic growth. Yet when we look at the discourse in both radical environmental circles and the mainstream society we see almost the same level of denial as that associated with population issues. Why? Surely there is no direct biological urge for economic growth.

There are a lot of reasons for this, which I will try to briefly identify. First of all, our economy is such a complex, interdependent edifice that it is hard to conceive of substantially modifying it without causing the whole system to collapse. And yet its continued growth is the only ultimate security that we can offer to the billions of people who are dependent on it. Finally, for many of our society's leaders the economy has taken on the traditional role that used to be filled by religious faith and the chivalric code. That is to say, their place in the economy fills an existential void for some of our world's most influencial people.

Fantasies have been written about what might happen if a person with a modern education and a modicum of technical know-how were transported back in time to a simpler age. Take, for example, Mark Twain's classic A Connecticut Yankee in King Arthur's Court. The hero of that tale, Hank Morgan, is able to create a modern (at least by 19th century terms) industrial society pretty much purely from the knowledge he carries in his head. What this sort of techno-rugged individualism misses, however, is how many of the key pieces of our modern world rest upon other elements---take away any one part and all the rest becomes impossible to sustain. If Hank Morgan were to miracurously appear in Dark Age England, for example, he would know how to do a great many things but would quickly find out that there wasn't enough iron available to realize any of his dreams. And if he tried to expand iron production, he'd quickly realize that there simply wasn't enough coal around to fuel the furnaces. And if he wanted to dig more coal, he'd find that there weren't enough roads (let alone railways) available to transport it to his furnaces. He'd have problems finding enough skilled and literate workers, or enough agricultural surplus to feed them, or enough copper, tin, lime, and all the other things needed to create Twain's Dark Age Utopia. If it was impossible to create the 19th century economy out of thin air, think about how hard it would be to create a 21st century one! It requires very complex machinery, electronics, robots, exotic metals, very highly skilled labour, etc-----take any one of these out of the equation and nothing else would work.

Equally important to a modern economy are the complex web of government regulations and business relationships that manage this huge globe-spanning machine. These include things like “just in time delivery”, the internet, fractional reserve banking systems, complex webs of international insurance, currency traders, futures markets, our legal system and so on. Add to this the fact that the international market consists of many smaller national and regional markets, all of which are in competition and very quick to take advantage of any weakness in another in order to gain market share. Indeed, everything is so complex that you will often hear politicians and business people refer to the fable of “The Goose Who Laid the Golden Egg” and suggest that we should leave things to manage themselves. Indeed, our economic system is so complex that no one really knows how to control the thing without running the risk of having the whole thing grind to a halt. This means that an equally apropos fable is that of the woman who took a ride on a tiger and found that it was impossible to safely dismount. In this light, knowledgible people view anyone who talks about the need to rein-in economic growth as being little short of insane.

The second thing to understand about economic growth is the way so many of our personal and public institutions depend on it for their well-being. Take, for example, the concept of “retirement”. People realize that in ages past almost no one was allowed to spend a significant amount of time at the end of their lives without having to work. Since almost no one lived long enough to care, it didn't much matter. But with the increase in life expectency there also came a dramatic increase in the speed with which the economy grew on a year-by-year basis. This meant that, as a general rule, money invested in new enterprises could be guaranteed to increase exponentially in value (again, the “miracle of compound interest”.) Of course some businesses did well, and others failed. But if you were reasonably lucky and prudent enough to not put all your eggs in one basket, anyone with a bit of money to invest stood a good chance of seeing their investments grow. This meant that a little money “put away for a rainy day” became a lot of money at the end of a person's life.

Consider the following hypothetical numbers. A man starts work at the age of twenty and retires at age sixty. He puts away fifty dollars per week for his retirement. According to the following interest rates, he receives a different amount at age sixty.

At 5% he receives $330,000
at 4% he receives $257,000
at 3% he receives $202,000
at 2% he receives $160,000
at 1% he receives $128,000
at 0% he receives $104,000

Beyond the individual level, this sort of assured economic growth allowed institutions like companies and governments the ability to create pension funds. And with these, the concept of retirement became a real possibility for larger and larger segments of the population---at the same time that modern sanitation and medicine were allowing more people to get to old age before dying. Remove exponential economic growth from the equation and there is no dramatic increase in wealth over a person's working life; and without that the concept of retirement disappears for most people. No wonder ending economic growth is a scary prospect.

This problem goes beyond just the old-age pension, though. Every social program that the modern state provides is paid for by taxation. And there are real limits beyond which taxation becomes confiscation, which forces businesses and individuals change their behaviour in ways to avoid paying it (that is, they either go out of business or leave for somewhere else.) This means that if a government wants to bring in new programs it has to either cut existing ones first (which almost never happens) or expand the tax base to fund it. And with exponential growth and an increasing population the tax base continues to grow on its own as new businesses come into being, the number of tax payers grows, and, the income of citizens increases. This process has continued for generations and is what has slowly built up the welfare state as more and more services have been added onto the role of government---which before the industrial revolution traditionally consisted of little more than national defence and a criminal justice system.

