2014-07-18
Julian Hinton
“This book is about that great engine of history that gets presidents elected, assembles armies and sends men to the moon... this most godlike of government goals is economic growth.”
In these opening words of Supply Shock, Brian Czech has nailed the central problem of our times. It was once a good idea but is now our biggest problem in a full world. The ideal of an endlessly growing GDP (Gross Domestic Product) has come to be the overarching goal for so many governments and the people who elect them, that it seems to be the measure of all we aspire to. While some economists will realise it was never intended to be used to gauge overall social wellbeing, most proceed as if it should be, or that nothing can be done to change its counterfeit status as the main policy goal for all of society.
Czech stresses that GDP is valuable as a measure of economic activity and should be retained for that reason — but it says nothing about the desirability of the various activities that it counts. Uneconomic activities like cleaning up pollution are counted as good because they add to GDP. Instead they should be counted as a cost to society. Environmentally friendly activities such as making solar panels, electric cars or spending on computers and education are also counted into the GDP and we are told often these days that economic growth can proceed in a sustainable way if these types of activities are encouraged and increase. Not so Czech says — the overall effect will still be more ecological destruction because the economy is an integrated whole based on the old technologies that remain unsustainable if they continue and expand.
Green growth ahead
Supply Shock is largely a warning against the complacency inherent in ideas of “green growth” and “dematerialising” the economy. Many people assume that environmental problems will automatically be solved as the economy continues to grow and “development” is allowed to continue (i.e. growth of GDP). Many assume that policy makers are now aware of ecological issues and the economy and society will adjust automatically to deal with them but this seems very unlikely if growing GDP remains our main policy goal.
Czech patiently traces, in a scholarly and occasionally sarcastic and humorous style, the history of how this idea came to be orthodoxy in economic thought. He shows various examples of blind spots and absurdities in orthodox economics and consequently of most policy makers who follow it. For example Robert J. Bradley, president of the Institute for Energy Research says, “Natural resources originate from the mind, not the ground, and therefore are not depletable.” Czech shows that this defies physics and ecology as sciences and represents a theoretical delusion.
It seems most economists have settled into this comfortable belief in a Pollyanna future where all resource problems will be automatically solved by the ingenuity of science and technology, together of course with that perennial favorite of theirs, the invisible hand of the free market. The idea that the supply of some important resources might actually run out and cause disastrous problems for society — supply shock — is hardly considered.
Fallacies and the future
Part 2 of the book is called “The Dismal Science Comes Unhitched” and traces the development of key fallacies in the history of economic thought since the mid-19th century. As a result of the under-emphasis on 'land' in economic theory, policy makers have lost sight of the importance of natural resources. They seem to assume that they are endless. This has happened largely as a result of the rise of the ambiguously named neo-classical economics which came to dominate university economics departments through corrupt manipulations of staff and curricula by wealthy individuals and corporations. This was done specifically to oppose theories that put land back at the center of the economy, those of Henry George and his Land Value Tax proposal which were very popular in the early 20th century (and still survive today).
In Part 3 of the book “Economics for a Full World”, he elaborates on ecological economics as the best way to understand the impact on the planet of our production and consumption habits. Czech doesn't spend a lot of time detailing the possible horror scenarios of famine and war that various shocks to supply might bring about. Instead he shows encouragingly that “Despite the fact that economic growth is currently the priority in American domestic politics and policy, as well as in many other nations, history tells us there is nothing sacred about it. Economic growth may be called into question by national governments at any time, if only the people express their concerns.” (p. 225)
Franklin D Roosevelt questioned it in the 1930s: “Our last frontier has long since been reached… A mere builder of more industrial plants, a creator of more railroad systems, an organizer of more corporations, is as likely to be a danger as a help… Our task now is not the discovery or exploitation of natural resources, or necessarily producing more goods. It is the soberer, less dramatic business of administering resources and plants already in hand.” And Czech says there “even were industries that favored a stable economy over a growing economy, at least temporarily. These included the railroad, petroleum and automobile industries.”
Czech says that if enough people want to change the way economies work, humanity can save itself but it's unlikely to be “a prosperous way down” from the present state of overconsumption. He sees it as possibly happening through strict application of existing or amended nature conservation and full employment legislation in America and similarly in other countries. These would prioritize environmental protection over destructive economic expansion. He looks to a new generation of Steady Statesmen to lead us to a steady state economy where environmental destruction is halted. He contemplates the prospect of a post-collapse dictatorship and on a populist level he foresees a naming and shaming strategy taken up by a broad-based social movement that would be aimed at the ostentatious over-consumers among the rich and super-rich. This would hopefully discourage people from aspiring to excess wealth with its attendant ecological damage to the planet. He cites examples of this sort of social movement already happening.
Supply Shock is essentially optimistic. Czech thinks we are at a crossroads and can still choose — not already too far down the wrong road. I hope he's right.