Recent Posts

Monday, October 7, 2013

Ecological Economics Part I: A Brief History

Americans have known implicitly that something is very wrong with the global economy for nearly 50 years, when the first stirrings of discontent started to shiver at the base of the economic pyramid. The 60's saw a large-scale protest movement that focused on the Vietnam War but also criticized the commercialization of American life in all its insidious forms. Though, hippies tend to be identified with the anti-war movement, tuning and dropping out was much less a critique of American foreign policy than a critique of the American way of life. The war merely gave a focal point to a wide range of special interests that would have otherwise had a hard time articulating just what they were frustrated with. That many of them were horrified by the deeper, long-term implications of the pro-growth, militaristic, corporatism, which emerged in the wake of WWII as the dominant expression of American exceptionalism didn't seem to occur to many of them. One has to wonder, if it had, would that have made a much better rallying cry than protesting the Vietnam war, considering nearly all critiques fell under the umbrella of anti-capitalism protest (feminist, environmentalist, ecological, anti-war).

At any rate, hitching their protest movement to the horses of war  had the ironic result of giving the protesters very little to be officially upset about when the war ended. Thus economic criticism fizzled in the 1970s and was nearly completely squashed in the 1980s as Reagan, riding a cresting wave of cheap fossil fuels and capitalistic enthusiasm, seemed to prove that perpetual economic growth was possible, and that America would remain at the top forever.

The 1990s was powered by the conversion from an industrial economy to a service economy and all the necessary infrastructure, as well as the opening of the BRIC markets to foreign investment. But, though the 90s seemed like a freewheeling, prosperous time, the conversion to a service economy was really just a one time boost that fizzled by the turn of the 21st century, once there was no more outsourcing to do, and all the fat had been cut from domestic payrolls.

So, by 2001 most American companies, seeking new markets to fuel their need for growth, moved into the financial markets, taking advantage of new and exotic financial products in order to make their money work overtime to compensate for the fact that there were precious few growth opportunities in the real economy. Real estate and the barnacles of financial products that clung to it was the easiest target and so the real estate bubble blew and blew and blew, until it blew up. And now, 5 years later, the money people, having been bailed out by governments worldwide, are busy engaging in the same shell game that got us in trouble int he first place and the stock indices climb higher and higher, though the real economy, the so-called Main Street, is still suffering as though there has been no recovery at all. The companies that survived are still searching for the next growth opportunity, but having blown up manufacturing, service, real estate, and the banking industry, they're a left with precious little to eat up in the name of growth.

Throughout this period of market liberalization and growth-obsession there have been a long stream of protest movements that have focused on a wide array of critiques of the global capitalist system, but very few have had a solid economic grounding from which to offer an alternative. However, in 1996, after two decades of shouting in the wilderness, Herman Daly published his book Beyond Growth, which spawned a whole cottage industry for what would eventually be called ecological economics. Daly's theory, pulling from ecology, was that economic growth was the problem, and that the constant pursuit of growth would only lead to resource scarcity, and ultimately to economic collapse. Essentially the theory is a two-pronged attack on the current capitalist model, one focusing on the damage inflicted on the natural world through growth, and the other centered on modern accounting principles, which allow companies to ignore the true costs of production, hence subsidizing those processes that are most destructive to the natural world. What Daly and his acolytes ultimately call for is a steady state economy, which actively promotes full employment over growth, and accounting standards that take into account the primacy of what they call natural capital in the human economy and attaches a value to this natural capital, thus promoting a human economy that is in sync with the natural economy.  

This theory is complex, with a ton of moving parts, but over the next few weeks I'm going to discuss each of the individual critiques a little more in depth, to help bring out the most salient points.