Economic growth also has a tremendous impact on the politics of a nation. One of the classic lines for politicians in liberal democracies has been “a rising tide lifts all boats”. What this cliche really refers to is the way economic growth has tended to end class warfare in modern democracies. That is to say, in a world where there is only a set amount of money to go around, the rich can only be rich if they take money away from the poor. This breeds a politics where the poor and rich resent each other and engage in constant battle (think of all those peasant revolts in medieval Europe.) But if the economy keeps growing faster than the population does, then that means that it is possible to convince the poor to accept the continued existence of the rich as long as they believe that the entire population is doing better every year than the one before. The other cliche about this state of affairs is that most people don't care about what percentage of a pie they get as long as their particular piece keeps getting bigger. In a no-growth economy the rich simply have to feed on the poor and class warfare begins all over again. And in a nation suffering from class warfare, it is much harder to make the compromises that are necessary to sustain a liberal democracy. In effect, an end to economic growth threatens the continued existence of democracy.

Ending growth has a particular dread for Third World nations. The standard prescription for ending poverty is that the nation has to “develop”. And what is development other than really fast economic growth? Ecologists have repeatedly asked the question about how the world is going to end climate change if India and China's citizens all end up owning automobiles and using air conditioners the way North Americans do. Yet the question always gets thrown back into their faces “Do you expect these people to voluntarily live in poverty forever?” It has been the stated goal of every “right minded” person---Left, Right, Communist, Capitalist, Religious, Atheist, whatever---that someday “development” will be able to raise the poorer nations of the world to the level of the “West”. Indeed, this dream has eaten up the sweat and blood of enormous numbers of idealistic people. It must seem monstrous indeed that when we are finally reaching the point where it seems possible that significant sectors of the Third World will actually become “developed” that we need to stop the process in its tracks because of environmental concerns.

It needs to be stated that beyond the materialistic concerns that are mentioned above, there is also a spiritual one. Expansion of the Welfare State and Development are not simply political and economic issues, they also idealistic visions that have sustained generations of people. In essence, they embody the general notion of “progress” and the incremental improvement of human kind. And in the absence of any sort of other spiritual narrative, “Progress” is something that gives life meaning and unifies the vision of countless people who have rejected religion. Suggest to these folks that nature sets firm limits beyond which the material culture of the human race simply cannot expand, and you have made impossible what motivates their efforts and fuels their sense of self-worth. I suspect that this is why so many traditional “Leftists” and “Progressives” have such a visceral antagonism towards Green political activists. On an inarticulate and intuitive level they understand that the idea that economic growth must be limited is some sort of existential threat to that specific set of values that they have built their lives around.

On the right side of the political spectrum a similar gut-renching antagonism exists with regard to the suggestion that there need to be limits on the economy. But I think that it is different from those mentioned above. Whereas people on the Left find themselves obsessed by the concept of “equality” or “economic justice”; the Right, I believe, is more concerned about “freedom” and “liberty”. Probably the most extreme expression of this worldview comes from the pseudo-philosophy of Ayn Rand. Her novels, which seem to be most popular with young males, seem to fill the same sort of role as adolescent “ripping yarns” literature. Rand's novels are, in effect, a sort of “Horatio Hornblower” books for young Conservatives because they fill their readers with visions of excitement and adventure of a sort that people rarely experience in the real world. Unfortunately, a small segment of the readership fails to grow out of this phase and continue to support Libertarian politics for the rest of their lives.

Beyond these fantasies for the immature, there does seem to be an element of the Capitalist vision that appeals to many people's deep-seated need for adventure. At least in the fantasy life of a lot of the supporters of an unfettered free market, I think that business competition fills the primeval wish to compete and conquer that used to be satisfied by hunting and tribal warfare. A case can certainly be made, for example, that the loudest proponents of capitalism tend to be very competitive people who spend very little effort being concerned about the plight of those who get in their way. As such, they could be said to be something like a “warrior class”.

For those people who seem most successful at business, the marketplace often seems to create a sort of existential “reason to be” that is much like the creative impulse that inspires artists. That is to say, the best elements of capitalism are about creating new products and wealth. And the process of doing so gives purpose and meaning to the lives of so engaged. In fact, I suspect that this is why so many “captains of industry” work so hard. Indeed, they simply cannot be in it “for the money” or else they would slacken off and enjoy themselves once they have made their pile. Yet if you look at people like Bill Gates and Warren Buffet, it almost seems as if the money itself is irrelevent. (Which would explain why they and so many other super-rich individuals give so much of it away.) I think that it is this sort of pseudo-spiritual engagement that many people have with the economy that explains why so many people seem to be so deeply threatened by the environmental movement. Contemplating an end to economic growth is not simply an end to some people making money, it is much more like doing away with their purpose in life. And, of course, the money that these people have gives them enormous influence in society.

Of course, most people are not left-wing activists out to create a egalitarian utopia. Nor are they rightwing disciples of Ayn Rand out to make the world safe for Nietzchian supermen. Most aren't even people who get their zest for life from business. But unfortunately, a very large fraction---if not the majority---of our society's leaders are. Many of our social activists, trade union leaders, the people who run our charitable institutions, politicians, and so on, really do have a vision of constantly expanding welfare state. And some of our most rabidly pro-business activists and politicians really do believe that there is something inherently evil in any attempt to limit the freedom of business. And finally, a lot (if not most) of our most successful business people really do get a great deal of personal satisfaction from working to make their businesses grow. And put these three groups together and you have defined just about the entire leadership of humanity. As a group, our leaders have an enormous personal investment in the concept of unfettered economic growth. In light of this emotional attachment to the present system, I simply cannot see how they can be counted on to deal with climate change before it is too late---especially as the last doubling cycle before catastrophie will initiate events that will arrive with what seems supernatural speed.

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