Mar 062012
 
 March 6, 2012  Posted by at 12:39 am Earth

Herman Daly is a formidable mind. He has been writing for many years about the true effects of clinging to our perpetual growth paradigm. Daly concluded long ago that the solution to the plethora of problems this paradigm leads us to would be to move to a steady state economy. This conclusion is questioned by many, and perhaps not always for the wrong reasons.

There can not really be a question, though, about the data that bring him to his conclusions. From a purely economical point of view, we can see that the added value conveyed by every additional – borrowed – dollar has at the very least threatened to become negative.

That would of course mean the end of the game, even if those operating in the narrow confines of the financial world are loathe to even contemplate it. They see nothing narrow in their view of the world. For them, they are the world. They will simply refuse to entertain the idea that injecting more money/credit could start leading to less growth.

But the numbers don't lie; if there's any growth left, it's very marginal. And that's in a system where externalities, the costs of things like depletion of resources and pollution resulting from consuming resources, are simply not counted. We discount the future, by pretending we live only in the here and now (and damn our children). It's our reptillian or even amoeba brain speaking.

In short, we may have already reached the point where there no longer is any economic growth, there is only uneconomic growth. Or as Daly puts it: "illth increases faster than wealth".

This realization is a major threat to our economic system, and it will therefore continue to be completely ignored and discounted – until the system collapses -. Businessmen, bankers and politicians realize they owe their positions to the growth paradigm. No present-day banker or businessman will make a profit when the paradigm dissolves, nor will any incumbent politician be re-elected on a platform of "hold it right there".

From their point of view, this is a logical conclusion; for mankind as a whole, it's the stupidest idea ever, and a very destructive one. It's just that the destruction doesn't take place at this moment. It takes place at some point in the future. And so we ignore it; we discount the future, and we discount the lives and well-being of our children.

Here's Professor Daly's latest:

Uneconomic Growth Deepens Depression

The US and Western Europe are in a recession threatening to become a depression as bad as that of the 1930s. Therefore we look to Keynesian policies as the cure, namely stimulate consumption and investment—that is, stimulate growth of the economy. It seemed to work in the past, so why not now? Should not ecological economics and steady-state ideas give way to Keynesian growth economics in view of the present crisis?

Certainly not! Why? Because we no longer live in the empty world of the 1930s — we live in a full world. Furthermore, in the 1930s the goal was full employment and growth was the means to it. Nowadays growth itself has become the goal and the means to it are off-shoring of jobs, automation, mergers, union busting, importing cheap labor, and other employment-cutting policies. The former goal of full employment has been sacrificed to the modern ideology of “growth in share holder value.”

Growth has filled the world with us and our products. I was born in 1938, and in my lifetime world population has tripled. That is unprecedented. But even more unprecedented is the growth in populations of artifacts — “our stuff” — cars, houses, livestock, refrigerators, TVs, cell phones, ships, airplanes, etc. These populations of things have vastly more than tripled. The matter-energy embodied in these living and nonliving populations was extracted from the ecosystem.

The matter-energy required to maintain and replace these stocks also comes from the ecosystem. The populations or stocks of all these things have in common that they are what physicists call “dissipative structures” — i.e., their natural tendency, thanks to the entropy law, is to fall apart, to die, to dissipate. The dissipated matter-energy returns to the ecosystem as waste, to be reabsorbed by natural cycles or accumulated as pollution.

All these dissipative structures exist in the midst of an entropic throughput of matter-energy that both depletes and pollutes the finite ecosphere of which the economy is a wholly contained subsystem. When the subsystem outgrows the regenerative capacity of the parent system then further growth becomes biophysically impossible.

But long before growth becomes impossible it becomes uneconomic — it begins to cost more than it is worth at the margin. We refer to growth in the economy as “economic growth,” — even after such growth has become uneconomic in the more basic sense of increasing illth faster than wealth. That is where we are now, but we are unable to recognize it.

