Social Ecological : The Environmental Crisis and the Need for by Clive L. Spash

www.clivespash.org

Department Sozioökonomie WU Wirtschaftsuniversität Wien

UiUnivers ity o fMf Manc hester 25th February 2014 Outline

1) Where does come from? • Brief History

2) How Does Ecological Economics View the Environmental Crisis? • Mainstream Economists Shutout Reality • The Realist Agenda in Ecological Economics • Fighting for a Radical Alternative Economics

3) The Need for a Different Economic System • Growth for What? • Growth for Whom? • Growth and the Competitive Spirit Part I Where does Ecological Economics come from? Growing Environmental Concern in the Industrially Developed World: 1960s to 1980s

• DDT bioaccumulation • Radioactive fallout from nuclear testing • OPEC oil shock price rise • Long range transport of air pollution, acidic deposition •Suppp()gersonic Transport (SST) and climate change • Love canal, chemical waste 1978, 56% birth defects over 5 yrs • Stratospheric ozone depletion • Nuclear reactor accidents and radioactive waste contamination (3 Mile Island, USA; Sellafield, UK; Chernobyl, Russia) The Rise of

The Promise Bohm and Kneese (1971: ix-x) The Economics of the Environment, stated “a profession rethinking, extending, and revising its concepts, and finding new applications for them”. They drew a parallel with “the ferment in the profession when the Keynesian revolution was in progress” andlid claime dhitd history was ithin the ma king

Topics Raised • Spaceship Earth (Boulding) • Thermodynamics (Georgescu-Roegen) • The steady state economy (Daly) • Existence values (Krutilla) • Ethics and treatment of future generations (d’Arge, Page) The Fall of Environmental Economics

Conforming to Mainstream Formalism Environmental problems as fundamental failures market system (Kapp, 1950)  simple addressed by property rights (Coase, 1960) Materials balance theory, laws of thermodynamics  a general equilibrium framework (Kneese, Ayres and d'Arge, 1970) Pollution all pervasive (Hunt and ddArge'Arge, 1973)  an optimal control framework (d'Arge and Kogiku, 1973) Multiple environmental values outside of economics (Krutilla, 1967)  cost-bene fit ana lys is an d a we lfare theore tic framewor k (Kneese, 1984).

Orthodox Constraints on Innovative Thought • preference utilitarianism •oppgtimal control modelling • discounting • a monistic value system • mathematics as a doctrine of rigour Ecological Economics

Early Modern History • K William Kapp (1950) The Social Costs of Private Enterprise • Ciriacy-Wantrup (1952) Resource Conservation

• Polanyi (1944) The Great Transformation • Galbraith (1958) The Affluent Society

Environmentalism and Economics • Boulding (1966) The economics of the coming Spaceship Earth • Mishan (1969) Growth: The Price We Pay • Georgescu-Roegen (1971) The Entropy Law and the Economic Process • Meadows et al. (1972) • Victor (1972) Pollution: Economy and Environment • Schumacher (1973) Small is Beautiful: A Study of Economics as if People Mattered • Hirsch (1977) Social Limits to Growth • Dalyy( (1977 ) Steady-State Economics

• Söderbaum, P., 1975. Tilväxttänkande eller ekologisk grundsyn. Ekonomisk Debatt 2, 113– 120. • Passet, R., 1979. L’e´conomique et le vivant. Payot, Paris. Ecological Economics

ElEcology • Ehrlich, P., (1968) The Population Bomb. Sierra Club-Ballantine, New York. • Odum, H.T., (1971) Environment, power, and society. Wiley- Interscience, New York. • Pimentel, D ., et al ., 1973 . Food production and the energy crisis. Science 182, 443– 444. • Holling (1973) Resilience and stability of ecological systems. Annual Review of Ecological Systems. • Jansson, A.M. (Ed.), (1984) Integration of economy and ecology. An Outlook for the Eighties. Proceedings from the Wallenberg Symposia. Askf Laboratory, Stockholm.

