Center for the Advancement of the Steady State Economy
Regular Contributors:  Herman Daly, Brian Czech, Brent Blackwelder, James Magnus-Johnston, and Eric Zencey. Guest authors by invitation.

Where Does Inflation Hide?

Filed under: Banking,Herman Daly,Inflation,Monetary Policy — Brian Czech @ 9:09 am

By Herman Daly, CASSE Economist Emeritus – February 20, 2018

The talking heads on the media explain the recent fall in the stock market as follows:

A fall in unemployment leads to a tight labor market and the prospect of wage increases; wage increase leads to threat of inflation; which leads the Fed to likely raise interest rates; which would lead to less borrowing, and to less investment in stocks, and consequently to an expected fall in stock prices. Therefore investors (speculators) rush to sell before the expected fall in stock prices happens, bringing about the very fall expected. So the implicit conclusion is that rising wages of the bottom 90% are bad for “the economy”, while an increase in the unearned incomes (lightly taxed capital gains) of the top 10% is good for “the economy”. The financial news readers of the corporate media avoid making that grotesque conclusion explicit, but it is implicit in their explanation.

A wage increase, in addition to cutting into profits, is considered inflationary, and that leads the Fed to raise interest rates and choke off the new money feeding the stock market boom and related growth euphoria. But higher interest rates serve other functions, most notably to keep capital from being wasted on uneconomic projects that are financially lucrative only at zero or negative interest rates. Furthermore, positive interest rates reward savers, provide for retirement and emergencies, and even reduce the inflationary effect of consumer spending.

As long as officially measured inflation is low the Fed can keep on pushing money into the economy to finance the asset boom. But why, with so much added money has there apparently been so little measured inflation? In truth there has been a lot of inflation, but it has simply not been measured by the Consumer Price Index (CPI). Why is that? Because the new money is borrowed into existence by investors who use it mainly to buy existing assets (stocks, bonds, real estate, art, crypto-currencies, etc.) . The price of assets goes up; we have asset price inflation, but asset prices are not part of the CPI and go uncounted. Inflation occurs in asset prices rather that in consumer goods prices, leading to boom and bust cycles.

Also some inflationary pressure spills into the goods markets, but does not register directly as a price increase and thus goes uncounted. Examples are numerous. At the supermarket the price stays the same while the box of raisins gets smaller, the block of cheese shrinks, the cup of yogurt is less full, the self-checkout line becomes the only option, etc. Air fares may not go up, but seat space declines, “miles” become ever more difficult to redeem, and quality of service becomes aggressively bad. Everywhere customer service declines as recorded “answers” replace real people (“your call is important to us—please stay on the line”). Our premier newspaper, the NYT, may not raise its price but it repeats the identical articles over and over after day and in various sections of the same edition. The price to watch network TV is to endure the commercials, which keep getting longer and louder. In sum, quantitative easing has resulted in unmeasured inflation, mainly in the asset market, but also in the consumer goods market.

Economists at the Fed are not stupid – they know this. Why then do they not correctly measure inflation and stop quantitative easing and the resulting zero (or even negative) interest rates? Because increase of asset prices benefits the asset owners, the rich, while the smaller rise in the undercounted CPI hurts mainly the poor. Also, under our fractional reserve banking system new money (interest-bearing private debt) must be loaned into existence, and banks lend to those with collateral, those at the top. In a sovereign money system the new money (non interest-bearing public debt) could be spent by the Treasury into the economy at the bottom to finance public goods and real production and employment (for an explanation of sovereign money, see Positive Money. Giving private banks the right to create money, as does our fractional reserve system (that no one ever voted for), is a giant subsidy to the private banking sector. Incidentally, the Fed is owned by these member banks who profit from excessive money creation, even though it is supposed to act independently in the public interest.

Farewell to FWS – Goodbye to Gag Orders

Filed under: Corruption,Economic Growth,Governance — Brian Czech @ 8:03 pm

Brian Czech, Arlington, Virginia

Open letter to FWS, sent directly to FWS employees on February 7, 2018.

Friends, colleagues, and past FWS co-workers,

I once considered the U.S. Fish and Wildlife Service to be the world leader in conservation, and was proud to sign on! But that was a long time ago: 1999 to be precise. Today, something is awry at FWS headquarters, and that’s what drove me to retire on October 31. Within the leadership ranks of the National Wildlife Refuge System, especially, ethical lapses have led to corrupt tendencies. The mission has suffered and careers have been impacted; none more than mine, which was perennially crippled by gag orders.

The prohibited topic? The trade-off between economic growth and wildlife conservation, also known as the “800-pound gorilla.” The trade-off was the focus of my Ph.D. research in the 1990’s, when I documented the causes of species endangerment as a who’s who of the American economy. I presented these causes in Science, elaborated in Bioscience, and detailed the sociopolitical context in a book on the Endangered Species Act.

The gag orders were ironic, because my background on the 800-pound gorilla was one of the reasons FWS hired me to begin with. As the first “conservation biologist” for the National Wildlife Refuge System, I was told to “think big,” “long term,” and “outside the box.” Beginning in 2001, though, I was strung along by Refuge System chiefs who said “It has to be talked about, but now is not the time.” I waited patiently for the right time to come, occasionally re-testing the waters and invariably getting re-gagged.

While the gag orders started in 2001, the harshest one was issued in 2011 while a previous director awaited his Senate confirmation hearings. I was prohibited from saying “anything having to do with economics.” Another ham-handed order was issued in 2016 as the presidential primaries heated up. All the orders – along with reprimands, suspensions, and various other forms of coercion – were designed to buffer appointees, chiefs, and deputies who were petrified by the politics of economic growth. Such abject fear belied the talents of one appointee who boasted, “I can drink politics with a firehose.”

Not all FWS or DOI programs are inclined to evade the topic. Rather, a clique of Refuge System chiefs has squashed every reasonable effort to raise public awareness of the trade-off between growth and conservation. Now we are paying for this lack of awareness across the landscape.

