TO WHAT EXTENT ARE GREENS' CRITIQUES OF ECONOMIC GROWTH JUSTIFIED?

Published May 17, 2020, 1:13 p.m. by Moderator

Introduction


Green growth advocates for the complete overhauling of the traditional economic growth model for an ecologically sustainable model that will guide investment decisions in meeting the growing demand for energy, agricultural products, water, and other essential natural resources as a consequence of economic growth. The OECD outlines green growth as a way of spurring economic growth while protecting the natural resources that sustain human existence. Green growth strategies are an amalgamation of best business practices coupled with environmental conservation (OECD, 2019).


Green growth strategies should not be confused with ecological improvement. Rather, it offers a hands-on and flexible methodology for realizing tangible, quantifiable advancement across financial and environmental systems, while also considering the associated social costs of green economies. The central motivation for green growth policies is to safeguard the economic potential of natural resources by ensuring that they are exploited on a sustainable basis. The economic potential of natural resources includes clean air and water, and the irrepressible biological life that supports humanity. Natural resources are not finite and interchangeable and green growth economic policies are driven by the notion of humans will run out of resources, if the current economic policies continue to be implemented (OECD, 2019).


The current economic policies are focused on driving economic growth at all costs without considering the environmental costs associated with the production of the products and services. Fiscal policies and globalization have forced countries to implement economic policies that are focused on immediate growth through the production of more goods and services. Capitalism propagates a ‘mercantilist’ culture that favors ‘ownership’ of material goods and this has resulted in ecological destruction (Schumacher and McKibben, 2010).


Economic Growth as a concept


Economic growth denotes the degree of an upsurge in the total creation of personal property and services within a state. Financial progress is characterized by an intensification of the industrious capability, which is principally driven by an increase in consumption. Economic growth creates job opportunities, stimulates commercial inventiveness, and innovation. Proponents of traditional economic growth models argue that sustained economic growth is vital to lifting standards of living and provides better welfare for all. This goes contrary to the evidence on the ground which shows that economic policies benefit the rich more than they uplift the poor (Dercon, 2014).


Economic growth is dependent on several factors such as natural resources, capital, and labor. Natural resources such as land, mineral ores, watercourses, and climate are fundamental to sustained economic growth. Natural resources can be industrialized and structured to enhance the productive capacity of a country. Economic growth is also dependent on the quality and size of the labor force. Education and vocational training initiatives are vital to sustaining economic growth (Lopez, 1994).


The challenge of the current capitalistic policies of sustained economic growth through the production of more goods and services to satisfy ‘unlimited’ human demands is unsustainable. If the current capitalistic growth model persists then the natural resources will not be able to match the escalating worldwide demand for foodstuffs, fuel, and construction materials. Our current consumption rates will outstrip the ecological carrying capacity within the next century. Other indirect consequences of a capitalistic economic growth model are unstable product prices, uncontainable effluence, critical damage to public wellbeing, and extinction of endangered species (Brock and Taylor, 2004).


Modern economic growth theories base their origins from the 15th - 17th century’s mercantilism. The word "mercantilism" was crafted by notable French economist Antoine de Montchrestien to describe the economic theory which considered the amassing of properties as the foremost measurement of financial progression and the core objective of commercial undertakings by merchants and the state. Earlier practitioners of mercantilism favored the accumulation of precious metals and coins as a symbol of economic prosperity. Mercantilists measured the financial clout of the state based on the entire quantity of the merchandise created and therefore favored a trade surplus as it helped increase manufacturing capacity and expand the national economy (Sharipov, 2015).


According to mercantilists’ economic theory, the profits accrued from the creation of products and access to loan facilities ultimately lead to economic growth. And since wealth was measured in terms of precious metals and coins, the availability of golden and silver monies, provided traders with cheap loans.  It’s based on this reasoning that initial mercantilists advocated for the limiting of gold exports from their countries because economic growth was pegged on the availability of gold and silver coins in circulation, while dynamic commercial activity was perceived as a precondition for economic growth (Sharipov, 2015).


The mercantilist’s economic approach can be viewed as a chronological configuration, on the modest point that all the wealth at that period existed only as commercial resources. Industrial wealth was yet to take hold. The mercantilists adopted a protectionist trade policy, which encouraged the export of goods, because of the associated capital flows into the country, and at the same time imposed trade restrictions on imports. This economic dogma was intended to guarantee excess goods, by ensuring that the home country had a sufficient amount of metal money, which was how the mercantilist’s sustained economic growth (Sharipov, 2015).