Co-evolutionary development Sustainability Resilience theory Syyystems analysis Complexity Establishing Ecological Economics as a Reputational Organisation

Martinez-Alier1987 Journal & ISEE Costanza (ed.) 1991. Ecological Economics. established 1989 Ecological economics: Energy, Environment and The Science and Society Management of Sustainability Social Ecological Economics

Spas h, C. L., 1999. The deve lopmen t o f env ironmen ta l thin king in economics. Environmental Values 8, 413-435. Part II How Does Ecological Economics View the Environmental Crisis? The Green Economy Mainstream Economists Shutout Reality Economy as an Isolated System

Macroeconomics describes an isolated system, where there are no exchanges of materials or energy with its surroundings ThiiifThis is in fac t a perpetltual mo tion mac hine whic h opera tes w ithou t any degradation or loss in terms of materials or energy Open System Reality

Economic systems require physical inputs of materials, minerals , and natural resources and in reality the more an economy grows the more materials are consumed .

Open systems exchange materials and energy with their surroundings. Total supply of materials to U.S. manufacturers during the 20th century

Thomas D. Kelly (2002) Raw materials and technology fuel U.S. economic growth. Mining Engineering December pp.17-21 Inputs and Outputs: Physical, Biological and Chemical Processes

As we know (but mainstream economists neglect from their models) physical inputs are required they create desired outcomes but also undesirable outputs!

First Law of Thermodynamics

Conservation of energy and mass Energy, like mass, can neither be created nor destroyed

Materials mass after consumption equals the mass of resources before extraction/harvesting

Economic growth via increased production must: (i) Increase inputs of material and energy into the economy (ii) Increase waste loads into the environment

IlitiImplications 1. Interdependence of media: Land, air and water 2. Pollution is an all pppervasive problem

We should be concerned for both the quantity and tftilttype of materials we create, use and ditditthi introduce into the environment Modelling Materials Flow

Thomas D. Kelly (2002) Raw materials and technology fuel U.S. economic growth. Mining Engineering December pp.17-21 Trying to Close Some of the Loops and Loses

Recycling, increased durability and technical efficiency are means of reducing or slowing material flows to the environment

Raw materials supplied to USA manufacturers in the 20th Century (excluding stone, sand and gravel)

Recycling

Recycling

Recyclin g, in cr eased dur abili ty an d techni cal effi ci en cy aaere m easoeans of reducing or slowing material flows to the environment BUT have minimal impact in our throwaway fashion conscious consumer society driven by growth.

Thomas D. Kelly (2002) Raw materials and technology fuel U.S. economic growth. Mining Engineering December pp.17-21 Not Just a Quantity Issue: Technology & Innovation First and Second Laws of Thermodynamics

Conservation of energy. Energy, like mass, can neither be created nor destroyed . Energy is constant between a system and its surroundings

Economic growth via increased production and consumption must: (i) Increase inputs of material and energy into the economy (()ii) Increase waste loads into the environment

Pollution is an all pervasive problem.

EtEntropy is a measure o f th e qualit a tive s ta te o f energy. Energy is conserve d within an isolated system, but moves towards minimum usefulness. (Earth is an open system but effectively a closed system only seriously exchanging energy. ) Order in economic/human systems implies disorder elsewhere in the terrestrial system. It also exploits sources of low entropy

Three sources of low entropy (i) Terrestrial stocks of concentrated minerals (ii) Solar flow of radiant energy (iii) Gravitational force of moon, planets, sun Primary energy use per unit of land area in the United Kingdom, 1830-2000

500

Hydro/Elec. Import

400

Natural gas J/ha] GG 300 DEC) [ Petroleum 200 use ( use yy

100 Coal

Energ Wood

Agric. Biomass 0 55 00 55 00 55 00 55 00 55 00 55 00 183 184 186 187 189 190 192 193 195 196 198 199

Krausmann, F., Schandl, H., Sieferle, R.P., 2008. Socio-ecological regime transitions in Austria and the United Kingdom. Ecological Economics 65, 187-201. Carbon dioxide emissions and GDP (per capita)

