Managing Without Growth Review

Managing without Growth review Peter A. Victor Prologue The author wants people to question their own beliefs that success equates with the accumulation of material goods. We believe that economic growth must never be sacrificed; Even a green economy must still grow. Stopping or reversing economic growth is anathema. Chapter 1: The idea of economic growth The government obsession with delivering economic growth is a recent phenomenon, having developed during the 20th century. The idea of progress is one of the defining and most powerful elements of Western civilization. Progress -Assumes that there is a past and a future -Assumes that man is in charge of his own destiny, and that actions made now causally influence future status. -Weighs different conditions as better or worse than others, hence creating a metric for the measurement of progress. -Until the Enlightenment, people had no concept of progress and believed that the world was either the same as it had always been, or was declining. -Modernity is the very idea that humans are in control of themselves and their world. -The idea of progress began in 1500’s Western Europe as two things happened. Science— the objective study of how certain events influenced later ones—came to be. The area also began to experience noticeable increases in the standard of living thanks to new technologies, convincing people that positive change was indeed possible. [Interesting example of positive feedback—new technology convinces people of its worthiness, spurring attitudinal changes that lead to greater investment in technology.] -During the 1700’s, development of the idea of progress diverged in England and Continental Europe. The English accepted societal structures and focused on expanding the economy as a means of progress. French thinkers continued to stress the need to reform both the economy and social structures to attain progress. This shaped later events. Today, “development” best defines the old French model of progress. -By the 1800’s, educated people across the Western world believed in the idea of progress, and many historians were validating it by developing theories of growth based upon changes observed across history. -Few people today question the idea of progress. Economic growth as a measure of progress -GDP is the most frequently cited measure of progress -However, it is poor for this purpose since GDP takes into account production of things that might indicate declines in quality of life, like greater spending on police and military, on healthcare, or on means of pollution control. [But spending on the military and healthcare might be on research, which could spur development of more useful products later.] GDP also does not factor in depreciation of capital stock or the value of unpaid, volunteer, and black market labor.

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-GDP became an important measure during WWII because it clearly indicated how much war materiel a state could make. -At the end of WWII, the West was concerned that the Depression could return, so economic growth became an obsession. Keynesianism and full employment -Keynes did his work right before WWII. He disagreed with mainstream economics in several important ways. First, he believed that the unrestrained free market created high unemployment and underutilization of capital. Second, he believed that lower wages— generally touted as the cure to unemployment—hurt the economy by sapping consumer spending. -Keynes believed that the government could keep unemployment low and aggregate demand high by using taxes appropriately. -Keynes believed that deficit spending could be justified as a real means to stimulate the economy, and that high taxation could be used to cool the economy down and stop inflation. -Right after the war, the Anglosphere committed itself to full employment via Keynesianism. Full employment is also a feature of the UN charter. -Before Keynes, it was recognized that governments were needed to regulate markets and monopolize some important industries and services, but it was never believed that government could create full employment. -The West managed to make Keynesianism work until the early 1970’s when high oil prices caused stagflation. Antiinflationist monetary policies then became popular to solve the problem. From full employment to economic growth -Keynes factored investment into AD, but did not take into account that fact that many investments increase productivity and employment. -Economic growth thus became necessary to ensure full employment, and governments made the former a policy priority. -The prestige competition of the Cold War also drove the West to build their GDP’s as fast as possible. Economists question growth -Some notable economists began to do so starting in the late 50’s. -Ezra Mishan focused on the costs of economic growth to welfare, which of course is the variable which the entire economy strives to augment. -By the 1970’s, the environmentalist movement was also beginning and, though without economic basis at the time, allied itself with antigrowth economists. -Mainstream economists believe that free market mechanisms can alleviate the effects of resource depletion, with new technologies being developed to replace or more efficiently use resources as they become scarcer. However, this mechanism fails (market failure) if clear property rights are not applied to the resource (tragedy of the commons). -If owners of a resource believe that consumers are about to switch to something else in light of the resource’s growing scarcity, the producers will increase production rates to lower prices and increase consumption, which only accelerates the rate of depletion [2008 oil price cuts]. -Economist Arndt is an optimist who stated in 1978 that there was no reason world grain production increases couldn’t exceed population growth for generations. But per capita

