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Notes on a Greener Economy

by Carl Schlyter on 20th November 2012

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In this text Carl Schlyter, Member of the European Parliament for the Green Party of Sweden, offers some thoughts on policy actions that could lead to a greener and more liveable economy, including shorter working hours, more thoughtful subsidies, and better investments.

The Uneconomic Economy

Standard economic theory follows the logic of growth. Growth creates jobs, investment creates growth, and money fuels investments —while money is an (the only) infinite resource created by banks. But the loans must be paid with interest, which can only be paid for by growth and we are stuck in an endless pyramid-scheme. When it works from an economic point of view growth drives resource use to unsustainable levels creating ecological collapse and when economic growth doesn’t “work” it leads to social and economic collapse. We have an economy that can never work!

Traditionally our main challenge has been to transform natural resources into useful products, but today we are moving towards a scenario where the limit to the economy is not production capacity, but the natural resources needed for it. Fighting economic crisis with traditional measures by stimulating investment, consumption and reduced taxes is more and more unlikely to produce the desired economic growth. Instead, by increasing resource use it will lead to increased resource prices and scarcity. And, there is an increasingly strong link between increasing resource costs and economic crisis.

The loan-based growth model also increases inequality since it increases the share of income distributed by financial gains and reduces the share of the economy paid as salaries, which are more evenly distributed than financial gains, even if we see growing disparities. If the relation of profits to salaries had remained as they were in 1980 Swedish workers today would earn $14,000 more per year! Instead, workers receive an increasingly smaller fraction of the gains from production, contrary to the situation of capital owners. The situation is similar (but at lower absolute levels) in many EU-countries.

The challenge is therefore to have high employment rates without using traditional growth or even so-called green growth fueled by financially and socially unsustainable growth in loans. Creating or keeping jobs in a low/no growth scenario needs new thinking; I present a few ideas on how to do so here.

Shorter Working Hours

Are we happier when we are richer? Yes, of course! Those who are hungry will certainly be happier if they have food on the table and those who are cold will be happier to have warm clothes. However, excessive consumption does not seem to make us significantly happier. Once we have satisfied our basic requirements, other things make us happy, such as social relationships, culture, meaningful work, the enjoyment of nature, and the like. The now fairly extensive research on happiness shows quite convincingly that we start to value things other than buying gadgets already at relatively low levels of income and that the extra consumption permitted by working longer hours no longer compensates for the loss of free time. In light of this research we should reduce the average working-time.

There are pressing environmental reasons for introducing shorter working-hours; when working, we emit, on average, considerably more greenhouse gases than when we are not working. Introducing shorter working hours as a tool in environmental policy is highlighted in a recent report on green jobs published by the United Nations Environmental Programme (UNEP) in cooperation with the International Trade Union Confederation (ITUC) and the International Employers Organisation (IEO).

Shorter working hours would give us time for genuine involvement in organizations and associations, political parties, networks and such. Shortening working hours would thus lead to a strengthening of democracy. We would also gain more time to develop personal relations, sing in a choir, take a walk in the countryside or do other things, which require time and make us happier without having to consume significant amounts of finite resources.

In times of recession we should divide the available work evenly between us in a show of solidarity instead of creating divisions between those who are unemployed and those working too much. By replacing redundancy with shorter working hours it is possible to create a feeling of cooperation among workers instead of marginalization and destructive competition as people fight to avoid being sacked. In order to get the environmental benefits and not cause significant costs, reduced working time would lead to efficiency gains taken out as free time rather than increased pay. For countries with low minimum salary, such as the US, this would need to be raised and paid for by reducing the income inequality or by increased taxes for the rich and reduced taxes for low-income households.

Reduced working-time was tested with great success during the Great Depression in the USA in the 1930s, when it resulted in 3-5 million new jobs being created. Will Kellogg, for example, introduced a 30-hour working week at his large cereal factory in Battle Creek, Michigan.

