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WHEN GROWTH STOPS -- SUSTAINABLE DEVELOPMENT, PT. 6
Here we wrap up our discussion of sustainable development, based on the excellent book BEYOND GROWTH by Herman Daly.[1]
Sustainable development means, first, setting physical limits on the "throughput" of the human economy. Throughput means all the materials and energy flowing through the economy -- all the things we make and use, and all the energy required to do so. Another phrase for "throughput" is "total consumption," which is total human population multiplied by per-capita consumption.
The total throughput of the human economy must be kept small enough to avoid exceeding two physical limits of the ecosystem: its capacity to regenerate itself, and its capacity to absorb our wastes. Each year now, scientists report new evidence that the human economy has exceeded both of these ecosystem limits.
For example, nature creates (regenerates) new topsoil each year, but in much of the world (particularly in the U.S.) humans are destroying topsoil faster than nature can create it.[2] Loss of topsoil reduces our future farming capacity in a fundamental way. Topsoil destroyed today is topsoil taken from our children and grandchildren.
Pesticides provide an example of humans producing wastes faster than nature can absorb them. If nature could absorb pesticide residues as fast as humans created them, then there would be no buildup of toxic residues. But there has been a measurable buildup of pesticides at the north and south poles, at the bottom of the deepest oceans, in the drinking water of much of the midwestern U.S., and in the breast milk of women worldwide. We have clearly exceeded nature's capacity to absorb pesticide wastes, thus denying our children their rightful share of nature's detoxification capacity.
In sum, there really are "limits to growth" and we have already exceeded some of those limits. This means that, at some point, continued economic growth (growth of throughout) will create bads faster than it creates goods (an economist would say "marginal costs will exceed marginal benefits"). Daly (pg. 40) argues, for example, that the U.S. chemical industry may have already passed the point at which its toxic discharges are costing society more than the benefits provided by its products. If this were the case, then society would receive net benefits by shrinking the chemical industry instead of promoting its growth.
Unfortunately, we have no way of measuring whether our economy has passed the point at which costs have begun to exceed benefits because, in our national accounting system (in which we measure "gross domestic product"), we count all production of goods and services as "goods." In tallying up gross domestic product (GDP) we never subtract any bads. Chemicals are counted as goods and the products they allow us to make are counted as goods. This makes sense. But when our chemical factories produce chemical waste dumps that must be cleaned up at huge public expense, those costs are counted as "goods" too, instead of being subtracted as bads. If a few hundred or a few thousand children get cancer from exposure to chemical wastes, their hospitalization, their radiation treatments, their chemotherapy, and their funeral expenses are all counted as "goods" in our total GDP. If their parents sue, all the resulting court expenses are counted as goods, not bads. In sum, the nation's brightest economists maintain our national accounting system with a calculator that has a plus key but no minus key.[3] Therefore we have no way of knowing whether the costs of economic growth have exceeded the benefits. The nation's economists (and politicians and business leaders) simply assume that if GDP is rising, our standard of living is rising too. But, as the song goes, it ain't necessarily so. (For substantial evidence on this point, see REHW #516.)
Historically, growth is an aberration; a steady state economy is the norm. Only during the past 500 years has growth begun to seem like the normal condition for human economies. The physical limits to growth (which we are now perceiving because we have exceeded some of them) require us to return to the steady state sooner or later. If we do so by choice, we may be able to guide the process and achieve a steady-state economy with a reasonable approximation of the "good life" for most people, world without end.[4] On the other hand, if we continue to blindly accept the ideology that growth is good, then natural limits will reduce our numbers with an ecological meat axe and the suffering will be immense.
Why do we have so much trouble imagining a no-growth economy?
Daly believes there is one central reason: because a steady-state economy, one that is no longer physically growing, will force us to confront the problem of inequality, which is another name for the problem of poverty. So long as the total economic pie is growing we can say, "The poor will be lifted out of poverty by growth, so we need not take any special steps to alleviate their condition -- in fact we hardly need to think about them at all because the market will take care of them."
