Anyone who believes that exponential growth can go on forever in a finite world is either a madman or an economist.
Kenneth E. Boulding
Towards a Sustainable Economy (The need for fundamental change). Ted Trainer - Trainer's analysis of the market economy, its structural need for never endng growth, and the resource depletion and environmental degradation which inevitably follow is the clearest I have encountered. Of course many people have criticized the effects of unregulated growth, but surprisingly few individuals have realized that the destructive tendencies of our economic system are the inevitable result of fundamental structural components of our financial institutions which cannot be fixed by regulation, taxation etc. As long as the unlimited accumulation of wealth remains the primary driving force behind economic activity the tide of destruction cannot be stemmed. Trainer explains this truth in a direct and straightforward way.
Trainer does not content himself with deconstructing private finance capitalism. He attempts to present a concrete alternative which he refers to as the Conserver Society. Since this alternative in more detail in his book entitled The Conserver Society I comment on it in my brief review of that book below.
The Conserver Society. Ted Trainer - This book is Ted Trainer's vision of an economic alternative to private finance capitalism. Two principles which lie at the heart of this vision are voluntary simplicity and mutual support. I am in complete agreement that these principles must lie at the heart of any economic system which is sustainable in the long term. We cannot go on complexifying our use of material artifacts forever. We must develop a social concept of economic maturity in which we recognize the idea of being rich enough in material sense, instead of striving continuously to increase the variety and sophistication of our toys and our luxuries. Also, once we abandon continuous growth as our primary economic goal then cooperation and sharing of resources will be necessary in order to insure social stability.
Trainer's idea of how to achieve voluntary simplicity and mutual support is through a program of what I would call radical localization. The basic economic unit would be a village or town which strives to the maximum extent possible to be economically self sufficient, deriving food, clothing, shelter, and energy from local renewable resources. Trainer envisions this local economy as being largely cooperative, based on beneficial exchanges of labor rather than on cash exchanges and the accumulation of symbolic wealth in the from of bank accounts, bonds, stock funds, etc.
I personally have difficulty with the idea of using radical localization as our primary strategy for achieving a sustainable economy. Localization pushed to its logical extreme would imply a return to neolithic technology (Not very little bio-region is going to have access to high quality metal ores) and a probable return of illiteracy as even paper making and printing require a substantial degree of specialization of labor. To be fair to Trainer, he is not envisioning anything this radical. He assumes that some degree of centralized manufacturing will remain although it will be reduced in scale relative to today's bloated wasteful economies. However, he does not explicitly propose a structural framework for the functioning of this larger scale economy.
Of course, some degree of re-localization will occur. For example, in the long term sustainable food production will require the recycling of nutrients in human wastes into the agricultural system (This is a point which Trainer emphasizes). In practical terms such nutrient recycling will require people to live relatively close to agriculturally productive land. Nevertheless food exchanges between different regions (e.g. a grain producing region and a fruit producing region) may still make sense. Also food exchanges may help to reduce hunger caused local variations in agricultural production due to variations in weather, pest infestations, etc. Of course the practice of importing food from distant regions of the globe may be substantially reduced as transport cost rise. But such a reduction in trade is not the same thing as every village being completely dependent on its own local crop. In general rising transportation costs will change economies of scale many forms of manufacturing and in some case will induce an increased degree of localization and in others will simply reduce or eliminate manufacturing volumes. Some so called 'economies of scale' are merely large international corporations extorting tax breaks and virtual slave labor out of corrupt developing world governments. To the disappearance of this kind of 'efficiency' all we can say is 'good riddance'.
To my mind it is vital that we figure out how to achieve cooperative economic production at both large and small scales and how to mesh these economic systems together without creating a wealth mad, power mad elite. Trainer does not address this issue. He accepts the dichotomy between Wall Street and the Politburo as the only model institutions for large scale economic organization and therefore he lays emphasis on small scale organization. Although I am strongly in favor of cohesive local communities, I think that the issue of large scale economic organization has to be tackled as well.
Steady State Economics. Herman Daly - This book is economist Herman Daly's debunking of the arguments of the economic growth men (Daly's term) who believe that no limit exists to the standard of living that can be achieved by human technological cleverness. Although the idea that economic growth has limits can be regarded as a commonsense observation, we have been so mesmerized by propaganda in favor of the contrary assumption that it is a worthwhile exercise to read through these explicit criticisms of the standard pro-growth arguments. Daly does not attack a straw man, but quotes specific pro-growth economists, and then proceeds to refute their arguments.
