A MODEL FOR ENVIRONMENTAL SUSTAINABILITY AND ECONOMIC STABILITY
The relationship between the natural world and the “progress of humanity” has been complicated and contentious ever since man invented tools and fire. The human brain and psyche have allowed us to out compete most other living organisms. We have developed a model that measures progress based almost exclusively on economic growth.
For centuries our ingenuity and the application of technology have allowed human populations to continue growing at increasing levels of prosperity, consuming resources and producing waste while skirting the limits of a finite world.
How long can we continue dancing on the edge of the cliff and not fall into the abyss? We now affect, what some would argue, is an outsized portion of the world’s resources compared to our population. Example, our species is throwing so much carbon into the atmosphere that it is affecting the climate, threatening our very existence as well as the natural world around us.
Is there a better way? Is there a different model based on something other than Gross Domestic Product (GDP) that would allow us to live in relative comfort while maintaining a sustainable relationship with the world that surrounds us and nurtures us? Smart people like Peter Victor think so.
Peter Victor is a Professor Emeritus in Environmental Studies at York University. His book, Managing Without Growth – Slower by Design Not Disaster, challenges the priority that rich countries continue to give to economic growth as an over-arching objective of economic policy. The challenge is based on: a critical analysis of the literature on environmental and resource limits to growth, the disconnect between higher income and happiness, and on the failure of economic growth to meet societal objectives of full employment, elimination of poverty and environmental protection.
Peter’s book uses a rigorous approach to provide insight at the frontier of ecological economics using both systems modelling and a more conventional macro-economic analysis. I encourage you to read the book but here is my précis.
Summarized elements of Peter Victor’s economic model:
- The Economy is a system which converts inputs (energy, material, land) into valued goods and services which contribute to individual well-being. Along the way, wastes are also produced as by-product. As the economy grows it consumes more inputs, generates more goods and services and creates more waste. The Economy is an open-ended system meaning that, theoretically, it could grow forever. It is responsible for neither creating the inputs nor for assimilating the wastes. For these things the Economy relies on the Environment. But the Environment is a closed system meaning that there is a finite limit on the amount of inputs it can supply and the amount of waste it can assimilate. As the Economy grows beyond the bio-physical limits to support it, economic output goes into precipitous decline.
- Initially individual well-being improves as the economy grows. But, as economic growth continues the relationship between economic growth and improvement in well-being becomes less and less direct. What that means for most “western” economies is that economic growth is no longer contributing positively towards individual happiness.
- In a traditional economy, economic throughput is essentially controlled by market prices. The economy assumes that all of the inputs are owned by somebody. If someone wishes to produce a good or service that requires an input (raw materials, labour etc.), a price for that input will be established with its owner. The scarcer the input, the higher the price. The higher the price, the more effort will be expended to create cheaper alternatives or discover ways to reduce consumption by making more efficient use of the input.
- Many aspects of the environment are used by everyone but owned by no one. Lack of ownership means no custodianship and scarcity in this context is not defined nor effectively measured. Market forces, therefore, are not good at setting prices for environmental qualities. Examples would be the atmospheric quality degradation as a result of the production of greenhouse gases or the bio-diversity reduction as a result of habitat destruction. There is not an entity that owns the atmosphere or that has custodianship of bio-diversity. Until recently, this didn’t matter so much as the natural cycles were able to accommodate and adjust to the environmental pressures caused by economic growth. Now the scale of the economy is so large that the natural cycles are being overloaded and have begun breaking down. A partial answer to this dilemma is to reduce the global rate of economic growth to near zero.
