Foul is no longer fair: Towards an economics for planetary stability

Talk to the Council for the Human Future conference, 21st March 2021

It is never hard to find commentary on why we are collectively failing to address the accelerating environmental emergency. 

‘We’re not wired to empathize with our descendants,’ laments a psychology professor in the Washington Post. ‘We lack courage,’ concludes President Macron to world leaders at the UN. ‘We need to do a much better job of informing people about the challenges,’ warns Bill Gates.

The reasons are multifarious, a causal process of nefarious complexity. So, it is tempting to latch onto a simple explanation, to conclude that we are psychologically or socially predisposed to unthinkingly commit collective ‘ecocide’. Or that this is simply a problem of the widespread use of environmentally damaging technology. 

Simple explanations engender simple solutions, from simply substituting dirty power plants and cars for clean alternatives, through using education to correct for cognitive bias, to perfecting democratic systems so the ‘true’ voice of citizens may finally contend with vested interests. 

All these are surely needed. But often the mainstream political and policymaking focus struggles to fullycomprehend a foundational truth. The structures and resultant dynamics of interconnected social and economic systems are a leading driver of the breakdown of global environmental stability. 

Deforestation in the Amazon and Cerrado is partly driven by investment decisions made by food producers. These producers are responding to profitable opportunities to supply beef to consumers hungry for meat around the world. Such tastes are encouraged by advertising and cultural expectations around living standards. Government policy encourages compounding material expansion of such consumption as it marks well against a narrow set of headline indicators and conceptions of progress. Questioning this state of affairs is difficult within the limited imaginary of what is appropriate and possible in economic theory and practice – and is often met with forceful reproach by vested interests who benefit from the status quo.

In this talk, I will explore how prevailing models of economic development around the world are a leading factor driving the environmental emergency. I will identify key elements of the political-economic paradigm – the narratives, assumptions, policies and power structures that dominate contemporary political and economic thinking in and between countries – that are driving environmental breakdown and that act as a barrier change. I will explore the contours of a paradigm better capable of responding to environmental breakdown, and I will finish by considering the strategic challenge facing those seeking such a paradigm shift.

The problem

Most if not all countries are socially and economically focussed on encouraging growth in consumption, of cars, homes, technological devices, food, certain services and so on. The factors driving compounding increases in consumption are wide-ranging. 

To be successful, firms must compete in markets and so necessarily invest to reduce costs, innovate for new products, encourage a greater level of purchases. The finance system facilitates and also drives these dynamics, seeking and supporting profitmaking opportunities. The drive to reduce costs by increasing labour productivity requires more consumption to offset the potential loss of employment. 

Economic contraction and crisis resulting from boom-and-bust business cycle dynamics also drive unemployment. In practice, the resultant increase in public spending requirements is often used as justification to later cut social security. Together, unemployment and the limited provision of social support creates a dynamic in which social conditions are necessarily eroded outside of periods of rising consumption and production. 

Therefore, the consensus response is to re-establish growth in consumption and production, leading to more spending and employment, all of which are supposed to improve social conditions. 

This growth is also necessitated by global economic competition between states, organised influence from its prime beneficiaries, and a range of factors driving individual consumption decisions, such as advertising, cultural norms, and positional pressures – the so-called desire to “keep up with the Joneses”.

It is no wonder, then, that the mainstream political imaginary has internalised the fallacy that ongoing growth in consumption and production, measured through gross domestic product or otherwise, is the primary cause of improvements in societal welfare.

This is not the case. Other factors, such as inequality, the health implications of types of consumption, the provision of key public goods, cultural elements – are all key determinants of overall societal welfare, and are missed by GDP and other headline measures. Most pressingly, these measures also fail to recognise that the economy is something embedded in not separate to nature and that compounding growth of material consumption is destroying nature, the biophysical foundations upon which economic activity is even possible. 

We see this when observing that growth in global GDP has tracked growth in global material footprint and, to an extent, global CO2 emissions from fossil fuel combustion and industrial processes. 