Lest anyone think the gag orders reflected a technical disagreement, I quote a long-time Refuge System chief: “Everybody knows there’s a conflict between economic growth and wildlife conservation. It’s just not our role to talk about it.” Thankfully such shirking doesn’t infect every agency. Imagine the Surgeon General acquiescing, “Everybody knows smoking causes cancer. It’s just not our role to talk about it.”

Furthermore, the chief was off-base with “everybody knows,” unless he considered “everybody” to be FWS, where we’ve all witnessed the growing economy usurping, eroding, or polluting habitats. He failed to acknowledge the widespread misinformation outside FWS. Politicians, seeking to appease, mislead the public with, “There is no conflict between growing the economy and protecting the environment.”

The gag orders weren’t politically affiliated, either. The win-win rhetoric of “no conflict” was common to Democratic and Republican administrations alike. It was patently false in a bipartisan way, “everybody knew it” (at least in FWS), and sound science had refuted it. Yet to this day the win-win rhetoric constantly re-appears in public forums from the local town hall to the halls of Congress. It attracts wishful followers of all kinds, enough of them to keep economic growth atop the pedestal of domestic policy.

If the gag orders stemmed from neither technical disagreement nor political fealty, then why were they issued? In my opinion the answer is an indictment of an agency gone astray.

Corruption isn’t always as cut and dried as, for example, nepotism or embezzlement. For 18 years I watched chiefs come and go at headquarters, and in recent years especially, the layers of chiefs have treated the Refuge System as their oyster, incessantly travelling to spectacular refuges, rendezvousing regularly at the National Conservation Training Center, and even jaunting overseas to “assist” foreign nations. Their travelogues would be the envy of National Geographic explorers (with lulls only at times of intense political scrutiny). These chiefs are unwilling to jeopardize their tax-paid perks on a heavy topic at the heart of conservation. Maybe it’s not corruption per se, but it’s certainly unethical, unsustainable, and irresponsible.

Our privileged chiefs need a reminder of what it means to be a leader. Theodore Roosevelt said, “Nothing in the world is worth having or worth doing unless it means effort, pain, and difficulty.” He didn’t mean the “effort” of airline travel, the “pain” of per diem paperwork, or the “difficulty” in skirting a challenge. In FWS, leadership at the national level means identifying the biggest challenges to wildlife conservation, then mustering the fortitude to address precisely those challenges.

In retrospect, after studying the relevant case law (Pickering v. Board of Education, Garcetti v. Ceballos, etc.) and speaking with First Amendment experts (including Ceballos), I am convinced my gag orders would have failed the test of constitutional jurisprudence. I only wish I’d had enough time left in my FWS career to challenge the gag orders in court, for I surely would have. Alas, I ran out of time as my next job beckoned.

But you might have the time! Pursuant to your First Amendment rights as private citizens who happen to work for the government, don’t allow anyone at FWS or DOI prohibit you from raising awareness of the trade-off between economic growth and wildlife conservation. As a private citizen, you do have the right to speak on issues of public concern, even in the workplace.

At the very least, you can talk about the 800-pound gorilla on lunch and coffee breaks: that’s First Amendment 101. But your rights are far greater. Most of you can broach the topic as part of your duties, as context for your program, or in many other creative venues such as DOI’s electronic “ideas box.” The idea is to get the topic flowing enough to reach an audience of critical mass. An example of a productive pathway would be: Your program → division chief → AD → Director → Secretary of the Interior → Cabinet/President. Yet the possibilities for participants in this dialog are endless: other FWS programs, other government agencies, non-profit organizations, professional scientific societies, Congressional committees and caucuses, to cite the most obvious examples.

Who’s to say these conversations won’t reach the Federal Reserve as it debates monetary policy, or the Council of Economic Advisors as it advises the president on fiscal policy? Even beleaguered by all the gag orders, I managed to meet with one of the Council of Economic Advisors, talk with heads of state at Rio+20, and address the UN General Assembly in New York (albeit on my own time). Imagine what a well-primed political appointee could do! But it’s up to you to do the priming.

The fact is, you never know when one of our fellow discussants might be in a position to affect the rate of GDP growth and change the national dialog. It wasn’t long ago when a U.S. Treasury Secretary (Henry Paulson) was a big-time birder serving on the board of The Nature Conservancy, having grown up on a farm in Illinois. I believe he could have been a game changer in the growth debate, but he needed more information from the experts (you!) on the trade-off between economic growth and biodiversity conservation. His business education didn’t suffice. Without our insights and input, he was hamstrung by the win-win rhetoric, conceptually and politically.

So let us challenge any gag orders on the topic. If you happen to get one, be sure to call me. I’ll do my best to help you. Better yet, call PEER (Public Employees for Environmental Responsibility). They’re the best in the business at protecting federal employees from unlawful or inappropriate censorship.

And don’t let anyone tell you it’s just talk, that we can’t actually do anything about it. That’s the logic of simpletons and cynics. Let’s face it, in government we don’t do anything without talking about it. And to some degree, that’s the way it should be. You don’t just adopt a new policy, budget, or interest rate hike without a thorough dialog about the consequences, good and bad. Yet, in direct contradiction to the goal of wildlife conservation, we have allowed economic growth to be treated as an unquestioned goal, to be pursued forever with no questions asked.

In the halls of FWS, I believe the topic of economic growth will once again spur rational, insightful, and courageous conversations. These conversations should occur at national wildlife refuges, ecological services offices, fish hatcheries, and especially in regional offices and headquarters. As the limiting factor for wildlife in the aggregate, economic growth should be the unifying issue for wildlife conservationists at all levels and in all locales.

Economic growth is also a highly relevant issue at every societal level from local to national. Local discussions happen “where the rubber meets the road.” Community officials make local growth decisions. At the other end of the spectrum, national-level discussions are needed for influencing the fiscal policies of Congress and the monetary levers of the Federal Reserve. Headquarters staff getting paid the big bucks ought to be doing their part to spur these discussions.

Obviously you can’t go straight to the top. Hallway discussions are a modest start. That’s fine, because these discussions gradually permeate conference rooms, telephone lines, and the internet as well as reports, programs, and strategies.