- In Canada, a no-growth economy would still strive for the following:
a. Full employment (defined at 4% unemployment or less)
b. Poverty elimination (based on Statistics Canada Low Income Cut-Off model)
c. 2% inflation or less managed by the Bank of Canada
d. Environmental sustainability as measured by decreased GHG emissions that would sustain a 1.5°C increase or less to the global climate
e. Declining debt to GDP ratio
- The government policy elements that would move us in the direction of this low or no growth economic model would be:
a. Balancing immigration levels, life expectancy and birth rate to achieve a stable (not growing) population base
b. Management of the environment according to the three “Daly” principles, i.e. :
i. The rate of consumption of renewable resources should not exceed their rate of regeneration,
ii. The rate of depletion of non-renewable resources should not exceed the rate at which renewable alternatives are created,
iii. The rate of waste emissions should not exceed the eco-system’s ability of to absorb it (For example, this implies setting a price on carbon emissions, either tax or cap and trade)
c. Setting out a measures to combat social exclusion and poverty including:
i. Macro-stabilization and framework measures, (e.g. framework legislation establishing rights and freedoms)
ii. Protective measures aimed at maintaining a safety net, (e.g. targeted wealth transfers such as social assistance and social housing)
iii. Measures to promote work incentives and support labour market entry and participation, (e.g. literacy, language and skills training)
iv. Measures aimed at creating/expanding/maintaining economic opportunity, (e.g. job creation and support for self-employment)
v. Measures to promote community based economies and neighbourhood quality, (e.g. community, social and economic development, local support for culture, sports and recreation)
vi. Reformation of public programs for greater accessibility, (e.g. health, education and financial services access)
vii. Measures promoting the quality of life, well-being and personal development, (e.g. investments in health programs and support for issues such as teen pregnancy, mental health, substance abuse)
viii. Measures aimed at enhancing community receptivity, (e.g. anti-discrimination measures)
d. Setting our measures to encourage work-week reduction to reduce individual “over-employment” (i.e. those working more than 50 hours/wk) and provide better work/life balance as well as creating more employment opportunity)
e. Focus investment, productivity gains and technology development patterns in ways that support and reflect the changing direction in how people lead their lives: more leisure and recreation, more time with family, friends and community, more public goods, fewer private, status goods.
f. Tax corporations based in part on the capital that they employ because it favours investment in people over produced assets
g. Impose a structured capital gains tax that favours investment in beneficial, less damaging technologies
h. Impose tax structures that favours maintenance and repair of, rather than replacement of, existing capital stock
i. Implement limits on economic throughput that would translate productivity gains into increased leisure to reduce the rate of unemployment or to reductions in environmental burden through environmental training, awareness and changes to process
j. Implement technology assessment programs that would review proposed implementation of new technologies to evaluate both their beneficial and deleterious effect in terms of achieving the goals that people really value
k. When evaluating the benefits of international trade agreements, consider their environmental impact both in the source country and in the transport of raw materials and finished and semi-finished goods around the world. Aim for net zero balance of trade on a global basis.
l. Impose policies to curtail the culture of consumption as a way to increase status at the expense of others. Instead, consumption should be focused on purchasing goods or services that are truly useful and on increasing individual well-being.
a. Don’t expect very many of these policy initiatives to come from governments as they are now structured. As Peter Victor says, “they must be wanted and demanded by the public because they see a better future for themselves, their children and the children of others, if we turn away from the pursuit of unconstrained economic growth.” (hence the Fridays for Future movement)
b. It is highly unlikely that a single country could move towards a no-growth economy on its own. It must be a global initiative, one which initially tolerates growth for the less developed countries at the expense of growth for the currently, “richer” nations
c. While small community based initiatives will help initiate and support the groundswell, ultimately the change must migrate to the mainstream. Again to quote Peter Victor, “A ground swell of support for voluntary simplicity and for more locally based economies and communities, or something similar, might be just what is needed to lead the transformation that logic, data and compassion say is required, but it will not be sufficient. Unless governments introduce appropriate policies for managing without growth based on widespread support but obliging all of us to change our ways, the contributions of those willing to lead the way will prove insufficient.”
Peter Victor’s book was written in 2009 with an updated edition released in 2019. It’s concepts are even more relevant today than when the book was first released and the reasons for change ever more compelling.
The COVID – 19 pandemic has taught us global economic transformation is possible if the consequences of not taking action are seen as too dire. The catastrophes associated with climate change mount up by the day with untold human suffering and economic damages into the trillions of dollars. What will be the tipping point when collectively we say, “enough is enough. We need to try something different.”