http://nordpil.com/go/portfolio/mapsgraphics/carbon-dioxide-emissions-and-wealth/ The Environmental Crisis 80 percent emissions reductions on 1990 levels needed by 2050 to stabilise atmospheric concentrations and stand a chance of avoiding temperature rises above 2ºC Parry, M., J. Palutikof, C. Hanson and J. Lowe 2008. ‘Squaring up to reality.’ Nature Reports Climate Change 2(June): 68-70 is More than Climate Change Soil erosion Deforestation WtWater sali liinisati on Insecticides and pesticides Particulates in the air Tropospheric ozone pollution Stratospheric ozone loss Acidic deposition Toxic chemical waste Heavy metals Asbestos Nuclear waste Biodiversity loss Acidification of the oceans Hormone discharges into the water supply and so on ... Economics and Physical Reality What economists regard as are talked of as one-off minor aberrations in an otherwise perfectly functioning market price system. "In reality they are a normal, indeed inevitable, part of these processes. Their economic significance tends to increase as economic development proceeds, and the ability of the natural environment to receive and assimilate them is an important natural resource of rapidly increasing value." (Kneese et al., 1970)

Externalities are NOT external to the economic system. They are part of the established economic process  cost shifting.

There is no free market economy Including social costs means changing all prices in the economy – Mitigates any simple efficiency claims – CthddConcerns over path dependency – Control costs are endogenous – Social indeterminacy of control costs – Strong uncertainty

Kneese, A.V., Ayres, R.U., d'Arge, R.C., 1970. Economics and the Environment: A Materials Balance Approach. Resources for the Future, Washington, District of Columbia. The Realist Agenda in Ecological Economics Example an Ontology of

Economy Environment

SD

Society

What does this representation tell you about reality? The Mainstream Sustainable Development Imaginary

Three systems Systems properties (i) Biosphere or ecosystems •co-equal (e.g. same size circles) •interconnected (()ii) Economyyy or market system •overlapping (iii) Society or human social system •self-governing Elkington’s Triple Bottom Line

Sustaining Corporate Growth

People Profit Planet (Social System) (Market System) (Natural System) Ontology: Hierarchical Systems Reality

Physical Environment

Biophysical Environment

Society

Economy Non-Market Social Systems

Sustainable Social Structure

PlPeople Planet (Social System) (Natural System) Non-Human Natural Systems

Sustainable Natural Structure

Planet (Natural System) The World as Capital

Source: Gund Institute for Ecological Economics, University of Vermont, USA The Capital Approach

Standard Economic Argument even in the absence of any technological progress exhaustible resources do not pppose a fundamental problem if reproducible man- made capital is sufficiently ʻsubstitutableʼ for

(Dasgupta and Heal, 1979; Hartwick, 1977; Solow, 1974; Stiglitz, 1979)

"We can pass on less environment so long as we offset this loss by increasing the stock of roads and machinery, or other man-made (physical) capital. Alternatively, we can have fewer roads and factories so longgpyg as we compensate by having more wetlands or mixed wood lands or more education." (Turner, Pearce, Bateman, 1994, p. 56)

"Weak sustainability is based on a very strong assumption, perfect substitutability between the different forms of capital." (Munda, 1997, p.217) The Fantasy of Mainstream Economic Sustainability

Economic Faith Social System EconomicSystem System Natural System Implications of Physical Reality

Dynamic implications: we are constantly changing the environment, especially reducing forms of orgggygganised energy and creating disorganised ones

Irreparable damage results when throughput of economy exceeds the ability of terrestrial systems to recuperate

Nonscarcity (nondisruptability) of source and sink functions has been erroneously assumed in economics

Qualitative degradation threatens ecological stability and creates change in ecosys tems w hihhich are surpr iiising & nove l

Ignorance of potential feedbacks from ecosystem stress when the economic subsystem is too large. Scale matters.

Harmony with Nature Scale of the economy is important, but also the Quality of what is produced Fighting for a Radical Alternative Economics Ideological / Methodological Positions

(A) New Resource Economics We should base our efforts upon the basic tenets of accepted economic theory such as the axioms of consumer choice and model of the individual as a rational agent. The most important role for research is to inform policy makers as to the efficient use of scarce resources (B) New Env ironmen ta l Pragma tism The natural sciences provide objective information which should be the ppyrimary basis for informin gpyg policy, but we face a communication problem. The most important role for research is to be pragmatic and employ whatever approaches are effective to inform the policy community about environmental problems and their solution. (C) Social Ecological Economics Environmental problems are complex, can be viewed from multiple perspectives and involve values which are often incompatible. The most important role for research is to understand different disciplinary perspectives and develop institutional approaches and social processes to address the interface between economics, science and policy.