In a steady-state economy, we will have to decide what is a fair distribution of the benefits of the economy because, in the steady state, as the rich get richer the poor must get poorer. In this situation, the only way to make sure that a fair share is available for everyone (whatever society decides "a fair share" means) is to set a limit on how much the powerful and the predatory can take for themselves. Daly says simply, "In a steady state, if the rich get richer the poor must get poorer, not only relatively but absolutely. If the total [throughput of the economy] is limited there must be a maximum limit on individual income."
Daly believes this is the key reason why we refuse to confront limits to growth: we cling to the path of unsustainable growth so that we will not have to think about limiting inequality. (pg. 215)
Daly argues that establishing the principle of limited inequality is a necessary (but not sufficient) condition for achieving a modern steady state. He argues that the precise range of inequality that we allow is not as important as establishing the principle that inequality should be limited.
If inequality is to be limited, this implies that there will be a maximum allowable income and a minimum income. (These standards would have to be developed within each society because needs are culturally determined.) Daly argues (pg. 210) that the minimum income "would be some culturally defined amount sufficient for food, clothing, shelter, and basic health and education." The maximum income might be four times as great as the minimum (which is what Plato advocated), or it could be 10 or 20 times as great. The exact number isn't terribly important. The point is that there must be a limit on inequality -- the precise limit can be worked out in practice. (The overarching goal would be to provide sufficient incentive so that all necessary jobs are filled voluntarily by qualified people.)
Daly argues that limiting inequality (in a steady-state economy) is a way to achieve 3 things:
1) It is a way to keep the rich from leaning too heavily on the poor;
2) It is a way to keep the present generation from leaning too heavily on future generations;
3) It is a way to prevent humans from "leaning too heavily on other creatures whose habitats must disappear as we convert more and more of the finite ecosystem into a source for raw materials, a sink for waste, or living space for humans and warehouses for our artifacts."
In addition to the matter of fairness (the meaning of which each society or culture must decide for itself), in a steady-state economy we would need to limit inequality for another reason as well: to limit total human consumption, which is total population multiplied by per-capita consumption. It is total human consumption that stresses the ecosystem.
Because total consumption has two parts (human numbers and per-capita consumption), to limit total consumption, we would need to limit inequality AND limit total human numbers. In a steady-state economy (one whose total size is established by the Earth's limits), the more people there are, the lower their average standard of living must be. Controlling growth requires us to limit both human consumption AND human population. Both limits are ESSENTIAL if we aim to control the total size (throughput) of the global economy.
In recent decades we have invented several technological fixes aimed at circumventing the natural limits of ecosystems, so that growth can continue. The "green revolution" tried to speed up the growth rates of the edible portions of wheat and rice plants[5] -- but these changes were achieved at the expense of stability, resilience and resistance to disease. The latest technical fix is genetically engineered crops. The hidden costs of this latest agricultural gimmick have yet to be measured, but we can be sure that they will become apparent as time passes. Daly says, "It is for now certainly better for us to slow down our own biological growth rate than to attempt to speed up the growth rates of all the species we depend upon." (pg. 85)
It seems logical that we in the northern hemisphere must confront (and achieve) the limits to growth first be-
Individual countries will find it more difficult to limit their consumption as the "free trade" ideology is imposed on them by powerful traders like the U.S. "Free trade" hides the ecological costs of consumption. If Americans are doing the consuming but the related ecological limits are being exceeded in Mexico or in Indonesia, Americans can feel no incentive to reduce their consumption. Free trade even makes it difficult to keep relevant accounts because benefits are being enjoyed in one locale while costs are being created in another, thousands of miles apart.
There is considerable evidence that free trade doctrines are increasing inequalities within and between countries. As Herman Daly says (pg. 156), free trade will bring with it "a further writing off of the laboring class in this country, an increasing disdain toward uneducated and rural people by the corporate and university elite, and an increasing devotion by the former to the one thing about themselves that at least vaguely concerns the latter -- their growing arsenal of guns."
Within countries, great inequality creates civil conflict. Between countries, in a full world, high rates of consumption create international conflict. To the extent that free trade makes nations less able to control their rates of consumption, to that degree it will promote war within and between countries. To promote peace, nations need to become more self-sufficient and to consume less.
We have said before and we say again: We know of only one organization committed to tackling every part of the "sustainable development" problem: Sustainable America. We urge all our readers to join and support Sustainable America. This is important. Please do it. Telephone (212) 269-9550; fax (212) 269-9557; or www.sanetwork.org.