As you talk about economic growth, you’ll discover it’s not the Holy Grail after all. Breaking it down to increasing population and per capita consumption – as measured by GDP – demystifies it and helps us recognize the inevitable impacts on wildlife. Thinking of the economy as integrated sectors – agriculture, extraction, manufacturing, and services – explains the geography of endangered species.

As the implications of this discussion come into focus, policy makers and consumers can take it from there. Once the discussion is widespread and thorough, policy makers will be less prone to pulling out all the stops for growth, while citizens will temper their consumption. The bulldozer will slow and younger generations will be encouraged to keep fighting for conservation.

Don’t think it’s impossible, either. Look no further than Europe, where a “de-growth” movement is afoot, making a difference already in many local scenarios. If they can handle the 800-pound gorilla, so can we.

I wish you the best. Maybe we’ll talk, but more importantly, hopefully you’ll talk, in particular about the fundamental conflict between economic growth and biodiversity conservation. The mission of the U.S. Fish and Wildlife Service depends upon it.

Sincerely,

Brian Czech, President

Center for the Advancement of the Steady State Economy

www.steadystate.org

[email protected]

@SteadyStateEcon

#GDPupNATUREdown

 

Democrats, Donald Trump, and the Dark Underbelly of Economic Growth

Filed under: Economic Growth,Environment,Politics — Brian Czech @ 12:57 pm

Brian Czech, Arlington, VA, 1/30/18  (photo credits: theduran.com)

Democrats are stunned by Donald Trump’s lack of culpability for racist rhetoric, Twitter tantrums, and international insults. They shouldn’t be. They’re the party of “It’s the Economy Stupid.” They should know that if a president inspires a bull market, creates a few jobs, and grows the GDP, he can “stand in the middle of 5th Avenue and shoot somebody” without losing voters.

Elected Dems can’t hold Trump accountable because they can’t break their own addiction to growth. They’re defenseless against a growth-mongering president. They want the credit for economic momentum from the Obama era, yet they just know that stock market boom is all about Trump.

Hearkening back to Obama’s economic performance makes the Democratic Party look like a Super Bowl loser taking credit for the half-time show. They’re in the process of being long-forgotten. Trump owns the Department of Commerce, the fiscal policy pen, and the printing presses for reports on growth. Not to mention the Twitter Feed from Hell.

There is a solution for Democrats, if they dare take it. It’s a simple solution but a real paradigm shifter: It’s a new outlook on growth. Ironically, Trump’s going to help them more than anyone in their own party. By the end of his term, economic growth will never look the same. Consider three ugly lessons:

1) Trump proves it doesn’t take a stable genius to grow the economy. Any old dummy can do it by trashing the planet. All you have to do is dismantle the Environmental Protection Agency, dispose of public lands, and generally run roughshod over the hard-won environmental institutions of earlier administrations and congresses. Don’t worry about offshore oil spills, the Arctic, or endangered species. Just drill baby drill, and grow the economy!

2) Trump doesn’t want his Americana – especially his American economy – saddled with poor and huddled masses from the “shithole countries.” He’d rather have the entrepreneurs, industrialists, and inheritors who bring instant big money to his hotels, golf resorts, and casinos. His personal financial obsession melds into a brutal economic philosophy: Keep the little money out, bring the big money in. That’s the quickest way to excite Wall Street, grow the GDP, and take credit for both!

3) Trump doesn’t view the international community as a precious outcome of creation, evolution, or civilization. To him it’s a collection of potential customers or, at best, business partners to skunk. Trump pulled us out of the Paris Climate Accords. He’s threatened multilateral obligations from NAFTA to NATO. He’s an insult to the United Nations. Rather than pursing goodwill among nations, Trump pursues the terms of trade most likely to bolster American GDP, regardless of what it does to the hopes and dreams of less advantaged nations who once revered the USA for its generosity and its democratic approach to capitalism. The United States is losing respect like never before; a doubly dangerous trend in an age of international instability.

Trump gets away with it all by hiding behind the goal of GDP growth. His minions at the White House collude. How many times have we heard them tell us that Trump does more for blacks than Obama ever did, because he’s growing the economy faster and providing jobs for all? And how is he providing these jobs? By “taking historic steps to lift the restrictions on American energy, to reverse government intrusion and to cancel job killing regulations,” as Trump’s EPA Administrator puts it. Meanwhile he justifies his international bullying with, “When the United States grows, so does the world.”

Right now, due to the bipartisan obsession with economic growth, Democrats look like losers at the GDP racetrack, racist sentiments are fair game again, and the rapacious pursuit of growth is liquidating the environment. Democrats, racial minorities, and environmentalists can pine independently, “Woe is me.” Or, they can unify and announce to the president and Republicans, “It’s not just GDP, stupid.”

As a bonus, they might get the Green Party vote, and we all know how that can change history.

Nature Needs Half – And Twice the Steady Statesmanship

Filed under: Biodiversity,Brian Czech,Environment,Politics,Steady State Economy — Brian Czech @ 3:21 pm

Brian Czech, [email protected], 1/8/2018

 

WE NEED NATURE.

NATURE NEEDS HALF.

ERGO, WE NEED NATURE TO GET HALF.

 

Half of what? The planet. That’s the essence of E.O. Wilson’s latest – and greatest – project.

Why does nature need half the planet? To maintain a highly functional system of plants, animals, and their habitats. And we need such a functional ecosystem to support our own species. Nature is our habitat. No nature means no economy, no national security, and no international stability.

When E.O. Wilson says nature needs half the planet, we better listen, because Wilson is still the planet’s top conservation biologist. A wise elder at a spry 88, he cut his academic teeth on species-area relationships in the 1960’s. To this day, no one makes a more compelling argument for the need to conserve biodiversity, as well as how much we need to conserve. Nature Needs Half follows from Wilson’s recent book, Half-Earth: Our Planet’s Fight for Life.

 

E.O. Wilson in his Harvard laboratory, August 6, 2009. (Photo credit: Neil Patterson)

 

As a conservation biologist at U.S. Fish and Wildlife Service headquarters for 17 years, no academic figure was more relevant to me than Wilson. Whether it was working on the Land Acquisition Priority System, estimating the capacity of the National Wildlife Refuge System to conserve species, or identifying biodiversity hotspots in need of protection, Wilson’s theses put the sound in “sound science.”

