The Sustainable Economy
The Montreal Gazette, Saturday, December 15, 2007
As world leaders met this month in Bali to discuss climate change, global greenhouse gas emissions continued to increase daily. Canada is among the worse offenders. Primarily because of the oil sands, Canada's emissions have increased since 1990 by 33 per cent. When deforestation is entered into the equation, the figure is 54 per cent. Fearing social instability, few politicians want to take any steps that will slow their nation's economies. Most economists are looking for answers in continued economic growth. But a few are looking in the opposite direction. Among them are professors Peter Brown of McGill University and Peter Victor of York University in Toronto. They and other like-minded thinkers are trying to fashion a political and economic model for a new world order that would put the stewardship of our planet first. In conversations with The Gazette's William Marsden, they reveal some of the radical changes they think we will have to make to meet what our own politicians have described as the biggest environmental challenge mankind has ever had to face.
The Gazette: We live in a society driven by furious competition for seemingly endless economic growth. We measure it in GDP and GNP, job figures and other economic indicators. Where did this idea that unbridled growth is a good thing come from?
Professor Peter Victor: It really wasn't until the end of the Second World War that government adopted full employment as a policy objective and shortly thereafter in the early '50s and '60s, they said we'll adopt economic growth as a policy objective to promote full employment. The two go together. As soon as you start doing that you expand the capacity of the economy to produce, and so to keep it fully employed, you to have to keep expanding it. We have been on that growth spiral ever since.
Professor Peter Brown: There's an underlying human propensity to want stuff and what's happened in the 20th century is that got made into a virtue rather than a vice. ... Basically (economists) saw economic growth as an instrument for social stability.
The Gazette: This implies that the planet is capable of infinite economic growth.
Brown: It does for sure. And there are so many problems with that. One is that you cannot have infinite growth in a finite system. Every little kid knows that you can't fit a big thing into a small container, and that's the story of the second half of the 20th century. The economy got too big for the biosphere.
The Gazette: To what degree would you blame our current predicament with climate change on this growth spiral?
Victor: I'm not sure "blame" is the word. But it's very connected. Obviously. The process of industrialization has very much been tied to the increasing use of fossil fuels and also deforestation and land use changes many of which contribute to climate change because they reduce the capacity of the environment to capture the CO2. But digging in a sense deeper than that, the problem I see is that we think the solution to our problem still lies in economic growth. A lot of people think the solution to any problem lies in economic growth. Whether it's poverty or seeing the arts thrive. Whatever it is, people look to an expanding economy to make all these things possible.
The Gazette: We assess progress according to increases in GDP (gross domestic product, the annual total value of goods and services produced in a country, excluding transactions with other countries).
Brown: There are lots of problems with that. GDP is a measure of income but it's not a measure of wealth. So Canada, for instance, can have rising income, as we do, but declining wealth at the same time because of our exports of our natural resources. The GNP (gross national product, the annual total value of goods and services produced in a country) is really false accounting in the way it is used. It sounds like everything it produces is a benefit. But you are not netting out the costs. An easy example of this is: Montreal is a northern city and it's quite cool a lot of the time. But more and more people in Montreal are buying air conditioners. So we are protecting ourselves against a little bit of global warming but also Montreal is a big city with a lot of asphalt, a lot of cars - so we have a big urban-heat island effect. And at night, it's warm in Montreal where it used to be cool and people have bought air conditioners. Now according to GDP that's a benefit. But really we are protecting ourselves against the side effects of growth so that really should be a cost.
The Gazette: So as a result of this unfettered economic growth, we have global warming. We have totally failed to deal with it, particularly in Canada where our government's policy is to not do anything that will curb economic growth. Is it possible to combat global warming under our present national and international economic, social and political systems?
