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2022 | Book

Sustainability and the New Economics

Synthesising Ecological Economics and Modern Monetary Theory

Editors: Stephen J. Williams, Rod Taylor

Publisher: Springer International Publishing

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Technik" , Springer Professional "Wirtschaft"

Table of Contents

About this book

This multidisciplinary book provides new insights and hope for sustainable prosperity given recent developments in economics – but only if swift and strong actions consistent with Earth’s biophysical limits and principles of justice are universally taken.

It is one thing to put limits on resource throughput and waste generation to conform with the ecosphere’s biocapacity. It is another thing to efficiently allocate a sustainable rate of resource throughput and ensure it is equitably distributed in the form of final goods and services. While the separate but interdependent decisions regarding throughput, distribution, and allocation are the essence of ecological economics, dealing with them in a world that needs to cure its growth addiction requires a realistic understanding of macroeconomics and the fiscal capacity of currency-issuing central governments. Sustainable prosperity demands that we harness this understanding to carefully regulate the rate of resource throughput and manipulate macroeconomic outcomes to facilitate human flourishing.

The book begins by outlining humanity’s current predicament of gross ecological overshoot and laments the half-century of missed opportunities since The Limits to Growth (1972). What was once economic growth has become, in many high-income countries, uneconomic growth (additional costs exceeding additional benefits), which is no longer advancing wellbeing. Meanwhile, low-income nations need a dose of efficient and equitable growth to escape poverty while protecting their environments and the global commons.

The book argues for a synthesis of our increasing knowledge of the ecosphere’s limited carrying capacity and the power of governments to harness, transform, and distribute resources for the common good. Central to this synthesis must be a correct understanding of the difference between financial constraints and real resource constraints. While the latter apply to everyone, the former do not apply to currency-issuing central governments, which have much more capacity for corrective action than mainstream thinking perceives.

The book joins the growing chorus of authoritative voices calling for a complete overhaul of the dominant economic system. We conclude with policy recommendations based on a new economics that, if implemented, would come close to guaranteeing a sustainable and prosperous future.

Upon reading this book, at least one thing should be crystal clear: business as usual is not a viable option.

Frontmatter

Chapter 1. Introduction

Abstract

This chapter introduces the main themes of the book, centred on sustainability. It gives a brief summary of the modern environmental movement from the publication of Rachel Carson’s Silent Spring in 1962. It also briefly touches on the history of neoliberalism as both a reaction to the Keynesian Revolution in economics and the environmental movement. In essence, we argue that world leaders have largely ignored the consistent warnings from scientists and ecological economists on the existential perils of unrelenting growth, especially since the early 1970s. However, we acknowledge a growing chorus of new authoritative voices that are calling for significant and urgent change along the lines of the United Nations Sustainable Development Goals, a global Green New Deal or Just Transition. While welcome, we argue all such prescriptions for ‘sustainability’ will ultimately fail without a recognition of the limits to growth and other key features of sustainability, usually derived from ecological economics. We further argue that the recent emergence of modern monetary theory (a much-improved macroeconomics) provides important insights that complement ecological economics, producing a powerful new economics to guide humanity away from imminent danger towards vastly expanded wellbeing.

Stephen J. Williams, Philip Lawn

The Current Mess

Frontmatter

Chapter 2. The Earth System, the Great Acceleration and the Anthropocene

Abstract

The Earth System is a single, self-regulating system comprised of interacting physical, chemical, biological and human components. For the last 11,700 years, the system has existed in a relatively stable state called the Holocene. However, around the mid-twentieth century, human activities – population, economy, resource use, technologies – underwent a sharp increase that drove correspondingly rapid and, in many cases, unprecedented changes to the structure and functioning of the Earth System. This ‘Great Acceleration’ became the basis for a proposed new geologic epoch in Earth history – the Anthropocene. Perhaps the best-known feature of the Anthropocene is climate change, which threatens, under a worst-case scenario, to drive the planet into Hothouse Earth conditions. Tipping points in the Earth System, such as melting of the Greenland ice sheet and the conversion of large forests to less carbon-rich ecosystems, provide the feedback mechanisms for taking the trajectory of the system out of human control and irreversibly into Hothouse Earth. The planetary boundaries framework, based on limits to human perturbation of nine key processes that together define a stable state of the Earth System, provides the planetary ‘safe operating space’ for avoiding Hothouse Earth and returning the planet to Holocene-like conditions.

