A Non-Socialist Alternative to Today's Capitalism

The eternal return of the limits to growth

In the latest issue of The New Scientist, Yale University's Gus Speth says he seeks a non-socialist alternative to today's capitalism as a way to put a stop to economic growth. Speth is a contributor to the magazine's special issue detailing "The Folly of Growth." Economic growth is folly because "our economy is killing the planet." Speth outlines his vision of his "non-socialist alternative" in The Bridge at the Edge of the World: Capitalism, the Environment, and Crossing from Crisis to Sustainability (2008). Among other things, Speth argues that the "environmental agenda should expand to embrace a profound challenge to consumerism and commercialism and the lifestyles they offer" and "the democratization of wealth." The "alternative to endlessly pumping up an environmentally destructive economy" includes measures that "address the need for good jobs, income security, and social and medical insurance." To save the earth, Speth also advocates political reforms including "a minimum of free television and radio time for all federal candidates meeting basic requirements, reducing the perks of incumbency, bringing back the Fairness Doctrine requiring equal air time for competing political views and so forth."

Another contributor is Tim Jackson, a professor of sustainable development at the University of Surrey and the economics commissioner on the United Kingdom's Sustainable Development Commission. Jackson declares that we cannot rely on renewable technologies to help us avert climate change without sacrifices to our lifestyles. To show why sacrifices will be necessary, Jackson candidly calculates how much carbon dioxide human beings will be allowed to emit in 2050 to stabilize atmospheric greenhouse gases at 450 parts per million. According to Jackson, producing $1,000 worth of goods and services today emits half a metric ton of carbon dioxide. Adding it all up, some 28 billion tons are currently emitted and that must be reduced to only 5 billion tons by 2050.

Assuming 9 billion people by 2050, that means that each person can emit only 0.6 tons of carbon dioxide annually, which is lower than the average emissions in India today. In fact, if one divides the 1360 pounds of carbon dioxide annually allotted in 2050 to each person by 365 days per year that means each person would be allowed to emit only 3.6 pounds of carbon dioxide every day. That is the equivalent of burning less than a quart of gasoline or one-and-a-quarter pounds of coal per day. Burning that much coal would keep a single 60 watt light bulb lit for nearly 20 hours. According to some calculations, producing half a cheeseburger would exceed an individual's daily carbon dioxide quota. But in fact, Jackson says, it's much worse than that.

Assuming no economic growth for the next four decades, Jackson's calculations imply that people will be permitted to emit only 0.1 tons of carbon dioxide for every $1,000 of GDP in 2050. What if global economic growth proceeds at current rates? Jackson calculates that that would mean producing $1,000 of GDP emitting only 0.03 tons of carbon dioxide. That is equal to 66 pounds of carbon dioxide which is slightly more than burning 3 gallons of gasoline or 23 pounds of coal. Jackson calculates relentlessly on. Assuming that humanity wants to pursue the goal of global poverty eradication, he eventually reckons that "the carbon content of the economic output must be reduced to just 2 percent of the best currently achieved anywhere in the European Union." His upshot? "It is time to stop pretending that mindlessly chasing economic growth is compatible with sustainability." (Note that Jackson's carbon calculations are very similar to those reported in Russell Seitz' article "Carbon-Based Prohibition" in reason's August/September 2008 issue.)

An addtional contributor to The New Scientist special issue, Susan George, who is chair of the board of Amsterdam's Transnational Institute, advocates "ecological Keynesianism" as the solution to excessive economic growth. She specifically cites the U.S. war economy of the 1940s as a model for how to proceed globally. How would George pay for ecological Keynesianism? That's easy—tell the world's 10 million richest people who hold $40 trillion in "investable cash" and their banks that "they must devote X percent of their loan portfolios to environment-friendly products and processes at below market interest rates." George recognizes that that these eco-friendly investments will underperform, but she suggests that banks "can make up the difference by lending to big greenhouse gas polluters at 10 percent." George is even more ambitious, declaring, "The environmental crisis provides an ideal opportunity to get the global financial system under control. Taxing international currency transactions and other market operations needs only political determination and some software." As compensation for the expropriated, George suggests creating an Order of Carbon Conquerors and giving "them shiny green-gold silk rosettes for their buttonholes."

George evidently thinks that the $40 trillion in "investable cash" is being hoarded under Bill Gates' and Warren Buffett's mattresses, rather than being used to finance other productive activities. And just who would decide which environment-friendly products and processes should get George's concessionary loans? And how can she be so sure that "big polluters" will borrow at 10 percent anyway? Maybe they will just generate internal cash flows and self-finance while merrily continuing those activities that George dislikes.