Brown: The basic problem with our economic system is that it starts in the wrong place. It starts with the concept of the individual and building out from his or her desires, which get stimulated all the time by the government, by advertising and so forth. What we should start with is the economics of planet Earth and the biosphere of planet Earth and then try to size economic activity to the bio-system on which it depends. So I think global warming is just a tip of an iceberg of a system that fundamentally doesn't work. ... What we want in an economic system is a relative range of stability. ... I think we should basically take those ideas and extend them to ecological and planetary stability. Nothing in nature is ever stable. It's always changing. But we need to keep the changes within manageable ranges for ourselves and for other organisms. So I would say the purpose of the economy is not growth ... I would say it is the stewardship of the Earth's natural systems for the purpose of the prosperity of human beings and all the other species that live here.
The Gazette: That sounds all very nice but will it create jobs, feed families?
Victor: I have looked into this specifically with respect to Canada. I think we can show that you can have an economy that doesn't rely on economic growth. ... I think you have to make a transition to a system where growth is not a paramount object. I think you can have full employment and you can reduce the impact on the environment and the government can maintain a fiscal balance.
In many ways, the harder question is how do you make the transition from one to the other? ... In my work, I have looked at a no-growth scenario that is a complete disaster. The very worse that people fear: mass unemployment, increased poverty. You can do good things in very bad ways and really regret it. Alternatively though, other scenarios show you can move to a sort of no-growth over a period of say 25 to 30 years and you can do it through relatively modest change year after year, and it means lower investment, you don't keep adding to capacity in the same way. It means a reduced amount of time spent working. It means balanced trade rather than always trying to sell more to others than we import. I think it means a more careful, and this is a tricky one, I think it means a more careful assessment of new technologies before we introduce them into society. I think it means more deliberate programs for dealing with poverty instead of relying primarily on increased growth just to take care of that.
So there are a lot of things that we need to do, but obviously there are interests in society that see the future very differently and see their own interests being impaired by these kind of changes and will resist that. So whether the transition can be done smoothly or not, I am not too optimistic.
The Gazette: So would you say it is certain - given the accelerated pace of climate change and our reluctance to deal with it by taking any real action - that Canadians are in for some extreme and desperate times in the future to the point where we won't have a choice, we will have to change?
Victor: I think some people think we can chose continued economic growth of the kind that we have had for the last 50 to 100 years indefinitely. Well, I don't think that choice is there. But, being a rich society does give us a range of choices as to whether we keep striving for what we have become accustomed to and just react to changes, or whether we try to look ahead and say if we give ourselves a bit of time, we will have more opportunities. For example, it's pretty clear to a lot of people that a switch to mass transit is more energy efficient, uses less materials than the kind of road system we have now. But to make a change in that direction that is significant takes 15 to 20 years at a minimum. We could do that, but if we find ourselves with the worst end of the climate change scenario upon us with irreversible, non-marginal change to the climate, well then you don't have 15 to 20 years.
Do I think change is inevitable? Yes. Do I think they are going to be significant? Very much so. Do I think we are smart enough to make these changes simply because we've got good foresight? That's my biggest doubt.
The Gazette: We are essentially talking about a stewardship economic system where we look at ourselves as custodians of the Earth rather than consumers of its riches. So how would we go about implementing such a stewardship system and who would design it?
Brown: Most educated economists are not capable of designing the kind of systems we need. So we would have to start from a different kind of person.
Victor: It would be the result of many more heads than just mine. We have enormous intellectual energy going into promoting our current economic system to make it work better. I mean, the very best and brightest people who work in this general area are trying to work out how to make the economy function, as they would say, more efficiently and grow more. So you have to recognize that there's this incredible weight of intellectual energy going into the opposite question to the one you have asked me. The question you have asked me is only being addressed by a very small number of people, so we suffer as a result of that in terms of the richness and creativity of our ideas.
Brown: We're not going to get to where we need to get to, or it's very unlikely we'll get to where we need to get to, with the nation state system. All nations claim to want to see climate stability but almost all nations are not willing to pay anything to really seriously accomplish it. So it's the free-rider problem. ... We need to evolve some institutions that are capable of looking beyond the interests of the nation state to the interests of the whole world, to the interests of the whole planet and all things on Earth. And that would require a weakening of the power of the nation state. Think along the lines of the European Union where the present nation states would become like provinces or American states. So there would be a global federation and that federation would have certain, hopefully rather minimal, powers to deal with these global problems. I think we are in a place now where another layer of institutions has to come into play to solve some of these problems.
