COLUMN -- Nov. 19, 2008

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Earth-friendly Economics
Remodeling our economic system to better harmonize with the planet

By Patricia Dines

After the exuberance of Barack Obama's election, our attention now turns back to repairing our global economic system. Like many folks, I worry that the remedies chosen will benefit the few while costing the many, require the prudent to bail out the speculative, and continue the financial thinking that caused the wreck.

But mostly I'm concerned that, in our rush to return to "business as usual," the earth's needs will again be shunted aside, assuring even worse disasters. My hopeful scenario, though, is that our economic remodeling includes better aligning our systems with nature's, in ways beyond green consumerism.

I'm encouraged hearing Obama's new chief of staff, Rahm Emanuel, say, "Never allow a crisis to go to waste. They are opportunities to do big things."

So to help me explore the possibilities, I call Bruce Macpherson, who taught ecological economics at Sonoma State University and the SRJC for over 30 years. His journey with this topic started in the 1960s, when he concluded that environmental change required economic shifts, he says, "because so much of our behavior is economically determined."

Regrettably, he observes, economics can appear complex and absolute, discouraging our participation in essential decisions and giving away power to the experts who created the problems. He recommends seeing economics not as a science but as a set of ideas "dressed up in numbers, a way we choose to organize ourselves."

Macpherson says that he considers today "as good an opportunity as I've seen for a long while" for meaningful economic system redesign, because collapse "always leaves room for rebirth." Despite "all the unfortunate suffering that's been created by people's apparent wealth shrinking, it's perhaps a blessing in disguise," he counsels, because it's reduced the global consumption rates that were sending us "headlong into oblivion." Our error, though, is in perceiving these lower consumption levels as the aberration and seeking to return to unsustainable ones.

I ask him about former Federal Reserve Chairman Alan Greenspan's statement that the system's meltdown was a shock, because it had worked "exceptionally well" for decades. Macpherson replies, "It's like saying that the Titanic floated for a while, and then it didn't. Because it had within it flaws that were destined to eventually manifest themselves." For instance, because market fundamentalists have let free markets run wild, we're now having to relearn the Great Depression's lesson that restrictions are needed to control capitalism's more "rapacious" aspects.

Macpherson's solution isn't eliminating free markets, but better integrating them with natural systems. We do that first by recovering our ecological literacy, understanding that we live on a finite planet with an exploding population and disappearing habitat. In classes, Macpherson illustrated the peril of ignoring the planet's immutable realities by giving the mock homework assignment of climbing to the roof, willing away the law of gravity, then jumping.

He'd then present his summary of nature's key design principles, calling them the "biophysical requirements for sustainable societies." These include valuing diversity and complexity for creating stability (e.g., not putting all your eggs in one basket); limiting consumption and waste to the earth's carrying capacity; and doing better with less.

By comparing these natural laws with our current economic system, he derives the system's "five fatal flaws." His key remedies include bringing the earth into the economic model (for instance, by tangibly valuing intact ecosystems); using better measures of economic success (such as the Genuine Progress Indicator); living off the earth's income while preserving natural capital (for example, selective logging); rejecting the impossible goal of perpetual physical growth in a limited biosphere; and downsizing and diversifying for greater robustness.

I'm interested in further discussing these ideas, but Macpherson has largely retired, excited to travel and work through his stack of books. He indicates that various folks are implementing these principles, and suggests reading Peter Barnes' proposals in Capitalism 3.0.

Our conversation also reminds me of Marilyn Waring's classic video Who's Counting: Sex, Lies, and Global Economics (now on YouTube), which demonstrates that steering ourselves with the GDP metric actually encourages harmful activities.

However, I'm thinking most of Jared Diamond's bestselling book Collapse: How Societies Choose to Fail or Succeed. Diamond's examination of various cultures' collapses reveals consistent causes, including ignored environmental problems, prioritized short-term profit, and isolated elites benefiting from practices that harm others. A key determinant of a society's ultimate survival is whether it's willing "to re-examine long-held core values, when conditions change and those values no longer make sense."

Perhaps, with President Obama's help, we can do just that.