Although Daly's debunking of the 'growth men' is an enjoyable read, his proposed alternative to the current version of private finance capitalism is, to my mind, wholly inadequate. His fundamental proposal is to introduce resource depletion quotas for valuable natural resources. These depletion quotas would be introduced through a two stage process of purchasing natural resources. The first stage would be a government auction of rights to purchase resources. The total amount of purchase rights to be auctioned in a given year (or quarter or whatever time period is considered appropriate) would be determined by legislative decision. After gaining purchase rights a company would then make purchases in private markets up to the amount of the rights that they had purchased from the government. Because demand would be lowered by the depletion quotas resource princes in the regular market would actually be lower than they would have been without the depletion quotas. Thus the extra money per unit of resource generated by restricting supply would go to the government rather than to private corporations engaged in resource extraction.
Of course the depletion quotas will drive up prices of finished goods, except in those cases where increased manufacturing efficiency and resource switching can compensate for the depletion quotas. Daly recognizes that the increased cost of consumer goods will act has a highly regressive tax on the poorest people, so that he proposes some degree of income equalization to compensate for this change. He suggests allowing a ration between highest and lowest salaries for full time workers of 10 to 1 with a negative income tax being used to insure that the lowest paid workers reach the minimum level of income. The government income from the resource auctions is an obvious source for providing this negative income tax.
This proposal would face practical difficulties in a globalized resource market since it would be extremely difficult to get international agreement on depletion quotas, although it may well be worthwhile attempting such a thing with respect to oil supplies. However, as a general solution to the end of the growth paradigm I do not see how this proposal can succeed. Resource depletion quotas would encourage efficiency and resource substitutions, but when the point comes where such action cannot maintain further economic growth, then the idea that a market for infrastructure investments is going to be an effective way of allocating production resources seems mistaken. In a steady state economy the purpose of infrastructure investments is to maintain wealth rather than to increase it. As I have written elsewhere I believe that interest free community investment is the proper vehicle for infrastructure investment in a post-growth world.
Economics as Science. Kenneth E. Boulding - In spite of its imposing title this book is not a heavy weight economics text book. This book is Boulding's high level philosophical take on the functionality and usefulness of economics as a social science. Overall, the subject matter of this book is not of much relevance to the topics discussed on this website. However, his final chapter 'Economics and the Future of Man' is a very succinct and intelligent discussion of the limits to exponential economic growth. This book was written in the 1960s when resource constrained growth limits seemed comfortably distant on the time scale of people then living. However, the amount of intelligence required to realize that on the time scale of human history these limits will be reached relatively quickly is not large, and Boulding is an extremely intelligent man. Boulding contributed greatly to neo-classical economics and was greatly impressed with its achievements. But he held it to be an obvious fact that there must eventually be a transition to a new form of economic organization when the era of exponential growth ended.
Creating Alternative Futures. Hazel Henderson - Hazel Henderson is a self-taught economist who has been combating the thinking of establishment economists since the 1960s. Most of the essays in this book were written in the 1970s when high oil prices and high inflation seemed to herald the endgame of growth economics. Although new sources of oil eventually brought oil prices and inflation back down, the thinking in these essays is relevant to the oil crunch that we are now facing. Henderson's writing is rich in jargon lifted from a variety of sources, much of which is unilluminating. Nevertheless scattered here and there in the verbal jungle are some pithy insights if you have the patience to look for them. To me Hendersonís most interesting insight is that huge accumulations of capital in the form of large corporations become self-preserving entities that are neither private nor very enterprising. In an era of energy constraints on economic activity we need to find some way to break up these accumulations and to redirect the resources toward mid level technologies which will not necessarily increase our material standard of living, but may allow us to maintain a decent standard of living using lower quality energy sources.
The Poverty of Affluence. Paul L. Wachtel - Paul L. Wachtel is clinical psychologist rather than an economist. The subtitle of this book is 'A Psychological Portrait of the American Way of Life'. The book was begun during the Carter presidency when a prevailing sense of malaise and relative economic insecurity was prevalent in the United States. Wachtel's thesis is that in spite of the high price of gasoline, our material standard of living at that time was the highest it had ever been, and that our perceived economic insecurity was the result of a neurotic need for ever increasing wealth as a symbol of our continuing self-aggrandizing achievements. As a psychologist he believes that such neurotic behavior can be cured. Of course he also realizes that if we give up the goal of constantly increasing standards of living then the economic system must be changed, with the two most obvious changes being that a higher degree of economic planning will be required, and the tie between the right to economic consumption and having a formal 'job' must be weakened. He does not attempt to formally envision the new economic institutions required for this change (In this decision he is probably much wiser than I.), but merely indicates the principles which must inform the change. I particularly enjoyed his debunking of the notion that the economic failure of the Soviet Union and the Eastern Block constitutes definitive proof that economic planning must always be a dismal failure.
The real science of political economy, which has yet to be distinguished from the bastard science, as medicine from witchcraft, and astronomy from astrology, is that which teaches nations to desire and labor for the things that lead to life; and which teaches them to scorn and destroy the things which lead to destruction.