Wilson certainly inspired my efforts to help establish a national wildlife refuge in the Mobile-Tensaw Delta. Wilson, who grew up roaming the delta, was the best thing we had going for us. He had garnered crucial support from local and state officials. Unfortunately, FWS wasn’t transparent with its planning elsewhere in Alabama, and the state suddenly opposed any new refuges. The Mobile-Tensaw project was the baby thrown out with the bathwater.

Meanwhile, though, Wilson gave a boost to the steady-state movement. It was August 6, 2009, and we were in Wilson’s Harvard lab with his long-time associate, Neil Patterson. Wilson was carefully studying the CASSE position on economic growth, which describes (among other things) a fundamental conflict between economic growth and biodiversity conservation. His questions were nuanced and we discussed several clauses in detail. When he finally signed the position, it corroborated the conclusions of other world-class conservationists such as Jane Goodall, David Suzuki, Sylvia Earle, and Jean-Michel Cousteau. It was an act of “steady statesmanship” that was crucial to the acceptance of steady state economics in the conservation community.

If, on the other hand, Wilson had taken the stance that “there is no conflict between growing the economy and protecting the environment,” it would have crippled our efforts to advance the steady state economy among the Society for Conservation Biology, The Wildlife Society, Ecological Society of America, and other scientific societies, along with the conservation organizations that follow their academic lead. This was a real possibility; Wilson himself had entertained the win-win rhetoric a decade prior to signing the CASSE position. To his credit, he had the integrity – scientific and personal integrity – to formally acknowledge the conflict after studying the issue sufficiently.

It’s no surprise, then, that Nature Needs Half is an implicit prescription for a steady state economy. Rather than elucidating the details in prose, I defer to the CASSE logo, which was designed precisely to communicate that nature needs half. Take a look at the graph of GDP overlaying the planet. See where it stops? Exactly where the human economy uses one half of Earth’s resources (or “natural capital”), leaving the other half for nature and its non-human species.

 

The CASSE logo, designed to convey that nature needs half.

 

The CASSE logo is in marked contrast to President Trump’s approach to the environment. Instead of “nature needs half,” Trump says, “We can leave a little bit.” But this is no mere attack on Trump. The fact is that no president has charted a course of steady statesmanship. Only Franklin Roosevelt and Jimmy Carter came close, and only in long-forgotten moments.

Obama had steady-state potential but it remained latent throughout his presidency. He knew something was awry with perpetual growth theory, but by 2011 “Obamanomics” had veered onto the slippery slope of win-win rhetoric.

The short history of Obama’s stifled steady statesmanship was probably less a failure of Obama and more a failure of the conservation community. Outside of CASSE, few organizations explicitly advocated a steady state economy or even highlighted the conflict between growth and environmental protection. They failed to provide the political cover Obama needed to raise public awareness of the trade-off.

Obama’s appointees and professionals in the civil service were even less helpful. Instead of helping him develop a cogent message on economic sustainability, they actively suppressed any talk of limits to growth. I should know, having fought gag orders throughout my time at FWS headquarters.

Frankly it came as no surprise that the political appointees and high-level bureaucrats were the opposite of helpful to Obama. Many of them were retreads or recycled from earlier Clinton administrations and networks. The Clintons spent decades proclaiming that “there is no conflict between growing the economy and protecting the environment,” cynically bastardizing language from the 1987 Brundtland Commission Report for the sake political convenience.

The fact is, if Hillary had become president, steady statesmanship would have taken a disastrous step back. Political appointees and ladder-climbing bureaucrats would have curried favor left and right with the win-win rhetoric, and conservation organizations would have sold their souls for political and fiscal favor. Even the scientific, professional societies wouldn’t have been entirely above the fray.

With Hillary in the White House, economic growth would have remained the top domestic policy goal. Instead of getting half, nature would be steadily eroding. Few would notice, though. The Green Koolaid Choir would be strumming Kumbaya, and visions of win-win would be dancing in peoples’ heads.

In stark contrast we have Trump pulling out all the stops for economic growth. The conflict between growth and conservation is bloody clear. Trump doesn’t even try to hide it. “We can leave a little bit, but you can’t destroy businesses.”

I don’t know about you, but I’m guessing the irony is lost upon Trump. For what it’s worth, we may as well spell it out: Leaving a “little bit” is the surest bet for destroying the greatest number of businesses for the longest period of time. The fact is…

 

THE ECONOMY NEEDS NATURE.

NATURE NEEDS HALF.

ERGO, THE ECONOMY NEEDS TWICE THE STEADY STATESMANSHIP.

 

 

Trump’s National Security Strategy: Making America Greedy Again

Filed under: Uncategorized — Brian Czech @ 3:16 pm

By Brian Czech

 

President Trump: Strident, Greedy, and Bad for National Security.  (Credits: https://www.flickr.com/photos/marcn/23760800900 and PhotosForClass.com)

 

Warning: President Trump’s national security strategy is going to backfire like a shotgun plugged with mud. In one fell swoop, Trump called for:

1) Locking out foreigners;

2) Growing GDP as the key to national security, and;

3) Better terms of trade.

Now many voters, going down the list, will promptly put a checkmark by one or two of the items, and some (especially Trump’s base) will check all three. But let’s think about the combination. Here we are, the wealthiest country ever, clamoring for more, more, more – with an insatiable appetite for global resources – while letting fewer and fewer people into the country to enjoy the bounty. All while releasing more pollutants into the global environment and demanding more favorable trade.

How would you describe such a policy? What adjectives would you use? If you’re living in most parts of the world, “frustrating” might come to mind. For Americans who care about our standing in the world, it might be “embarrassing.” And these are mild adjectives; “threatening” and “dangerous,” respectively, might be more telling.

No matter where you are or where your patriotism lies, it cannot be denied that Trump’s national security strategy is utterly greedy. We haven’t seen the likes since President George H.W. Bush announced “the American way of life is not up for negotiation” before the 1992 Earth Summit. But Trump’s strategy is far more sweeping, imbuing greed into a comprehensive framework of domestic and foreign policy.

