Climate Change and the need for a New Economy

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Earthrise NASA

We are living in historic times. We may be facing the end of human history. This is hardly in the way Francis Fukuyama meant it. It is not the success of an economic and political system over another at the end of the Cold War. This moment may be as momentous as the discovery of agriculture, or writing, at the dawn of human history. We need to change how we think about business, wealth and what is progress. There are reasons for this, and they are of our own making.

For the first time in our collective history, our actions are putting the planetary life support systems under great strain. We know this because we have scientific data. We know our intense burning of fossil fuels, starting in the dawn of the Industrial Age, is adding greenhouse gasses to the atmosphere. The solutions to the crisis are not in business as usual. If we are to survive the Anthropocene, we will have to change a lot of how we do things in both business and politics. This includes how we behave regarding in-groups and out-groups. It may include a vast expansion of what we believe to be our kin.

There are many assumptions we live under. These will have to go. First, we need to change how we think of business cycles. We are not talking of the next quarter, or year, or ten years. Humans naturally have issues imagining things beyond a decade, let alone a lifetime. We need to change that. We also urgently need to change cultural norms regarding wealth and the economy. Both are human cultural constructs.

When Greta Thunberg addressed the United Nations, she referred to the myth of an ever-growing economy. It is at the heart of the modern market economy. We have lived with this mythology for the last seventy years. It came out of two world wars and a Great Depression that was global. Both wars and the Great Depression came after the second great age of globalization ended in the of the last century. This second stage of globalization grew over the last half of the nineteenth century. Its growth was made possible by new technologies, such as the telegraph, the railroad, and faster steamships. This allowed for goods and services, as well as information, to cross oceans at what were lighting speeds, compared to the age of sail. In some ways, these technologies should be understood in the same way as our modern-day Information Age is. It has proven to be revolutionary as well. It also shortened the time it takes for both information and goods and services to travel the world.

When the Great Depression started economists and policymakers had questions about employment, productivity, and other metrics. The tools to answer them did not exist. It is in this milieu that the concept of Gross National Product and eternal growth took hold. This started with the writings of Simon Kuznets, who developed the curve for which is known for in economics circles. Here is a good explanation of this concept:

In the 1950s and 1960s, Simon Kuznets hypothesized that as an economy develops, market forces first increase then decrease the overall economic inequality of the society, which is illustrated by the inverted U-shape of the Kuznets curve. For instance, the hypothesis holds that in the early development of an economy, new investment opportunities increase for those who already have the capital to invest. These new investment opportunities mean that those who already hold the wealth have the opportunity to increase that wealth. Conversely, the influx of inexpensive rural labor to the cities keeps wages down for the working class thus widening the income gap and escalating economic inequality.

The Kuznets curve implies that as a society industrializes, the center of the economy shifts from rural areas to the cities as rural laborers, such as farmers, begin to migrate seeking better-paying jobs. This migration, however, results in a large rural-urban income gap and rural populations decrease as urban populations increase. But according to Kuznets’ hypothesis, that same economic inequality is expected to decrease when a certain level of average income is reached and the processes associated with industrialization, such as democratization and the development of a welfare state, take hold. It is at this point in economic development that society is meant to benefit from trickle-down effect and an increase in per-capita income that effectively decreases economic inequality.

Kuznets said there were limits to his curve, and that it did not take into account things like household work, or other work that is not part of the formal economy. The latter is rarely taught in basic economic courses, or that we are facing real limits to growth. He was aware of it and later in his life he pointed to these issues. He was also critical because it took an almost religious form for economists since it made the market the center of the economy. Human values, or how actual humans benefit from a thriving economy is rarely spoken off in modern economic thinking. Nor is the basic question of the role of the economy asked.

This phenomenon started before Kuznets when politics and economics separated as fields of study at the end of the nineteenth century. This is why economists rarely speak beyond growth and other minutiae and do not look at the far bigger picture. Why political scientists rarely speak in-depth on the intersection of politics and economists. It may be time to rejoin both disciplines because they are joined at the hip. The growth of the Gross National Product has become the holy grail and solution to all issues. These range from unemployment to human potential.