The Gazette: Describe the political structure of this international body.
Brown: I haven't really thought through how it would be elected. But there would be a sort of international public sector and it would have taxing and public spending powers. One of the functions of this government would be very radical redistribution of wealth. In the present economic paradigm, the principal way of solving poverty is through economic growth. But for reasons we have already talked about that's not really practical at this moment. We are already outside the limits of growth. So if we are serious about tackling poverty, then we have to do it through redistribution and you need a reliable mechanism of redistribution to do that. So you could, for instance, have a universal income tax or you could have a tax on carbon, things like that. It would create revenue for this entity, which would then distribute it by some simple formula to everyone on Earth.
The Gazette: So under your model, how would you come to a decision on whether or not you would develop, say, the oil sands?
Brown: Every country gets so many tonnes (of carbon emissions) and you have to live within that. Canada only gets so many units.
The Gazette: Sort of like a salary cap in hockey?
Brown: Yeah, sort of like that. Now you can live within that. And so I don't foresee there will be any need for a world body to come into the province of Alberta and say, "You can't do this or you can do that." It would say to the government of Canada, "Look, here's the cap, you figure out how to live within it." And then the government of Canada would go to the provinces and say, "If you are going to do this, then you can't do this other thing." It's realistic ... this is a finite planet.
The Gazette: Good luck trying to tell a province it can't develop a resource.
Brown: (You would have) to strengthen the world court so that the behaviour of the states underneath the federation would be subject to judicial review and the findings of the court would be compulsory. These findings would be enforceable by law and, if necessary, with economic sanctions and in the very last resort, by military sanctions. ... It's important to see that we're on a treadmill. We want more growth because we want more jobs. And then when we get more jobs, we want more people to fill them. ... But there has to be a reckoning.
The Gazette: So it would change some basic concepts of crime and punishment?
Brown: Part of what I am proposing rests on a different ethic. I'm proposing what I call the commonwealth of life. I am saying that the real commonwealth is living things and not just humans. And so an injury to the environment is not an injury to something distant and out there. It's an injury to the very commonwealth itself. I would not make as sharp as distinction between harm to ecosystems and harm to persons as is made in law now. So I believe people who bulldoze wetlands, for example, should be subject to very severe criminal sanctions. It's not just an incidental act.
The Gazette: How would this affect fundamental human rights?
Brown: Strong property rights would not exist or they would be connected to strong fiduciary duties. So if you are the owner of a property, you have certain rights as an owner but you have very strong obligations to care for the property and to pass it along in such a condition that lets the life on it flourish. ... Basically our culture doesn't get the message that if we support the land, it will support us.
The Gazette: Professor Victor, is such a global government possible?
Victor: Not soon. You just have to see what's going on in Bali to see how far we are from that kind of arrangement. We haven't seen a lot of willingness of countries in the world to give up sovereignty when it comes to environment. They will give it up when it comes to trade. But they don't seem to be willing to give it up for the environment.
The Gazette: Do people want to change? I sometimes think people would be relieved to get off this treadmill?
Victor: There are a lot of studies showing that all this increased growth over the last century in the rich countries did not make people happier. That's what the evidence is showing right now. I think we ought to try to know more than we do about what does contribute to quality of life, how to measure it, and then try to design our economy and government policies towards those goals. So far, we have always come back to the same idea that growth is the answer.
The big question for me, and I don't have the answer, is whether what I am trying to describe here in terms of quality of life is already very well understood by people - and the obstacles to getting there are institutional. It's not that people don't know what is important. They just don't know how to get it.
Peter Victor is an economist and professor in environmental studies at York University in Toronto. He was one of the founders of the emerging science of "ecological economics" and has written numerous papers on the subject.
Peter Brown is a professor at the school of environment, departments of geography and natural resource sciences at McGill University. He is author of, among other books, Restoring the Public Trust and The Commonwealth of Life: A Treatise on Stewardship Economics.
wmarsden@thegazette.canwest.com
İİ The Gazette (Montreal) 2007