© Copyright Patricia Dines, 2008. All rights reserved.

"Patricia -- A very good article!  Have sent it to friends.  I picked up several copies at Whole Foods the day it came out (sure 'nuf, next trip they were all gone). If I can be of further help, please don't hesitate to call."
- Bruce Macpherson, Santa Rosa Jr College

You might also be interested in my articles on related topics in my Ask EcoGirl column, including how to green your holidays on a budget and more about greening our economy.

INTERVIEW OUTTAKES MACPHERSON

* It's a time to start saying, 'Well, maybe this system that we've all plugged into is far shakier than we ever thought.' "

* Now, because "the price system doesn't reflect the true value of what's being exchanged," we're undervaluing all things, which allows us to overconsume them, relative to the planet's carrying capacity.

* "It's surprising how people really think that somehow gasoline should be provided cheap and plentiful forever. It astounds me. That we just have to get over this speed bump and prices will come back down and everything will be fine."

* The problem, he says, is that we seek to bend the earth to meet our needs, when our dependency on the earth really requires us to align our economic behavior to the earth's needs.

* He says that he has "many good memories, especially of teaching ecological politics and economics at SRJC and SSU when "environmental studies" was new, and of the many extraordinary students I had in those courses."

RESOURCES

* Video: Who's Counting: Sex, Lies, and Global Economics, By Marilyn Waring,
http://www.youtube.com/watch?v=FbcWUoIqX6g

More about Waring is at http://en.wikipedia.org/wiki/Marilyn_Waring

* Book: Capitalism 3.0: A Guide to Reclaiming the Commons, by Peter Barnes (Author)
Barnes offers a readable and engaging exploration of capitalism's current design and flaws. He then proposes an innovative way that we could economically articulate our shared rights to a healthy environment, for ourselves and future generations.

* More about Ecological economics
http://en.wikipedia.org/wiki/Ecological_economics

* More about the Genuine Progress Indicator

The Genuine Progress Indicator (GPI) is a concept in green economics and welfare economics that has been suggested to replace gross domestic product (GDP) as a metric of economic growth.

GPI is an attempt to measure whether a country's growth, increased production of goods, and expanding services have actually resulted in the improvement of the welfare (or well-being) of the people in the country. GPI advocates claim that it can more reliably measure economic progress, as it distinguishes between worthwhile growth and uneconomic growth.

The GDP vs the GPI is analogous to the difference between the Gross Profit of a company and the Net Profit; the Net Profit is the Gross Profit minus the costs incurred. Accordingly, the GPI will be zero if the financial costs of crime and pollution equal the financial gains in production of goods and services, all other factors being constant.
http://en.wikipedia.org/wiki/Genuine_Progress_Indicator

More information is at Redefining Progress, http://www.rprogress.org/index.htm

* The Genuine Progress Indicator Could Provide an Environmental Measure of the Planet's Health, by Linda Baker, May/June 1999

On October 17, 1995, Senator Byron Dorgan (D-ND) asked his colleagues in the Senate to rethink sacred notions of economic progress. "We are told daily that the Gross Domestic Product (GDP) in America is up, our economy is moving forward and we are doing so well. But why, when Americans are working longer and harder just to keep up, why are we told that things are so good, that the GDP is a measure of enormous progress?"

The answer, continued Dorgan, is that the GDP is fatally flawed, as it privileges the world of the market at the expense of social and environmental breakdown. "The gross domestic product adds up everything Americans spend and declares that as the total good. As a result, the hundreds of billions of dollars that Americans spend to cope with crime, the lawyers, and social breakdown costs, is all GDP--car crashes, fender benders in front of the Capitol. Mr. President, $200 billion a year in repair bills and hospital bills give this country a real boost," says Dorgan.
http://www.emagazine.com/view/?655

* The Happy Planet Index
The Happy Planet Index (HPI) is an index of human well-being and environmental impact, introduced by the New Economics Foundation (NEF), in July 2006.
http://en.wikipedia.org/wiki/Happy_Planet_Index