Nothing could be more threatening to national security than having the rest of the world view you like a greedy pig at the global trough. That’s why Trump’s strategy may go down as the biggest foreign policy blunder in history. Is there a silver lining? Perhaps, if it causes enough reflection upon the components of Trump’s strategy.

The fact is, each of the components – tightened borders, growing GDP, better terms of trade – have their time and place. But how should these components be viewed by the richest nation during the early 21st century, with poverty suffocating many nations and environmental crises brewing globally? I think the answer is fairly simple.

To start with, we know that GDP growth cannot continue ad infinitum. We also know that, long before GDP stops growing, the increasingly desperate efforts to stimulate growth become more harmful than the growth is worth. This isn’t the 19th century with an open frontier to develop. At this point in history, oil spills, resource conflicts, and the extinction of species tend to outweigh marginal increases in GDP.

Although the limits to GDP growth cannot be thoroughly understood without a global perspective, it’s also clear that every nation has its own limits. Even for the nation that intends to invade others, eventually there’s no more “lebensraum.” In the 21st century, there’s basically no more “living room” to be peacefully taken. Grabbing more of it is tantamount to war.

It seems, then, that the more prudent approach to national security is adopting a steady state economy. This entails stabilizing the levels of production, consumption, and expenditure. Basically, it entails stabilizing rather than growing the GDP. And no it’s not stagnation: plenty of technological, financial, diplomatic, and national security dynamics occur in a steady state economy.

Of course, if the population is still growing in a steady state economy, then per person GDP declines. In other words, wages decrease and unemployment increases. In such an environment, the public sector – including defense – is every bit as endangered as the private sector. There’s nothing secure about that, either. Therefore, population stabilization is crucial for national security.

So we get to the issue of borders, which have to be tightened for the sake of stabilizing population. It’s hard to make friends and influence people while tightening borders, but there’s a big difference between respectful non-friends and angry, motivated enemies. The nation that announces the goal of a steady state economy has instant ethical credibility for tightening borders.

The steady-state nation essentially says to the world, “We’re not striving for more and more. We’re just trying to maintain what we have. We will solve our internal problems of poverty by reducing inequality. We’re trying to lessen our demand on global resources as well as our production of global pollutants. We care about the rest of the world, and when our situation is sufficiently stable, we can try to help other nations, especially those who also strive for stabilization as opposed to perpetual growth.”

The steady-state nation will garner respect in the international community, even if that respect comes somewhat grudgingly. It certainly will be far more secure than greedy nations that push their way into the cupboards of others. Greedy nations get their hands slapped at the UN and, if they persist in grabbing, start losing fingers outside the UN.

Finally, the steady-state nation provides crucial leadership in 21st century diplomacy. If a strong, wealthy nation such as the United States leads the way, others will follow suit. It is not difficult to conceive of a rock-solid alliance of steady-state nations that protect one another from the grabby advances of growth-mongering nations.

Meanwhile, nations with widespread poverty will finally have some breathing room. The outside demand for their natural resources will slacken palpably. Their attentions can be focused on their own economic development, and fewer of their citizens will become radicalized and retaliatory.

At that point in history, those nations that persist in their pursuit of rampant growth – especially those already having substantial wealth and power – will become the most isolated, castigated, and insecure nations on the planet. Let’s hope and pray the United States isn’t one of them.

Unfortunately, it will be if Trump succeeds in making America greedy again.

Thankful to be Back in the Steady-State Saddle

By Brian Czech

One thing about American holidays – there’s no mincing of words. Thanksgiving Day is as self-explanatory as it gets. And from where I write, it happens to be easy, giving thanks this time around. For starters, it’s a crisp fall day in Virginia!

But I’ve a bonus to be thankful for. Twenty days and three hours ago, I turned in my retirement papers at U.S. Fish and Wildlife Service headquarters and immediately went to work as CASSE’s executive director. In a way, I feel back in the saddle. Let me explain…

A long, long time ago I rode horseback from Benson, Arizona to Kuna, Idaho. With no company apart from Red and Jake (my late horses), my mind wandered to whatever I observed. And that’s how I started thinking about the problem of economic growth.

I could see the economy – especially its infrastructure and extractive sectors – seeping into the basins and deserts of the Southwest. I could hear it too, up in the air, down in the towns, and off on the distant highways. I’d wanted wilderness, not the economy; that’s why I rode out of Benson to begin with. You might say (with music optional) I fought the economy, but the economy won.

Well, I’m back in the saddle again, thinking about the problem of economic growth and seeking to address it from new angles. This is a far cry from Fish and Wildlife Service headquarters, where I was prohibited from even talking about economic growth. It’s good to be back on a meaningful, big-picture journey.

I am also thankful to you, readers of the Daly News, for your patience as the blog went dormant for the past two years. In case you’re not aware, CASSE is a tiny non-profit organization. (It may not seem that way to casual visitors, due to our large volunteer presence.) When I filed CASSE’s incorporation papers in 2004, becoming the first CASSE volunteer, I ran it on nights and weekends. Eventually we developed a modest budget, and over the years we’ve had four full-time paid employees – never more than two at once – and I make the fifth.

CASSE has been through the ups and downs of most tiny non-profits as they struggle for traction. But some things never change. My reason for establishing CASSE 13 years ago is the exact same reason I took an early retirement 3 weeks ago. The U.S. Fish and Wildlife Service issued a gag order a few years into my FWS career, prohibiting me from talking about the trade-off between economic growth and wildlife conservation. So I established CASSE in order to “speak truth to power.”

Serving also as a visiting professor in Virginia Tech’s National Capitol Region, I had three distinctive hats to wear, depending on topic and venue. Always, though, the topic that kept me awake at night and motivated my activities by day was the conflict between economic growth and environmental protection, economic sustainability, national security, and international stability. But my daylight hours were dogged by the FWS gag orders.

