“Promote consumption. Stimulate growth. Do as we say,” mainstream economists warn, “or you’ll find yourself with a faltering economy.” Unfortunately, given the way our economy is currently set up, they’re not wrong.
Workers remain employed, debts are repaid, and society maintains its stability only if consumption levels remain sufficiently high. On a finite planet, that is a serious problem. Wealthy nations must consume less if the ecological crises facing humanity are to be resolved, but the resulting reductions in economic activity produce recessions. These events lead to significant social hardship—shrinking wages, job losses, disappearing pensions, home foreclosures, and political instability. The structure of our economic system sets ecological health in conflict with economic well-being.
This conflict was described a decade ago in climate-specific terms by climate scientists Kevin Anderson and Alice Larkin. They pointed out that we must adhere to a finite carbon budget to limit global heating to tolerable levels, but unlike other scientists they also spelled out the economic implications. To keep to our budget we would need to reduce emissions towards zero at unprecedented rates, and the only historical examples of moderate emissions reductions had occurred in the context of economic recession. Where fossil fuel use had fallen dramatically, so did economic activity. This continues to be one of the most important messages arising from climate science: the actions we must take to maintain a livable climate would seem to come at the cost of economic upheaval.
Mainstream (neoclassical) economics offers little insight into this dilemma. But by developing economic literacy beyond the limits of the mainstream, activists can find ways out of it. Armed with a plan for transforming the economy, all that remains is to build a popular force capable of implementing it. The general public can and should participate in shaping how the economy operates, but the view of economics as a complex doctrine only intelligible to its neoclassical disciples encourages citizens to accept spectatorship. This self-doubt crumbles as it becomes clear that mainstream economics mainly serves to obscure and justify the simple exercise of corporate power.
The Limits of Mainstream Economics
Rather than offering a path forward, neoclassical economics seems perfectly constructed to perpetuate the status quo. Examining some of the field’s fundamental ideas reveals that it largely amounts to ideology dressed up as a rigorous discipline.
Neoclassical economics utterly abstracts from reality, perhaps most strikingly in its view of human behavior. The field envisions human beings as “homo economicus,” a species of self-interested and insatiable consumers whose behaviors are driven by greed. Never mind that through more than 90% of human history, cooperation within hunter-gatherer societies was the foundation of survival.
The concept of “Pareto efficiency” is central to neoclassical economic thought. We are said to have achieved economic efficiency when it becomes impossible to reallocate economic resources to make someone better off without making someone else worse off. Of course, under these conditions, wealth redistribution is always inefficient and harmful.
When it comes to decision-making, neoclassicals assert that our policy choices should be made through cost-benefit analyses that assign monetary values to priceless gifts like life itself. What happens if the arbitrary numbers that economists feed into their formula suggest that the expense of rapid decarbonization is greater than the value of future generations? Simple—we let temperatures rise. It wouldn’t be the first time cost-benefit analysis endorsed predictably deadly behavior.
These value-laden pillars of the discipline treat ever-increasing consumption and existing inequities of wealth as wholly appropriate. And yet, for many non-economists, economics seems to be a value-free science that ordinary people would struggle to comprehend.
Perhaps the most conspicuous attempt to legitimize mainstream economics is the Nobel Memorial Prize in Economic Sciences [emphasis added]. Unlike the original Nobel prizes, this award was not established by Alfred Nobel’s will in 1895 but by the Swedish central bank in 1968. It was then overseen in large part by the right-wing Mont Pelerin Society (MPS), a leading proponent of neoliberal ideas. The inception of the prize coincided with the rise of market fundamentalism and attacks by MPS economists on the original Limits to Growth study, published in 1972. Such illusions of prestige are needed to spread credulity for absurd ideas—like limitless consumption growth on a finite planet—which end up shaping our lives as citizens.