This is because prevailing means of meeting the supply of consumption are founded on unsustainable resource use, such as the combustion of fossil fuels and overexploitation of soils. Moreover, as a recent paper in Nature Communications stated: “The overwhelming evidence from decomposition studies is that globally, burgeoning consumption has diminished or cancelled out any gains brought about by technological change aimed at reducing environmental impact.”

Put bluntly, social progress has been achieved at the expense of the environment. As the economist Kate Raworth has pointed out, “there are no ‘developed countries’,” in that no nation is able to provide healthy and fulfilling social conditions without causing critical environmental destruction. 

In all, the accelerating environmental emergency poses a number of unprecedented challenges for economic systems around the world. 

Foremost is the correlation between consumption and environmental degradation. Low-income groups the world over are increasingly moving into middle- and high-income categories. This means that technological change will have to contend with both rapidly reducing the existing impact of consumption and that of the large increases in consumption resulting from growing global affluence. 

In turn, mitigation measures can sometimes be self-defeating, such as the observed offset of increased efficiency by net increases in production – the ‘rebound effect’ – and the path dependency of patterns of economic activity – for example, while electric vehicles provide a net reduction in environmental impact compared to combustion vehicles, they still impose large material costs to produce. 

Meanwhile, socioeconomic systems are experiencing rapid change, such as the impacts on employment of automation and the ongoing disruption of the pandemic. By many measures, societies are highly socially and economically unequal. Globally, economic and political power imbalances are the cause and effect of the inequity at the heart of climate breakdown. Altogether, high inequality could constrain cooperation at this crucial time. And, into the future, it is questionable as to whether domestic and international economic systems are robust to the growing destabilisation brought by the environmental emergency. 

The first story

This is a – if not the – crucial moment. Earth systems scientists conclude that we are in a state of planetary emergency, in which swift and transformative action is needed just to avoid a maelstrom of feedbacks that rob us of our agency over those factors driving or slowing environmental breakdown. 

The 2020s is therefore the latest in an unbroken line of “pivotal decades.” And I offer that it could be dominated by two major stories. 

The dominant political-economic paradigm of the last many decades has at times been largely agnostic or actively opposed to action on the unfolding environmental emergency. This is ending, at least in relation to the climate crisis. This is our first story: crudely, the neoliberal status quo is going to give this a go. 

There is a now a spectrum of modification occurring to the globally preeminent market fundamentalism, at once coming from within and against that paradigm. The 2020 BBC Reith Lectures delivered by Mark Carney, former governor of the Bank of England, are illustrative. Dr Carney explores the confused and limited concepts of value in modern economics and policymaking, how they diverge from those definitions of value broadly accepted in other parts of society, and the subsequent “realm of faith” into which market-obsessed decisionmakers have strayed. 

Reflecting wider concepts of value in markets—including the value of nature—is crucial to combatting the climate crisis. Doing so can better enable the financial sector, investment strategies and the wider behaviour of firms to increase efficiency and to accelerate the development and rollout of clean technologies and activities. 

A policy set to achieve this is also emerging, including higher levels of public investment, a more active approach to financial market regulation, and setting bounds on overall economic activity, which is essentially mandated by carbon budgets, if expressed in legislation. 

This approach is welcome but could face four major challenges. 

Firstly, the enabling policy set could be constrained. For example, many countries around the world are not implementing Covid recovery measures that encourage clean over damaging economic activity, or are considering austerity, against the express view of most economists. Moreover, how can laws and regulations keep ahead of the temptation to cut corners and use accounting tricks? Only a couple of months after Dr Carney’s Reith Lectures, he claimed that the investment portfolio of the asset management firm in which he is a vice chairman was carbon neutral because it “avoided emissions” by investing in renewable instead of fossil energy, which supposedly cancelled out the thousands of metric tonnes of carbon released by its other, dirty investments. 

The second problem concerns the factors that make up stable and cooperative societies. As is now well established, even those societies deemed as most “developed” are failing to provide citizens with broadly shared wellbeing to a standard often identified as being essential not just morally but to ensure cohesive social outcomes. High levels of inequality, material or otherwise, undercut cooperation and lead to power imbalances, which it can be argued have eroded action on the environmental emergency. While there is growing recognition that inequality is a major problem in its own right, there has been little progress in translating this into a credible policy programme. 

