Sustainability and Growth

The basic myth people prefer to believe is that good things will come about at little cost. This sort of myth has a warm and fuzzy feeling about it, because we prefer to believe that good ends are brought about by good means. What most people don't want to think about are the mixed cases, when good is mixed with evil.

Unfortunately, I am here to say that, in this world, almost everything is a complex choice between competing, interacting rights and wrongs. There is rarely any such thing as a clean-cut, black and white decision. Anyway, that is the way I see the world, an outlook which motivates my recent work on ethics. So, sour as it is, the following outlines some of the trade-offs involved in moving the U.S. and other First World economies into a sustainable mode.

The first problem in discussing growth is finding out what the term means. This may seem a silly endeavor, until it is discovered that "growth" means different things to different people.

1. Growth, applied locally, is interpreted as an improvement in the standard of living. Individuals and households are better off when they have access to more or better goods and services, as they themselves judge it. When people are asked about economic growth, they interpret that to mean change in their circumstances, for better or worse.
    
2. Growth, applied globally, is interpreted as an improvement in the standard of living on the larger scale of a region, society or State. The main differences from the local understanding of growth (1) are the scale and method of measurements. Global growth averages out differences between the various groups measured.
   
3. Growth, considered financially, is interpreted as a change in the monetary value of either (a) what is produced [as in Gross Domestic Product], (b) what is consumed, (c) the volume of trade or (d) the volume of money in circulation. These financial measures attempt to avoid the pitfalls in (4) of determining what goods and services are actually produced, or the vagaries of (1) and (2) which are highly subjective.
   
4. Growth, considered materially, is interpreted as the actual production or consumption of goods and services. This sort of growth is measured by counting how many widgets are produced or consumed in all the widget factories of interest (usually, within the survey region)  Services are measured by the number of people employed and how many hours they worked. This measure leads to government reports about employment, unemployment, work-week, and statistics about production in many key industries.
   
5. Growth, considered ecologically, is interpreted as the impact people have on their environment. There are several different measures of impact, the simplest of which is resource use. Resource extraction is indicated by the number of trees felled, tons of iron mined, gallons of water diverted to human use and myriads of other factors large and small.  Resource use is measured by assessing what is extracted, and what is returned substantially unchanged. Thus, household water returned as sewage counts as use, as does agricultural water contaminated with phosphates, nitrates, etc. Treated water returned in nearly the same condition as when extracted is not used. (Treatment is a cost of use.) Another measure of impact is in terms of total incoming solar radiation used. Currently. H. sapiens uses about 2/3 of the energy supplied by solar radiation, which is everything not used by non-human living things, leaving no room whatsoever for new uses.
   
6. Growth, felt socially and psychologically, is whatever satisfies people individually or in groups. This sort of growth may or may not have any measurable, economic component.

I am sure there are more definitions of growth than those listed here. But that is only the beginning of the problems in discussing economic growth. There is also the context of the issue: it makes a difference what economic system is in place. Growth issues have to be tackled differently in so-called mixed economies, as in Europe, Japan and India, neo-socialist economies, as in China and Russia, and ultra-Capitalist economies such as the United States. The United States is doing more poorly in addressing sustainability than any of the other countries just mentioned, probably because the Capitalist system makes such adjustments more difficult than other economic systems. For this essay, because the barriers to change are more obvious under Capitalism, I will concentrate on growth vis a vis Capitalism.

The key Capitalist idea affecting growth is profit. Profit is the surplus value extracted from economic transactions by the seller, after all costs are considered. "Costs" include resources (environment), wages (cost of labor), administration and liabilities to investors (cost of capital). In Adam Smith's Capitalism, sellers wrest a profit from sales because their product is scarce; i.e., consumers want more of the product than is available. It does not matter how that scarcity is arranged. Whether it is the natural scarcity of the Elixir of Eternal Youth or a deliberate scarcity created by Monopoly, scarcity is the ultimate source of profit. (Keep in mind scarcity is a two factor relationship involving the available quantity of product weighted by the desire for it.) In the Panglossian world of Smithian Capitalism, profit is justified because it somehow induces the producer to reinvest that surplus value in producing more of the desired product or, possibly, another scarce product. The "somehow induces" motive is Greed, which is supposed to drive entrepreneurs incessantly. Smith does not consider the case in which the seller walks away with the surplus value, becomes a Country Squire, and dissipates that fortune frivilously, even anti-socially. Moreover, Smith does not consider the case in which resources have an environmental cost, not just the human cost of extraction. (Of course, he may be absolved from responsibility for this omission to the extent that Ecology is a recently invented science, but that does not excuse his more recent adherents.) So, the key problems in profit-oriented Capitalism is that there is no theoretical mechanism to impose an ecological cost and there is nothing to prevent Capitalists from squandering their fortunes or acting in socially irresponsible ways. While Adam Smith did not think his system would be abused in those ways, his moral prejudices have been rebuked over and over again by what people actually do.

