Wednesday, January 26, 2011

Mainstream contemporary economics seems to believe that economics exists independent of the laws of biology, chemistry and physics.

Economic growth cannot buy the planet more time

Andrew Simms
Andrew Simms

Global economic growth - in its current form - cannot continue if nations are serious about curbing climate change, says Andrew Simms. In this week's Green Room, he warns that the consumer society cannot "have its planet and eat it".
A hamster (Image: PA)
The world has "bears" and "bulls", but thankfully not "hamster markets"
From birth until it reaches sexual maturity at about six weeks, a hamster doubles its weight each week.
If, instead of levelling-off in maturity, it carried on growing - continuing to double its weight each week - we would be facing a nine-billion-tonne hamster on its first birthday.
If it kept eating at the same ratio of food to bodyweight, the hamster's daily intake would be greater than the total, annual amount of maize produced worldwide.
In nature, there is a reason why things do not grow indefinitely.
Yet the entire canon of mainstream contemporary economics seems to believe that economics exists independent of the laws of biology, chemistry and physics.
It assumes, without exception, that infinite economic growth on a finite planet is both desirable and possible.

'Limits to growth'

To suggest that growth might ultimately be bounded by physical constraints, of course, is not new on the very margins of economics or in other disciplines.
Market trader with his hands on his head (Image: AP)
We have less excuse than usual to blissfully ignore how our impressive looking growth economies hide a negative ecological cash flow

For example, a group of researchers in 1972 used an early computer model to compare available natural resources with rates of human consumption. Their "world model" was published as the famous Limits to Growth report.
Back then, much less data and processing power were available. As a result, for some it acted as a wake-up call, but many others mocked it and used the report to brand the wider environmental movement as alarmist.
In 2008, a physicist called Graham Turner decided to look again at the controversial report. He compared its original projections with 30 years' worth of subsequent observed trends.
Amazingly, given the available technology and data, he concluded that they "compared favourably". The authors of Limits to Growth had been broadly right all along.
We shouldn't be surprised. At what point, and on what basis, did consumer society ever truly believe that it could have its planet and eat it?

Jared Diamond's book Collapse tells the history of societies throughout history that fell by overshooting their environmental life support systems.
He charts how wealth too often comes at the expense of liquidating natural capital and how, in environmental terms, "an impressive-looking bank account may conceal a negative cash flow".
Now, standing in the shadow of the banking crisis, we have less excuse than usual to blissfully ignore how our impressive looking growth economies hide a negative ecological cash flow.
Take just one example. A new report from our team at Nef (the New Economics Foundation) looks in detail at the relationship between economic growth and the need to avert runaway climate change.
Based on the leading models for climate change and the global economy's use of fossil fuels, the report - called Growth Isn't Possible - comes to a seemingly inescapable and self-explanatory conclusion.
It asks whether global economic growth can be maintained, while keeping a good likelihood of limiting global temperature rise to 2C (3.6F) - the agreed political objective of the European Union, and widely considered the maximum rise to which humanity can adapt without serious difficulty.

'Ecological bankruptcy'

Some nations, of course, face difficulty at much lower rises, such as small island states.
None of the models studied, including the most optimistic variations of low-carbon energy and efficiency, could square the circle of endless global economic growth with climate safety.
shopper in supermarket
The link between rising GDP and higher life satisfaction broke down decades ago

Over the last decade, carbon intensity has not gone down, it has generally flat-lined and, in some years, even gone up.
Professor Kevin Anderson of the Tyndall Centre for Climate Change Research at Manchester University, UK, concluded in another study that: "Economic growth in [industrialised nations] cannot be reconciled with a 2, 3 or even 4C characterisation of dangerous climate change."
There is also a growing appreciation that it has not all to do with climate change.
The latest set of accounts for humanity's ecological footprint reveal that, conservatively, it takes the Earth nearly 18 months to produce the ecological services that humanity uses in one year.
The negative cash flow is getting worse.

In a unique study, published in the science journal Nature in September 2009, a group of 29 leading international scientists identified nine processes in the biosphere for which they considered it necessary to "define planetary boundaries".
Of the nine, three boundaries had already been transgressed: climate change, interference in the nitrogen cycle, and biodiversity loss.
Assuming that humanity does not deliberately wish to destroy its own foundations, and with so much science and sophisticated monitoring available, why is this happening?
For all the promise of magic bullet technologies, continual growth drowns out energy and natural resource efficiency gains.

Even efficiency gains themselves do not necessarily reduce consumption. Counter-intuitively, greater energy efficiency tends to reduce costs and drive up overall consumption.
There is a growing awareness too that, at least where rich countries are concerned, the downside of growth comes with very little or no upside.
For most of these nations, the link between rising GDP and higher life satisfaction broke down decades ago.
Lord Adair Turner, chairman of both the UK Financial Services Authority and the UK Climate Change Committee, recently described the pursuit of endless rich country growth a "false god".
Dr Rajendra Pachauri, chair of the Intergovernmental Panel on Climate Change (IPCC), said GDP growth was "proving to be an extremely harmful way of measuring economic progress".
The reason is that in economic commentary, growth is always assumed to be good. But you can also have "uneconomic growth", when it is jobless, socially divisive or environmentally destructive. A parallel in nature might be growth like that in cancer.

Burden of proof

Are alternative measures of success available? Yes, many. But politicians and the business press remain uncritically spellbound by the equation "all GDP growth is good".
Here is an irony: the hard science of climate change is subjected continually to the most extraordinary degree of critical scrutiny in the media.
Given their actual number, informed sceptics are given disproportionate airtime and column inches.
But where the "dismal science" of economics is concerned, the daily reporting of its central tenet - growth is good - passes unchallenged.
The much vaunted journalistic balance is abandoned. Why? Perhaps it is because this type of economics is not science at all, but doctrine. To question doctrine makes you a heretic, and heretics get excommunicated.
The time has come to question. Now, the burden of proof lies on those who promise endless growth to demonstrate how it will be possible.
In the meantime, the pressing task for everyone else is to work out how all of us on the planet can have good lives while living within its means.
Andrew Simms is policy director of the New Economics Foundation (Nef) and co-author with Dr Victoria Johnson of Growth Isn't Possible: Why We Need a New Economic Direction, published by Nef and Schumacher College

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