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production actually peaked in 1984. (Grain meets the majority of the world’s food needs, directly, and indirectly as animal feed) -The author believes that the food supply will become inadequate to feed future populations as water, land and cheap energy resources are expended. -Arndt’s observations of economic growth: *There is presently no firm evidence that loss of nonrenewable resources like water will cap growth early, though it is possible this century. *The costs of economic growth rise relative to the benefits as incomes rise. *People’s appetites for material goods are insatiable and they will not voluntarily sacrifice further gains. *Economists and the public should pursue smart economic growth. Economic growth remains paramount -The author believes that growth should be sacrificed to ensure just distribution of wealth, both within and between countries. -The OECD was founded in 1960 to promote economic growth among its members. -Other foci like free trade, reducing debts and encouraging innovation are all just means to achieve higher economic growth rates. Sustainable development -Became a buzzword starting in the 1980’s. -Is vaguely defined, allowing governments to adopt a false commitment to sustainability without sacrificing growth.

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Chapter 2: Why manage without growth? People who live in poorly planned or excessively large cities understand the need for intelligent growth. Well-directed growth requires the strategic preservation of green spaces and natural resources, hence the existence of government agencies devoted to such causes. This book examines whether the goal of growth is even good for the citizens of rich countries, or for poorer countries who are impacted by the actions of the Developed World. While GDP growth is necessary in countries where growing populations would divide wealth into diminishing shares, populations have stabilized in the First World, meaning growth is no longer necessary to maintain our current quality of life indefinitely. Managing without growth is entirely possible, as the beginning 99% of human history— where growth was practically nonexistent—shows. [But that was before the idea of progress took hold in peoples’ minds] Low- and middle income countries still need to grow, but rich countries don’t. Since needs are always insatiable and resources always finite, even perfect management of growth and resources will never be entirely satisfactory. “Managing” in the book’s context means ensuring responsible division of resources and growth and coping with less growth and possibly fewer resources. Herman Daly’s 1996 work is cited: -Daly defines growth as an increase in the raw productive capacity and material possessions of a country. Development entails using available productive capacity and wealth in ways that improve human welfare. -The two metrics are entirely distinct: A country can grow without developing and vice versa. -Daly believes that growth in rich countries became deleterious to the world years ago. Economies as open systems -Economies are open systems, meaning they consume resources and output wastes and useful products. They interact with their surrounding environments. -The Earth is a closed system since there is virtually no exchange of physical material with its surroundings. Energy transfers occur, but do not affect the definition of the type of system. -Therefore, the economy’s impact is confined to the Earth. -The fact that energy resources are mined in one place and used elsewhere makes it difficult to track national contributions to pollution. -The environment supplies materials and energy to the economy, and purifies the air, land and water, neutralizing the effects of human pollution to a degree. Energy planning or energy determinism? -Energy demand forecasts are dependent upon forecasts about the size and composition of the future economy. -However, the reverse is also true—the availability of energy resources also shapes the size and composition of the economy. Cheap gas created suburbia. Open systems and Russian dolls -Open systems are nested—surrounded by—within larger open systems.

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-The human economy became appreciably disconnected from the natural world during the Industrial Revolution, which unsurprisingly coincided with the birth of economic theory (Adam Smith). Commodification -Commodification is the conversion of something outside the economy into something tradable and of value. -The commodification of labor was a major accomplishment. -An example of commodification might be bottling and selling water from a spring whose water was previously available freely.

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Chapter 3: Systems, information and prices Prices do not always convey accurate information about the true costs of a product, so buyers and sellers to not adjust their behaviors enough. This is due to a number of factors that undercut the formation of true markets: -Products sold by different firms are rarely homogenous in the real world. -Most consumer good categories are dominated by a few types of big-name brands, which can set prices to a degree. -Barriers to entry are often high enough to prevent many potential firms from entering. -Consumers rarely have the time or resources to fully research the market and to find the absolute cheapest price. -Externalities—which often involve damage to the environment—are rarely factored into the prices of goods and services. -People and firms often do not behave rationally in that they don’t consume or produce in ways that promote their own well-being in the long run. Satisfying apparent self-interest is often shortsighted and brings additional costs later. The theory of second best Price distortions in one product will also distort prices of all other goods that use the first product as an input. Petroleum-based energy sources often don’t internalize their environmental costs. Low prices encourage greater use of a resource, which can make it scarcer with time and lead to higher prices. “Dynamic efficiency” is the phenomenon in which future technologies and market adjustments are expected to match future demands and changes. If real incomes are expected to rise, it will become justifiable to some to consume more resources now since people will be able to buy them regardless of higher prices later. Prices alone often don’t send complete signals about the costs and benefits of our actions. GDP is therefore a flawed measure of welfare and of the direction of the economy. A society must allow freedom of information so that citizens will be informed of the ways their consumption might be hurting the environment and ultimately themselves.

