SOURCE: Subject: What we are really up against? Date: Wed,
20 Aug 97 15:03:39 -0700
From: Paul Krohn <krohn AT sirius.com>
To: "Crtitical Mass" <sf-critical-mass AT cycling.org>
Welcome to the battle between
traditional ('neoclassical') and ecological economics.
Where does Critical Mass fit into this?
Well, we want lots of
people to stop using cars -
a large contributor to GDP - and start using other forms of transit, such as
buses, bikes, and good old feet, which contribute some, little or not at all to
GDP. So any politician who successfully implemented a plan to switch
people from cars to other forms of transit would find themselves presiding over
a recession, in traditional economic terms, even though we would all be 'richer'
in terms of environment, peace of mind, etc. Here's a full article I OCR'd
in from World Press Review (great mag). Sorry to post something so long,
but I thought it would shed light on a lot of important issues to the list.
Amid the realms of media
coverage of June's annual Group of Seven summit, this article from a Canadian
magazine stands out for its lively, though partisan, demystification of a
complex subject - global economic policy. Ecological economists,
who warn that the system is feeding on the death of nature, are questioning the
more widely accepted theories of economic expansionsts, who see growth as a
cure-all.
Paul Krohn
from World Press Review ...reprinted without
permi$$ion...by Winky ;o)
June 20, 1997: Eight men with genial
smiles stand shoulder-to-shoulder on a broad lawn on a cordoned-off street in
Denver, Colorado. Denver police and the National Guard are on high alert.
The Group of Seven (G-7) economic summit is one of the very few occasions
where the leaders of the seven most affluent nations on Earth [the U.S., Canada,
Britain, France, Germany, Italy, Japan -and now Russia, the eighth member]
are together in one place. If aliens wished to throw the Earth's political
power structure into chaos, a missile here and now would do
it.
These men, here to coordinate their
economic, financial, and trade policies, stand at the helm of the global
economy. Of course, the global economy is like the 400-pound gorilla that
sits wherever it wants; none of the G-7 leaders has learned to make it respond
to their bidding and in politics, perception is
everything.
At the Denver summit, the mood is
decidedly upbeat. America is in the midst of the biggest bull market in
its history. A worldwide explosion in trade and private investment has
produced, over the past three years, a world growth rate nearly double that of
the previous two decades. From the way the
media report the news, you'd think all the economists in the world were singing
the same hymn for a prosperous future. But in
fact, the predictions of a new golden age are all coming from one
camp - the so-called "expansionists." The expansionist worldview
is one of the main competing visions of global economic reality today.
It's the dominant view because expansionists
(sometimes referred to as neoclassical economists) are the dominant economic
policy makers of our time.
The competing view of global economic
reality - the ecological worldview - is the new kid on the
block. Though growing in acceptance, its proponents probably make up fewer
than one in 50 of all the practicing economists and economics professors in the
world today.
The two worldviews are chalk and cheese.
Or, if you like, heaven and hell. Ecological
economists (also known as bio-economists) foresee an
apocalypse. They warn that
ecologically speaking, the world is already "full,"
and further expansion will lead us into an ecological nightmare. The expansionists, by contrast,
see growth not as a problem, but as the solution to our economic
woes. Expansionists have a profound belief in
technology and see no ecological constraints on economic activity.
Julian Simon, author of Scarcity or
Abundance? A Debate on the Environment, boasts: "We have in our hands - in our libraries really -
the technology to feed, clothe, and supply energy to an ever-growing population
for the next 7 billion years."
Within the ecological camp, of course,
those are fighting words. Ecological economists accuse expansionists of pawning
the family silver - of liquidating the planet's irreplaceable natural capital
for short-term gain. They maintain that our
current system is living off the death of nature, and future generations will
bear the costs.
