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October 11, 2019
You have stolen my dreams and my childhood with your empty words… People are suffering. People are dying. Entire ecosystems are collapsing. We are in the beginning of a mass extinction, and all you can talk about is money and fairy tales of eternal economic growth. How dare you! — Greta Thunberg, speaking at the United Nations Climate Action Summit on September 23, 2019
Sixteen-year-old Swedish climate activist Greta Thunberg did not mince her words when she denounced the “fairy tale” of eternal economic growth in her speech to the United Nations. What is she referring to, and is her outrage warranted?
Once upon a time, when our current industrial economic system began, the scale and efficiency of human activity was small compared to the seemingly limitless bounty of nature. Many economists asserted, therefore—and many still do—that the natural world is a virtually limitless stock, available for exploitation by commerce. As one source is depleted, another one will be found and exploited. If none is to be found, technology will step in to keep the economic engines rolling in perpetuity.
Countless decisions resulting from this “open” world mindset have improved the lives of many, while causing vast, negative, mostly unintended, consequences. Today, the scale, inequity and inefficiency of our economic system has surpassed nature’s limits. In 2018, Earth Overshoot Day—the date when nature’s budget for the entire year is exhausted, according to the nonprofit Global Footprint Network—fell on August 1. For the rest of the year, we survived by depleting resource stocks and accumulating CO2 in the atmosphere. In 2019, Earth Overshoot Day fell on July 29, the earliest ever. It appears that a change in mindset is urgently needed, a return to the sources of economic thought, as it were.
A Historical Perspective
Early economists were a dismal bunch, who believed that growth could not go on forever. As Arizona State University Associate Professor Christopher F. Jones writes, in the eighteenth century, “The founding fathers of economics… shared a belief that growth was finite, and that the reason for limits lay in the natural world… they based this conclusion on three observations. First, there was a limited supply of land. Second, all economic processes required at least some products of the land as raw materials. And third, the productivity of the land was subject to the law of diminishing marginal returns: each additional bit of labor and capital added to a plot of land will offer less and less benefit until no more gains are possible.”
Modern growth theory pushed back against this perspective in the 1950s, when a new model of growth, based on contributions of capital, labor, and technical progress, “assumed that land did not matter. To the extent that land or natural resources merited mention (and they rarely did), they could be seen as a sub-category of capital, interchangeable with money or machines” (Christopher F. Jones).
In this paradigm, the economy is seen as an abstract entity, separate from the natural world, with the environment as a subset of no value except as a source of resources and as a “sink” for waste. Social inputs beyond labor costs are not considered at all. When economy and environment do interact, like when pollution is produced, it is considered a “market failure,” a negative externality (i.e., the cost of a good or service does not reflect its full negative impacts on others). In 2006, a British Government report said that climate change is the greatest and widest-ranging market failure ever seen.
Economics was freed from nature’s limitations, regardless of past history. As one source of resources was depleted (e.g., Old World forests), another one could be found and exploited (e.g., New World forests). Eventually, technology would step in to keep the economic engine rolling (e.g., composite materials like carbon fiber). As Jean-Louis Martin and his colleagues explain, “Increasing mass production after World War II led to an economy of mass consumption, with economic growth at its core and the gross domestic product (GDP) as its performance measure. Its strongest supporters dismiss any limits to growth.”
This model worked well enough, as long as the negative externalities, like air and water pollution, drifted away into the greater world. Unfortunately, as William McDonough has noted, “Away” has gone away and we have been left to salvage what we can.
A New, Nature-Based Model
Could this story have a happier ending? In the 1970s, Nicholas Georgescu-Roegen, introduced a new, ecological economic paradigm that can help us return to the more credible, nature-based model that modern economics was founded upon. This approach places the economy within the environment, rather than independent of it. And, rather than shortchanging the role of society, as in the traditional economic model, the new paradigm defines the economy as a construct of society that moves goods and services through it while determining what has value and is economically viable.
The new model recognizes that the economy can only be sustained if there are healthy societies, living in healthy ecosystems that furnish renewable resources and assimilate wastes.
Our world is a closed system, with a finite quantity of energy and matter and fixed imports of energy (primarily sunlight), and minimal imports of matter. What we consume is taken from this closed system and, in one form or another, eventually returns to that system. Flows of matter from the environment and back into it are what support all life and ecosystems on our planet.
In order to sustain life within our closed system, we need to restore and maintain the natural systems and resources that make life possible. These include clean air, clean water, and clean soil. When we deplete and toxify these resources, we reduce the planet’s capacity to sustain our ecosystem and society. It is still possible to have an environmentally sustainable world. To succeed, we have to talk about an ecological economics paradigm that builds on the original foundations of economics, and accepts the finite nature of our world.
Author: Jonathan Herz
Top-Rated Climate Nonprofit – 4-Star Charity