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Chapter 4: Limits to growth – sources Past forecasts of imminent catastrophe from resource exhaustion have not come to pass because economies have shifted from goods to services production and because of dynamic efficiency. This chapter will explore whether the Earth will someday impose constraints upon human growth. Philosopher Thomas Malthus was the first major thinker to address the subject of Earth’s human carrying capacity. The book concedes that the percentage of humans living in abject poverty has declined, but the absolute number is still rising thanks to a growing overall population. [Way to see the glass half-empty…] In 2007, 3 billion people lived on less than $2 per day. With such miserable figures, it is unsurprising that people tend to form a negative impression about the future of humankind. Malthus predicted that population growth would outpace increases to food output, leading to mass starvation. He failed to anticipate improvements to agricultural technology and techniques, along with other measures that helped to reduce the human reproduction rate. In the mid-1800’s, W. Stanley Jevons correctly predicted that Britain would later be displaced as the world’s main coal producer as its easily accessible mines were exhausted and German and American mines came on-line. Scarcity and Growth was published in the 1950’s and showed that resource prices in the U.S. had declined since 1870, in spite of growing demand from a growing population. “Old scarcity” – shortages of raw resources like oil or timber “New scarcity” – loss of broader environmental health and biological diversity Prices for resources can be disconnected from their abundance. Total material requirements—the total amount of resources that is directly used by the population, or that must be moved or altered to access more useful resources—has increased with time, even in postindustrial economies. Postmodern, service-based economies only slow, not reverse, the growth of resource consumption. This is a more general trend also present in Developing countries: Better technologies definitely increase the efficiency with which resources and materials are used, but output is growing so fast that on balance the amount of waste is growing per capita. Total material throughput has increased. The “Anthropocene” period began 10,000 years ago and marks the period in which human activity has had a significant impact upon the biosphere. Energy -Until the Industrial Revolution, humans were dependant upon renewable sources of energy like firewood, windmills and draft animals. The first nonrenewable fuel was coal. -Coal was only overtaken by oil in the 1960’s, and today the former is making a comeback as the world’s fastest growing fuel, mainly because China has one of the largest coal reserves and is mining it for rapid industrialization. -Wind, hydroelectric, nuclear, and solar power produce electricity as primary energy. Fossil fuels are primary energy in themselves, and are combusted to produce electricity in power plants as secondary energy.

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-M. King Hubbert was a respected geologist who worked for Shell Oil and the USGS. In the 1950’s, he predicted, based on his analyses, that U.S. oil production in the lower 48 states would peak around 1970. This proved extremely accurate. -Today, it is accepted by everyone that the world will also experience a peak in oil production, followed by a long decline. However, there is no agreement over when this will happen. Some believe it already occurred in 2005, while others think it won’t happen until the 2030’s. -Supporters of an earlier peak oil date cite the fact that, since 1981, more oil has been consumed than has been discovered. -A gradual decline in oil production starting farther in the future would be manageable since better technologies would allow the world to shift to alternative energies with little pain. -The sudden or early arrival of peak oil would be a political and social disaster, and rich countries will be tempted to take over poorer oil-rich states to secure energy access. -The energy and transportation sectors would take years to switch from fossil-fuel power to electric power from renewable or nuclear sources. -The depressing truth is that peak oil will probably lead to increased use of coal and natural gas as substitutes, and not to a world of 100% clean, alternative energy generation. -Slowing the growth rate in Developed countries would allow more time to develop better clean energy technologies and to retool power grids for cleaner sources of production.