Physiocracy emerged in the 18th century as a replacement for the mercantilists’ economic theory. Physiocracy is a fiscal philosophy advanced by an assembly of 18th-century free-thinking French theorists, who supposed that the prosperity of states originates from the worth of ‘agricultural land’ or ‘property improvement ‘and that agrarian goods should be exceedingly valued. The noteworthy impact of Physiocracy economic theory is its emphasis on industrious exertion as the basis of wealth creation (Meek, 2013).


Physiocratic economists were the first to appreciate the impact of labor as a single source for value creation. The shortcoming of the Physiocratic economic model was that it believed that only agrarian labor could create value. It considered industrial and non-agricultural labor as uncreative supplements to agrarian labor. Physiocrats viewed the economics to be a natural progression guided by internal market forces, and therefore they were opposed to the state’s interference in these natural economic processes.


The conventional theory of financial evolution was originally proposed by Adam Smith who publicized classical economics in his manuscript in 1776 (Smith, 11776). The central philosophy of classical economics was that the prosperity of countries was centered on commercial trade. Trade occurs when two entities decide to interchange goods or services without imposing restrictions to make a profit. Trade thus results in wealth creation (Meade, 2013).


Classical economists believe that financial environments usually self-normalize when states don’t intervene. Adam Smith stated that market forces are a figurative ‘invisible hand’, which pushes markets towards their normal balance when buyers have the choice of many suppliers, and businesses that cannot effectively compete are permitted to die (Smith, 2006). Adam Smith cautioned against the threats posed by monopolies while stressing the prominence of economic rivalry (Smith, 1937).


Adam Smith associated surges in individuals’ prosperity with enhanced productivity of land, labor, and capital, which is replicated in the development of workforce efficiency and a rise in operational assets. Smith attached great importance to population growth as it directly impacted worker populations, savings, and ecological innovations, which contribute to sustained economic development.


Smith thought that a rise in the number of people was influenced by internal factors and was dependent on the available means of sustenance.  Investment also was dependent on savings used for business objectives. He linked productivity growth from land to ecological innovations and technological advancements in prevailing land productiveness. Smith postulated that the principal motivating power behind augmented productivity was the disunion of labor and technological advancements. Smith assumed that competition was the core driver of economic growth.


Malthus believed that as populations’ grow, human demand will outstrip the available natural resources leading to conflicts, disease epidemics, and mass famine. He proposed population control mechanisms that target the poorest who do not have access to resources. His theory did not consider population growth occasioned by mass immigration or emigration (Marquette, 1997). 


David Ricardo proposed the concept of relative benefits, which proposes that a country should focus its assets exclusively in productions that it best suited for and import products that it cannot produce locally. David Ricardo believed in the notion of the presence of usual market incomes and supposed that the proliferation of novel technologies would lead to job losses (Ruffin, 2002).


Keynesian and neo-Keynesian economic growth theories were first proposed by John Maynard Keynes. The fundamental feature of the Keynesian model is the role of real demand. Keynes believed that the growth of cumulative effective demand should lead to fiscal progression. He based his argument on economic standards such as domestic earnings, consumption, reserves, and funds. His theory was intended to explicate fluctuations in levels of economic activity.  He demonstrated that consumption decreases during periods of economic decline due to rising unemployment and reduction of income, savings, and investments (Jackson, 2009). 


Keynesian economics states that in a market environment where there is no demand to sustain economic growth, the government should intercede by applying macroeconomic policies such as tax or interest cuts (monetary policy) or increase government spending (fiscal policy) to stimulate economic growth. In monetary policies such as interest rates or tax cuts, the central bank loans cash to commercial banks at lower rates, and then the commercial banks pass on the cheaper loans to customers. Infrastructural investments provide a cash injection into the economy by generating trade prospects, jobs, and increasing consumption (Jackson, 2009).


Criticism of economic growth by Greens


Critics of Green Economics argue that there are many ways that economic growth can be ecologically sustainable. Modern conservation mechanisms and new technologies have provided innovative ways of conserving energy and reducing wastage. The most common criticism of neoliberal capitalism is that it largely focuses on increasing consumption as a measure of economic growth. This is more evident in humans’ unmitigated appetite for energy. As civilizations become more affluent, more services are produced than physical goods are expended, which is a trend that has the potential to lessen wastage and pollution (Schumacher and McKibben, 2010). Concerted pressure from green and environmental movements have forced governments to ratify climate agreements such as the Paris Climate Agreement in addition to domestic legislation that enforces more ecologically sustainable economic growth models.


