Sustainability: Economically and Otherwise

The Case for Economic Doom and Gloom, The New Republic.
Why we’re not out of trouble yet--not even close.

Brenner’s analysis of the current downturn can be boiled down to a fairly simple point: that the underlying cause of the current downturn lies in the “real” economy of private goods and service production rather than in the financial sector, and that the current remedies—from government spending and tax cuts to financial regulation—will not lead to the kind of robust growth and employment that the United States enjoyed after World War II and fleetingly in the late 1990s. These remedies won’t succeed because they won’t get at what has caused the slowdown in the real economy: global overcapacity in tradeable goods production.

Global overcapacity means that the world’s industries are capable of producing far more steel, shoes, cell phones, computer chips, and automobiles (among other things) than the world’s consumers are able and willing to consume. Companies can still sell their goods but at prices that undercut their rate of profit. In the nineteenth century, the redundant and less productive firms would have folded, and as wages fell, and profit rates went back up, the economy would start to revive. But that no longer happens. Firms have become too big and powerful to fail; and the citizens of democratic nations will justifiably no longer tolerate unemployment above 20 percent. Instead, the average rate of profit falls, private and public debt rises, and the danger of a large crash looms....

The bursting of the bubble precipitated the recession, but the underlying condition, which made possible the financial chicanery of the last 15 years, was the global overcapacity in tradeable goods. With American firms no longer eagerly seeking funds for expansion, the banks and shadow banks had to look elsewhere for profitable outlets. And with the economy that produces tradeable goods not producing new jobs, a government that took its responsibility for maintaining employment had to look elsewhere to stimulate demand and growth. Ergo, two bubbles, and two recessions....

Brenner argues, Keynesian spending is at best a palliative that temporarily creates jobs and that, over the long run, exacerbates the problem of excess capacity. This is a crucial point and I want to quote Brenner on it. He says that

Keynesian additions of purchasing power were especially critical in reversing the severe cyclical downturns of 1974-5, 1979-1982, and the early 1990s, which were far more serious than any during the first postwar quarter century and would likely have led to profound economic dislocations in the absence of the large increases in government and private indebtedness that took place in their wake. Nevertheless, the ever increasing borrowing that sustained aggregate demand also led to an ever greater build-up of debt, which, over time, left firms and households less responsive to new rounds of stimulus and rendered the economy ever more vulnerable to shocks. Even more debilitating, it slowed the shake-out of high-cost low profit means of production required to eliminate over-capacity in the world system as a whole and in that way prevented profitability from making a recovery....

Brenner is not saying that the U.S. economy won’t “recover” from this or future recessions... Instead, the world economy, and the U.S. economy, will resemble the post-bubble Japan of the 1990s—with its “L-shaped” recovery writ large.

Theses on Sustainability, Orion Magazine.
some excerpts:

HUMAN CIVILIZATION has been built on the exploitation of the stored solar energy found in four distinct carbon pools: soil, wood, coal, petroleum. The latter two pools represent antique, stored solar energy, and their stock is finite.

SUSTAINABILITY means: “meet[ing] the needs of the present without compromising the ability of future generations to meet their own needs.” This definition contains within it two key concepts. One is the presumption of a distinction between needs and wants, a distinction that comes into sharp relief when we compare the consumption patterns of people in rich and in poor nations: rich nations satisfy many of their members’ wants—indeed, billions of dollars are spent to stimulate those wants—even as poor nations struggle to satisfy human needs. Two: we face “limitations imposed by the state of technology and social organization on the environment’s ability to meet present and future needs.”

WHEN ALL is said and done, can we enlarge the economy’s ecological footprint forever in order to create wealth? Gradually, we are coming to recognize that the answer is no.

AN ECONOMY SUCKS up valuable low-entropy matter and energy from its environment, uses these to produce products and services, and emits degraded matter and energy back into the environment in the form of a high-entropy wake... An economy has ecological impact on both the uptake and emission side. The laws of thermodynamics dictate that this be so. “You can’t make something from nothing; nor can you make nothing from something,” the law of conservation of matter and energy tells us.... But energy is scarce: “You can’t recycle energy,” says the law of entropy.

ESTABLISHING an ecologically sustainable economy requires that humans accept a limit on the amount of scarce low entropy that we take up from the planet (which will also, necessarily, limit the amount of degraded matter and energy that we emit).

ACCEPTING A LIMIT on the economy’s uptake of matter and energy from the planet does not mean that we have to accept that history is over, that civilization will stagnate, or that we cannot make continual improvements to the human condition. A no-growth economy is not a no-development economy; there would still be invention, innovation, even fads and fashions. An economy operating within ecological limits will be in dynamic equilibrium (like nature, its model): just as ecosystems evolve, so would the economy. Quality of life (as it is measured by the Index of Sustainable Economic Welfare, an ecologically minded replacement for GDP) would still improve.

OUR CHALLENGE is to create something unprecedented in human history: an ecologically sustainable civilization that offers a high standard of living widely shared among its citizens, a civilization that does not maintain itself through more-or-less hidden subsidies from antique solar income, or from the unsustainable exploitation of ecosystems and peoples held in slavery or penury, domestically or in remote regions of the globe. The world has never known such a civilization.