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Chapter 5: Limits to growth – sinks and services Sinks -Refer to natural features and processes that can degrade wastes produced by humans. -Some amount of damage to the ecosystem is totally repairable. Problems occur when humans create wastes faster than the sinks can neutralize them, and the wastes accumulate. -Some human wastes are extremely damaging or take very long periods of time to decompose. These are major problems for natural sinks. Lead and CFC’s -Thomas Midgely Jr. was an employee for GM who discovered that lead additives to gas made engines run smoother and that CFC-based refrigerator coolant was superior to what was being used at the time. He was hailed for these discoveries, which later turned out to be very polluting. -The failure to determine the life cycle of lead and CFC’s and their impacts on the environment highlights the sort of thinking that prevails in a world where the implications for economic growth are foremost. -In 1974, it was discovered that CFC’s were destroying the ozone. In 1987, the Montreal Protocol effectively banned CFC production worldwide. -Reasons for the rapid response: *Consensus among experts about the harmful properties of CFC’s. *Small number of CFC producers made the industry easy to control. *High public awareness of the problem. *Availability of cheap substitutes for CFC’s (HFC’s and HCFC’s). -A CFC black market existed for a time, anyway. -Nevertheless, atmospheric CFC levels will not decline to pre-Midgely levels until the late 21st century. Thousands of people and habitats will continue to suffer until then. Climate change -In 1896, Servante Arrhenius calculated that a doubling of atmospheric CO2 levels would raise temperatures 5ºC at the equator and 6ºC in temperate areas. -The 2007 Intergovernmental Panel on Climate Change now estimates that a doubling would result in a 2-4.5ºC rise. [Arrhenius was on the right track.] -A 1988 international conference in Toronto marked global warming’s entry into the public consciousness. -The Kyoto Protocol was ratified in 1997. -CO2 stays in the atmosphere for a century. The sink for absorption is full. Even if CO2 emissions were to stop today, the damage already done will remain for a long time. As such, the human race will inevitably need to adapt to CO2-induced climate change to a degree. -The European policies aim to keep the global temperature from increasing no more than 2 degrees. Nuclear energy -Nuclear waste is a good example of a manmade waste which overwhelms the natural sink, which is almost nonexistent. Ecological destruction/loss of “services”

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-The Amazon rain forest is being destroyed, threatening ecological diversity and the communities that depend upon the rainforests. -Overfishing has caused several fisheries to collapse. Once populations shrink below a certain threshold, collapse occurs rapidly. The aquaculture (fish farming) industry’s use of chemicals to promote fish growth and health has also damaged the environment and again shows how the obsession with growth blinds people to taking normal precautions and exercising due diligence before acting. -Depletion of freshwater supplies will cause suffering and even war this century.

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Chapter 6: Limits to growth – synthesis Actions in complex systems often have unintended consequences. This idea formed the basis of the book The Limits of Growth. The Limits of Growth (1972) -Commissioned by the Club of Rome—a group of unelected people from several countries who were concerned about humanity’s future. -Attracted a lot of media attention upon release. -If current demographic, pollution, and industrialization trends continue, limits to all growth will be reached by 2072, probably resulting in a sudden collapse of all aspects. -This is not inevitable: A sustainable global lifestyle could be instituted. -The odds of achieving the latter outcome diminish as time passes. -A prime criticism from economists was that the analysis did not factor the impact of rising prices of scarce goods and their ability to force conservation or changes in behavior. -The book also rated the ability of new technologies to avert disaster as being low. -Critics contend that there are too many unknown variables to make such predictions so far into the future. -Follow-ups to the book have yielded the same conclusions as the original. -On the flip side, the critics could be putting too much faith upon the ability of prices to send reliable signals and upon the ability of technology to solve problems rapidly enough. Using only renewable resources and present technologies, the human race would not be able to support itself. The use of nonrenewable resources is the only thing keeping us going at this point. “Ecological footprint” often refers to the land area needed to grow enough trees to sequester the carbon produced by the entity in question.