Thirdly, while mainstream appreciation of the enormity of the climate challenge has improved markedly over the last few years, limited progress has been made in relation to appreciation of biodiversity loss – and all the global targets for acting on this have been missed. Comprehension of the emergency as encompassing the critical destabilisation of the Earth System as a whole – a destabilisation that could soon overwhelm our agency – is functionally absent.

The fourth problem follows directly. Arguably the biggest bet being undertaken by the modified status quo approach is to maintain the current consumption model and to assume decoupling is possible in general and in the time allowed. This is could prove to be supremely risky. 

While a decoupling of material growth and CO2 emissions has been observed in some countries, questions have been raised as to what extent this is still the case when factoring in emissions produced from overseas production and other factors which are outside the purview of carbon accounting standards. 

Moreover, empirical studies cast doubt on whether global decoupling can occur rapidly enough and in relation to other environmental impacts while still maintaining the current attitude toward the type, level and growth of consumption. This is partly because of the environmental cost incurred by substituting dirty technologies for clean alternatives, where possible, and the material nature of our current types of consumption themselves. 

The emergent alternative

This has led a range of economists, campaigners, policymakers and more to suggest that effectively substituting dirty for clean is not enough and that the consumption model upon which economies are founded should also be questioned, if not just to hedge our bets. 

A starting point for these alternatives is to change the goals driving policymaking, economic activity and the wider political imaginary. Foremost is the doughnut approach, coined by Kate Raworth, which seeks to focus economic activity on meeting a set of minimum wellbeing standards, such as health and voice, while ensuring environmental impacts are kept within sustainable limits. This “regenerative and distributive economy” provides a “safe and just space for humanity.” 

Inherent within this and similar concepts is that economies must transition to a new model of prosperity and abundance. Wellbeing, broadly defined, is only a limited function of material concerns and so, beyond a certain point, growth in material consumption does not necessarily increase wellbeing. This means that the good life is less about getting the latest smartphone and more about social interaction, care, compassion, fun, inquisitiveness and creativity – and that material consumption, like that smart phone, can be a means to those ends: not, as our social and economic stories often tell us, the ends themselves.  

In this conception, breaking the link between compounding material consumption is an imperative for physical and mental health, vibrant communities, and cohesive societies, let alone a pressing environmental necessity. Methods for doing so directly seek to provide the conditions for more easily achieving basic material needs, such as adequate nutrition and healthcare, and providing space outside of work for play and social interaction. 

These include minimum and universal basic incomes and the provision of universal basic services, particularly of healthcare, education and mobility. It also includes better recognising and rewarding what we already have: higher wages for those “key workers” upon which we rely, in an out of pandemics, and for all those billions of us, particularly women, who care and do all the other unwaged labour, day in, day out, that is so often ignored by mainstream economics. 

All this requires a huge amount of investment. This is where concepts of a “green new deal” come in, providing an organising purpose – a mission – for societies to rapidly invest in the enabling conditions for more equitable, sustainable and resilient economies. This is about making up for lost time, expediting technological development and deployment, providing high quality jobs, and bolstering the social fabric – and doing so in a way that is attuned to a range of inequalities and injustice. 

This is only possible with a fiscal-monetary settlement that recognises, finally, that the era of fiat money emerging after the breakdown of the Bretton Woods settlement means we are free of many of the constraints on investment still haunting the economic imaginary. This was proven, again, by the response of many governments to the pandemic and many may, again, fail to see it, falling back into the fiction of artificial constraints on societally critical investments.

Changes to the financial system are also needed to drive this investment. This means more of the rules that divert energies from speculation to sustainable investment, part of which can be achieved by an activist approach from states, through directed investment banks and so on. It also means getting serious about the power dynamics in and around finance and how they contribute to inequality and power imbalances, including through ending tax havens and implementing global agreements on tax avoidance and evasion. 

Recognising the central threat of inequality and power imbalances to the collective response goes beyond finance. Put bluntly, we have little chance of marshalling an effective effort to re-stabilise the Earth System without it being and feeling like a shared endeavour. It is also surely risky to assume that rapid action can occur under the existing distribution of power and reward, which led us to the precipice. 