Over the years at FWS, the gag orders never really expired. Instead, I accumulated a collection! The pressure to ignore the “800-pound gorilla” was intense in recent years. I’ll have a lot more to say about this in the book I nearly completed while still working for FWS. But for now, I am just thankful; thankful to be working for CASSE, thankful for Daly News readers, and thankful for a crisp fall Virginia day.

Unfortunately it won’t be easy for any of us to be thankful in the coming years of the 21st century, unless we succeed with steady statesmanship. Problems will abound as nations pull out all the stops for economic growth, far exceeding their ecological capacities. So let’s do our best to steer them otherwise with common sense and steady state economics.

Meanwhile, let’s be thankful for that opportunity.

Happy Thanksgiving!

No Mere Resolution: The Vermont Legislature and the Steady State Economy

By Brian Czech

Brian CzechHere’s a day to remember: May 6, 2016. That’s the day when, late in the afternoon, the Legislature of the State of Vermont passed H.C.R. 412, “House Concurrent Resolution Honoring the Center for the Advancement of the Steady State Economy for Its Important Work.” In a nation where acts of steady statesmanship – political support for a steady state economy – have only just begun, the Vermont Legislature has offered a perfect and prescient precedent.

Some may scoff at the idea that any resolution could be momentous. It’s true that, typically, a resolution isn’t as distinguished as a statute, an executive order, or a Supreme Court decision. H.C.R. 412 was one of 47 resolutions passed on that adjourning day of the 2015/2016 Vermont Legislature. True, too, that the legislature didn’t resolve to reform any economic policy with H.C.R. 412.

Now that we’ve looked the donut squarely in the hole, let’s consider what the Vermont Legislature did accomplish:

1) The steady state economy – the only sustainable alternative to unsustainable growth or recession – was brought out of its academic niche into mainstream political dialog. We’re not talking about the ramblings of a quirky county commissioner or misfiring mayor. A state legislature represents the second-highest lawmaking level in the land. In Vermont, a famously beautiful and progressive land that has also offered us a viable presidential candidate, there was virtually unanimous support in the legislature for recognizing limits to economic growth, the problems caused by growth, and the solutions inherent to a steady state economy.

2) Vermonters have proven the phrase “steady state economy” is not the bogeyman it was thought to be by the architects and activists of the “new economy” movement. If a state legislature can stomach, reprint, and even honor the phrase, it’s time to stop the hand-wringing in futile attempts to come up with a warmer and fuzzier phrase that would connote an economy of stabilized size. “Steady state economy” is perfectly clear with no connotations necessary. Let’s just tell it like it is, and thank you Vermont.

3) H.C.R. 412 is loaded with implications for future adjustments to tax codes, budgets, program goals and incentives of all kinds. Meanwhile, it provides leadership that is immediately relevant to consumers. Consumers are citizens who constitute the demand side of the economy. Any citizen mulling the construction of a new home, the purchase of a new vehicle, or the development of a new wardrobe has a decision to make. To illustrate by extreme: Hummer or hybrid? Conscientious, widespread tempering of demand toward sustainable levels starts with leadership, such as provided in H.C.R. 412.

Suddenly, doesn’t the donut look bigger than the hole?

H.C.R. 412 was introduced by Representative Curt McCormack of Burlington. The Burlington connection makes a lot of sense, given the long-running leadership in steady state economics coming out of the University of Vermont and its Gund Institute for Ecological Economics. In fact, McCormack is on the UVM Board of Trustees.

It’s refreshing that, in the political days of short-term memory and “small hands” rhetoric, some politicians are doing their homework on the big picture and the long term. The perpetual push for increasing GDP is a growing threat to the environment, the economy, national security, and international stability, but the threat is clear only for those who stop to think about it. Led by McCormack, May 6 was the day a state legislature stopped to think about it. It’s a day worth remembering.

Guess What Trudeau Said About Growth?

By James Magnus-Johnston

James Magnus-JohnstonIn an appeal to Mr. Trudeau’s philosophical musings, I’ve written a letter to him listing five ways Canada can foster a better, more sustainable economy.

 

 

“There are a lot of people out there, environmental thinkers like Herman Daly and others, who talk about the fact that maybe endless growth within a finite system is not either possible or even desirable. Maybe we have to talk about shifting our focus so that instead of just growing, we’re actually developing and improving.” Maclean’s, “In conversation: Justin Trudeau” 2012

Justin Trudeau.Canadian Pacific

Canadian Prime Minister, Justin Trudeau. Photo Credit: Canadian Pacific.

Dear Prime Minister Trudeau,

Congratulations on winning a majority government. While most of the world appears to be fixated on your admirable hair and bone structure, I’m caught reflecting on these words you uttered a few years ago. I’m not surprised that I haven’t heard you repeat them recently, since very few world leaders adopt the rhetoric of the post-growth paradigm. But it’s clear that you have some fundamental knowledge of alternatives to growth.

If your handlers wouldn’t dare let you say such things on the campaign trail, it’s perhaps unlikely to think that you’ll adopt a steady state agenda during your term in office. On the other hand, what you said wasn’t printed in some obscure blog, taken out of context, or overheard in conversation. It was in a national platform, Maclean’s magazine, one of Canada’s largest newsmagazines. Your remarks appear to reveal some sincerity about your view of the world we’re currently inhabiting—a world with definable environmental limits to growth, like climate change.

Of course, the norms of the majority and rhetoric of the status quo can overwhelm the greatest idealists, especially in a centrist big-tent party like Canada’s liberal party. So I’m going to appeal to your not-so-long-lost philosophy by reminding you that many young folks are facing a bleak future. And I don’t just mean low-wage jobs. I mean a fear of catastrophic environmental breakdown, as evidenced by rapid methane releases in the Arctic and ocean acidification—both characteristics of climate change—as well as mass extinction. These are real, tangible manifestations of the limits to growth.

It’s going to be very hard to turn our atmosphere around, but we could adopt policies immediately to shift our focus “so that instead of just growing, we’re actually developing and improving.” Here are five practical ways to move us towards a better, more sustainable economy. After all, you’re the one that keeps reminding us that “in Canada, better is always possible.”