Will Steffen

Chapter 3. Australia’s Natural Environment: A Warning for the World

Abstract

The immense size, varied land systems, different climatic regimes, and great antiquity of the Australian landmass have fostered the development of an extraordinarily rich and endemic biota. Yet, despite the importance of this unique natural heritage, evidence is mounting that Australia’s living systems are under increasing assault. On land, the major threats faced by the biota include land clearing and fragmentation, pressures from livestock production, pest species and pathogens, consumption and extraction of natural resources, altered fire regimes, climate change and climate variability, and interactions between these drivers. Equivalent pressures face the biota of aquatic environments, with climate change interacting with other threats to produce poor prognoses for the future of freshwater resources and major marine ecosystems such as the Great Barrier Reef. Despite the success of some conservation programs, the varied threats to Australia’s fragile environment are exacerbated by the demands of the nation’s burgeoning human population and the generally apathetic response of government to the manifest problems. We suggest that the Australian environment can be seen as a ‘canary in the climate coal mine’—an early herald of global environmental decline—and that more recognition of the problems, more courage, more resources and stronger laws will be crucial if any semblance of ecological sustainability is to be achieved.

Chris R. Dickman, David B. Lindenmayer

Chapter 4. Climate Change and Human Health

Abstract

This chapter focuses on the consequences to human health from climate change. We argue that the prospects for global human health are more ominous than most informed activists for global health realise. Unsurprisingly, risks to human health increase with the severity of climate change. After reviewing the history of the concerns about climate change and health, the chapter reviews some of the “primary” (heatwaves and other extreme weather events), “secondary” (kidney disease) and “tertiary” (large-scale violence) health risks. The mental health effects of some of these issues, which can arise in association with any of these categories, are also discussed. We also mention some possible effects, specific to children. Healthcare’s own considerable carbon footprint and resource consumption are described, with suggestions for improvement. While the focus of the chapter is mostly global, we briefly mention air pollution from coal-fired electricity generation in Australia, where a comparatively high proportion of electricity is generated by this method.

Colin D. Butler, Ben Ewald, Forbes McGain, Karen Kiang, Ann Sanson

Chapter 5. How Sustainable Are the UN Sustainable Development Goals?

Abstract

The UN SDGs, while including indispensable environmental goals for the first time, skate over crucial contradictions between these and genuine solutions to the unaddressed deficits still experienced by billions of people. Of particular concern is the injunction to foster economic growth, defined as growth in per capita gross domestic product (GDP). The ‘growth solution’ remains at the heart of the 2015 goals, ignoring the extraction and pollution effects inevitably attached to it. The rich world continues to ignore claims for redistributive justice; however, global sustainability is not feasible without at least minimal redistribution. The relentless increase in material flows in the world economy continues to defy all reduction targets and all undertakings. Growth in these flows needs to cease, unless that growth is meeting actual human needs. Given that we cannot abandon significant increases in material flows where the social goals of the SDGs demand them, it will be necessary to reverse growth in the rich world to accommodate this.

Kerryn Higgs

How We Got Here

Frontmatter

Chapter 6. The Evolution of Neoliberalism

Abstract

The term ‘neoliberalism’ is widely used and often misused and misunderstood. Properly understood, it is the ideological underpinning of the era of financialised capitalism which emerged from the economic crises of the early 1970s and remained dominant for the rest of the twentieth century. Its central theme was the idea that markets, particularly financial markets, generally outperform governments in the allocation of resources and investments. Neoliberalism came in a variety of forms, reflecting the variety of liberalism itself, but was different from preceding forms of liberalism because of the need to respond to the successes and failures of social democracy in the second half of the twentieth century. In one form or another, neoliberalism became the unquestioned basis for the thinking of both centre-right and centre-left parties around the world. This chapter describes the rise of neoliberalism in the twentieth century, its failure in the twenty-first and the prospects for a progressive alternative.