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Chapter 7: Scale, composition, and technology As of 2007, the world population was 6.6 billion. This could be 7.6-10.6 billion by midcentury, largely depending upon fertility rates. Over half of the world’s population is urban. A service-based economy pollutes less than an industrial one, but often, such a switch merely relocates pollution to poor areas that handle the industry. While this book doesn’t question that technology and growth have made the world a better place since the Industrial Revolution, it challenges the notion that it can continue to do so indefinitely into the future. Knowledge may increase exponentially, but remember that it is still possible for knowledge to be forgotten, or for it to fail passing down generations. Brander (2007) reported that the rate of technological growth had slowed since the 1970’s, with most growth occurring in the highly visible consumer technology sector. The IPAT equation is used to examine the interrelation between scale, composition and technology. I = P x A x T where I = impact on the environment, P = population, A = affluence/per capita GDP, T = technology (impact on raising GDP) A criticism of this equation is that the right hand variables are independent when in real life they are interrelated. The equation also fails to take into account regional differences and casts the world as a whole. A better equation that is more detailed can also be used. [Too long to write down] The equation shows that switching to a service economy helps the environment, but sometimes just displaces manufacturing to other countries. Net pollution is the same. Technology is left to halt pollution. Much of the apparent switch in the OECD from goods to services economies comes from accounting artifacts: All of a manufacturing firm’s internal expenses are classified as “goods manufacturing,” but if it outsources its nonmanufacturing components like IT, HR, and accounting, those are now classified as “services.” The total amount of manufacturing and hence pollution thus remains constant, even if the economy “switches” to being services-based. Even if services comprise a large share of the economy, the growth in the absolute size of the economy can ensure that even the smaller share of goods manufacturing represents a net increase in the number of goods made. [OK, but this doesn’t take into account how new technologies make goods production more efficient] The household switch to consumption of more services is also deceptive: People are overwhelmingly consuming larger amounts of goods and services, with most of the new services being purchases of things the consumers used to provide for themselves (restaurant meals, car washes, etc.). This occurs thanks to higher incomes. Consumption of goods in the OECD has massively increased. Shipping of goods, which is a growing industry thanks to international trade, is classified as a service. Key point: The growth of the “services” sector doesn’t mean pollution is decreasing. Technology and environmental impact -Technology may or may not be able to save the environment. There is no way to know. The prudent course is to err on the side of caution and to slow growth.

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-New technologies are always a two-edged sword, bring new advantages and problems. Slowing growth would allow a more thoughtful development of technologies, avoiding the pitfalls. [I’m not sure about this: The bad uses will always eventually surface.] -It is unrealistic to expect technology to solve all of our problems: Climate change and damage to ecology involve very complex and poorly understood systems which we would probably fail to fix. Preserving the genetic information of near-extinct species would also be of dubious value towards future reintroduction since their former habitats would be gone. [Habitats could be restored with enough time] -Improvements to technology, especially where it comes to efficiency can take very long periods of time [gives the example of the steam engine, but ignores explosive growth of other technologies like computers]. -When people get more efficient appliances like lights or heaters, they tend to use them more or buy them in greater quantities, negating possible price and pollution savings. [Not true in all cases—if you buy lights that are 3x efficient, you don’t leave them on 3x as long because this is too much of a behavior change.] Making room – the case for carbon -Many environmentalists believe that carbon emissions must be radically cut by midcentury to avoid catastrophic global warming. No one knows exactly what concentration of CO2 will cause disaster. [Also, what constitutes “disaster”? Bangladesh flooding? The other 99% of the world would be fine.] -Others argue that further economic growth is needed to allow all economies to survive the expensive switch to cleaner economies. -The fact that almost all remaining population growth will occur in poor and middling countries is good news since people there consume fewer resources. -Global CO2 production must decline by 2.5% every year (compounding interest makes this big in the long run) for the next 50 years to reduce CO2 emissions by 60%. -If projections for slow population growth hold true, CO2 increases will be much smaller. -The developed countries’ populations will grow only a little before shrinking, so we can assume a net 0% growth rate until 2100. -If the Developed countries can have no population growth, no GDP growth, and increased energy/materials efficiency thanks to conservation and new technologies, their CO2 emissions can decline by 40% over 50 years. -If Third World countries grow as they did during the 1992-2002 period, net CO2 production will decline by 15%. -Continued economic growth in the Developed World pressures Third World countries to do the same: The first group doesn’t need more wealth while the second does. It is not fair to force poor countries to pay the burden for increased energy efficiency. Economic growth, CO2 and energy -As GDP increases, per capita CO2 usage also increases—efficiency is not obtained with newer technology. -The historical record shows that faster economic growth is not required to pay for CO2 mitigation. -In the Developed world, slower rates of GDP growth have been associated with faster drops in CO2 and switching to greater energy efficiency.