Doing Less Gives Us More

Green economists usually apply full cost accounting in order to, for example, be able to determine the viability of an investment or the real rate of return in a manufacturing process. If parameters that traditional economists do not usually consider are taken into account, the conclusions reached may be quite different. A few examples:

A report published by the Food and Agriculture Organization (FAO) of the United Nations estimates that global fishing industry revenues could actually increase by €50 billion per year simply by fishing less. To reach a balance between catch sizes and regeneration of stocks would necessitate a change from the current approach of overfishing and, in the short run, lower the catches. The authors of the report state that such a strategy would require the capacity of the global fishing fleet to be halved. A young cod that is left in the sea for an extra year grows by approximately 20%. Nowhere in the anthropogenic economy can such sustainable, fossil-free growth be achieved. Reducing the capacity of the global fishing fleet could easily be done if there was enough political will to do so. The fishing industry is heavily subsidized and reducing subsidies would automatically reduce the fishing fleet.

Other industries are subsidized as well. In World Energy Outlook 2011, the International Energy Agency (IEA) reports that fossil fuels are subsidized with over 400 billion dollars annually. To this, all unpaid external costs caused by fossil fuels should be added. If these subsidies were abolished the Kyoto objectives could be attained. Instead, the subsidies make reaching these objectives close to impossible.

Military spending is another huge pool of money that could be put to better use than is the case at the moment. Stockholm’s International Peace Research Institute (SIPRI) has estimated that global military spending in 2011 amounted to 1,738 billion dollars, which equates in real terms to an increase of 52% since 2002.

The above example from the fishing industry illustrates how less effort, sometimes, can actually create significant economic value. In the cases of the energy and military sectors reducing subsidies could save hundreds of billions of public dollars, and benefit the public interest.

Investing Better

Stopping destructive investments and subsidies is one step towards a greener and more just economy. Getting more out of remaining investments and efforts is another step. A growing number of security experts point to the fact that a lack of natural resources will lead to future conflicts. A security policy that really aims to provide security should be using an increasing proportion of its funds to help fight water shortages and resource waste rather than purchasing weapons that will be used to fight human opponents. This is also the essence of Indian scientist and environmental activist Vandana Shiva’s book Water Wars.

We can pro-actively invest in other ways. Many pension funds, for instance, are significant shareholders in multi-national companies. We must use this fact to place more stringent demands on these businesses with regard to the environment and working conditions. Some trailblazers have already begun taking such steps; an example is the pension fund for civil servants in California (CalPERS), which manages over 240 billion dollars and is the second largest pension fund in America. The fund makes direct investments in small, unlisted companies in the environmental sector, and a few percent of the annual investment sum is invested in regions with high unemployment.

The Swedish National Pension Funds (AP funds) could generate added value in the form of a better future, not just in terms of money generated, but by investing in green technology and green developments for the good of society. After all, what’s the point of having a good pension (after working many hours at the expense of enjoying life) if increasing amounts of it have to be used to pay for flood and storm damages, higher insurance premiums and costs associated with lower crop yields and new epidemics?

 

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This post was written by

avatar After having worked with people at a landfill in Brazil, Carl Schlyter realized that taking care of the environment goes hand in hand with improved social conditions. Today, Carl Schlyter is Member of the European Parliament (MEP) for the Green Party of Sweden. In the European Parliament he is vice chair of the Committee on the Environment, Public Health and Food Safety.

Carl has written 1 posts on Post Growth Institute.

{ 2 comments }

avatar 1 Kimbowa Richard November 20, 2012 at 22:29

Addressing harmful subsidies that deplete natural resources like fisheries is key, but needs to be pushed for. The world continues to pay a heavy price for this!

avatar 2 Benjamin November 22, 2012 at 01:27

Politicians, economists and financiers repeatedly try to convince us that a constant economic growth is absolutely necessary for our society to exist and prosper. Let’s see what happens if today’s economic growth, which is harmful to people and the environment, kept growing continuously for the next 100 years:
- 3% yearly economic growth for 100 years means 7.5x increase in production
- 5% yearly economic growth for 100 years means 130x increase in production
- 10% yearly economic growth for 100 years means 13,800x increase in production
If we continue like this with just 3% economic growth per year, in the next 100 years we will use up all natural resources, destroy the planet’s ecosystem and by doing so, indirectly destroy ourselves as well.
Not only urgently — but immediately — we need to seek solutions and create a social order that will replace the harmful economic growth with a beneficial one. That is ecohumanism.

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