Captioned “Integrating Ecological and Economic Change”, this insightful talk was given at the National Network for Justice and Peace’s annual conference on July 24. Mark Rotherham is a Lancaster-based film and media producer with extensive experience teaching ecology. He works closely with the Lee House Center for Mission Awareness in Thornley, near Longridge.
In 1947, Paul Samuelson drew the defining picture of macroeconomics. Instead of using mathematics to show the financial transactions between the different components of the economy, his circular flow diagram was based on the metaphor of water flowing through leaded pipes.
The following year, engineer-turned-economist Bill Phillips built a Samuelson circular flow diagram hydraulic machine. Its MONIAC ââ(Monetary National Income Analogue Computer) consisted of a series of transparent reservoirs that filled with pink water to simulate financial flows through the economy. No one noticed, however, that MONIAC ââwould not work unless you plugged it into the power supply first. Ultimately, it’s energy, not money, that makes the world go round.
Samuelson’s diagram lacked a representation of the Earth as the source and sink of all the materials and energy we consume in the economy. Building on the work of Herman Daly – one of the founders of ecological economics – Kate Raworth redesigned economics to represent it as a subsystem of the larger Earth system.
We often use the words “energy” and “power” interchangeably. However, power can have different meanings. In physics, it is simply defined as the rate of energy transfer. In politics, power refers to a social dynamic that can be exercised either in a horizontal form (eg democracy) or in a vertical form (eg dictatorship). The pyramid of power is the classic vertical shape with the monarch at the top and the slaves at the bottom.
Today’s power structure is more complex and consists of overlapping interests between various actors in political economy. It is, however, still a vertical power structure with the financial interests of a wealthy elite at the top. Over the past two centuries, through colonialism and the closure of common lands, the ruling class has used immense violence to force people in subsistence communities to become wage-dependent industrial workers.
While the Industrial Revolution depended almost entirely on coal for its energy, it gave workers an effective means of protesting the brutal conditions of working class life. Miners, shipyards and railway workers invented the general strike to force factory owners to the bargaining table. This is how 20th century democracy was won and lost. We must remain attentive to the link between sources of energy and forms of political power.
Regarding the policies needed today, monetary reform is fundamental to the ecological economy. Commercial banks create money out of thin air every time they give a loan. This money goes into the economy on both sides of the balance sheet, both in the form of credit to lenders and debt to borrowers, which multiplies at compound interest. As this systemic debt escalates, the economy must either grow or collapse.
Herman Daly considers GDP growth to be just as likely a measure of “disease” as a measure of wealth. The costs to nature and to society are called âexternalitiesâ and are therefore not counted. GDP itself is also subject to the law of diminishing returns to a point where continued economic growth becomes counterproductive.
Looking ahead to COP26. British Prime Minister Boris Johnson will say, as he did at the virtual climate summit in April 2020, that we can ‘have cake, eat’ which means we can grow the economy and reduce carbon emissions. This statement does not take into account embodied energy emissions in material consumption which has remained closely linked to GDP growth.
Our global material footprint tripled from 1970 to 2015. In 2020, the global economy consumed 100.6 billion tonnes of raw materials. This is double the sustainable level of 50 billion tonnes. To supply our current level of material consumption, we would need two planets.
To bring carbon emissions and material consumption within the limits of the planet, we need a rapid and significant reduction in the use of resources. There is no empirical evidence that this can be achieved alongside GDP growth.
Albert Einstein defined “insanity” as doing the same thing over and over again, expecting a different result. When the pandemic emerges, we have to choose between âgreen growthâ or decline. âGreen growthâ is little more than a euphemism for big business as usual. For the sake of life and future generations, wealthy nations must curb economic growth, abandon GDP as the benchmark measure of economic health, and establish policies for a green economy.
Today, a large portion of the world’s population suffers from multiple forms of social deprivation even as planetary boundaries are crossed. At COP26, world leaders must agree on emergency measures to heal these deadly social and ecological wounds.
Instead of the GDP growth curve, Kate Raworth’s donut shape must become a new icon for the 21st century economy. Within the circle, between the social foundation and the environmental ceiling, is the safe and just space for humanity.
See the videos of the conference on: www.justice-and-peace.org.uk/conference/
Keywords: NJPN, Mark Rotherham, Climate Change, Economy, NJPN Conference, COP26
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