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Chapter 8: Economic growth and happiness Famous scientist Richard Layard believes that high GDP does not make people happier. U.S. real per capita GDP has more than doubled since WWII, but average happiness is the same. [A more complex analysis of the data is needed: Other changes have happened since then to affect happiness] Unemployment and inflation are negatively correlated with happiness as well. Once income hits $15,000 per year, money cannot bring further happiness. [This is obviously not true in the U.S.—people making that much money have to miserably struggle just to survive.] Studies have shown that increases in relative income cause far greater increases in happiness than increases in absolute income—people naturally want to feel superior. Studies also show that social attachments are far more integral to happiness than wealth, which is a knock at the capitalist system. People expect higher levels of wealth to bring them greater happiness, but they overlook the fact that more wealth brings more responsibility and pressure for even greater gains, so the original expected utility is less than what is actually realized. Daly believes that the externalities of economic growth (chiefly, pollution) start rising faster than the accretions to happiness beyond a certain point, making the overall growth uneconomical. The general progress indicator (GPI) is an alternative to the GDP as a measure of wealth. The former factors in environmental damage, crime, family breakdown, etc. It shows that U.S. real wealth has plateaued since 1980. The book admits that GPI is an imperfect measure. [I am very impressed with the analytical, thoughtful, objective tone of this book.] How does one quantify the economic damage of CO2? Should the damage a given amount causes in its year of emission be just counted, or should it be counted continuously over many years as it continues to hurt the environment? Consumption: Useful goods, status goods, and public goods -Positional goods: Part of the utility depends upon other people not also having them (if everyone has a car, you suffer in traffic jams, or if everyone has a house in the suburbs like you, sprawl is the result) -Positional goods make wealth increases zero-sum, at least to a degree. -Status goods: Not necessarily useful, but they convey something special about the owner and become less valuable as other people acquire them. -Public goods: Nonrival and nonexcludable A society in which people strongly desire goods for their status connotations is therefore dangerous since it leads to high consumption with zero sum growth in happiness. Mainstream economic models ignore positional motivations and therefore cannot explain purchases of huge amounts of goods and services. Luxury taxes are therefore justified since they prevent activities that would encourage other people to waste their money and produce hurtful externalities in a self-defeating spiral. The externalities are internalized by the tax. Problematically, most goods and services are in part useful and in part also just status symbols. It is hard to separate the different aspects of utility for analysis.

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Computer analyses of economies where peoples’ economic decisions are in part motivated by status seeking indicate that advanced economies will, in time, start focusing their R&D resources towards developing new status goods. After a while, almost all innovation will be towards creating new trinkets that have little real use. People derive little utility from them as they proliferate. (Cooper, Garcia-Penalosa, Funk) It is impossible to win a race for status within our society. There must be some other focus. As people grow wealthier, they enter into new socioeconomic levels, and expectations are raised, so what was previously considered wealthy or special is now just average. The struggle for superiority thus never ends and never leads to happiness. Wasteful consumption could be curbed by convincing people to change their values.