ECOLOGICAL ECONOMICS SOCIAL ECOLOGICAL ECONOMICS Two Approaches to the Environment

Superficial and Indirect Treatment of environmental issues as special cases of more general theoretical constructs in mainstream economics  focus on discourse ignoring the explicit treatment of the environment e.g. externalities & missing markets, natural capital, green growth

Serious and Direct The recognition that serious attention to environmental reality leads to the need for a totallyypp new approach based in p olitical economy and interdisciplinary learning  focus on discourse addressing social & environment interactions e.g. cost shifti ng, mark et f ail ure, c lass con flict, po lit ica l & econom ic power Social Ecological Economics 5 Reasons for Ignoring the Mainstream

1. Marginalising anything heterodox, e.g. approach to future generations discounting not ethics; uncertainty reduced to risk; values reduced to money

2. Mix is confusing and contradictory e.g., value pluralism vs. value monism

3. Economic imperialism, power is uneven i.e., conformity to methodological and ideological positions is required changing concepts and ideas. Ecological economics treated as a sub-field of environmental & resource economics. 4. Lack of direction and unity of field impacted e.g. contents of the journal Ecological Economics; Beijer Institute; role of Partha Dasgupta and Karl Goran Maeler

5. Swamped by that which we openly argue and acknowledge is not progressive and indeed is the antithesis of what is sought and proposed.

Part III The Need for a Different Economic System

Degrowth Degrowth is NOT a recession or an economic depression  this is NOT saying we need an economic disaster  it is saying we will get one under the current system

Degrowth does NOT say nothing must grow!!  clearly Nature, for example, is full of growing things  the point is economic growth is highly problematic

Degrowth is a provocative, political, confrontational term the last time such a term was used it was Limits to Growth  convertditted into sus titaina bldble deve lopmen tit i.e. Econom ic Grow th! since then all important concepts have been cooptable & coopted

Degrowth is a rally point for alternative and radical Green criticism  economic growth is a key target here  inequality, injustice  failures of the economic promise

An “umbrella keyword, a multi-faceted framework that gives purpose and connects different policies and citizen initiatives” Kallis (2011) Décroissance and Sustainable Degrowth

“the term Décroissance can be traced back to an authorised translation of Georgescu-Roegen’s ‘declining state’, the idea of Décro issance – as it i s w ide ly emp loye d by soc ia l movemen ts – encompasses more than the critique of GDP as a measure for well-being. It embodies a radical questioning of the way social reproduction is intended and frames a multifaceted vision for a post-growth society.” Muraca (()2013)

Sustainable degrowth has been defined as: “an equitable down- scaling of production and consumption that increases human wellbeing and enhances ecological conditions at the local and global level” Schneider et al. (2010) Growth for What? Human well-being as a stock or flow concept?

Stock Flow Aim: maintenance of a Aim: maximum given stock condition consumption in minimum for the minimum time; ‘joy of throughput ’ flow/use of resources

Being well fed for nutrition Eating for hedonic pleasure Does Increasing Consumption Make People Happier? Within a country at a given time those with higher income are, on average, happier

Raising the income of all does not increase the happiness of all  material norms of well-beinggj adjust with societal income Raising income over a life time does not, on average, make an individual happier  hedonic adaption, i.e. aspirations change with circumstances comfort goods vs. cultural goods (e.g. arts, crafts, music)  social comparison, i.e. keeping up with the neighbours positional vs. non-positional goods

Individuals fail to allocate time to achieving non-positional and cultural goods The Consumer Society: Happiness is Just Around the Corner! Increasing Consumption and Material Wealth

“most individuals spend a disproportionate amount of their lives working to make money, and sacrifice family life and hlthhealth, diihihitidomains in which aspirations rema ifilttin fairly constant as actual circumstances change, and where the attainment of one’s goals has a ,more lasting impact on happiness.” Easterlin (2003) Questioning individual choice and preferences then become a subject of public policy concern but is regarded as taboo.

