The Climate Emergency

At about 14 minutes into the recent Federal Leaders’ debate there was a back and forth between Elizabeth May, leader of the Green Party of Canada, and Maxime Bernier, leader and founder of the People’s Party of Canada, in which Bernier — who advocates for free-market policies, liberalized trade and private property rights — called May’s policies “socialist.”

“With her policies wealth will never be created,” said Bernier, and he likened what he saw as May’s brand of socialism to that of countries like Venezuela.

In response, an incredulous May retorted: “The climate crisis is the single biggest economic opportunity in a generation or more.”

Calling it a defining moment in the debate would be an overstatement. But when it comes to climate change and economic growth, it was extremely telling.

There are some deep policy divides between all of the five main parties. For instance, Bernier is clearly a big drinker of ‘free market Kool-Aid,’ and May does genuinely care about environmental and social justice. But a closer inspection will reveal that there is one area where no one seems willing to be an outlier. There was not one party on the spectrum from left to right that was willing to openly tackle the inexorable problem we face: that our ever-growing economy is eating away at our life support systems.

Enter Milton Friedman.

Friedman is the Nobel Prize-winning guru of free market policies who taught economic theory for three decades at the Chicago School of Economics and is probably best known for prescribing his brand of capitalism to the brutal Chilean dictator, Augusto Pinochet, after he seized power in a U.S-backed coup in 1973.

In his 1982 book Capitalism and Freedom, Friedman said that a crisis is what produces real change. “When the crisis occurs, the actions that are taken depend on the ideas that are lying around.” He said that the “function” of the economist is “to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.”

Of course, Friedman was referring to free market policies, which were lying around when the economy tanked in the 1970s. What followed in a number of countries (including Canada) was a swift shift to neoliberalism, also known as hyper-capitalism, corporatism, or market fundamentalism. Whatever you call it, it involves a hands-off approach to economics: the unrestrained accumulation of capital, the concentration of private power and wealth and a hollowing of the protective and interventionist role of government.

In Part 2 of this series, I began exploring whether growing a “green” economy would be much better than the one we have growing now, and how new approaches to dealing with climate change, like sufficiency — the idea of having enough — need to be able to emerge. I also introduced you to Peter Victor, an ecological economist and Professor Emeritus at York University and the author of the 2019 edition of Managing Without Growth: Slower by Design, Not Disaster. 

Victor says that in the kind of political climate that emerged with neoliberalism, it’s become increasingly difficult to imagine alternative economic futures.

And that’s putting it nicely. As I’ve written elsewhere, through the use of persuasion and coercion — hollow promises that it would eventually bring material advancement, more pay, and more opportunity — politicians touted neoliberalism as a “bitter pill” and people obediently swallowed.

It was also eventually embraced by parties of all stripes (to varying degrees of enthusiasm), as evidenced by the recent federal election in Canada. Today there appears to be very little, if any, debate about neoliberal assumptions.  ^[1]Credit for the analysis of common patterns across a variety of countries should go to Jonathan Swarts and his 2013 book Constructing Neoliberalism: Economic Transformation in Anglo-American … Continue reading

But from the perspective of ecological economics, which recognizes that “the economy is embedded in the biosphere,” the notion that there is no alternative to economic growth is “unacceptable,” says Victor. But this connection is even often absent in the way economics is taught to university students, says Victor, because the supply of resources needed to actually keep the economic cycle going is often missing from the economic cycle. ^[2]Victor’s quotes up to this point are taken from his 2013 talk and this 2015 paper.

In a telephone interview, Victor tells me that people often ask, “how can we live without [economic] growth?” but, he says, “the more important question is how can we live with an unstable climate and how can we stabilize it once we’ve destabilized it?” He continues:

People concentrate too much on what they see as social and economic barriers to change forgetting that the changes that will be imposed upon us if we don’t get our act together will be much more serious.

Accelerating towards what?

While we are still officially in the Holocene geologic epoch, which began roughly 11,700 years ago, unofficially we are in the Anthropocene — a time period in which human behaviour and activity has altered the planet in profound and unprecedented ways, from warming the planet to eroding the ozone layer to acidifying the oceans.

This new Anthropocene designation has been debated for many years, but an article in the journal Nature reports that a panel of scientists recently voted in favour of making it official and have submitted a formal proposal for the new epoch to the International Commission on Stratigraphy, the body that oversees the geologic time chart.

The panel proposes that 1950 will mark the start of the new time period, coinciding with what’s called the ‘Great Acceleration,’ “when rapidly rising human population accelerated the pace of industrial production, the use of agricultural chemicals and other human activities.”