For instance, Germany practices the ecological modernism model that utilizes advanced technologies as an attempt to sustain both the environment and economic growth. Governments, companies, and organizations across the world are investing in green energy alternatives such as solar power, wind power, and other renewable energy sources. Recycling is now an obligation for all companies and progressive governments are advocating for a strong zero-waste policy People have become more eco-conscious and in western societies, organic foods and vegetarianism are preferred because they require fewer natural resources to produce and do not use artificial fertilizers and pesticides that are major pollutants (Schumacher and McKibben, 2010).


 Critics of Green Economics contend that the concerns raised by the Greens about the negative effects of economic growth are either overstated or are absent. They argue that technological innovations have created an avenue through which economic growth can be ecologically sustained without increasing the rate of pollution (Schumacher and McKibben, 2010).


This argument does not take into consideration that some of these branded products and computer technologies are manufactured by exploited workers. Electronic waste is one of the major sources of pollution. Economic growth is manifested by an increase in air travel, which is a major source of greenhouse gases. Car ownership rates also skyrocket during economic booms leading to more pollution. From a green’s perspective, the fundamental challenge with globalization is that it stimulates economic activity which leads to more production, more consumption, and increasing pollution (Schumacher and McKibben, 2010).


One of the major arguments by the Greens is that economic growth undervalues human realities. Economic growth policies such as comparative advantage create a sense of economic alienation as occupations that are deemed not openly industrious from an economic point of view are less valued. Governments are obsessed with creating sound economic policies leading to bureaucracy bottlenecks during implementation (Schumacher and McKibben, 2010).


In neo-liberal capitalism economic growth is spurred by competition. Individuals and groups are pressured into hyper-competition that has arisen from globalization. Employees are expected to work for longer hours for less pay. Educational institutions create tailor-made courses that are geared at promoting competencies that lead to an increase in economic growth. Success is measured by the accumulation of wealth and individuals compete to occupy higher social statuses. Neo-liberalism capitalism intensifies individual anxiety levels. The Greens contend that economic judiciousness that values individuals based on measurable indicators transforms all requirements in a capitalist society into the want for possessions (Schumacher and McKibben, 2010).


One argument that has gained traction over the years is that economic growth leads to a reduction in poverty levels. In reality, it is the wealthiest of the society who benefit the most while the poorest who are usually prevented from accessing the resources to which they formerly had the right to use. For example, the 19th industrial revolution in England led to poverty, discontent, and catastrophe. Schumacher wrote in his book ‘Small is Beautiful’ that economics should be a medium through which human beings become happier and should serve ethical needs (Schumacher and McKibben, 2010).


Classical economists Adam Smith and David Ricardo assumed that trading nation-states were equal partners that were making cogent judgments based on independent valuations of their internal factors of production. Classical economists did not give weight to the inherent power inequities present between merchant states and manufacturing states. The intense competition advocated by classical economists typically results in businesses reducing wages, laying off workers, poor working environments, and total disregard for environmental management to reduce expenditures. Multinationals often increase product prices to safeguard their profits but are less concerned about improving the welfare of their workers and the environment (Schumacher and McKibben, 2010).


Green economists argue that globalization in its current format serves only the interests of the elite, and therefore should be reversed or transformed as it can be constitutionally compelled.  Fiscal strategies by agencies such as the IMF force poor countries to request financial aid to sell o national assets including energy, water, communications, and public infrastructure. The European Union has monetary policies that place limits on government spending. Governments also have to reduce corporation taxes and give extended tax breaks to multinationals to encourage foreign direct investments (Schumacher and McKibben, 2010).


For illustration, the IMF insisted that the Senegalese government reduce government spending to spur economic growth, this measure resulted in massive job losses (Sjöberg, 2000). After the implementation of the financial policy, unemployment rose from 25% to 44% between 1991 and 1996. Multinational corporations dictate economic policies around the world, but they create fewer job opportunities due to their cost-cutting measures that favor downsizing and outsourcing. The top 200 multinationals engage less than 1% of the world’s labor force (Schumacher and McKibben, 2010).


The negative effects of globalization are accentuated in food production. Globalization has been disastrous to local farmers in developing countries who have been squeezed out by ‘cheap imports’. This has affected the diversity of local diets. The import of similar products from distant locations is a waste of scarce energy resources which in turn increases the production of greenhouse gases. Globalization has led to the opening of free trade zones that benefit European, North American, and Japanese producers who are highly subsidized by their respective governments. These policies have led to disastrous consequences for some countries. For instance, Haiti was a leading producer of rice and groundnuts both for domestic and global consumption. As a condition for financial aid, the IMF compelled the country to allow the importation of rice which signaled the end of the country’s rice industry (Schumacher and McKibben, 2010).  