Assume for a moment that our survival is
indeed threatened. How can we remove that threat? An obvious answer
is to pursue sustainability. Expansionists, of
course, see sustainability as a much simpler proposition: Create as much wealth
as possible by freeing up markets, privatizing government services, and
eliminating barriers to trade. This will
produce a new round of economic expansion and create the wealth we need to
tackle environmental degradation, poverty, and our other economic woes.
But there's a glaring flaw in the expansionists' argument. They
haven't come up with an accurate way of measuring economic growth. Their
chief measure of growth, the gross domestic product (GDP), is seriously
flawed.
Consider: When the Exxon Valdez
spilled its load of oil into the
Gulf of Alaska, America's GDP went up. (A lot of money was spent on the
cleanup, media coverage, ecological testing, legal fees, etc.) Consider:
Walking, biking, and mass transit contribute less to the GDP than using an
automobile. Trains contribute less than airplanes; an extra blanket or
sweater less than raising the thermostat; staying home to raise your daughter
less than getting a part-time job at Wendy's. (Indeed, the GDP fails to assign any value at all to unpaid or
volunteer work.)
GDP measures the "goods" but not the
"bads." That's why
ecological economists have developed their own measures of economic welfare.
The GDPs of the U.S., Britain, and Germany all headed merrily upward from
1955 through the 1980s. However, a more accurate measure of economic
progress, the ISEW (Index of Sustainable Economic Welfare) developed in 1990,
tells a very different story. When some of the "bads," such as pollution,
depletion of nonrenewable resources, and car exhaust-related health costs are
factored in, a radically different picture emerges. The U.S., German, and
British economies all show no improvement in economic welfare since the 1970s.
In fact, economic welfare levels off and falls
dramatically. News stories of a bizarre and
tragic wholesale fraud recently began filtering out of Eastern Europe.
Citizens who had sunk their savings into pyramid investment schemes that
promised money for nothing got a rude taste of the dark side of the free market.
In Albania, new investors eventually dried up, and the funds began
failing. Albanians collectively lost a billion dollars - three
times the national budget deficit. They had trusted their government and
had been betrayed. The response in the West was predictable. We
shook our heads at those poor benighted bastards who had been convinced to "bet
on miracles." But here's the rub: Is our economic miracle really any
different? Don't we trust our financial advisers, our expansionist
economists, our political leaders, almost as blindly as Albanians trusted
theirs?
Most of us have no idea where our money
is. It's
not in the bank we left it in. The bank injected it into the bloodstream
of the global market. We sink billions into mutual funds and retirement
plans, figuring these to be secure, broad-based, blue-chip investments. But
what's in these funds? Just as with hot dogs, you don't really want to
know. We assume the markets will hold and our
nest eggs will grow, when in truth our investment portfolio is often held together
with baling
wire and faith. And so, we might justifiably suspect, is the global economy.
The Albanians may have been naive, but
their actions were to some degree
understandable. They had to do something with their money. they could
not
simply hang on to it because, with rampant inflation, it was devaluing rapidly.
We
in the G-7 nations are now caught in a similar vise. We're scared of the
future. We
want our money to grow quickly, spontaneously, miraculously. So we try
stocks,
bonds, arbitrage, derivatives, hot gold stocks, pork-belly futures.
Pyramid schemes depend on a continuous
supply of dupes. In the
expansionist model of the global economy, future generations are the dupes.
As
supplies of clean water and air grow scarce, as climactic instability escalates,
we
eventually will reach a point where one generation suddenly balks - unable
to buy
into the scheme. How close we are to that moment of truth is
anybody's guess.
Meanwhile,
back in Denver, the seven leaders put on a good show for the 2,000
journalists and TV crews who gathered there. There were daily news releases,
communiques, background papers, and joint declarations. We feel mildly
reassured. These guys must know what they're doing. The global economic
ship
is on course. Our age of prosperity is also the age of open and frank discussion.
The perception we have is that there are no secrets among the Group of Seven.
Everything is up for discussion - except, of course, the American way of life.
WINKSLINKS