Around mid-20th century was also when the first atomic-bomb blasts “littered the globe with radioactive debris” which became embedded in sediment and glacial ice — and therefore part of the geologic record. So the panel also proposes calling the official start of the Anthropocene the “Atomic Age.”

Not surprisingly, the ‘Great Acceleration’ also coincides with a period of unprecedented economic growth, a result of a number of factors, including rising population and access to relatively cheap fossil fuels. While this rate of economic growth has never been seen before in human history, our adherence to it, as a policy objective, is a very recent phenomenon.

Victor says it all started after WWII, and is rooted in the Great Depression of the 1930s. That was when government expenditure was seen as a solution for the extremely high levels of unemployment at the time. Victor explains that in the 1940s a number of governments, including Canada’s, passed legislation committing to full employment, and in order to achieve this government had to stimulate the economy by spending money, which expanded the capacity of the economy to produce.

“If the expanded economy was going to provide full employment, then expenditures had to increase even more. This is economic growth,” he says.

Victor says in the 1950s governments decided to promote growth first and full employment second. “We now produce in order to employ.”

“Every time I hear a politician — and I hear it all the time — boasting or celebrating some new activity, like a pipeline, ‘Oh, the pipeline is great because we need jobs.’ Nobody is saying we need that oil. What does that tell you? It tells you that the main purpose of that investment, or the main benefit, as it’s seen, is to solve a distributional problem because you need a job to have an income because if you don’t have an income you don’t have access to a share of the output of what the economy produces unless you get some kind of income supplement of some kind.”

“This continual pressure to expand production is coming at increasingly serious environmental cost,” Victor tells me.

He says there are ways to ensure that people have the incomes they need to buy what they need other than having to continually expand the productive base of the economy.

But here is the key point: “The pursuit of growth has a priority that impedes our ability to think how could we re-configure the economy so that it would serve human wellbeing,” he says.

Forget growth; there are better options

Interested in examining the possibility of an economy that was either growing slowly or not growing at all, back in 2006 Victor set out to build a model of the Canadian economy, called it LOWGROW, and reported the results in the journal Ecological Economics. He wanted to explore various growth scenarios by altering the assumptions used in the model, including what would happen if there was no growth at all.

When Victor eliminated increases in all the things that contribute to economic growth — including consumption, investment, government, trade, population, and productivity — but without including any policy interventions, the model yielded some very “unpalatable” results and entered a “disastrous downward spiral.” Unemployment and poverty went way up, as did the government deficit. But GDP stabilized and GHG emissions came down.

“That was just an exploration and was intended at the time to give people a bit more confidence in the model itself, so I couldn’t be accused of building a model that just gives you the results that you want. I honestly didn’t know what it was going to do when I turned off all the pulses for growth,” Victor tells me.

In fact, other than testing the first model, he doesn’t think the “disaster” scenario is really that relevant to the main argument, which is that “we can manage quite nicely without growth.”

But the “disaster” scenario was clearly a valuable exercise because it showed that ‘zero growth’ or ‘no-growth’ should not be pursued as the policy objective alone — similar to the way that growth is pursued now.

“’No growth’ is not a panacea,” the report stated, and “specific policy interventions are required to achieve the desired objectives.” ^[3]From Victor’s 2007 paper Managing Without Growth.

More than a decade later, Victor debuted the results from his latest model in the 2019 second edition of his book Managing Without Growth. In it he explores whether it’s possible to have full employment, no poverty, fiscal balance, and reduced GHG emissions without relying on economic growth. You can access an interactive version of this model here.

Essentially, Victor runs three scenarios — the “base case scenario” (or status quo scenario), the “GHG reduction scenario,” and the “sustainable prosperity scenario” — 50 years into the future to see what happens to various conventional economic, social, and environmental indicators.

The base case or status quo scenario — a continuation of current trends and relationships with no new initiatives except the inclusion of the government’s commitment to a rising carbon price reaching $50/ tonne GHG in 2022 — yields results that are not that surprising: GDP nearly triples, there are higher levels of consumption and household debt, more poverty, and a doubling of GHG emissions.

Victor likens the results of our adherence to the status quo with the “disaster scenario” from his earlier work. “In some respects the base case is a disaster scenario with its ever increasing environmental impacts and precipitous decline in the sustainable prosperity index.”

