8. March 25 14 ENV222 lecture outline.pdf

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School of Environment
Stephen Scharper

21) March 25 Steady-state capitalism Lawn, Phillip (2011). “Is Steady-state Capitalism Viable?:AReview of the Issues and anAnswer in theAffirmative.”Annals of the New YorkAcademy of Sciences. 1219. pp. 1-25. ▯ Lecture outline ▯ The Lawn reading is a bit difficult because he is so caught up in the debate over whether we can have a steady-state economy and still be capitalist.Accordingly, I have added below a short reading from Victor (2010) which I hope you will find useful. The debate is important, however, because as Lawn points out the solution is far more likely to be accepted if it is seen as still being capitalist. ▯ Definitions . capitalism: Jan. 23 lecture notes: “1. Definition of capitalism reader p. 111 "a set of economic and legal institutions which together make the production of things for private profit the normal course of economic organization." ▯ reader p. 111 four elements necessary for capitalism . production by private actors, not the state (as in communism) . legal system, enforced by the state, which protects private property . legal system which ensures contracts between buyer and seller can be enforced . legal system which ensures investor receives significant portion of profit (although some is taxed by the state)” ▯ . material and energy throughput: the total of all materials (fish, oil, wood etc) and fuels (coal, natural gas etc) extracted from the nonhuman world, processed and then returned as wastes ▯ . economic growth: reading, p. 453 - increase in gross domestic product (GDP) which essentially is the total of all market transactions; Note: an economy can grow at a different rate from growth in material throughput, for instance as the result of increased efficiency (fewer materials needed to produce the same quantity of products); thus we could still have economic growth in a steady-state economy ▯ . development: reading, p. 453 - "betterment" or "qualitative improvement"; eg, increase in total human happiness Note: Lawn's argument is that we can have development without economic growth. ▯ . profit: net return on capital investment; reading p. 460 lists three means of increasing profit: . increase output, sell more products: if profit on each product sold is 5% of sale price, doubling sales will double profit ▯1 . improve the product and sell same quantity at a higher price; if profit is increased to 10% due to higher sale price, and same quantity is sold, profit doubles . produce the same quantity at a lower cost, through increased efficiency (less material and/or labour needed to produce the product); same quantity sold, at same price, but profit increases from 5% to 10% so total profit increases Note: Lawn's argument is that profit can still exist in a steady-state economy because only the first of those three requires increasing throughput. ▯ . job: paid employment (within an organization or by selling services in the market) employment is one of the major means of distributing wealth employment is also important because it provides not only material rewards, but also psychological rewards; eg, from exercising skills, gives identity Note: Lawn p. 454 suggests two ways we can ensure full employment in a steady-state economy: 1) reduce working hours to the same number of jobs is spread amongst a larger number of people (see Victor reading below); 2) the Job Guarantee - government provides jobs. ▯ . green growth: economic growth (rising GDP) which is decoupled from material and energy throughput; essentially, clean production (March 18 lecture); see Victor's comments below and Lawn p. 462 "pipe-dream" ▯ Sources of economic growth: Mokyr, Joel (1990). Twenty-Five Centuries of Technological Change:AHistorical Survey. London: Harwood. p. 2 lists four things which produce economic growth: 1) increase in capital investment 2) specialization and trade, both of which increase total efficiency 3) population growth accompanied by expansion of infrastructure 4) technological change which increases productivity/efficiency of materials and labour ▯ 1. What is the solution ▯ The solution is to ensure that throughput of materials and energy (total quantity extracted from the nonhuman world, processed, and returned to the nonhuman world as waste) does not increase from one year to the next. ▯ As advocated by Daley and Lawn this is done by: . using law to limit quantity of each type of material and energy (wood, minerals, fish, coal etc) extracted each year (Lawn suggests the law include cap-and-trade system); these limits would take into account population increase by lowering the limit as needed to offset increased throughput resulting from growing population . although not really discussed in the Lawn reading, this would be accompanied by existing or strengthened laws governing discharge of wastes and pollution to the environment . instead of relying on market growth to solve problem of unemployment, government directly provides employment through Lawn's suggestion of a Jobs Guarantee ▯2 . however, do rely on market to allocate products by means of decentralized buyer-seller exchanges (which, plus continued existence of profit, means it is still capitalist) . although not really discussed in reading, allow economic growth in South to address poverty, while moving to steady-state in North ▯ ▯ 2. Implications ▯ 2.1Addresses the problem of increasing per capita consumption, which clean production and carbon price do not address. ▯ 2.2 Requires substantial expansion of the role of the state, relative to the market: . by limiting extraction of materials and energy ▯ Limits on extraction do exist now, eg totalAnnualAllowable Cut for forestry; total fishery catch ensure sustainability of the resource. For such thing as fossil fuels or minerals, that is not ther to case. ▯ . by providing the Job Guarantee ▯ Something similar is provided by the modern welfare state. Jobs are not guaranteed, but a minimal level of financial support is provided through welfare payments, unemployment insurance, plus publicly provided benefits such as education and health. ▯ But note the reading reference to Kalecki, p. 456 top right: "powerful capitalists prefer the existence of some unemployment... "; business needs unemployment to keep the price of labour (wages) low and thereby ensure that the division of the wealth created by capital and labour together benefits capital more than labour. This interest of business means it will oppose policy which ensures full employment such as the Job Guarantee. ▯ Lawn argues, p. 455 that the Job Guarantee would only provide minimum wages and therefore workers would compete for higher paid private-sector jobs, with that competition keeping the ▯rice of labour low (how low would depend on what the minimum wage is set at). Even if still capitalist, this expansion of the state runs counter to the neoliberal ideal of a shrinking state role. ▯ 2.3 Requires redistribution of wealth Since the traditional means of addressing poverty (economic growth) is no longer available, redistribution has to be used. Lawn suggests doing that by Job Guarantee, but it could instead be done by a guaranteed annual income. ▯ ▯3 3. Likelihood will be adopted ▯ Drivers: . academic economists like Daley, Victor and Lawn . not the objective of any large portion of environmentalists; of those who do argue for it, more will call for eco-socialism ▯ Barriers: . political opposition by those (investors) who benefit from the current system of economic growth; since they are rich they are also politically powerful Lawn argues that investor opposition is reduced by these factors: ▯ 1) it is still capitalist, not socialist; ie, it still relies on the market and private production 2) investors can still generate profit ▯ He does not discuss this, but I would argue there is another factor which can reduce opposition, if it is still seen as capitalist. This is the fact that material wealth (money) is not the main motive for investors. Once they have satisfied needs, the motive to get more money is psychological - the same motive that leads to purchase of products, as discussed in the Jan. 21 lecture, or the satisfaction from a job, referred to above. Investors find happiness by playing a game they are good at (investing) as do hockey players, lawyers, teachers and others. If profit is still available, even if at lower levels, they can still do what they enjoy doing. ▯ . political opposition from those fearful of losing their job (see below) ▯ . requires a major change in values (p. 466) ▯ ▯ My own argument is this. 1) The prospect of laws limiting intake of resources is extremely unlikely and would be costly and difficult to enforce. 2)Although still politically difficult, it is more likely Canada and other countries might increase material and energy prices - the concept of a carbon price has been accepted, as has the concept of full-pricing for water (principle is accepted but not implemented); governments would benefit from increased revenues and so have self-interested reasons for doing this. (See Lawn's arguments against this note dd, p. 466). 3) The key is the problem of unemployment. When unemployment rates go up, people act politically and vote governments out of office, which will prevent any government from moving toward a steady-state economy. To address that, we have to move away from relying on jobs as a main vehicle for wealth distribution. For that, we need a guaranteed annual income, high enough that unemployment will not be an immovable barrier to the transition to a steady-state This is part of my ongoing argument that we can only achieve fairness between the human and nonhuman worlds by first making the human world more fair. ▯ ▯4 ▯ ▯ ▯ ▯ ▯ ▯ ▯ ▯ ▯ Questioning economic growth: our global economy must operate within planetary limits to promote stability, resilience and wellbeing, not rising GDP Author(s):Peter Victor Source:Nature. 468.7322 (Nov. 18, 2010): p370. Document Type:Article Copyright : COPYRIGHT 2010 Nature Publishing Group http://www.nature.com.myaccess.library.utoronto.ca/nature/index.html Full Text: [ILLUSTRATION OMITTED] The idea that governments of developed countries should no longer pursue economic growth as a primary policy objective is widely regarded as heresy. Yet a growing number of scholars, policy- makers and citizens are coming round to the idea that the planet cannot sustain continued global economic growth. Even economist Robert Solow, who won the 1987 Nobel Prize in Economics for his work on economic growth, said in 2008 that the United States and Europe might soon find that "either continued growth will be too destructive to the environment and they are too dependent on scarce natural resources, or that they would rather use increasing productivity in the form of leisure" (1). The idea of steady-state economies, or even economic 'degrowth, in developed countries is gaining traction. The reasons for disenchantment with economic growth as a paramount policy objective are not hard to find. Humanity has gone beyond the 'safe operating space' of the planet with respect to climate change, nitrogen loadings and biodiversity loss, and threatens to do so with six other major global environmental issues
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