Another anti-growth guru in the special issue is former World Bank ecological economist Herman Daly, who claims that "we are heading for environmental and economic disaster." Why? Because "the scale of the global economy is approaching the limits of what our planet can cope with." Daly discerns certain signs of these impending limits. "As the oceans are emptied, forests shrink from logging and levels of pollutants and greenhouse gases in the atmosphere rise, the environmental and social costs of further growth are likely to intensify until we reach a point at which the price we pay for each unit of extra growth becomes greater than the benefits we gain," writes Daly. Daly is right that the oceans are emptying, some forests are shrinking, and some pollution increasing, but he gets his diagnosis wrong. Those things are happening not just because of capitalism's rapacious urge for economic growth, but because those resources are unowned in open access commons available for anyone to grab or abuse. Capitalism is "blind to [these] environmental costs" because they have been excluded from its ambit.

For example, Science just published an article in September pointing out that private property in fisheries actually halts their collapse and promotes sustainable harvests. And what about shrinking forests? It is true that tropical forests are shrinking in poor countries in which such forests "belong" to the government. However, a 2006 study published in the Proceedings of the National Academy of Sciences found that "among 50 nations with extensive forests reported in the Food and Agriculture Organization's comprehensive Global Forest Resources Assessment 2005, no nation where annual per capita gross domestic product exceeded $4,600 had a negative rate of growing stock change." Daly blames deforestation on logging, but the Consultative Group on International Agricultural Research points out that the "main threat to tropical forests" comes from slash-and-burn agriculture practiced by poor farmers who have no other option for feeding their families. The result is the loss or degradation of some 25 million acres of land per year. As Jesse Ausubel, the director of the program for the human environment at Rockefeller University says, "The last 15 to 20 years have seen a widespread reversal in forest trends." The chief exceptions are Indonesia and Brazil. And air pollution trends? They have been declining in developed countries for nearly three decades.

Capitalist economic growth is what has paid for both the technological progress and the compliance with regulations that have made environmental improvements possible. Daly is correct that greenhouse gases continue to accumulate, but can he be so sure that "each unit of extra growth becomes greater than the benefits we gain" from burning fossil fuels to produce energy?

So what might a "non-socialist alternative to today's capitalism" look like? Well, the New Scientist's editors describe how following Daly's economic prescriptions could set the developed countries on a path to a "sustainable society" by 2020. In the new society, "scientists set the rules." Growth is allowed, but "only as long as it doesn't breach the limits set by ecologists." In other words, ecological central planning. For example, during this transition, a new carbon tax makes "petrol-fueled travel prohibitively expensive."

In addition, in Daly's world, bank reserve ratios are raised substantially and commercial lending declines. Interest rates fall to very low levels. In Daly's 2020 ecological society, "we can't maintain full employment," but he tells us not to worry, because now "people work part time, generally as a co-owner of a business rather than as an employee. The whole pace of life is more relaxed. Incomes are lower but we are rich in something that many of us had never experienced before: time." Daly adds that we will have to stabilize our population, "and that includes immigration rates as well as birth rate." This will put pressure on the pensions system, but finally the economists have something to do; they are "busy working out what contributions will be needed to make it sustainable."

Daly, however, does accept that the value of goods can increase by means of technological innovation. But he fails to understand that this concession overthrows his assertion that humanity must settle for a steady-state economy. For example, Jesse Ausubel and Connecticut Agricultural Experiment Station researcher Paul Waggoner show that technological progress is helping humanity to wring ever more value out of less physical stuff. For example, they report that the average global consumer, including those in China, increased affluence by 45 percent while using only 13 percent more energy in 2006 than in 1980. Without China, the average consumer increased affluence by 34 percent with little change to energy use. In addition, the average global consumer only consumed 22 percent more crops while richer consumers actually used 20 percent less wood. Between 1980 and 2005, the world's farmers nearly doubled crop production while increasing cropland only 7 percent. If farmers around the world produced crops as efficiently as American farmers, global cropland could be cut in half.

Technological progress and changes in consumer behavior are both offsetting the ecological impacts of population growth and increasing affluence. "An annual 2-3 percent progress in consumption and technology over many decades and sectors seems a robust, understandable, and workable benchmark for sustainability," concludes Ausubel and colleagues. In other words, human creativity is producing more wealth through economic growth by progressively decoupling it from physical resources and the natural environment.

Canadian environmentalist David Suzuki complains in the special issue that economists "believe humans are so creative and productive that the sky's the limit." As Ausubel and others have shown, there is considerable evidence on the side of the disparaged economists. Finally, the New Scientist contributors demand that we keep our hands off nature, while they are disturbingly eager to impose policies that would be the moral equivalent of bulldozing the world's economy.

Ronald Bailey is reason's science correspondent. His book Liberation Biology: The Scientific and Moral Case for the Biotech Revolution is now available from Prometheus Books.