Happy new year!December 12, 98
SUSTAINABLE DEVELOPMENT, PART 5: EMISSIONS TRADING
There are 3 problems facing every economy: resource allocation, fair distribution, and tolerable size.
Resource allocation means deciding what the economy should make -- more automobiles, more nursing homes, or more chocolate truffles, for example. We can't make everything we might want, so we must make choices. In the U.S. and other "market economies," allocation is handled mainly by "the market," meaning the system of prices. Prices send signals to manufacturers to make more of this and less of that, according to what people want and can afford to pay for.
Fair distribution means just what the words say --distributing the benefits of the economy with fairness and justice. The market has no inherent ability to do this. Left alone, the market will tend to make the rich richer and the poor poorer until a small number of people ends up owning just about everything. To achieve a fair distribution, people must make political decisions about what's fair, and about how to achieve their goal of fairness. One formula for fairness, endorsed by economist Herman Daly, says that high-income people should only make about 10 times as much as low-income people.[1] There are precedents for such a limit in American society. Approximately 10-to-1 is the range of pay in federal civil service jobs, and in our military. A general makes about 10 times as much as a private. A 10-to-one ratio allows hard-working, ambitious people to earn 10 times as much as people who prefer to take it easy and enjoy life. (And fixing the relationship between the bottom and the top would give the high-income people an incentive to favor raising the incomes of the low-income people because it would be the only way the high-income folks could increase their own income without violating the 10-to-1 rule.) The way to achieve a fair distribution (once you've decided what's fair) is conceptually simple: transfer payments. Tax the haves and transfer the money into the hands of the have-nots. Transfer payments can take various forms --you could simply write checks to the have-nots, or you could provide jobs that pay wages, for example.
The third problem --how large should the total human economy be --has never been considered a problem until very recently (although British economist John Stuart Mill did write about it in 1857). Until very recently, the world looked as if it could support an endless expansion of the human economy. But in recent decades, signs of serious trouble have emerged. In particular, it has become apparent that the world is running out of (or, more accurately, already has run out of) the capacity to absorb industrial wastes safely. The buildup of carbon dioxide and chlorofluorocarbons (CFCs) in the atmosphere, and mercury in fish, are three examples of this problem. It is now apparent that there is some optimum size for the human economy --a size that will provide a sufficient quantity of goods (sufficient to allow "the good life"[2]) for the greatest number of people, world without end. If the economy grows beyond that optimum size, it will begin to produce bads (such as toxic fish) faster than it produces goods, and we (and future humans) will be deprived of some of the benefits we enjoy today. There is a good chance that the total human economy has already exceeded the optimum size and that further growth in throughput will do more harm than good. ("Throughput" means materials and energy flowing through the economy --people making more stuff and using energy to do it.)
The size of the economy has never been considered a problem for two main reasons: 1) until recently, the world has always seemed nearly empty from a human viewpoint; and 2) even when the size of the economy began to cause obvious problems, people did their best to ignore the signs, to avoid facing uncomfortable choices. An end to growth is literally unthinkable for most people --especially for Americans --because growth has always been our main method for achieving a fair distribution. We have always been able to argue that poor people would be better off next year because their slim piece of the pie would grow a bit larger as the total pie expanded. Thus we have advocated more growth instead of confronting the question of a fair distribution of benefits. In other words, throughout our history we have substituted growth for politics. Once growth is removed as our all-purpose problem-solver, we will have to face squarely the problem of fair distribution. This is very likely to cause serious disagreements and perhaps even strife. It could get ugly.
As we (in the industrialized world) think about ways to make the transition from our present economy to a steady-state economy in which throughput is no longer growing, a necessary step is to become more efficient. Efficiency is politically acceptable to nearly everyone. Efficiency means cutting waste, learning to do more with less. Who could be against that? For a time, improved efficiency can give us the same benefits that we used to get from real growth.
So how do we cut waste for the least cost? Most economists favor a system called "tradeable pollution permits" also known as "emissions trading." As we will see, many (but not all) environmentalists oppose tradeable pollution permits. Most economists, including Herman Daly, favor them.[3] However, Daly favors them for reasons that are different from the reasons given by most economists.