  1. Start counting some of the costs associated with GDP growth (formally or informally). Tar sands growth, for instance, has myriad costs associated with its expansion, including insured losses due to extreme weather, droughts, and floods, among other things. At the community level, some indigenous communities have no trouble getting funding for incarceration and diabetes treatments but can’t get funding for healthy food and community development. You could help turn this around.
  2. Finish what your father started experimenting with in Dauphin in 1978 and implement a basic income for all Canadians. Senator Hugh Segal has made a great case for why this is a practical idea.
  3. Consider a formal, nationwide price on carbon. You mentioned that you’d leave it to the provinces, but the only reason different provinces have different carbon pricing systems is because it’s taken so long for the federal government to get started on this in the first place. Much like the emergence of a national healthcare system, you could learn from the provincial early adopters and go nationwide.
  4. We have a central bank. Let’s start using it again for low-cost or even no-interest borrowing. If you have an ambitious infrastructure agenda, and want to do it without creating long-term debt, borrow from your own bank rather than the private banks. The debt-based private banking system has rather stupidly inflated the prices of commodities and housing for folks under the age of 40. That’s called “uneconomic growth,” and it’s fostering a generation of exploited Canadians.
  5. Help free up the working day, week, and year by encouraging greater work flexibility, like some European models. Full time employment for everyone is impossible to provide with low growth rates (like the present). Young people are the ones getting the shaft, and we’re well beyond the need for everyone to spend their lives toiling in low-wage jobs.

So, Mr. Trudeau, if you truly believe (as you said) that “maybe we have to talk about shifting our focus so that instead of just growing, we’re actually developing and improving,” I’ve just provided five examples of how your government can start doing that right away.

We recognize that the devil is in the details, and we’re here to help sort through them with you.

For a thriving, sustainable future,

James Magnus-Johnston

Canadian Director, Center for the Advancement of the Steady State Economy (CASSE)

 

Time to Stop Worshipping Economic Growth

By Brent Blackwelder

Brent Blackwelder

There are physical limits to growth on a finite planet. In 1972, the Club of Rome issued their groundbreaking report—Limits to Growth (twelve million copies in thirty-seven languages). The authors predicted that by about 2030, our planet would feel a serious squeeze on natural resources, and they were right on target.

In 2009, the Stockholm Resilience Center introduced the concept of planetary boundaries to help the public envision the nature of the challenges posed by limits to growth and physical/biological boundaries. They defined nine boundaries critical to human existence that, if crossed, could generate abrupt or irreversible environmental changes.

The global economy must be viewed from a macro-perspective to realize that infringement of the planetary boundaries puts many life support ecosystems in jeopardy. Without functional ecosystems, the very survival of life forms, as well as human institutions, is put in doubt, including any economy. There is no economy on a dead planet!

PB_FIG33_upgraded_mediaBLANK_11jan2015

Scientists are concerned that we have already overstepped the boundaries on biogeochemical flows (nitrogen) and biosphere integrity (genetic biodiversity). [click image for larger view] Image Credit: F. Pharand-Deschênes /Globaïa. 

These boundaries apply to the economy because the economy is a wholly-owned subsidiary of the ecosystems that make life on earth possible. (Some understanding of ecology should be a prerequisite for an advanced degree in economics!) Scientists are concerned that we have already overstepped the boundaries on biogeochemical flows (nitrogen) and biosphere integrity (genetic biodiversity).

Today’s global economy and the various regional and national economies regularly neglect planetary boundaries. Crossing a boundary is tantamount to crashing through a guardrail and plunging over a cliff. The blind encouragement of economic growth that does not respect these boundaries is setting up human civilizations for collapse. Two of the most harmful types of growth are ruthless and futureless.

Ruthless growth benefits a few at the top but does nothing for the middle class. One of the reasons that Bernie Sanders’ presidential campaign has attracted larger and larger audiences is that he says the most crucial issue facing the United States is the gross discrepancy between the middle class and the billionaire class.

Futureless growth destroys resources, such as water, forests, fisheries, and farmland that will be needed by our children and grandchildren, and by wildlife. Futureless growth directly conflicts with common family values. We tell our children to save for the future rather than squander their money. We don’t tell them to outspend their peers. We don’t tell them to judge the quality of their lives based on material possessions and quarterly financial reports.

To remain within the nine planetary boundaries, nations must shed the fetish of economic growth and transition to a true-cost, steady state economy. Some of the critical transition steps include:

  1. Replacing the GDP as a measure of well-being (lots of work has been done on coming up with an index of sustainable productivity).
  2. Getting the Securities and Exchange Commission (SEC) to require corporations to disclose their pollution externalities (the SEC is not hopeless, as can be seen by its recent decision to require CEOs to publish their salaries along with those of the average workers at their companies).
  3. Going to a four-day work week to secure fuller employment (this has happened in some European countries; Canadian economist Peter Victor has papers on why this is a crucial transition step).
  4. Dematerializing the economy (i.e., so that it’s cheaper to repair an appliance than it is to buy a new one).
  5. Identifying the areas in which the economy should grow—and those where it should shrink or degrow (i.e., the usage of fossil fuels must shrink sharply, and in so doing, roof-top solar will grow to become a much larger part of the global economy).
  6. Identifying the most heinous types of economic growth (ruthless and futureless) and showing how their costs exceed their benefits.
  7. Stabilizing population to keep humanity from further transgression of the nine boundaries.

There are about seven billion people on earth today, and forecasts indicate there will be nine billion by 2050. Already, almost one billion malnourished people are feeling the squeeze, as they painfully bear testimony to the truth of what Malthus predicted two centuries ago. Key first steps to stabilizing population in a progressive way are:

  1. Empowerment of women.
  2. Requiring all foreign assistance to be designed so that women will be better off as a result.
  3. Making contraceptives widely available.

Our global economy is treating the planet as if it were a business in a liquidation sale. Even environmental organizations—devoted to environmental protection— have been slow to acknowledge the major causes of environmental degradation, such as perverse economic incentives encouraging raw resource extraction and non-renewable energy use. We need environmental leaders to speak out for a new, just, and true-cost economy; and to challenge the mindless embracing of economic growth—even ruthless and futureless growth. Environmental leaders should be driving the push toward refocusing economic thinking on the changes that we will have to make if we are going to move to a healthier economy that exists within the nine planetary boundaries. Only if humanity stays within these nine boundaries can it continue to develop and thrive for generations to come.

