Sunday, November 10, 2013

A Must Read Article by Roger Boyd: Economic Growth: A Social Pathology

Read the whole essay:

Economic Growth: A Social Pathology (at Recilience)

Economic Growth: A Social Pathology (at Humanity's Test)

Some excerpts: 
The theoretical and epistemological bases of mainstream economics, of which GNP is an artefact, are challenged by attempts to integrate economic and ecological considerations. These see the economy as being an open system, embedded within the closed system which is earth. In this picture the economy is reliant upon ecological sources for inputs (e.g. raw materials, soil, plants and animals, oxygen), and ecological sinks for waste product outputs (e.g. nitrogen run-off into rivers, carbon dioxide into the air). Mainstream neo-classical economics does not factor in the measurement of such things, generally treating inputs as infinite or infinitely substitutable, and the impact of waste products as unquantifiable “externalities”. As long as the economy was not large in relation to the overall ecology, such shortcomings tended not to matter, but over the past 200 years of exponential growth the economy has become much larger in relation to its ecology. Authors such as Georgescu-Roegen10, Daly11, and Victor12 argue both for a fully integrated Ecological Economics (or a Bioeconomics as Georgescu-Roegen prefers), and the acceptance that continued exponential growth threatens the sustainability of human society through the depletion of non-renewable ecological sources, and the overuse of renewable ecological sources and sinks.

The Roman Empire, and modern civilization. One thousand years separate the first two, and over fifteen hundred years the latter two. As Morris puts it “If someone from Rome or Song China had been transplanted to eighteenth-century London or Beijing he or she would certainly have had many surprises … Yet more, in fact much more would have seemed familiar … Most important of all, though, the visitors from the past would have noticed that although social development was moving higher than ever, the ways people were pushing it up hardly differed from how Romans and Song Chinese had pushed it up.19” The development of complex societies relied upon the production of a surplus of food, and other forms of energy, above that required for basic existence. This surplus allowed for specialized occupations, such as artisans and soldiers, and an increased level of social complexity. Such societies are an “anomaly in history”, having only existed in the last 6,000 years, while “throughout the several million years that recognizable humans are known to have lived, the common political unit was the small, autonomous community”20. The size and complexity of such societies was limited by the available bio-mass (predominantly food, fodder for animals, and wood) and the efficiency of the mammals utilized (humans, horses, oxen etc.) in converting that bio-mass into useful energy. The reality of these limitations can be seem even in the “cradle of democracy”, Ancient Greece, where the freedom and material comfort of a limited number of men was supported by a large cohort of non-citizens, such as slaves and serfs, whose surplus energy could be utilized for the benefit of the few21. Increased complexity can be seen as a problem solving strategy20, with additional available energy as a pre-requisite, through greater levels of differentiation, specialization, and integration. Tainter proposed that the decreasing returns of additional complexity are a fundamental limitation on societal longevity20, as would be a lack of the incremental energy required to support ongoing increases in complexity, and the resultant lack of ability to deal with new challenges.
The utilization of non-renewable hydrocarbon energy sources such as coal, oil, and natural gas within the past 200 years, allowing access to the product of previous historical ecologies, was a discontinuity that allowed human society to escape limitations on its size, complexity, and growth rate. By way of example “Hunter gatherer societies … contain no more than a few dozen distinct social personalities, while modern European censuses recognize 10,000 to 20,000 unique occupational roles, and industrial societies may contain overall more than 1,000,000 different kinds of social personalities”22. This phenomenal increase in societal scale and complexity was highly path dependent, in physical infrastructure, economic configurations, and hegemonic ideology, as human societies evolved to optimize their fit within the new circumstances of greatly enhanced access to energy. This process accelerated in the post-war period as oil, with its high energy density and ease of transport, was increasingly exploited. The outcome is a socio-economic configuration in the industrialized countries which is highly sensitive to the continuous availability of complex interconnections between specialized sub-systems, high quality energy, and ongoing growth. This is reinforced by a ruling ideology which assumes growth as a given, and treats the ongoing accumulation of wealth and physical goods as highly desirable and socially positive.

Over the past two centuries of plentiful high quality energy very large investments have been made in physical and social infrastructure which may be either invalidated completely, or otherwise greatly diminished in value by a move away from economic growth. The financial system which underpins the functioning of modern economies is one of these, as at its very core is the assumption of exponential growth. The majority of what is counted as financial wealth is actually constituted of claims upon future economic growth, and without such growth such wealth would be shown to be illusory and evaporate. The value of any private corporation is predominantly dependent upon its future profit flows, and the growth of those flows relative to the current period. The higher the rate of growth the higher the company value, hence the lower “price to earnings ratio” (the ratio of the value of a listed company to its current earnings) of low growth companies such as utilities to high growth companies such as new high technology start-ups. Without continued economic growth the ability of a company to grow earnings would be severely constrained, and the realization of this would lead share prices to fall to reflect this new reality. The charging of interest on loans is also dependent upon economic growth as increased economic activity is required to produce the incremental cash flows required to pay back the interest26. The dislocation of the as currently constituted financial system from a cessation of economic growth would be severe, and the effects of such a dislocation would greatly impinge upon society’s ability to both function and make required investments in sustainable alternatives. The very direct effects of financial dislocation upon the real economy were shown during the 2008/2009 financial crisis when global supply chains were temporarily impacted by reductions in international trade finance, resulting in some companies not being able to fund international trade shipments27. From a systems perspective the present financial system can be seen as a positive feedback loop, which when functioning well drives continued growth and when functioning badly enhances systemic collapse. “Reinforcing feedback loops are self-enhancing, leading to exponential growth or to runaway collapse over time. They are found whenever a stock has the capacity to reinforce itself.28” Capital is just such a self-enhancing stock, for example through the payment of interest which can then be reinvested to earn more interest.