Growth-obsessed mainstream economics builds its biases into policy and official materials. One of the most consequential examples is the integrated climate-economy models used by the Intergovernmental Panel on Climate Change (IPCC) to evaluate our mitigation options. Models that envision us limiting warming to 2C often incorporate nonexistent technologies to magically negate emissions, which keeps decarbonization rates compatible with continued economic growth. Renowned economist William Nordhaus’s model, used to inform policy-making around the world, finds that action leading to 3.5C warming by 2100 is economically “optimal.” This work earned him a Nobel Memorial Prize in 2018. The IPCC has described the likely impacts of 4C warming—just beyond optimal—as “substantial species extinction, global and regional food insecurity, consequential restraints on common human activities [including growing food and working outdoors], and limited potential for adaptation in some cases.” Non-economists would recognize these as outcomes we must avoid at all costs.
Economics for a Stable Climate
Where should activists turn for insight into transforming the economy?
Rediscovering the work of veteran activist Noam Chomsky can be a useful start. Chomsky’s essays and talks combine insights from diverse economic thinkers and can be immensely helpful for deconstructing supposed economic realities. His heretical views on the economy stem from his reading of Gabriel Kolko (a historian), Karl Polanyi (an economic anthropologist), Ha-Joon Chang (a heterodox economist), and many others, including several anarchist thinkers. These voices emphasize that economics is inherently political and, as Chang assures us, “95 per cent” common sense.
There are also distinct branches of economic thought that envision a very different economy. Ecological economics (not to be confused with environmental economics, which is a sub-discipline of the neoclassical variety) offers well-developed perspectives and policy prescriptions to reconcile human needs with planetary boundaries. Herman Daly, the godfather of the field, points out that because neoclassical economics excludes the environment from its “pre-analytic vision,” with its foundational economic model a circular system of value exchange between businesses producing goods and households consuming them, the economy ends up looking like a perpetual motion machine. There are no inputs from the natural world (no resources, many of which are nonrenewable) or outputs to it (no inevitable waste products from economic activity). Just pretend that the economy isn’t a subsystem of global ecosystems and the idea of limitless growth will seem completely reasonable.
While mainstream economics is of little use to those seeking solutions to the real-world threat of ecological collapse, ecological economics proposes a steady state economy (SSE) that prescribes limits around human activity to maintain the natural systems we need to survive. The main priorities of this economy are sustainable economic scale and just distribution of wealth, goals not achieved through markets but through policies based on science and values. Once sustainable and just conditions are established, markets can then play the much smaller role of allocating scarce resources to the goods and services that are most desired. This economy could meet the public’s basic needs and allow for rapid emissions reductions without falling apart.
Ecological Economics’ Contribution to the Green New Deal
The Green New Deal (GND) must recognize and resolve the tension between economic stability and serious climate action. I believe the following changes to economic and social institutions, constitutive of a SSE, are essential to incorporate into activists’ plan to address the climate crisis.
First is the foundation of a SSE: a cap on the resources flowing through the economy, called throughput, which achieves the goal of sustainable economic scale. A nationally (and ultimately internationally) binding carbon budget would largely establish this throughput cap because fossil fuel use would likely fall faster than renewables are installed, limiting and reducing our energy consumption at least in the short-to-medium term. Measures to equitably distribute energy, such as Tradable Energy Quotas, would thus be essential to implement together with the cap. Rather than assuming the rapid addition of renewable energy capacity will sufficiently displace fossil fuel use, a scientifically-informed GND must reduce emissions with reference to our carbon budget, but the concept isn’t explicitly discussed within Alexandria Ocasio-Cortez’s GND resolution. Because shrinking energy use would produce the social ills associated with a recession under the current structure of the economy, the following SSE institutions are vital for maintaining economic stability and ensuring a just distribution of resources.
The second institutional pillar of a SSE is a democratically directed job guarantee. The GND resolution mentions a guaranteed jobs program among its “goals and projects,” and its proponents often envision the policy as a means of connecting individuals with a meaningful role in the transition to renewable energy. But it matters whether activists see the policy as useful-but-inessential or absolutely vital, as some fighting over the substance of eventual legislation may assert that large investments in renewables are sufficient on their own to create job opportunities. A whole-economy job guarantee is essential because the private sector’s control over employment links work opportunities to continued growth, and therefore ensures that mass unemployment follows from reducing consumption. A job guarantee would decouple employment from growth and eliminate the threat of joblessness as energy use and consumption shrinks. It would also allow citizens to reorient economic activity around less resource-intensive tasks like ecosystem restoration and caring for others. And if we find that fewer labor hours are needed with reduced consumption, the policy could incorporate work-sharing to shorten the working day, week, or year. Guaranteed employment will be a crucial stabilizing force as we fundamentally transform our society.