John Quiggin

Chapter 7. Population Growth

Abstract

The first human populations were, like those of all other species, forced to live within the limits of the planet’s ecological systems. Since the Industrial Revolution, technologies have allowed a dramatic increase in the population. The demands of humans are now measurably altering planetary systems, most obviously by changing the global climate and by driving a catastrophic loss of biodiversity. While the United Nations has embraced Sustainable Development Goals and many countries have stated commitments to development patterns that could be sustainable, progress toward those goals has been impeded by a widespread failure to recognise the crucial importance of stabilising our population. Unless we develop socially acceptable strategies for limiting population growth, human civilisation faces a bleak future.

Ian Lowe

Chapter 8. A Brief History of The Limits to Growth Debate

Abstract

Commissioned by the Club of Rome, the Meadows team at the Massachusetts Institute of Technology (MIT) produced The Limits to Growth in 1972. Using system dynamics modelling, the team found that economic growth will reach physical limits by the middle of the twenty-first century. Economists in particular rejected the notion that human economies have any limits and treated the work with derision. Scientists took a more supportive approach and have written independent reviews and developed the limits ideas. A number of them have tested the modelling against real-world outcomes 30, 40 or 50 years later, and have found that the Limits projections are reliable. While it is often claimed that collapse can be avoided by large technological advances, it is likely that a paradigm shift in human, social and economic expectations is also necessary.

Kerryn Higgs

Chapter 9. The Role of the Fossil Fuel Industry

Abstract

The global fossil fuel industry has played a pivotal role in the quadrupling of population since World War II and in the commensurate exponential increase in economic growth with its associated wealth creation. The foundation stone was massive expansion in the production and consumption of fossil fuels, globally and in Australia, which led to a corresponding accrual of power and influence on the part of fossil fuel industry players. The implications of increasing fossil fuel use, in terms of global warming as a result of increased atmospheric carbon concentrations, have been understood scientifically for decades. Yet the fossil fuel industry chose to ignore the science, and in its own perceived self-interest, deliberately prevented the development of serious policy to avoid the potentially catastrophic outcomes of this warming. The result is that the world must now take emergency action to rapidly reduce atmospheric carbon concentrations, in large part due to the intransigence of the industry itself in facing up to this reality, and its refusal to constructively manage its own decline. This is particularly the case in Australia. The industry should either proactively co-operate in handling the emergency, or it will be rapidly phased out.

Ian Dunlop

Chapter 10. Economic Failures of the IPCC Process

Abstract

Projections of the economic damages from climate change by Neoclassical economists have dominated climate change mitigation policy. These projections have been generated by methods that fail to meet even minimal academic standards. Research by scientists establishing the existence of “tipping points” in climate that will be triggered this century, at levels of temperature increase over pre-industrial levels that have already been exceeded, have been misconstrued to allege that there are no significant tipping points for the next three centuries and for temperature rises below 3 °C. Economists have simply assumed, with no proof, that activities undertaken indoors or underground, which constitute over 85% of GDP, will be unaffected by climate change. They have used data on the weak geographic relationship between temperature and GDP as a proxy for the impact of climate change on the economy. These intellectual failures are endemic to Neoclassical economics, with a methodology that treats critical assumptions as if they are merely simplifying assumptions.

Steve Keen

Designing a Safe and Prosperous Future

Frontmatter

Chapter 11. An Introduction to Ecological Economics: Principles, Indicators, and Policy

Abstract

This chapter begins with a fictional story about a small group of people who become shipwrecked on a bountiful exotic island. The problems encountered as the group transforms itself into an ever-growing society consuming increasing quantities of the island’s limited resources provides a simple analogy of what is now occurring at the global level and an ideal basis for an introduction to ecological economics. Following a summary of how ecological economics began and has since evolved, a series of fundamental ecological economics principles are outlined. The principles are grounded on a real-world view of the economy, which starts with the recognition that the economy is embedded in the living world and, as such, humankind’s ability to provide for itself on a sustainable basis is constrained by limited stocks of natural resources, biophysical processes, and the physical laws governing production and consumption. Whilst the chapter debunks many myths and reveals a number of harsh realities, it offers a viable and realisable path to a sustainable, just, and prosperous future, albeit one dependent upon growth eventually being abandoned in favour of a qualitatively-improving steady-state economy. Some indicators and basic policy measures to help guide this awkward transition are briefly elucidated.