The other critical concept of our current economic ideology is value, and how this is added to things. This is why a wild forest has no value, but the lumber within that forest does. This is at the heart of Donald Trump’s desire to clear cut American forests. This is also why Jair Bolsonaro wants to develop the Amazon into a modern-day paradise for agriculture and industry. Biodiversity is not seen as important on its own. Nor is clean water or air. Never mind that dirty air and water adds costs to the medical care of populations affected.

Partly we as a dominant species do not appreciate biodiversity, and the job these wildlands do to keep our water clean, and how critical they are to the global water cycle. Nor do we understand how they help keep the cycle of life going. In some ways, we see ourselves outside this weave because our dominant societies believe in dominion over nature. This has to change, and ancient peoples understand how closely tied we are to the weave of life. Our ideology of GNP growth as the only goal does not take into account a lot of these critical life details. Kuznets himself became a critic of the curve he helped create, for it ignored this and the thriving of humans as the main objective. We confuse thriving with wealth, at our collective peril.

This is why GDP is superficial and a bad measure of the true size of the economy, or how interconnected we are to the planet. We understand at an intellectual level that our activities on the world is becoming an issue. However, there are powerful forces that are married to the idea that we need to extract every last ounce of fossil fuels from the land. What remains in the ground will be lost value. This is why the science of climate change is dangerous to these interests. We also know that it does not matter if you have billions of dollars. You too will also be affected by climate change and other stressors on the life systems of the planet. If we go beyond certain limits, environmental collapse may very well see the extinction of the species. All that GNP growth will not help anybody at that point. This will be the end of human history, truly. This could happen in our lifetime.

This is why we need to start pricing the effect of human activity on the collective environment. It is also why we need to change how we think about our concepts of value. If we continue to think that only things we have touched have it, and nature lacks it, we will continue our assault on it. This may very well kill us.

We need to price externalities, such as pollution, into all the products we use. Corporations fight this because they rely on not having to pay for these costs. These added costs range from environmental cleanup to environmental laws, to begin with. If you produce chemicals, the last thing you want is to pay for added costs. It is best, from a current business perspective, to keep these costs out of your ledger. Companies have fought regulations successfully for decades. They have also located factories in countries where environmental laws are weak to non-existent and allow them to pollute to their heart's content without having to deal with these added costs. These range from pollution downstream to medical care and infrastructure. And if their pay for their workers is low, that is just a bonus.

Nations attract these companies, who should be understood as bad actors, with tax-free zones and programs. They see these bad actors as a means of technology transfer and to increase local employment. They know this will grow the GDP of their nation. The after-effect of higher medical costs from cancers and other environmental diseases is an acceptable cost to pay. After all, the policymakers that invite these companies will not have to deal with the effects ten and twenty years down the road.

There is another concept we have to understand. This is accelerationism.

Accelerationists argue that technology, particularly computer technology, and capitalism, particularly the most aggressive, global variety, should be massively sped up and intensified — either because this is the best way forward for humanity, or because there is no alternative. Accelerationists favour automation. They favour the further merging of the digital and the human. They often favour the deregulation of business, and drastically scaled-back government. They believe that people should stop deluding themselves that economic and technological progress can be controlled. They often believe that social and political upheaval has a value in itself.

This is critical since this has made our world, This is a place that relies on increased consumption and ever-decreasing levels of regulation. This we must fight, and to do so we need to change how we define progress, and ask again, what is the role of the economy? It should be what allows human beings to thrive, but with respect to the natural world. These concepts are explored in Doughnut Economics, written by Kate Raworth. We need to move beyond current definitions; we are running out of time. This is why market economics is on its last legs. This is also why the future is not within the current concepts of the market. In the current environment saying this is revolutionary. We may also be facing the last days of the nation-state. It is not that old, in fact. In the span of human history five hundred years or so is not that large of a span. Responding to global challenges will demand a global response. Someday, we may look back at our age as the waning days of an old regime, not unlike the end of multiple monarchies. We may be seeing the last gasp of a current economic and political ideology that is teetering on the edge of collapse.

What emerges will also have to include a new economic system It will have to be one that places human needs and the environment ahead of corporate entities. We are seeing this take shape on the edges. We live in very dangerous, but exciting times.

“May you live in interesting times…” indeed we do.

Written by

Historian by training. Former day to day reporter. Sometimes a geek who enjoys a good miniatures game.

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