The third SSE pillar is bringing the monetary and financial system under public control. Money is a multi-purpose tool that facilitates economic activity in market systems. Growing economies generally require an increasing supply of money. There is a private channel of money creation which injects new money into the economy as private banks make loans (contrary to the usual presumption that loans come from existing money) and a public channel provided by central banks, which create money as national governments spend. However, about 95% of new money creation comes from private banks, while myths about “printing money” obscure the power of the public channel.
This has interwoven ecological, economic, and political effects. Ecologically, when investment decisions are driven by private banks seeking profits, the result tends to be ever-growing consumption. Economically, because private banks create the bulk of new money, the money supply is tied to debt that must be repaid. Currently, much of this money is used to speculate and inflate asset price bubbles. When it becomes clear that most debts won’t be paid or bubbles burst, banks protect themselves by cutting off lending. This is a major cause of recession as money creation stops and the supply shrinks as some debts are repaid. Central banks must then step in to create money as they did during the Great Recession, but whether they bail out and reinstate the private banks responsible for the instability or finance public needs is a political choice.
With the money supply controlled by private banks, we remain prone to financial crises that threaten the stability needed to complete the sustainability transition. And banking elites have historically controlled central banks, keeping the wraps on the public channel of money creation and maintaining economic conditions they find suitable. What is needed, then, is a government committed to serving public interests and unconstrained by myths about the scarcity of money. Such a government could revoke private banks’ ability to create money and operate the monetary and financial system to serve the sustainability transition, financing it in full without taxation and ensuring sufficient money creation to protect the economy against shocks as we rapidly phase out fossil fuels.
Though all of these policies require activists to dispel economic myths, this is particularly true for democratizing the monetary system. The movement must educate the public about how private and central banks create money, that national governments don’t rely on taxation to spend and do not need to budget like a household, and that currencies only function due to public authority and ought to be treated as a public resource. Private control of investment decisions rests upon a complete lack of public attention to these ideas.
Fourth, a non-growing economy requires defined limits to economic inequality. We could achieve this by establishing an income floor and a ceiling to income and wealth. Though the job guarantee would ensure a sufficient income for workers, a guaranteed income would be needed for those who cannot work. This would further decouple well-being from growth by ensuring that retired citizens can meet their needs without retirement accounts that depend on a growing economy. The maximum income and wealth limit would ensure that inequality never gets out of control as national wealth levels off, preserving social and political stability. In 2018 the ratio of average CEO-to-worker pay was 278 to 1, with executives making $17.2 million. A ratio of 25 to 1, for example, could establish an income range of $40,000 to $1,000,000 (in 1965 the ratio was 20 to 1). Simultaneously implementing universal basic services, such as widespread public transportation that makes personal vehicles unnecessary, would also encourage reduced inequality through shared consumption.
To maintain the integrity of our throughput caps we must also dampen the forces pushing the economy to grow. The goal of our economy is derived from its institutions, and corporations’ pursuit of profit maximization leads to an economy that maximizes consumption. The fifth SSE policy is turning corporations into non-profit cooperatives by establishing meeting community needs within ecological limits as their legal purpose. These cooperatives would be governed by the workers, customers, and community-members that interact with them to help ensure that this purpose is fulfilled, with clear reporting and accountability mechanisms built-in. How do we fundamentally change our productive institutions? We need to remember that corporations are creations of the state. A movement in control of government can transform or abolish the corporate charters that bring these institutions into existence in the first place.