* The Titanic Lifeboat Academy, an "outpost" of the Post Carbon Institute, plays further with the Titanic metaphor. They're a center for research and education in sustainable living practices, deep ecology ethics, renewable energy systems and low-impact appropriate technologies.
http://lifeboat.postcarbon.org/

* Book: The Lorax, by Dr. Suess
The tiny Lorax speaks for the trees.
http://www.robbsbooks.com/rseussth.htm

CURRENT ARTICLES

* Protesters Take Their Outrage to Wall Street, By Steven Wishnia, AlterNet, September 26, 2008, Printed on September 26, 2008
EXCERPTS: "Though he doesn't want to see the economy collapse, he said the crisis is an opportunity to dream of a different system, of smaller, more locally based commerce." ... "their chants of "You broke it, you bought it" reverberating through the narrow office building canyons and off the flag-draped wall of the New York Stock Exchange." ... "Many Wall Street types greeted the protesters with contempt." ... "Such contempt from the upper classes is nothing new to the lowly proles of Gotham." ... Leona Hemsley telling her housekeeper that "We don't pay taxes. Only the little people pay taxes." "
http://www.alternet.org/story/100414/

* Greenspan: It's a 'credit tsunami', By Aaron Smith, CNNMoney.com staff writer, October 23, 2008

Former Fed chairman says crisis will pass, but congressmen say he dodged responsibility and didn't foresee crisis.

Committee members weren't buying Greenspan's rosy forecast, lambasting him and two other officials -- SEC chairman Christopher Cox and former Treasury Secretary John Snow -- for failing to prevent the credit crisis and for refusing to take responsibility for it.
http://money.cnn.com/2008/10/23/news/economy/committee_regulatory/

* Double Bind: Savers on the Hook for Squanderers, Laura Rowley Money & Happiness, October 8, 2008
http://finance.yahoo.com/expert/article/moneyhappy/113568;_ylt=AtqM1oxm0h6TO2u5tDKVH.eER4V4

* An end to big spending?, JEFF KAN LEE, The Press Democrat, Nov. 13, 2008
As retailers brace for 'nail-biter' season, experts see demise of consumer-driven economy
http://www.pressdemocrat.com/article/20081113/BUSINESS/811130351/1036/NEWS07?Title=An_end_to_big_spending_

* US hedge fund managers defend industry before Congress, by Andrew Clark, The Guardian, November 13 2008
In a rare day of public scrutiny, the billionaire bosses of five leading hedge funds appeared before the House oversight committee to answer charges that their unregulated bets on financial markets have destabilised the global economy.
http://www.guardian.co.uk/business/2008/nov/13/useconomy-congress-hedge-fund-managers

* Bush: Economic crisis not a failure of free market, By BEN FELLER, Associated Press Writer

"I'm a market-oriented guy, but not when I'm faced with the prospect of a global meltdown," Bush said.

"History has shown that the greater threat to economic prosperity is not too little government involvement in the market, it is too much government involvement in the market," he said. "It would a terrible mistake to allow a few months of crisis to undermine 60 years of success."

PD COMMENT/PERSONAL OPINION: Um, except the most obvious current example of lack of regulation crashing the economy. They want free rein when driving recklessly but us to clean up the predictable mess. All along people have been warning of the ways it wasn't working for so many people. It's not a choice between "free market" or not, but how we do free market. What's been discredited is market fundamentalism, letting the free markets run wild, trickle down, etc. We need to make sure we get that lesson so that they don't keep conning us into that game that benefits a few at the cost of the many.

http://news.yahoo.com/s/ap/20081113/ap_on_go_pr_wh/meltdown_bush

* Opinion: Crisis is opportunity to create new rules for global economy, By GORDON BROWN. WASHINGTON POST, October 18, 2008 at 5:21 a.m.

"This is a defining moment for the world economy.