According to Capitalist theory, when there is no scarcity, profits disappear. When consumption balances production exactly for a sufficient period of time, surplus value should fall to zero. When supply exceeds demand, the producer will probably suffer a loss. That reasoning simply reflects common sense beliefs about human nature, and observations of auction behavior, that the more something is wanted, the higher the price. But, according to Tversky and Kahneman, the price curve is not symmetrical. People value things to which they are averse differently than those to which they are prone. So, we would expect upward price pressure - inflation - to be greater than downward pressure for the things we want, and vice versa for the things we do not want. In other words, a surfeit of things we value will not suffer as severe deflation as a surfeit of things we do not like. These observations are summarized in the idea that prices are not elastic, as Adam Smith assumed, but are actually inelastic in varying degrees. The importance of elasticity is this: the further Smithian notion of easy entry to, and exit from, markets is analogous to price elasticity. Inelastic prices may inhibit market entry, or prematurely force market exit. Inelasticity usually favors oligopoly or monopoly, and sometimes is a result of them ("rigged prices").

Here, to be fair, I need to say what "sustainability" is. One kind of sustainable environment is in balance; i.e., there is a steady state condition of inflows and outflows which maintains things as they are. In such an environment, physical and biological conditions are static over time. Now, this is a condition which never occurs in nature, as actually everything is always changing. So, it is better to modify this definition by adding the condition, "in the short run." Over a short period of time, say a biological generation or two of the dominant species in an ecological niche, not much changes. The reason for such a definition is to allow modeling of a stable environment as a reference.

Almost all ecological niches are constantly changing. They evolve from one state to another state in varying periods. Sustainability, more generally, includes this notion, where it is assumed we know how  things are changing  in the absence of human intervention. In sustainability, we are trying to capture a picture of what nature is doing  for comparison with human activities. This is an idea fraught with difficulties in practice, especially when the factors involved in niche stability are hard to observe and transient. For example, a certain niche might be kept in balance by the presence of very small quantities of catalytic substances. On the other hand, it is not that hard to observe inputs and outputs of materials used on a larger scale, or gross cycles of life and death.

In human affairs, sustainability is not a value free term; rather, it is a goal (ideal) in the management of the environment. To say that an environment or economy is sustainable is to claim that it can last indefinitely as it is. To complicate matters, this is not a claim that such an environment or economy is static. The internals of the entity might change from time to time, and its interactions with the external world might change as well. Nonetheless, there is something we identify as that entity which persists. Environments and economies are sustainable in exactly the same sense as individuals: an individual has an identity which does not change because of what it eats, how it grows or what it looks like. A maple tree changes its leaves every year, but it is still the same maple tree. That sustainability is difficult to pin down in many cases, and often changes its colors, is not an argument against it. We have to work with what we know in each case.

My reason for reciting the foregoing, which I have argued in previous work, is that the Capitalist system has to be at least modified to co-exist with ecological sustainability. A very basic change would be the assessment of costs of resource use. In other words, when water or land or other geological resources are withdrawn, there is a cost associated with displacement of those resources' world-line. (Imagine a world line in Einstein's space-time of the untouched resource, and then its world line when commandeered for human use. The volume between the deviated and undeviated world lines is proportional to the cost.) Resource costs have to be applied and enforced using an exponential scale which is the inverse of the estimated fraction of resource remaining; i.e., as a  resource is depleted, the cost of using it rises exponentially. Only government is capable of introducing this pricing scheme, as there is no other mechanism in traditional Capitalism. This is a limitation of growth as defined in (2).

A sustainable economy cannot use resources without limit. That much is plainly so because our life support system is composed of limited resources. The immediate consequence is that, for a given standard of living, the population must be limited. Further, in order to have a sustainable system, the population must be limited to that number which at most draws replaceable resources; i.e., the ecological loading cannot exceed ecological productivity. This limits the extent of growth possible under definitions (4) and (5).

A sustained economy could grow financially (3), but that depends on whether participants are satisfied (6). Any financial growth in a sustainable system cannot improve the standard of living by drawing down natural resources. Such growth would have to be in the sorts of products available to consumers or in their satisfaction with their lives. Suppose, for example, that entire societies limited their populations and acquisitiveness, and dedicated themselves to the arts. These artists' colonies might reward their most noteworthy members with large amounts of money, and capitalize upon  their skills. Growth as in (6) is possible in that sort of society while observing the limits imposed by (4) and (5). Capitalism can be adapted to this sort of society, provided that the economic gains pursued by entrepreneurs are adjusted appropriately. One can imagine an unlimited Wall Street game or Casino as a major occupation. But, this will only work if basic services, such as growing food, are somehow provided on a regular, ecologically sound and non-competitive basis.