The last major pillar of a non-growing economy is a stable population size. An expanding population creates ever-rising demand, and though the current global growth rate of around 1% per year sounds small, it results in the addition of one billion people to the planet roughly every dozen years. In November 2019, over 11,000 scientists from around the world declared that Earth faces a climate emergency and asserted the need to stabilize the human population as one of six “critical” steps to address the crisis. When breaking down emission trends, the IPCC shows that population growth has often approached or exceeded the impact of economic growth in driving increasing emissions in recent decades (Figure SPM.3). At the same time, the UN projects that the population will expand to between 9.4 and 12.7 billion by 2100.
Many activists avoid discussions of population, rightfully alarmed by the racist history of eugenics and concerned that it emboldens eco-fascist ideologues, but the moral issues raised by inaction remain significant. The rights of future generations and those whose basic needs are not met today depend on a population size that allows for ecological stability and a sufficient share of resource use. This applies to all countries that share this finite planet. Promoting a stable population in high-income nations, where citizens currently consume disproportionate resources, has the greatest impact on problems we face today. But supporting the right of all people to have their basic needs met means that the consumption levels of citizens in low-income nations must increase, and population growth in these countries will have a more significant impact on the global environment in the near future. Those who study population issues note that rapid changes in fertility in the past have resulted from non-coercive means that could be promoted today, like ensuring women’s voice in reproductive decisions, providing family planning services, and encouraging small-family norms.
While these policies may be some of the most important stepping stones to a SSE, additional changes, like capital controls and a shift away from consumer culture, would also be needed. Because corporations or other countries may seek to gain a competitive advantage by avoiding steady state policies, national governments will need to implement controls, such as laws limiting how much money can be moved abroad or compensating tariffs, to prevent capital flight and protect the domestic economy as it transitions. And by generating society-wide discussion about the corporate roots of consumerism and exploring definitions of freedom that emphasize ecological and democratic principles over limitless consumption, we can develop a culture that embraces an economy of sufficiency over excess.
Beyond SSE institutions, the role of energy in the economy also deserves particular attention from activists. Incorporating the work of energy analysts, who research the societal implications of large-scale conversions from one energy source to another, is critical to plan for the transition from fossil fuels to renewables. This work allows us to foresee potentially serious challenges arising during the transition and how an all-renewable world may be different than the one to which we’re accustomed. Some of these possible differences can be found in my previous essay on ecological and energy literacy. One major takeaway is the need to rapidly relocalize food production in anticipation of phasing out oil, which is currently a primary input to centralized, large-scale agricultural systems. If public support for rapid decarbonization is built on the expectation of a straightforward transition to a society largely similar to the present, it could be jeopardized if reality turns out to be more complicated. It’s crucial that activists plan ahead for issues that could threaten to derail the energy transition and prepare the public for the possibility that an all-renewable world requires changes to our lifestyles.
The ideas above dispel myths about the economy and help us envision new possibilities. Economic literacy allows activists to see that many of the harms caused by recessions aren’t the inevitable result of “economic laws,” but rather political choices. The idea that as consumption shrinks people unavoidably experience mass unemployment or that there isn’t enough money to provide for public goods is false. Poverty in the midst of extravagant wealth is a choice. The population’s basic needs, like having food and shelter, can be met in the context of decreasing consumption. Some of the ideas developed by ecological economists and other academics are vital for solving the problems activists are working on, but they can remain buried in books few will read, conferences few will attend, and classes few will take. What these disciplines seem to lack is a strong link to movements that need their vision and analysis but also represent the only vehicle for their ideas to ever define society. Liberating knowledge must be spread beyond the ivory tower through movement institutions dedicated to public education, so that it may become the new common sense.
The current economic system is driving us towards ecological collapse, but there is nothing inevitable about it. The economy is a human construct that humans can change. That corporate power needs the cover provided by economists and economic theories hints at its vulnerability. By developing our own economic literacy, this strategy would no longer sway the public mind or win its acquiescence. Movements aimed at creating a fundamentally different economy would have the autonomous character they’ll need to overcome the legions of economists trying to convince them and the broader public that such changes would lead to chaos. Knowledge is power—let’s ensure we’re acting like it.