We are living through the first financial crisis of this new global age. And the decisions we make will affect us over not just the next few weeks but for years to come.
http://www.pressdemocrat.com/article/20081018/OPINION/810180328/1042?Title=BROWN__Crisis_is_opportunity_to_create_new_rules_for_global_economy

* Trading on both Russian stock markets halted, By Catrina Stewart, Associated Press Writer, October 8, 2008
EXCERPT: "[Russian President Dmitry Medvedev] also proposed a new global financial architecture, arguing that bullwarks of the old financial order -- the International Monetary Fund and the World Trade Organization -- had been discredited in the 1990s. He said new financial centers and strong regional currencies could provide stability and prevent a repeat of the global financial crisis. Medvedev has previously touted Moscow's ambitions to become a financial center and make the ruble a reserve currency."

PD NOTE: As in agriculture, regional currency provides robustness, versus the monoculture of one world world financial system that's vulnerable to being wiped out. Still, it's fascinating to hear a world leader talk about this.
http://biz.yahoo.com/ap/081008/eu_russia_markets.html

* Recession Is Not All Gloom and Doom, by Shawn Dell Joyce, Oct. 7 2008
"Is it possible that Americans might be poorer but happier in times of recession than in times of plenty?

"The National Opinion Research Council at the University of Chicago tries to quantify how happy Americans are with a yearly poll. Since 1950, the number of Americans responding that they were "very happy" has steadily declined. Between 1970 and 1994 it dropped 5 full points, indicating that less than one-third of Americans were "very happy." In 2006, our happiness level was at a new low in spite of a healthy economy, and record amounts of consumption per capita.
http://www.creators.com/lifestylefeatures/sustainable-living.html

* Wall Street vs. Green Street: Who is Doing Better?, By Richard Seireeni, October 6, 2008, Published on GreenBizSite (http://www.greenbiz.com)
EXCERPTS: "Like every other American, I have been sitting in awe as our mighty financial institutions have vaporized before our eyes. So, I began to wonder: How have green financial groups been doing? ... In contrast to Wall Street, where profits and investor returns trump all, Salmon Nation is modeled on a broader principal where profits aren't necessarily everything because protecting the health of the planet while ensuring social equality are just as important."
http://www.greenbiz.com/column/2008/10/06/wall-street-vs-green-street-who-doing-better

* Chinese Manufacturing Shrinks by Record, Survey Shows, By Nipa Piboontanasawat
China's manufacturing contracted by the most on record last month as the global financial crisis cut demand for exports, a second survey showed.
http://www.bloomberg.com/apps/news?pid=20601087&sid=adYI9yc6OrVs&refer=home

* China Stimulus Plan Will Boost Stocks Sentiment, By Chua Kong Ho, Nov 09 2008

China's 4-trillion yuan ($586 billion) stimulus plan will boost stock-market sentiment, Morgan Stanley said, predicting short-term rallies for steelmakers, building materials producers and financial companies.

...The stimulus package, of which 100 billion yuan is earmarked for this quarter, will be spent on low-rent housing, roads, railways and airports and infrastructure in rural areas. The funds, equivalent to almost a fifth of China's gross domestic product last year, will be used by the end of 2010, the Beijing-based State Council said yesterday on its Web site.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a0OmFE6m57QQ&refer=home

* What Politicians Dare Not Say, By Tim Jackson, New Scientist (pg. 42), Oct. 18, 2008

Scratch the surface of free-market capitalism and you discover something close to visceral fear. Recent events provide a good example: the US treasury's extraordinary $800 billion rescue package was an enormous comfort blanket designed to restore confidence in the ailing financial markets. By forcing the taxpayer to pick up the "toxic debts" that plunged the system into crisis, it aims to protect our ability to go on behaving similarly in the future. This is a short-term and deeply regressive solution, but economic growth must be protected at all costs.

...The message from all this is clear: any alternative to growth remains unthinkable, even 40 years after the American ecologists Paul Ehrlich and John Holdren made some blindingly obvious points about the arithmetic of relentless consumption.

...With the environmental situation reaching crisis point, however, it is time to stop pretending that mindlessly chasing economic growth is compatible with sustainability. We need something more robust than a comfort blanket to protect us from the damage we are wreaking on the planet. Figuring out an alternative to this doomed model is now a priority before a global recession, an unstable climate, or a combination of the two forces itself upon us.

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