Tradeable pollution permits are a simple idea. First you decide how much total waste (pollution) to allow in an area. Second you create "rights to pollute" which, taken together, add up to the desired total pollution, and you establish initial ownership of those rights. The third step is where the market comes in. Some people (or corporations) can reduce pollution more cheaply than others. Those for whom reduction is cheap will proceed, thus freeing up some number of unused "rights to pollute." Those rights can then be purchased by firms for whom genuine reduction would be expensive. This scheme promises to provide society with the desired level of total waste (pollution) at the least cost. So far so good.
Herman Daly likes this plan for one main reason: the process of issuing tradeable pollution requires society to confront each of the three economic problems separately: sensible allocation, fair distribution, tolerable size.
The problem of tolerable size must be confronted first: how much total pollution is tolerable? The market has nothing to say about this question. It is a political question. How many sick people is acceptable? How much crop damage caused by air pollution is OK? How many mercury-poisoned fish will we tolerate?
Once that question is settled, then we move to the matter of fair distribution. How should initial ownership of "rights to pollute" be distributed? What is fair? Here again, the market provides no help. This is strictly a political question that citizens must decide among themselves, based on ethics.
Should polluters automatically receive the right to pollute at their current level? This rewards polluters by freely giving them a public good (the capacity of the ecosystem to absorb wastes). Furthermore, it provides the biggest rewards to the biggest polluters. This hardly seems fair. (This is the system that Congress, with help from the Environmental Defense Fund [a mainstream environmental organization], wrote into the Clean Air Act, and this is the system that the U.S. government favors in negotiations over the Kyoto agreement on global warming.)
Another way to distribute pollution rights would be to declare them, collectively, a public good and auction them off to the highest bidder. This has the disadvantage of favoring the wealthy (many of whom made their fortunes by polluting). This doesn't seem completely fair either.
A third way to distribute pollution rights initially would be to give a small pollution right to each citizen in the affected area. Citizens could then dispose of their personal right any way they wanted --they could sell it to a polluter who could use it, or they could retire their right and thus provide a little cleanup.
After the political problems have been solved (establishing the total pollution desired, and making a fair distribution of initial pollution rights), then the market can handle the problem of allocating pollution in the most economically efficient manner (as firms and individuals buy and sell each other's rights according to their circumstances). At least that's the theory.
On paper it looks good and Herman Daly is right: tradeable pollution permits expose three separate economic questions to public scrutiny, in the process revealing that the market has a relatively minor role to play in the overall scheme. The political questions are much larger and more difficult than the question of buying and selling pollution rights, and the market has nothing to do with them.
In actual practice, however, tradeable pollution permits have proven to be a very unfair way to allocate pollution,[4] and there is evidence that they do not always reduce pollution. In some instances, they may actually increase it.[5]
Here are some obvious problems with pollution trading schemes in actual practice:
** Emissions trading moves pollution from one location to another. In practice, this often means dumping more pollution on the poor and on people of color.
** Setting the total desired amount of pollution assumes that risk assessors can determine how much pollution is "safe" for humans and for the ecosystem. Risk assessors have a notoriously poor track record of making such estimates.
** Pollution trading requires careful monitoring and accounting of who is emitting what. Governments, including the U.S. federal government, typically rely on self-reporting by the polluters themselves, who have a large monetary incentive to issue false reports.[4] Internationally, there are no government agencies capable of accurately monitoring thousands or millions of polluters. Monitoring by citizens would appear to be the only practical solution to this problem, but no examples of such a system exist on a large scale.
** Emissions trading will complicate a permit enforcement system that already does not work. Until government can show that it can monitor and enforce limits, emissions trading should not be implemented.
** An emissions trading system has no inherent, built-in incentives to reduce pollution. Unless the system requires an annual decrease in the total pollution allowed, emissions trading will simply lock in today's pollution levels. Polluters need a constant incentive to reduce their discharges toward zero, but emissions trading inherently offers no such incentives.
** In accord with the principle that the polluter should pay, polluters should be required to absorb the costs of the entire pollution control system. Present systems give away the store to the polluters.[6]
--Peter Montague
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