 

 

Appropriate Scarcity

By Robert A. Herendeen

  … appealing to people to restrain themselves [by] self-enforced abstinence alone is a waste of time. By and large, we consume as much as our incomes allow…. changes… cannot take place without constraints that apply to everyone rather than everyone else. Manmade global warming cannot be restrained unless we persuade the government to force us to change the way we live.

—George Monbiot, Heat (2006/2009)

The results indicate that the likelihood of paying a positive amount for supporting renewable energy is higher under a mandatory scheme compared to a voluntary payment option in the UK.

—Elcin Akcura, “Mandatory vs. voluntary payment for green electricity,” Ecological Economics (2015)

 

herendeen.3I believe Monbiot says it true. And Akcura (who knew?) provides research-based confirmation.

I envision fulfilling, challenging, joyful lives within environmental constraints, but I can’t imagine that happening without societal signals to reinforce consistent behavior. If level of consumption is a problem, then scarcity is a necessary part of the solution. In the least disruptive and potentially fairest sense, this means using prices to determine demand. To cut to the conclusion: my favorite example is a carbon tax.

Monbiot’s statement is frightening, Draconian, and an apparent non-starter politically… almost. But the consequence of denying it leads to several futile proposals and viewpoints which permeate the literature, both scholarly and public. They are futile because they do not produce results that are big enough and fast enough to beat back anthropogenic climate change. Hearing them repeatedly frustrates me. These are:

1. We citizens are being sold the idea that economic growth (especially GDP) is good by government bureaucracies that need it to stay alive, and by corporations that want it because they are greedy (e.g., “the 1%”).

2. We are personally acquisitive because of intensive advertising. Otherwise, we would readily embrace “enough is plenty.”

3. A steady state economy will only be achieved when a new human consciousness emerges. That is not exactly imminent, but it’s in sight.

4. Peer pressure will solve the classic (game theoretic?) problems of free riders, defection, and over-riding competitive ambition in general.

The Temple to Ramesses II at Abu Simbel (II)

The Temple to Ramesses II at Abu Simbel (II). Photo Credit: Institute for the Study of the Ancient World.

The human beings that I observe, work and live with, and love, largely don’t fit these principles. This includes me. We need help. So, about these points:

1. Most of us don’t know or care what GDP is. However, we do have explicit or implicit desires for material/experiential growth at the personal or familial level. Such as: a larger house, a vacation cottage, a new car, a foreign eco-tour, increased travel to visit the grandkids, a secure college fund or retirement package, some new clothes—probably before the old ones wear out. Sum these aspirations over the population and you have pressure for overall growth.

Recently I asked who in my circle at the edge of academia in a progressive college town wants zero personal or professional economic growth. Not soon-to-graduate students looking for the first job. Not immigrants who arrive with almost nothing. Not newlyweds considering starting a family. Not academics building research programs or pursuing tenure. Not college presidents. Not development officers of green non-profit organizations. Not the mayor or city council. And of course not the usual suspects in the business community. I finally concluded that some well-off retirees seem to want zero growth….that’s about it.

2. Watch a TV auto ad and it’s difficult not to suspect—and resent—advertising’s role in fanning the flames of demand. (Mmmmm, a lone car on an otherwise unoccupied road accelerating against the shriek of the engine and the announcer’s deep n’ throaty voice…). But what advertising seduced Pharaoh Ramesses II into carving four 65-foot-tall likenesses of himself from native rock at Abu Simbel ca. 1250 BC? Or the government of Dubai into erecting the 2,722 foot (i.e, 0.52 mile) Burj Khalifa Tower in 2009 AD? I believe essentially all of us are hard-wired to want more of something for some reason. If there is good evidence that advertising is the culprit in overall consumption growth and not just in choosing between spending options, let’s see it.

3. Given the three-millennia separation of the two above construction projects, I think it is wishful thinking to expect Homo sapiens to spontaneously embrace zero growth collectively any time soon.

4. But even if 99+% of us do that, what about the non-cooperators? To the extent that the world is zero-sum (a politically incorrect but applicable description if there really are limits), it takes only a few competitively acquisitive individuals to produce a mess. If the few want more, sooner or later they will destabilize a group of otherwise modest, cooperative individuals. Envy kicks in, or defensive measures to avoid losing. An example of the latter: What to do when the tax bill on your modest abode skyrockets when Ringo Starr and Mick Jagger move in next door (aka the “Aspen effect”)? Try to maintain your modest lifestyle and move 40 miles downriver, or do what it takes to get into the high production/consumption game yourself?

All this brings me back to Monbiot’s bald and bold statement: there is negligible action without effective, broadly felt, implementable…scarcity. In other words, “appropriate scarcity” is not optional; it is necessary. Yes, increasing the price of “bads” is a frequent theme on these pages, but often only as one item in a longish list of principles based on Herman Daly’s powerful writings. Rather, it should be at the top of the list.

There is no question that accomplishing scarcity (for fossil energy, say) by caps and/or taxes is politically, socially, economically, and humanly difficult—a global top-ten red flag. I believe that at the U. S. national level at least, it is feasible. Equity impacts can be minimized by income tax rebates to lower-income households. Other impacts, especially regional, are tougher. In general, moving slowly reduces disruption, but we have scant time. What I hope for is national-level appropriate scarcity of fossil fuels. Done right (a daunting task, to be sure), we can reinforce our own behavior in doing what we (say we) must do to restrain global warming, and have good lives doing it.

 

Dr. Robert Herendeen is a fellow at the Gund Institute for Ecological Economics at the University of Vermont. His research interests include energy consumption, quantitative analysis of environmental issues, and environmental bookkeeping. He is a physicist who conducts economic input-output analyses to determine resource requirements and other impacts of consumption, following the parallels between economic and ecological systems and analysis of perturbed ecosystems. His most recent work covers the connection between net energy and the price of all consumer products.

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