NJPN Conference: Framing the Global Crisis - Mark Rotheram

Subtitled 'Integrating Ecological and Economic Change', this insightful talk was given at the annual conference of the National Justice and Peace Network on 24 July. Mark Rotherham is a Lancaster-based film and media producer with wide experience in the delivery of ecological education. He works closely with the Lee House Centre for Mission Awareness in Thornley, near Longridge.

In 1947 Paul Samuelson drew the defining picture of macroeconomics. Instead of using mathematics to show financial transactions between various components of the economy his Circular Flow diagram was based on the metaphor of water flowing through plumbed pipes.

The following year engineer turned economist Bill Phillips constructed a hydraulic machine of Samuelson's Circular Flow diagram. His MONIAC (Monetary National Income Analogue Computer) consisted of a series of transparent tanks that filled with pink water to simulate financial flows through the economy. Nobody noticed however that MONIAC would not work unless you first plugged it into the electric supply. Ultimately, it is energy, not money, that makes the world go 'round.

Missing from Samuelson's diagram was any depiction of the Earth as source and sink for all the material and energy we consume in the economy. Building on the work of Herman Daly - one of the founders of ecological economics - Kate Raworth has redrawn the economy to represent it as a subsystem of the larger Earth system.

We often use the words 'energy' and 'power' interchangeably. Power however can have various meanings. In physics it is simply defined as the rate of energy transfer. In politics, power refers to a social dynamic that can be exercised in either a horizontal form (e.g. democracy) or in a vertical form (e.g. dictatorship). The pyramid of power is the classic vertical form with the monarch at the top and slaves at the bottom.

Today's power structure is more complex, consisting of overlapping interests among various actors in the political-economy. It is however still a vertical power structure with the financial interests of a wealth-elite at the top. Over the last two centuries, through colonialism and enclosure of common land, the ruling class have used immense violence to force people in subsistence communities to become wage dependent industrial workers.

As the Industrial Revolution came to depend almost entirely on coal for energy it gave workers an effective means of protest against the brutal conditions of working class life. The miners, dockyard and railway workers invented the general strike to force factory owners to the bargaining table. This is how 20th century democracy was won and lost. We should remain alert to the link between sources of energy and forms of political power.

Turning to the policies needed today, monetary reform is fundamental to ecological economics. Commercial banks create money from nothing each time they issue a loan. This money enters the economy on both sides of the balance sheet, both as credit to lenders and debt to borrowers, which multiplies at compound interest. As this systemic debt escalates the economy must either grow or collapse.

Herman Daly considers GDP growth just as likely to be a measure of 'illth' as a measure of wealth. Costs to nature and society are called 'externalities' and are therefore not counted. GDP itself is also subject to the law of diminishing returns to a point where further economic growth becomes counterproductive.

Looking ahead to COP26. UK Prime Minister Boris Johnson will assert, as he did at the virtual Climate Summit in April 2020, that we can "Have cake, eat," meaning that we can grow the economy and reduce carbon emissions. This assertion does not take account of emissions from embodied energy in material consumption which has remained tightly coupled with GDP growth.

Our global material footprint trebled from 1970 - 2015. In 2020 the world economy consumed 100.6 billion tonnes of raw material. This is double the sustainable level of 50 billion tonnes. To supply our current level of material consumption would require two planets.

To bring carbon emissions and material consumption back within planetary boundaries we need a rapid, steep reduction in resource use. There is no empirical evidence that this can be achieved simultaneously with GDP growth.

Albert Einstein defined 'madness' as doing the same thing over and over again, expecting a different result. As we emerge from the pandemic we must choose between 'green growth' or degrowth. 'Green growth' is little more than a euphemism for big business-as-usual. For the sake of life and future generations rich nations must curtail economic growth, abandon GDP as the go-to metric of economic health and establish policies for an ecological economics.

At present a large proportion of the global population is suffering multiple forms of social deprivation even as planetary boundaries are being exceeded. At COP26 world leaders must agree on emergency measures to heal these deadly social and ecological wounds.

Instead of the GDP growth curve, Kate Raworth's doughnut shape must become a new icon for 21st century economics. Within the circle, between the social foundation and environmental ceiling, lies the safe and just space for humanity.

LINKS

See Conference videos at: www.justice-and-peace.org.uk/conference/