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Chapter 9: The disappointments of economic growth Economic growth has benefits, but also social and environmental costs. -Pollution, loss of species. -Overcrowding, crime, alienation, loss of old ways of life The costs and benefits of economic growth are often unequally distributed -Poor people often suffer the externalities generated by the rich -Entire poor countries are sometimes subjugated or colonized so that a rich one can extract wealth from it. The sort of growth the West has experienced cannot be extended to the rest of the world unless the West constrains its own growth: The planet can only bear so much. It is only fair to allow the poor countries to grow while the rich ones suspend growth. Economic growth has failed to meet its objectives: full employment and poverty elimination. Full employment -Growth in the size of the labor force and in individual productivity prevent full employment -Reducing the length of the work week would allow the work to be spread among more people, decreasing unemployment, and better technology would allow more work to get done. [Not as bad as it sounds—the work week used to be 60 hours, and there is no reason 40 hours is the human optimum. We might enjoy further decreases.] Poverty -Defining poverty is problematic: Some define it as the absolute inability to pay for basic goods and services while others define it relatively, say, as having an income less than half of the country’s median. -In Canada, poverty levels have stayed in the same range since 1980. -Relatively small direct transfers of national wealth to poor citizens could eliminate poverty. Economic growth and income inequality in Canada -Gini coefficient varies from 0 to 1 and measures income distribution (0 is totally the same, 1 is totally unequal) -The Canadian Gini has risen since 1980. -Most of the economic growth during that period occurred among the wealthy, with the middle and lower classes staying basically the same. Some explanations for the rise in income inequality: -Since greater numbers of people go to college, more are taking on student debts. Upon graduation, these people take on entry-level jobs that are low paying. Hence, the ranks of low-paid workers with heavy debt burdens increases, even if higher education is positive in the long run. -Easier access to credit makes people more debt prone in general. Poorer people are especially prone to this. [Is it somehow the fault of rich people that poorer people get themselves into debt?] -Accretions to the stock market primarily benefit wealthy people. -The sizes of inheritances have been increasing. Economic growth and the environment

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-Kuznets curve: Environmental damage peaks during the early phases of industrialization and then steadily declines thanks to more efficient technologies and more focus on the environment (people have the time and money to care about it once they get rich enough). -But as we have seen higher consumption and the simple movement of polluting factories overseas offsets and explains much of the apparently observed pattern. -Measures of pollution trends in Canada are mixed, but show that economic growth has not brought universal declines in pollution.

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Chapter 10: Managing without growth in Canada – Exploring possibilities Keynesian economics lost ground to monetarism in the 1980’s and 90’s. If full employment, lower poverty, and a better environment can be achieved without economic growth, than the case for the necessity of the latter is undermined. LOWGROW is a computer program that allows the economy to be modeled. Different values are assigned to the program to simulate how different policies will affect Canada by 2035. Business as usual -Economic growth, but worse poverty and environment. -77% rise in CO2 No growth in any area -An economic disaster, even if phased in over 10 years. -Unemployment triples, GDP drops, more debt Low growth then no growth with high investment -Some increases in productivity and public and private investment. -Strong government wealth redistribution programs. -Length of work week reduced to encourage more employment. -GDP rises then levels off, poverty dramatically declines along with unemployment. -CO2 emissions rise 30%. Low growth then no growth with a higher trade balance -The same as the last scenario, but with less investment and a higher trade balance. -Same effects as the last scenario, but with only 14% more CO2 emissions. Low growth then no growth plus a carbon tax -Same effect as above, but pollution drops from 2005-35. Conclusion -A no growth policy can be disastrous if implemented carelessly, but can be beneficial if properly structured. -LOWGROW cannot account for regional or sectoral differences in pollution and productivity.

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Chapter 11: Policies for managing without growth Summary of the book so far. Controlling population -Zero economic growth requires zero population growth to avoid per capita decreases in wealth. -Many OECD countries are already at or below this point. -The natural born Canadian population will start declining by 2040. -Immigration could solve indigenous population decline problems and even lead to substantial growth. -Developed countries typically favor immigrants who bring valuable skills or money that can improve the economy. However, this hurts the Third World countries (brain drain) from which they come. The poor countries need these people more than the Developed ones do. [Argument against immigration?] -Optimists note that these immigrants send back remittances and that their departure opens opportunities to others within their home countries. -There is debate over the impact of immigration in light of these factors. -Limiting immigration for ecological reasons is difficult since opponents will perceive its true aims as being racist. -Increasing the quota for refugee immigrants and family reunion immigration while decreasing the number of skilled worker immigrants would allow Canada to maintain immigration without depriving Developing countries of the talent they need more than Canada. [Jesus, talk about demographic suicide…] -Immigration policies can keep the population stable in Developed countries while also serving humanitarian ends. Environment -Daly believes that the size of the economy should first be capped, and that afterwards, and equitable distribution of resources should be decided. -Daly’s three principles of environmental management: *Renewable resources should not be harvested faster than they regenerate. *Nonrenewable resources should not be used faster than alternatives can be developed. *Pollution rates should not exceed the rate of natural recycling. -Daly focuses on restricting the size of the economy by limiting inputs. This neglects the fact that outputs cause environmental damage, too. Both ends should be restricted. -GDP growth should be halted, along with growth in throughput. -Policies for limiting throughput *Limits on fish catches *Limits on (sub)urban sprawl *Limits on total pollution emissions *Current restrictions merely cap the concentration of pollutants that a facility may emit; they do not cap the total amount of pollution in the environment. This is the case for greenhouse gases. *Discussion of the cap-and-trade system *The U.S. created such a system for acid ran precursors under the Clean Air Act of 1990. *An alternative is to tax a type of pollution and then to adjust the tax rate until the emission rate is at the desired level.