“The reason pref erences are excl ud ed f rom poli cy consid erati on by mainstream economics is because each individual is assumed to be the best judge of his or her own interests.” Easterlin (2003) Economic Individualism and Unquestioned Motives

Preference Utilitarianism The best action has the largest preference weighted net value Adding together such values across individuals and time can and should be used to determine resource allocation PfPreferences are Ki ng If people don’t care biodiversity doesn’t matter If people prefer cheap food now to sustainable agriculture that is what is right If people want plastic trees instead of real ones they should be provided If people have no WTP for endangered insects, bacteria, soil microbes and so on then they have no value

Mainstream economics avoids questioning individual consumer preferences Green growth does likewise and promotes Green hedonism Growth for Whom? Power Elites and Wealth

Wealth Distribution

$1 million or more 29.7 million people $50 million or more 84,700 people in the world — 35,400 of them living in the U.S.A. $$,pp100 million or more 29,000 people world-wide $500 million or more 27,000 people world-wide

less than 1% of the world’s population control 38.5% of the world’s wealth

2011 WSJ report on stats. by Credit Suisse

A mere 75,000,000Є $49,000,000 International Poverty

1.7 billion people in the 109 countries covered by the MPI— a third of their population — live in multidimensional poverty — reflecting acute deprivation in health, education and standard of living. United Nations 2011 report

$1 a day or less 1.2 billion people, ~20 percent of the world’s population $2 a day or less 2.8 billion people, ~50 percent of the world’s population UN Hunger Vital Statistics

$10 a day or less 80 percent of the world’s population Growth and the CtitiSiitCompetitive Spirit Europe 2020: A Discourse on Competition & Leadership

"Sustainable growth: promoting a more resource efficient, greener and more competitive economy."

"An industrial policy for the globalisation era to improve the business environment, notably for SMEs, and to support the development of a strong and sustainable industrial base able to compete globally" "but competition from developed and emerging economies is intensifying" [more specifically N. America and China are mentioned]

Sustainable growth means building a resource efficient, sustainable and competitive economy, exploiting Europe's leadership in the race to develop new processes and technologies "we must improve our competitiveness vis- à-vis our main trading partners through higher productivity" "To gear th e si ngl e mark et t o serve th e E urope 2020 goal s requi res we ll functioning and well-connected markets where competition and consumer access stimulate growth and innovation."

Note: In 30 pages, there are 38 references to competition and 14 to greening.

European Commission, 2010. Europe 2020: A European Strategy for Smart, Sustainable and Inclusive Growth, Communication from the European Commission, Brussels. Growth as a Race for Leadership

Jaeger et al. (2011) argue that: Learning-by-doing increases competitiveness and thus spurs economic growth, ldithEleading the European economy to a superiththior growth path.

"Make no mistake: a new world order is emerging. The race for leadership has already begun. For the winners, the rewards are clear: Innovation and investment in clean energy technology will stimulate green growth; it will create jobs; it will bring greater energy independence and national security." Jose f A ck ermann, CEO of D eut sch e B ank , D ecemb er 2010 Cited by Jaeger et al. (2011)

Make no mistake, where there are winners there will be losers

Ackerman, J. (2010): Green Growth - the Role of Financial Institutions. Global Metro Summit: Delivering the next Economy, Chicago, 8 December 2010 hURL: http://www.db.com/en/media/Deutsche_Bank_-_Global_Metro_Summit_-_Speech_Dr._Ackermann.pdfi – visited on 15.02.2011

Jaeger, C.C., Paroussos, L., Mangalagiu, D., Kupers, R., Mandel, A., Tàbara, J.D., 2011. A New Growth Path for Europe: Generating Prosperity and Jobs in the Low-Carbon Economy: Synthesis Report. European Climate Forum, Potsdam, pp.27. A Race or a Fight

Readily available, highly concentrated, minerals and energy are limited.

Fossil fuel energy use is set to become increasingly dirty (e.g. fracking, brown coal). Nuclear power is also dangerous and dirty.

Minerals extraction will increasingly produce more waste for the same useable materials and venture into valued and sensitive natural landscapes and ecosystems.

The comppgyppetition for energy supplies and natural resources has already become a matter of national security

Our Competitive Future: Land grabbing, resource wars , pressuring states to act outside international treaties, increasing unilateralism.

Cli!Conclusions! The Growth Economy The End! THANK YOU

FifiFor more information www. clivespash.org