In an age of endless consumption which keeps the economic wheels turning it is no surprise that our leaders have failed dismally to address adequately the very real and long-term global issues of climate collapse and it has been left for too long on the political backburner. This week GIMMS extends a very warm welcome to Andrea Grainger, our guest MMT Lens author. Andrea takes a look at how modern monetary reality sheds a vital light on how to address the challenges we face to avoid global environmental catastrophe and extinction whilst still meeting human needs and keeping within the resource limitations of our life-giving planet.
The last month has been a big one for environmental news. We saw the Global Climate Conference in Poland, where politicians and scientists from all nations have gathered to further develop the agreement reached in Paris last year. We also saw the launch of the Extinction Rebellion activist group. Six-thousand people gathered in London to declare rebellion against the British Government. The group states that we are on the path to global ecological catastrophe; the mass extinction of animal species and the collapse of human civilization, due to the criminal negligence of British and foreign governments.
These two events highlight where western society is at the moment, with dealing with our environmental crisis. Politicians of all political stripes mostly accept the problem of climate change, but their rhetoric on the issue is largely self-congratulatory; praising their own parties’ policies regardless of how little they are actually doing. Rarely in the mainstream political discourse do we hear anything close to what scientists say is necessary on climate change, and other environmental issues are largely ignored. Only recently has plastic pollution managed to get any hearing, and other issues like soil erosion, freshwater depletion, ocean eutrophication, peak minerals and biodiversity loss get no hearing at all.
Part of the reason for the huge gap between what politicians are doing and scientists are saying is obviously public ignorance; but there are also huge economic factors. One is vested interests; particularly the fossil fuel lobbies who still have huge wealth, and spend massive amounts to lobby politicians, create think-tanks, and influence media groups.
Another economic factor is neoliberalism which maintains tens of millions of people across the world in pointless unemployment to create a scarcity of jobs, so that desperate workers can be underpaid, and private shareholders can rake in more profit for themselves. This is appalling at any time, but climate change makes it more so, now that we have desperate need for a rapid transition to a sustainable economy.
The MMT critique of neoliberalism is essential for breaking its ideological hold on society. It is necessary, but not sufficient, for tackling the third barrier to a sustainable society, that of limits to growth. Ecologists have been warning for decades that it is not possible to protect our planet if we keep trying to consume more stuff each year than the year before. Technology has allowed us to be more efficient with our resources, and allowed us to ‘decouple’ our economic growth from environmental damage. But there are limits to how fast we can do this; humanity has never managed to achieve ‘absolute decoupling’, where growth happens without any environmental damage. We have only ever been able to slow down the rate at which we destroy our Earth. Partly this is because of the ‘Jevons Paradox’; as first recognised by William Jevons; as technologies are introduced to improve resource efficiency, they also drive down costs for consumers, leading to more consumption, so the benefits of resource efficiency are lost.
If we want to protect our planet, then slowing down our economic growth is inevitable. As British citizens, we can see that our country is much richer than other nations, and poorer nations need growth much more than we do, so it would be wise to shoulder much of the burden ourselves, and slow our growth down more to give space to developing nations. We may need to move to a ‘steady state’ economy, where no growth happens for a decade or more.
The idea of no economic growth seems very foreign to us today, as humanity has seen exponential growth for two-hundred years, ever since the industrial revolution. But the idea that growth would one day stop has been considered by economists for almost as long. Adam Smith, John Stuart Mills, David Ricardo and Keynes all spoke of a future end to economic growth. Keynes claimed that his grandchildren would live to see this, described it as ‘state of abundance’ and said that
“People would find themselves liberated from such economic activities as saving and capital accumulation, and be able to get rid of ‘pseudo-moral principles’ — avarice, exaction of interest, love of money — that had characterized capitalistic societies so far. Instead, people would devote themselves to the true art of life, to live “wisely and agreeably and well.”
Since the Bretton Woods conference in 1940s, GDP growth has been used as the main metric of a nation’s economic success. Economic growth has become synonymous with progress and wellbeing. But the original populariser of GDP, Simon Kuznets, said that GDP was never meant to be used in this way. He did not consider it a good measure of wellbeing, because it didn’t consider income distribution, or the social and environmental costs of production.
Since the 1970s the field of ‘happiness economics’ has evolved to look at what really drives human wellbeing and how to design economies to provide it. What has been found is that for poor individuals and poor nations gains in income are very important, but as individuals and nations become richer gains in income become less significant, and other factors like income inequality and strong social bonds become much more so. If a steady-state society focused on improving these things, then we could see our wellbeing improve much faster than it is today. A steady-state society does need to mean the end of technological innovation, so we could keep developing technologies to improve labour efficiency, but rather than using that to produce more goods for ourselves we would instead focus on increasing our leisure time and approach the 15-hour week working once envisioned by Keynes.
A steady-state society is necessary, and could be better than our society today, but it needs significant restructuring of our economy to work. If economic growth stops, then the return on investment for private companies will fall sharply, and private investment from shareholders will plummet. If we significantly reduce income inequality then this will be worse, as workers’ wages go up, and shareholders profits fall.
MMT helps us to understand that this is not necessarily a problem. If a foreign company decides to pull their investment out of Britain and shut down their factories, the Government can always move those workers onto the Job Guarantee scheme for a time, while they look for a British company that can expand or be formed to rehire those workers. The transition to a steady-state economy is however more complex than this, as all the for-profit sectors of our economy start to stagnate, decline and eventually collapse. A steady-state economy would necessitate a broader transition away from for-profit businesses to non-profits and cooperatives; businesses focused not on the profits of private shareholders, but on the benefits provided to their workers, customers and local communities. This kind of economy is known as ‘market socialism’ and is similar to what Keynes talked about when he advocated for the death of rentierism. With a more cooperative and democratic economy, the people making key business decisions would be held more accountable for their actions, and we could develop a more meritocratic society, where people’s income and wealth more accurately reflects their contribution to society.
To make such a society function effectively, we would need a much more developed cooperative sector, with cooperative business studies becoming a normal part of our education curriculum, and to create a culture where customers and community members are encouraged to engage with their local coops and hold them accountable. We would also need new institutions to replace the role now performed by private investors, hedge funds and for-profit banks, who constantly seek out new opportunities for investment and get finance where it is needed to create jobs. This could be done by credit unions, non-profit banks and local councils in a decentralised and accountable way, so finance serves the interests of the society.
This is still a significant economic and cultural shift for humanity to undergo, but it is necessary. Those of us who understand MMT can be more confident that it is possible, and lead the way in making it happen sooner. The faster humanity accepts what is necessary and gets started, the more lives we can save from being destroyed by ecological damage.
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