This means getting creative about ownership and other means of inclusion and shared decision-making and reward, such as economic democracy and municipalism, and using progressive tax policies to reduce a range of economic and political inequalities. It also means acting to reduce power imbalances in the global economy, including limiting the legal power of transnational corporations and breaking the dependency-extraction relationship between global north and south.

And all of that requires a new analytical framework for economics. The maintenance of stocks, particularly essential ecosystems and biodiversity should be prioritised, with the removal of certain things, including much of nature, out of the purview of markets altogether. This analytical framework should be interdisciplinary and include analyses often disregarded by the current paradigm, including power and exploitation. It will necessarily draw on findings that run contrary to the current paradigm, including that human behaviour is social, cooperative, adaptable and often prioritises intrinsic over extrinsic values. The widespread adoption of such a framework will of course require changes to how economics is taught. 

The second story

Now, everything I just explored – from changing goals, through the means to go beyond material consumption as the lodestar of social and economic life, to an appropriate analytical framework – all of these are ideas and practice that exist or are being implemented. We have the ideas; we have the frameworks. But we face three barriers: will, scale, and time. In short, it is taking too long for the mainstream to adopt these alternatives, if they ever will. 

This is why we must finish on a consideration of strategy. 

Which brings us to the second potential story of the 2020s. Much of the mainstream narrative on the environmental crisis over the last many decades seems to have been akin to warning fellow crewmates on a ship of a far-off storm. A small deviation in course would avoid disaster in the future. But the bearing was not changed, and the ship accelerated, and we’re now in the storm. 

The consequences of having entered the storm will likely mount as we head to 2030. The temperature rise will be approaching 1.5C, if it hasn’t already reached higher, and 2C won’t be far off. Damage and disruption will be growing and compounding. 

By this point, the vertiginous stakes will be obvious to all who dare look. As the destabilisation grows, the ecosystem of influence seeking to realise the change I mapped above will have to evolve to deal with the realities of being in the storm and not just warning about it. I finish by offering three potential areas of evolution. 

Firstly, the story will have to change. Telling the truth will always be a critical task. The project of educating people about the environmental emergency, with care and compassion, will forever continue. But the loci of those stories carrying the truth will have to shift. The mess will be all too obvious, including to regressive political forces rehearsing the catechism that “liberal elites knew, they did nothing, now we must protect ourselves and take what’s left”. Explaining how bad it is will increasingly have to come alongside even more powerful stories that explain why this is happening, how it came to this, and what we can all do together to fight for a liveable future. 

Secondly, and following directly, it will become even more important to mature and extend the inclusive, inter-sectional politics that is growing across the world and is associated with many of the ideas and practices I explored earlier. An unstinting focus on greater equality is critical. We may be occupying the same ship as it heads into the storm, but the conditions are and have long been very different across the crew, as are the levels of responsibility, for the mess and for the response, and of capability. Again, to have a chance, this must be and must feel like a shared endeavour. 

Thirdly, we need strategies and leadership that are robust to continuing the fight under conditions of growing destabilisation. This challenge is particularly acute for younger generations. Leadership in their future means facing an unprecedented challenge: to rapidly transform socioeconomic systems in a last-ditch attempt to re-stabilise the Earth System while contending with accelerating environmental breakdown and compounding societal destabilisation. 

Certain strategies and approaches employed in more stable times, even those from the late 2010s, might not be effective in those decades; stability breeds complacency. But action can be taken to better pre-empt and be equipped for this future, a new, explicit frontier of activity across those seeking paradigmatic change. It means better using the unprecedented foresight that helped us identify these unprecedented threats, going beyond binary invocations of it being “too late” as the existential threat grows, or an understanding of the future employed singularly as a tactical cautionary tale to spur action in the present so as to avoid these prognostications becoming a reality. 

For ours is the crucial moment. Alongside the grief, as the fires rage and the fear grows, we need stories of focus, struggle, and hope as we head into this next phase, battening down the hatches with a voracious resolve to fight for a future against the lashing fury of this storm.

Key references