Philip Lawn, Stephen J. Williams

Chapter 12. Energy Systems for Sustainable Prosperity

Abstract

Ecologically sustainable energy technologies comprise renewable energy supply together with improved efficiency of energy conversion and use. Together they can mitigate the climate crisis, greatly reduce pollution of air, water and land, create more jobs than are lost in the fossil fuel industries they replace, and contribute to energy independence and social equity. The best technical energy supply strategy is transitioning fossil fuelled electricity to renewables, electrifying most heating and transportation, and producing fuels by using renewable electricity to make hydrogen and ammonia. This technological transition is necessary and urgent, but unlikely to be sufficiently rapid to avoid irreversible climate change. Substantial demand reductions are needed by rich countries, beyond the technological measures of energy efficiency. This would entail an end to growth in energy production, materials extraction, land clearing and population, that is, the creation of a steady-state economy within Earth’s biocapacity.

Mark Diesendorf

Chapter 13. Climate Change Litigation and Human Rights

Abstract

Climate change litigation and jurisprudence, from a slow start in the years before 2000 – when there had been a mere eight specific climate change litigation cases filed globally – rose to 338 cases between 2001 and 2010, reaching 1186 cases between 2011 and 2020. In early 2021, the United States leads in cumulative volume with 1308 cases; Australia ranks second globally with 115 cumulative cases. This chapter outlines the major developments in such litigation, with a particular focus on the role of human rights instruments. It then briefly examines changes in the interpretation of corporate law in respect to climate change. Taken together, there is growing momentum in a search by civil society for legal remedies given the profound seriousness of climate change and the abject disappointment of policy responses.

Michael Kirby

Chapter 14. Paying for a Green New Deal: An Introduction to Modern Monetary Theory

Abstract

Modern monetary theory (MMT) is the brand name for a school of thought which has emerged since the year 2000 as the first serious challenge to orthodox macroeconomics in many years. Although the brand name dates back only to the 1990s, the economics has long historical roots, going back more than a century. It is based on a detailed analysis of the mechanics of modern monetary systems, and a model of the economy as a set of inter-locking balance sheets evolving over time, needing to be managed to ensure full employment and price stability are maintained and financial instability is avoided. The distinction between currency issuers and currency users is of central importance, as is the role of taxation in creating a demand for a currency and maintaining the value of that currency over time. MMT emphasises that unemployment is always a political choice and never a necessity, and that the key issue with the implementation of a Green New Deal is not paying for it but planning for and organising the real productive resources necessary to bring it about. What is technically possible can always be paid for by a monetary sovereign government – including a Green New Deal.

Steven Hail

Chapter 15. Conclusion and Policy Options

Abstract

This concluding chapter synthesises the information presented throughout the volume and restates the thesis from the introductory chapter: that humanity probably has a decade to fundamentally change its adversarial relationship with the planet – and each other – if disaster is to be avoided. Our current approach amounts to a ‘war on nature’ when ‘harmony with nature’ is required. To achieve this, the discipline of economics, especially, needs to change course towards the principles of ecological economics (which we may well call real-world economics, where biophysical limits are respected). We advance a range of policies to inspire discussion, and call on all governments to declare a global emergency in line with recent authoritative reports.

Stephen J. Williams, Philip Lawn

Backmatter

Title: Sustainability and the New Economics
Editors: Stephen J. Williams
Rod Taylor
Publisher: Springer International Publishing
Electronic ISBN: 978-3-030-78795-0
Print ISBN: 978-3-030-78794-3
DOI: https://doi.org/10.1007/978-3-030-78795-0