Why this inability? Partly because our national accounting system, GDP, only measures “economic activity,” not true income, much less welfare. Rather than separate costs from benefits and compare them at the margin we just add up all final goods and services, including anti-bads (without subtracting the bads that made the anti-bad necessary). Also depletion of natural capital and natural services are counted as income, as are financial transactions that are nothing but bets on debts, and then further bets on those bets.

Also since no one wants to buy illth, it has no market price and is often ignored. But illth is a joint product with wealth and is everywhere: nuclear wastes, the dead zone in the Gulf of Mexico, gyres of plastic trash in the oceans, the ozone hole, biodiversity loss, climate change from excess carbon in the atmosphere, depleted mines, eroded topsoil, dry wells, exhausting and dangerous labor, exploding debt, etc. Standard economists claim that the solution to poverty is more growth — without ever asking if growth still makes us richer, as it did back when the world was empty and the goal was full employment, rather than growth itself. Or has growth begun to make us poorer in a world that is now too full of us, and all our products, counted or not in GDP?

Does growth now increase illth faster than wealth? This is a threatening question, because if growth has become uneconomic then the solution to poverty becomes sharing now, not growth in the future. Sharing is frequently referred to as “class warfare.” But it is really the alternative to the class warfare that will result from the current uneconomic growth in which the dwindling benefits are privatized to the elite, while the exploding costs are socialized to the poor, the future, and to other species.

Finally, I eagerly submit that even if we limit quantitative physical throughput (growth) it should still be possible to experience qualitative improvement (development) thanks to technological advance and to ethical improvement of our priorities. I think therefore we should urge policies to limit the quantitative growth of throughput, thereby raising resource prices, in order to increase resource efficiency, to force the path of progress from growth to development, from bigger to better, and to stop the present folly of continuing uneconomic growth.

A policy of quantitative limits on throughput (cap-auction-trade) will also block the erosion of initial resource savings resulting from efficiency improvements (the rebound effect or Jevons paradox). In addition the auction will raise much revenue and make it possible to tax value added (labor and capital) less because in effect we will have shifted the tax base to resource throughput.

Value added is a good, so stop taxing it. Depletion and pollution, the two ends of the throughput, are bads, so tax them. If you are a technological optimist please have the courage of your convictions and join us in advocating policies that give incentive to the resource-saving technologies that you believe are within easy reach. You may be right — I hope you are. Let’s find out. If you turn out to be wrong, there is really no downside, because it was still necessary to limit throughput to avoid uneconomic growth.

Home Forums Uneconomic Growth: When Illth Trumps Wealth

This topic contains 0 replies, has 0 voices, and was last updated by  Raúl Ilargi Meijer 7 years, 6 months ago.

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  • #8599

    Herman Daly is a formidable mind. He has been writing for many years about the true effects of clinging to our perpetual growth paradigm. Daly conclud
    [See the full post at: Uneconomic Growth: When Illth Trumps Wealth]

    #1363

    hombre
    Member

    Excellent article Ilargi!
    This fella, Professor Daly, states in powerful, if elegant, paragraphs what any thoughtful person understands by just paying attention! One need not be a high-shingled economic scholar (perhaps better not to be) to see the damage being wrought to our globe and, as well, to ascertain the obvious limits to economic growth and expansion. You posted a winner here!
    Glad I found this page as I was wandering through the new set-up this evening, which I am finding to be less enjoyable I admit than the old format.
    By the way TAE folks, the wind blew some of us away this week and we (Hoosiers) are all trying to pitch in and fill the voids as best we can in many Indiana hearts and lives. One NEVER knows…

    #1375

    Glennda
    Participant

    This is a very important point.

    Why isn’t this trumpeted from the roof tops?

    Probably because this is not the diagnosis TPTB want to let us hear. If only our government had the public good in mind, instead of their individual re-elections. Why are our public servants doing their jobs? They should be fired. We need some wisdom in public office.

