Economy versus environment (Part 94)

Q: What would actually happen if any significant proportion of the population suddenly took it into their head to reduce their environmental impact? A: The economy would collapse.

If you look at the recent recession, it is striking how much damage was done by relatively small changes in GDP. Of the highly developed nations, the UK (among the OECD countries, a middling performer) was so badly hit that it has experienced a loss of a little over 2.5% since the end of 2007. What? 2.5% in two years? A bit over 1% a year? What’s the big deal? Yes, I know, losing 1/80th of my income would not be a good thing in a year, but how can this be enough to do so much damage to an economy?

So what would happen if, say, 20% of the population managed to knock 50% off their environmental impact? Surely that would be an excellent start. Well, from an environmental point of view, perhaps. But if that translated into a 10% fall in consumer spending, where would that leave the economy? Consumer spending represents about 56% of German GDP, 58% of Japan’s GDP, 64% of the UK’s and 72% of the US’s (here). So a 50% fall in spending by 20% of all individuals would cut these economies by somewhere between 5.6% and 7.2% of GDP. In other words, even such a small change by a small minority would reek more economic havoc than the current recession!

So, we all get the environmental bug, and the economy folds. And with it go (as the current recession has also shown) investment in green technology and solutions of all kinds. Not everything, but far too much to support the real greening of industry. On the contrary, investors would be heading for the safe, short-term returns. And governments everywhere would be trying to compensate for the shortfall with new spending – and so shoring up the very economic activity those who had cut their impact had hoped to eliminate.

This isn’t a criticism of taking action, of course. But it is the old revision-versus-revolution problem. If you want only that the system work a bit more benignly, you need only revise the system so that it loses its more unpleasant foibles. But if the problem you are worried about is inherent in the system itself, revision isn’t the answer. The only way to fix systematic problems is to change the system in systematic ways.

That in turn is a political issue. Our politicians are of course firmly committed to growth, but that is not an irreversible condition. But two things are fundamental.

1. We must develop a credible explanation of this most fatal link between economy and environment, and make it as central a plank of future political discourse and policy-making as growth and consumerism have been since the 1970s.
2. We must define a programme for migrating our existing economy to a sustainable form. This cannot wait for 'the market' or the actions of private corporations, whose interests will never be to change themselves while there is still money to be made. Governments and local organisations must start to plan the elimination of environmentally destructive economic activity, undo the vicious circle of capital expansion that drives consumerism, obsession economic growth and the disregard of the poor and weak.