Ecological illiteracy It’s a term I learnt from the British author Tim Jackson and it has come in handy ever since. It is particularly useful in discussions with economists. As long as most of them believe that anything, including that age-old forest, can be replaced as long as money and innovation are at hand, you are talking at cross purposes. In the meantime the world perishes ecologically, but that is taken to be a side-effect to be put right with more technological innovation. And why not develop an app in the process. The fact that our planet remains small while the economy keeps growing doesn’t fit the framing of most economists. And make no mistake: I get little pleasure from discovering this kind of illiteracy. It does show, however, the huge profit that can be had if thinkers are willing to look beyond the low wall of their own field of study. And the missed opportunity if they do not.
So the book of 2014, Capital in the 21st Century, was both a highlight and a disappointment. Thomas Piketty encapsulates his work in the formula r>g. If capital yields a higher interest rate r than economic growth g, the unequal distribution of wealth increases correspondingly. Ultimately destabilising a society. The author also teaches us an important history lesson: in terms of equality, the 20th century was an exception. The returns the rich received on their capital decreased substantially. And in the golden years after 1945 economic growth was as much as four percent over a thirty-year period. So, in combination with progressive taxation, we reached the greatest equality ever. Those were optimistic times with the slogan: growth is a tide lifting all the boats, everyone would benefit from the rise in wealth. As we know after 1975 growth plummeted while capital levies largely disappeared. So we’re back to square one, with little growth, a lot of profit for the rich and increasing inequality. And there Piketty sounds the alarm bell.
But the solution he offers: make growth bigger than the return on capital, is outdated. Since the 1970s we have been consuming more each year than nature can sustain. Each year our ecological capital is depleted. And here’s where Piketty’s missing ecological link lies. That’s why after forty years of environmental crisis it’s time for a new motto: growth is a tide flooding all the dikes. And that’s the second alarm bell of our times, which unfortunately Piketty fails to sound.
For what is Piketty’s solution if he ignores the ecological crisis? Lower r and raise g: lower the interest rate on capital and aim at classic economic growth. I agree with the first, but I am astounded by the latter. Because the economist rightly explains what exponential growth means. It means that this year’s growth is added to the stock with which next year’s growth percentage is calculated. Piketty teaches us that with a growth of one percent in one generation the economy grows by a third. And, he goes on: “that is less spectacular than an annual growth of 2 to 2.5%, which leads to a doubling in any generation”. But do we really think that we can add a third or double the amount of stuff we’re producing without fatal ecological damage?
Those who, like Piketty, formulate a future agenda, cannot ignore the ecological challenge. Developments such as climate change are detrimental to the welfare state. And it doesn’t help when in your book you invariably mention the possible deterioration of natural capital. In reality, we in the West are living as if we had an ecological capital covering five planets. The challenge confronting us is a tough one: to lower the impact of our economy by a factor 10. With the predicted growth we rapidly approach a factor 20, which we’ll never be able to lower with the present economic system. Optimists will dismiss this out of hand by referring to the decrease in environmental pressure in the West. They forget that when we shifted production to China pollution moved with it. With the just intention to facilitate sufficient growth and advance the distribution of wealth, Piketty in fact predicts the great ecological catastrophe of the 21st century.
Why stick to the present GDP-driven growth model? It has been creating inequality for over thirty years. Furthermore, ecology and inequality are inseparably linked. The economic model buttressing our welfare state is based on exhaustion and undermines the ways of life of large numbers of people worldwide. From oil drilling to open pit-mining, we wouldn’t submit to it at home. To argue in favour of GDP-based growth in 2015 is no longer possible from a global equality point of view. If we look at the limited number of greenhouse gases we are allowed to emit globally within the framework of climate policies, the gluttony of the rich countries has already stifled the chances for growth of the poor countries, who know already that they will never achieve what we have built up in the West, unless they give up on the planet. In short, a global growth strategy on a planet with finite resources hits the weak the hardest.
Luckily there are those who move beyond classic economic theory and integrate ecology in their thinking. A recent study by Jackson and Peter Victor shows that with the proper policies in place a deceleration in growth goes hand in hand with an increase in equality and environmental pressure! Progressive taxation plays a role, but especially the things we invest in. Is it robotisation with fewer and fewer jobs, or do we invest in labour intensive services that will help develop the circular economy? Take for instance the repair networks needed in every town and city, the growing of crops in people’s vicinity. Is it not smarter to invest in worthy jobs than to put money into more and more production done with increasingly fewer people, in addition to the rising number of burnouts?
We need another thermometer to replace GDP-growth. Because it’s increasing when there are more road accidents or more rubbish has to removed from the environment. A better thermometer would be the Index for Sustainable Economic Welfare. Compared to 1990 it even slightly dropped in Flanders, one of the richest regions in the world. A strange paradox: we work harder, we consume more, and we aren’t benefiting, with the quality of the environment worsening unabated.
When opting for classic growth Piketty endorses productivism: if the cake gets bigger, it is easier to give out a greater share to those earning less. Thus the social democratic challenge of the 20th century gets a 21st century update. But when growth functions as an alternative for the equal distribution of wealth, we defer the issue of equality. It being the challenge of the 21st century to bake a different cake, not bigger, but better. What’s more: who to bake this cake? Formula r>g is only problematic if the bulk of the capital remains in the hands of a small group. Those who take the essential economic decisions get the larger part of the pie. There is a viable alternative if we consciously invest our savings and pension money and build a locally embedded, sustainable economy. Citizens cooperations the field of renewable energy lead the way. Social and ecological objectives go hand in hand with economic targets, including a reasonable return for every shareholder. The more people enjoy the return on capital r, so much less dramatic a small growth g will be.
It may surprise many: in spite of my criticism I am a fan of Piketty’s. He shows our society a clear way round the cliff of social instability. And a more equal society is an ecological need too, as inequality boosts consumption. And his agenda is clear: introduce a capital levy, put an end to fiscal competition between countries and exchange fiscal data. At the same time, Piketty the thinker accepts productivism, by which the old cake grows and grows. Piketty’s ship will end up on the ecological cliff: the crossing of ecological barriers will structurally destabilise societies. In one region this can occur in the form of water shortage – take California – while other densely populated coastal regions are faced with rising sea levels, with the ensuing millions of climate refugees worldwide.
It is foolish for ecologists to dismiss Piketty’s book. His insights are indispensable in the pursuit of ecological justice. Hence my proposal to Piketty: write a new book about ecological capital in the 21st century. If we fail to take account of that capital we may be capitalists or socialists, but we are certainly consuming our future.
This essay is a greatly abridged version of an article which recently appeared in Tijdschrift Oikos (in Dutch).