    The growth of the GDP is the opposite of the growth of the public good.

    Only a child is so short sighted that think they can grow forever.

    How about some growth in wisdom? How about planning ahead? How about some real adults in the government?

    How can we get this intelligent information more widely spread? Perhaps the Occupy Movement can be supplied with some short bites for signs at demonstrations. Maybe we should all send Daly’s articles to the White House or to our State governors.

    #1380

    Melville
    Member

    Great article… …and thoroughly depressing 🙁
    If I’d known twenty years ago what I know now, I’d never have recklessly had 3 children. I love them (and all children) dearly and am fearful of what awaits them. They expect the same opportunities and lifestyle their parents had.

    I guess my challenge is to continue to learn low-tec skills like organic farming that I can pass on to them.

    Thank you for a wonderful and unique website.

    #1383

    Greenpa
    Participant

    Melville- do NOT regret your 3 kids. While the way forward is dark; the alternative is- oblivion. Which I think is even less desirable.

    Re: growth/steady state: I came to the same conclusions as Daly 4 decades ago, when I first started to seriously study biology. It’s freaking obvious, really, if you actually put the pieces of the puzzle together and look at the picture. “Economists” really don’t; they insist on looking at only 20 pieces of the 200 piece puzzle.

    At the moment the piece I’m most interested in is the VAST momentum and inertia of the current economic fantasies. It’s staggeringly huge; and backed up by a century of fossil fuel inputs. My favorite current measure of this inertia is the manufacture and sales of – pliers.

    I have a sneaking suspicion the world already possesses enough pliers to serve all the needs of the present population; and any conceivable future population, to boot. And yet- the world continues to manufacture more pliers. Sure, there are plenty of “improved” versions to plump up the sales; and increasing numbers of special purpose pliers; but even so. We have ENOUGH pliers for the entire solar system; for all time.

    But they continue to be manufactured- and SOLD; by the millions. I think when we see plier sales start to wane- that will be the horizon when “growth economics” pushers will finally have to face some reality. But frankly- I see no pause in plier sales this year.

    So there you have it. Until we reach the Plier Horizon- the fantasy of endless growth will dominate human thought.

    🙂

    (I considered using screwdrivers as the measure, incidentally, but they are too variable, greatly increasing possible markets. Phillips? Torx? Stubby/Long? Magnetic/Non? Power/Manual? Just too much- although the reality here is the same; yes; we have ENOUGH; now.)

    #1385

    gylangirl
    Member

    This article makes me proud to be a Terp with an Econ degree.

    #1388
    #1389

    bluesky
    Member

    Excellent article. I am curious however, how “technological advance” (which Daly says will assist with qualitative improvement) is possible without a fully functioning (i.e. growing) economy.

    #1391

    John Day
    Participant

    Enjoying your input Ilargi!
    We, who are reading this, need to look at what is at hand, and how to create little living seeds to plant deeply as the forest fire roars in the distance. We have lots of resources, some under-appreciated, and some to undergo deep discounts in the near future as stages of economic withdrawal-convulsions sweep over our human world. Maybe we are in the fortunate position to be out of debt, and valued, with some resources as a result. It has been a long time since I bought a new car, but I just spent $11k in overpaid taxes on a 1.2 kW solar PV set up with 10 kWHr of nickel iron battery storage. This is not for immediate deployment, but when we settle into our longer term situation, the seed we hope will grow after the fire.

    #1397

    mrawlings
    Member

    Bluesky, good point. From where I sit we already have enough technology and more to last us forever (kind of like pliers). Much of it is completely superfluous, and some is sadly underutilized. Ultimately I see the low-tech Appropriate Technologies as being the liferaft for human civilization. It’s just a matter of how long we wait to implement these technologies on a massive scale, and how much death and destruction will result from our failure to prepare in a mature and responsible way for the inevitable results of our irresponsibility and immaturity (“our” = those of us in the developed world).