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*An international carbon trade market would make sense since the substance is the same and does not really produce localized effects. Poverty -Poverty implies social isolation and shame along with lack of money. -Addressed with a battery of redistributive government policies, especially benefiting children and families. -Running a purposefully inefficient economy would allow the work to be spread better, providing jobs for women and the poor. Reduced work time -From 1870-1970, the work week dramatically decreased in length thanks to better productivity and the labor rights movement. -This decrease slowed much thereafter and stabilized in the Developed World in the 1990’s. -Further decreasing the length of the work week could combat unemployment. -Pay would have to be reduced for everybody. -The government would have to spend money training the currently unemployed people to work. -Salaries can be changed, but fixed costs per employee (retirement, healthcare, dental care) cannot, so expenses will mount. -Employers must be prohibited from allowing people to work overtime, or else the expansion in the labor force will not occur. -A shorter work week would increase happiness since people don’t realize that they gain less utility than they think from increasingly large amounts of money. Investment -Investment, productivity and technology are tightly interrelated. -Investment in new infrastructure, buildings and equipment usually leads to higher productivity. -Ecological economists want a zero-growth economy, which means curtailing types of investment that lead to most types of economic growth. However, investments in areas like healthcare, education, and recreation could and should be supported. -Investments that lead to more private, status goods should be reduced. -Specific types of taxes like capital and capital gains would be useful for the ecological economist agenda. -Taxes on investments that increase throughput or environmental damage should be increased. -Tax benefits should be offered to entice firm owners to maintain existing machines and capital. Productivity -Increases in productivity that allow the same finished goods to be manufactured with fewer material inputs are always welcome. However, increases that allow the same output using fewer workers are more problematic, and must be compensated for by expanding the economy and GDP in some sustainable way. -The better solution is to just keep everyone employed but just reduce their work hours as productivity improves. Technology

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-New technologies usually reduce the monetary costs of production, yet often there are externalities mainstream people don’t appreciate: The new technologies might be more polluting in some way or may require scarce resources to build or fuel. -The 1974-95 Office of Technology Assessment (OTA) provides neutral analyses of the effects of new technologies. -European countries still have such agencies. -They are a good idea since they allow policymakers to consider all consequences of a new technology before allowing its widescale use. International trade -There is a basis for international trade insofar as different countries have different levels and types of labor, resources and capital. Daly contends that this is undercut by the fact that all three have become mobile in the modern world. -The environmental costs of transporting things to support international trade in all its aspects should also be considered. -International trade also leads to unemployment among low-skilled workers in rich countries and worker abuse in poor countries. -Furthermore, is it democratic for politicians to override the anti-free trade sentiment that prevails among most citizens to instead satisfy an economic imperative? [What if the underlying bases for protectionism are irrational and self-defeating? Does it really matter how many uninformed people support it in that case?] -Mathematically, international trade cannot be a net surplus or deficit: Every country with a trade deficit must force another country into a trade surplus of equal value. Since surpluses are economically valuable while deficits are hurtful, international trade agreements should be refashioned to allow poorer countries to run surpluses while richer ones deal with deficits. Consumption -Advertising should be informative and less intrusive, not omnipresent and aimed at artificially changing preferences in ultimately useless and self-defeating ways. -Current modes of advertising do not promote wellbeing. -Taxes should be high on status goods and low on useful, durable goods. Managing without growth in one country? -A single country would have difficulty pursuing zero-growth policies since it would violate international agreements. It might be necessary to withdraw from some of these treaties. -If a country instituted zero-growth policies, rich people would move their assets overseas, and skilled workers might leave entirely rather than suffer lower wages. -The effort can only succeed if people all over the world change their values to be less materialistic, and if the government helps from its end.

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