The steady state economy implied by sustainability cannot grow with respect to population, or material or resource use. Thus, any improvements in the standard of living in the sense of (1) or (2) will have to be "internal." Growth might take place in one locality at the expense of another. Or, growth might occur by a changing set of values and practices. There is an inescapable psychological element of growth, as in (6); i.e., what is growth is whatever it is perceived to be. In this last sense, growth can occur without further impinging on the natural environment. This is very important, because growth in the traditional sense of growing households and accumulation of things is no longer possible in a resource limited world.

The point of impact is in households and jobs: the places individuals are assigned in society. It is traditionally held that families grow, but this cannot happen in a sustainable world where the population limit has been reached. It is traditionally held that people work to earn a living, to bring home the bacon. But, in a sustainable economy, the number of traditional jobs will be very limited. If the limits are set by sustainability of resources, there can be only so many oil wells, coal mines, steel mills and automobile factories. Only so many houses can be built. None of that prohibits more efficient use of available resources and labor, so, as efficiency in the use of resources increases, there may be a temporary increase in the demand for labor. In the long run, however, there will be limits to improvements in efficiency, so labor demand will fall. What these circumstances point out is that what passes for work will have to change, as will what families are about. There will have to be a change in personal aspirations as well as criteria of what will satisfy.

Since sustainable economies will balance resource use with demand, all within ecologically sustainable limits, it is very likely most of the profits in basic industries will disappear altogether. In other words, Capitalism won't work for them. Almost everything pertaining to resource extraction and management will have to be strictly regulated, so those industries are likely to become public utilities or publicly owned. Such industries include metals, lumber, water, agriculture, energy and transportation, which taken together constitute a majority of the U.S. economy. History shows that Capitalists abandon industries when the profit disappears, so a sustainable economy is very likely to be owned or run by the government. In the end, sustainability means a highly socialized economy, at least with respect to the means of production. This probably implies the regrowth of the Welfare State as well, since there will be major human dislocations needing remediation.

There are many who glibly say that growth is possible in a sustainable economy, imagining, for example, that large numbers of workers will find jobs in burgeoning alternative energy and recycling industries. It is probably true that some of the workers displaced by conversion to sustainability will get jobs in those areas. But it is also probably true that most of those displaced will have nowhere to go without major retraining and subsidies lasting many years. Most loggers and lumber mill workers in the Northwest lost their jobs due to environmental concerns. During the Clinton Administration, promises were made to support and retrain those workers, but little was done. It has turned out that former loggers are not easily turned into white-coated technicians. Forested areas that once had high family incomes have become permanently depressed. Some small towns and villages were abandoned when their mills shut down. While a few lumber towns have been successful in attracting tourists, the tourist industry does not support many high-paying jobs. Most of the service jobs supporting tourism go to relatively unskilled, non-union women who are paid slightly more than the minimum wage and few or no benefits. Loss of resource-based industries changed the social structure of those towns from predominantly middle or working class into predominantly poor. While a few benefitted handsomely from the change, most people did not.

Another stratagem rural towns have used to counteract the loss of environmentally sensitive jobs is to attract Seniors. Retirement to quiet, slower village life is attractive to many Seniors. Retirees bring to such small towns their relatively great wealth as well as the jobs needed to support retirement communities. This is not a bad solution, but is eventually discovered to contain less than meets the eye. Retirees are often wealthy, but their income is low. Thus, retirees do not spend money as freely as their small town hosts would like. Retired people may build a home in their new community, but most of them buy existing homes or condos. Most retirees do not spend money fixing the homes they purchase, so these homes tend to degenerate over the years. Retirees get sick and usually have serious medical problems after a few golden years. Thus, most of the money retirees spend goes toward medical care and housekeeping needs. While this offers some opportunities for jobs in medical and nursing care, most of the jobs are at the low end. Seriously ill seniors usually leave their retirement nests and return to the big city where state-of-the-art medical care is available. I have found all the foregoing to be true from personal experience.

Bringing in tourism and retirement communities is only a partial solution to the loss of jobs in areas that were dependent on resource extraction and processing. Supporting my view that government supervision and intervention are required to solve the problems of sustainability, most of those areas are already heavily dependent on transfer payments for their survival. Most retirees live on transfer payments such as Social Security and pensions. Large numbers of unemployed and disabled persons are permanently dependent on some form of welfare; i.e., transfer payments. Family farmers are supported by government programs for traditional, political reasons. Most rural and former resource areas would have to be abandoned except for government programs.

I think I have said enough on the problem of a sustainable economy for the moment. I think what actually happens when sustainability is enforced can be seen today in the rural areas of the West Coast from Eureka to Tacoma, and in the forests and deserts of the West Coast States. Generally, the effect is devastating. In most cases, growth and sustainability are incompatible. Nonetheless, we have to solve the problem of creating a sustainable economy based on sustainable ecologies. In figuring out how to do that, we have ready-made test beds in the Northwest and Northern California.