In the second scenario — one that resembles what the “green growth” advocates are advancing — additional efforts to reduce GHG emissions are added to the status quo/ base case scenario, including a significantly increased carbon price, and the electrification of road and rail transport. ^[4]In the GHG Reduction Scenario (and in the Sustainable Prosperity Scenario), the price on GHG emissions from electricity generation increases over 10 years from $50/ tonne (which is included in the … Continue reading The rate of economic growth slows somewhat yet the model yields some very positive results: GHG emissions eventually decline by 80%, and there’s significant progress toward shifting to renewable electricity. But Victor says there are disturbing trends in social and environmental indicators: There’s no progress in reducing income inequality or poverty, and the environmental burden index rises. ^[5]Part 2 of the series explored the “Energy Emissions Trap,” which essentially presents the dilemma that “an insufficiently rapid transition to renewables will imply a scenario in which it is … Continue reading

“That’s quite a powerful message,” says Victor. While it’s true that a transition to renewables is a necessary part of the strategy to reduce GHG emissions fast enough, it isn’t enough. It still fails to deliver on social indicators and is far from being environmentally benign.

Victor’s third scenario, called the “sustainable prosperity” scenario, includes the GHG reduction initiatives from scenario two but includes other policy initiatives such as an increase in transfer payments in the form of a guaranteed income to reduce income inequality and to reduce poverty, a lower rate of population and labour force growth, and a reduced average work week. Another important element is green investment, to “alleviate other environmental threats and adapt to climate change,” Victor explains. Some of this investment may be profitable but some is not: such as investment in shoreline protection from rising sea levels, and preservation of habitat to reduce threats to non-human species. With less conventional investment than otherwise, labour productivity increases more slowly. When this is combined with reduced average work hours, economic growth slows over many years, and eventually stops in the 2050s.

Because of the other policy measures introduced, social and environmental indicators show great improvement: GHG emissions plummet even further than they do in scenario two (by 85% compared to 80%), the percentage increase in renewable energy exceeds scenario two, the environmental burden index plummets, income inequality plummets, there’s less consumption, which results in lower household debt, and work hours eventually decrease with productivity gains taken as more leisure time.

There’s a lot of good news packed into those results but the potential feedback effects of reducing income inequality alone are worth exploring here. Lars Osberg has been an economics professor at Dalhousie University for more than four decades and has done a vast amount of research on the subject of growing inequality in Canadian society and the economic value of social cohesion. He’s also the author of the 2019 book The Age of Increasing Inequality: The Astonishing Rise of Canada’s 1%. 

In an interview, Osberg says that, among other things, increasing inequality “creates a rat race of competitive consumption — everybody is trying to keep up with people who have a little bit more than they have and the top is pulling away so much faster than the middle class that it’s becoming harder and harder for the middle class to keep up in this race.”

Osberg says that ultimately this “generates more and more human unhappiness because it’s not just that people compare themselves to other people, there’s a whole ad industry out there that’s selling conspicuous consumption as a lifestyle.” He adds, “with the declining rate of labour productivity and aging population, growth is going to slow anyhow. So it’s just crazy to think about growth as a solution to inequality.”

When growth is moved to the sidelines

Victor says there are lots of things that can still grow in Canada with a zero-growth economy: wellbeing, literacy, life expectancy, fairness, conviviality, security, community-mindedness, environmental quality.

Even the resource-efficient sectors of the economy can grow, in principle, he says. But material and energy throughput, human population, and even the stock of physical capital or infrastructure must all stabilize or go down. ^[6]From “Exploring alternative Economic Futures: A Zero-Growth Economy.” 

Victor also points to the now growing body of literature about the relationship between economic growth and happiness: beyond a certain level of income, people do not get any happier. This ties back into Anders Hayden’s work on the sufficiency movement explored earlier in this series, and the idea that we can “live well” within limits or “have enough for a good life,” while also “not consuming so much that it is ecologically excessive,” or “creating harm in terms of undermining the possibilities of other people today and in the future to be able to meet their needs.”

But can capitalism stop growing? I ask Victor.

Victor explored this question in the second edition of his book:

I end up concluding that it remains an open question and that I think the kinds of changes we’ve been discussing, if they were to happen over the next half century, people might very well look back and say this is no longer capitalism, at least in the way it was practiced in the early part of the 21^st century. So I’m not one of those who says we’ve got to first get rid of capitalism before we can actually solve our problems. I think that’s a formula for not getting a lot done. But I do think the kind of changes that need to be made might very well transform the system away from something which we now call capitalism. 

Victor says the story that progress and economic growth are synonymous is a relatively new story and that we “need to tell different stories…for what else might be possible.”

I just hope that if a crisis occurs this time, it will be ideas like Victor’s that will be lying around.

Cover photo: Northern Pulp clearcut at Square Lake, NS. Photo by Linda Pannozzo, who comments: “Only in a delusional system could this make economic sense.”