The financial system has many of the largest and most powerful corporations in the world within it, all heavily motivated to support the ongoing economic growth which underpins their continued success. The fossil fuel industry, which is dependent upon continued hydro-carbon driven growth also has many of the largest corporations among its ranks. An example is Exxon Mobil, which has annual revenues greater than the GDP of the majority of countries in the world29. The ability of such huge corporations to function effectively is dependent upon the transportation and communication systems made possible by fossil fuel energy. With their free speech rights, power over media organizations through advertizing spend decisions, the ability to directly fund political organizations in many countries (with little or no limits in the United States after Citizens United Supreme Court ruling30), and hire lobbyists, such corporations provide very significant opposition to any movement to reduce growth and/or dependence on fossil fuels. Authors such as Oreskes & Conway31, and Hoggan & Littlemore32 have documented many of the activities used to forestall actions which may be in the public good, but would negatively affect corporate profits and freedom of action. These utilize many of the advanced socio-psychological techniques developed in the early twentieth century by such figures as Edward Bernays33 to create the consumer culture required to drive the increasing levels of demand needed in an age of ever increasing material production facilitated by fossil fuel energy, and to “manufacture consent”33 as a method of social control.

The ideological infrastructure has also been fundamentally affected by the continued exponential growth over the past two centuries. An underlying belief in the efficacy of continued economic growth, together with a near absolute confidence in human ingenuity and technology to overcome any obstacles pervade the dominant capitalist and socialist belief systems. Catton has likened the belief in technology to a “Cargo Cult”, and noted that modern technological advancement depends heavily upon the energy surplus provided by fossil fuels, and while such advances developed new and more efficient ways of utilizing fossil fuel energy they have not developed viable long term replacements for fossil fuels14. Greer also notes the dependence of renewable technologies on a fossil fuel subsidy, with the example of a solar cell “which requires large doses of diesel fuel to mine the raw materials and then ship them to the factory … larger doses of natural gas or coal to generate the electricity <to turn> raw materials into a cell” 44. To this can be added the fossil fuels needs to transport the finished cells, and to install them. The hegemonic economic paradigm of the capitalist economies, “neo-classical economics”, also assumes limitless or infinitely substitutable natural resources. For the vast majority of the past 200 years of exponential growth this was consistent with reality as the human economy was not large enough to appreciably impact the overall ecology. The momentum of exponential growth has quite recently grown the human economy to a scale where it is having significant impacts upon its ecology, but the hegemonic economic paradigm has not caught up with this reality. Areas of research such as Ecological Economics and Bio-Economics, which strive to incorporate the economy within its overall ecology, are still very much on the fringes of economics with little or no impact upon the mainstream. The inability of scientific communities to change paradigms in the face of even overwhelming evidence was noted by Kuhn45, with the eventual change being dependent upon the turnover of leaders within the respective discipline in many cases. With economists being so central to societal decision making processes this provides a major impediment to change. Cognitive Dissonance also provides a blockage to change generally, as individuals are driven to reject information that conflicts with their own beliefs, or those of the groups to which they belong46, and a number of studies have indicated the role of cognitive dissonance in the rejection of the evidence for climate change47, 48.

Industrialized human society is a complex system that has developed through adaptation to the availability of seemingly endless amounts of high quality fossil fuel energy. Two centuries of such adaptation have created a society that has a high level of fitness to its current ecological niche, but with a greatly reduced level of resilience to changed ecological circumstances and highly developed inertial tendencies. The example of a drug addict comes to mind, who knows that continued drug use will kill him but is unable to save himself. Parts of his body crave the drugs, the process of withdrawal is both emotionally and physically painful, and his drug-damaged body may not be able to survive the physical stresses of the withdrawal process. The continued drug use, or in the case of society fossil fuel use and economic growth focus, is truly a pathological, but also a very understandable response. Many organizations have focused on local initiatives in the face of such societal-level inertia and resistance, as with the Transition Town movement pioneered by Rob Hopkins49, but they risk remaining relatively marginalized with little affect on the overall direction of society. Such local initiatives could also be overwhelmed by wider societal problems as ecologically-driven crises intensify, as they are not truly independent of the overall society and its ecology. Another reaction, as with David King (the former United Kingdom Chief Scientific Advisor), is that real change will not happen until the ecologically-driven negative effects are obvious and large enough to overcome societal resistance50. Given the delayed feedback inherent in resource depletion and ecological degradation, together with the non-linear nature of complex systems such as the global ecology, it may very well be too late by then. A greater focus is required on changing the fundamental societal barriers to change, and on producing a competing positive discourse for a society that currently has an “inability to construct a narrative that links to reality” 51. - Roger Boyd

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