    #1398

    mrawlings
    Member

    Ilargi,

    Thanks, these are the concepts that lie at the heart of our challenges. Call it the Dominant Paradigm, the Pattern Logic of industrial civilization, ultimately it comes down to the systems which drive our culture and economy. Just like the rules of the game of Monopoly inevitably leads to one player owning everything and all the other players bankrupt, we too have been hurtling towards the natural consequences of the way we live.

    #1410

    3Point Pete
    Member

    Maybe someone can help explain this to a cousin of MMT proponent, Monetary Sovereignty. I put this most excellent AE post forward (maybe my favorite) as I regularly debate about the perpetual growth religion that MMT and MS don’t seem to address.

    The blogger, Roger Mitchell writes,
    , ” . . . the added value conveyed by every additional – borrowed – dollar has at the very least threatened to become negative.”

    He doesn’t understand that a Monetarily Sovereign nation doesn’t need to borrow, and when it does borrow, it easily could pay off all its loans in one day. Actually, he doesn’t understand Monetary Sovereignty. Period.

    He also said, ” . . . we may have already reached the point where there no longer is any economic growth, there is only uneconomic growth.”His rationale is, “the costs of things like depletion of resources and pollution resulting from consuming resources”

    Really? The world is doomed? Sounds a bit of hyperbolic to me. Didn’t Malthus say that 200+ years ago?”

    I wonder if one of you big brains could sum up a simple explanation to Mr. Mitchell. I keep thinking “Monetary Sovereignty” is a contradictory term. Sovereign means self-governing. With the Fed and central banks issuing interest bearing debt-based money it seems that we have a command economy. There is nothing self-governing about it and as MS proposes we could eliminate all “debt” with a few keystrokes, the current institutions in place will never allow that to be a reality. Am I off base? Looking to educate myself and another seemingly smart “economic expert” that seems rather cavalier about the growth paradigm’s effect on our ecosystems.

    Thanks ~ Pete

    #1414

    bluebird
    Participant

    hombre said “By the way TAE folks, the wind blew some of us away this week and we (Hoosiers) are all trying to pitch in and fill the voids as best we can in many Indiana hearts and lives. One NEVER knows…”

    My daughter in SW Ohio was caught up in the tornadoes. Luckily, she and her husband and pets are fine, her house is fine, but the tornado flattened her barn and everything in it. A dozen+ large old trees blew over, and the cleanup is a daunting task. No matter how prepared one is, Nature will always bat last.

    #1416

    HDP
    Member

    FWIW there has been an X class solar flare which NASA currently believes is at least partly earth-bound.

    https://www.spaceweather.com/

    NOAA https://www.swpc.noaa.gov/

    More in-depth from NASA https://science.nasa.gov/science-news/science-at-nasa/2006/10mar_stormwarning/

    #1425

    coffejohn
    Member

    All fine until the end when we are told that the solution is to tax resources. The problem being that the rich will continue to enjoy these resources while the poor will have to do without.

    Otherwise a great article.

    #1430

    HDP
    Member

    This article encompasses most of the Illth themes and goes well beyond, published by (repentant) former Republican Party strategist Kevin Phillips.

    Numbers racket: Why the economy is worse than we know.

    https://harpers.org/archive/2008/05/0082023

    #1431

    Greenpa
    Participant

    Great fun- Europe has in fact hit a Plier Horizon event; only, in automobiles:

    https://www.nytimes.com/2012/03/08/business/global/the-other-ticking-time-bomb-in-europe-auto-overcapacity.html

    Sounds pretty serious, actually. And speaks directly to the concept of “growth”. Not going to happen.

    #1433

    el gallinazo
    Member

    Recommend in particular tonight’s episode of Capital Account with guest Paul Craig Roberts. With Citibank hiring Watson the Robot, CA introduces the Dimonator.

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