The alternative to a healthy economy


Green growth strategies are a vital part of the organizational transformations required to generate robust, ecologically-friendly, and all-inclusive economic growth. Green economics can unravel new growth avenues by augmenting production through the creation of incentives for better proficiency in the usage of natural assets, waste, and energy management. Green economics also unravels new openings for invention and product creation by assigning assets to the most pressing needs of the society. Green growth strategies boost investor confidence as the policies ensure greater expectedness in environmental policy issues. Green growth strategies create new markets for green products, services, and technologies.  Green growth adds to economic consolidation by marshaling revenues through the implementation of environmentally friendly taxes, and the abolition of ecologically destructive subsidies. The additional revenue accrued from green taxes can be used in anti-poverty programs to improve public health, education, and sanitation (Jackson, 2009).


Green growth strategies have to be custom-made to fit individual country environments. Green economists have to prudently deliberate on how to cope with any potential compromises and how best to combine green growth and poverty reduction strategies. The combined strategies could include the provision of efficient infrastructure to access and sustainably use energy, water, and transport resources.  Green combined policies could include public health interventions such as dealing with health complications associated with environmental degradation. The primary objective of green growth policies is to ensure that natural assets, especially in low-income countries are used sustainably leading to a reduction of environmental risks and improved standard of livings for communities that directly depend on the natural resources to survive (Jackson, 2009).


Green economists argue that concentrating on the gross domestic product (GDP) as the central measure of economic growth is problematic as it usually ignores the impact of natural resources on the prosperity, health, and welfare of individuals. Classical economists should, therefore use a comprehensive series of measures of growth, to include the value and configuration of economic growth and its impact on people’s prosperity and well-being. The OECD is currently working on a policy framework that incorporates hybrid policy combinations and analytical implements that are country-specific and can be adopted for diverse circumstances. This is just one of the many ways economists can create and implement green growth strategies in a manner that contributes to poverty alleviation, job creation, and a strong and sustainable economy (Jackson, 2009).


In 2010, the global Degrowth Conference submitted several suggestions to support a post-capitalist economy that adheres to ecologically sustainable practices. Some of the proposals include the enablement of home-grown currencies, measured abolition of fiat money, interest rates reforms, preferment for small, self-proprietorship not-for-profit businesses, protection and development of indigenous markets and formation of new rules for international markets, instituting of cohesive strategies to reduce working hours and introduction of a universal basic income (Schumacher and McKibben, 2010).


Other green growth strategies proposed by the Degrowth conference include legislation on lower and upper-income limits based on percentages, dissuasion of extreme consumption of non-permanent products,  legislation to encourage consumers to use more durable products, abandonment of extensive infrastructures such as atomic plants, weirs, furnaces, and rail networks, the transformation of road infrastructure to pedestrian lanes, bike pathways and open public spaces, increased taxes on advertising and banning advertisements on public spaces, funding for conservation movements, organizations and individuals struggling against unsustainable resource mining (Schumacher and McKibben, 2010).


The Degrowth Conference also proposed the introduction of international mining suspensions in ecological zones that are rich in plant and animal life or are of profound cultural significance to the local communities. The conference also advocated for reimbursement for environmental destruction, the abolition of population control policies, funding for women’s reproductive health issues, sensible reproduction and the freedom to migrate. It also proposes a more inclusive decision-making framework that decommercializes politics and enhances the direct participation of all stakeholders in decision-making (Fournier, 2008).


Capitalist Critique of Green Economics


The first argument against green economics is that capitalism does not permit the stringent delinking of economic growth and ecological destruction. Green economists believe that ecologically sustainable growth can be made possible through ecologically-friendly technological and social innovations. However, this is harder to replicate in reality. Empirical evidence on the ground shows that the ‘rebound effect’ will nullify all the energy savings realized through efficient energy management. Lower costs create a growing demand for increasing productivity to cater to increased consumption. Economic growth is driven by proficiency and output, which increases the demand for more energy and natural resources (Jackson, 2009).


Another shortcoming of green economics is that it ignores existing power relations. Green economists have narrowed the social dimensions to economic growth, green jobs, and poverty alleviation thus ignoring cultural and structural considerations such as ethnicity, gender, and social classes. The primary motivation of capitalism is to make profits and for a green economy to be sustainable it has to make profits for the ‘green’ businesses to survive. ‘Green fuels’ have resulted in food shortages for poor and marginalized communities as the ‘green products’ are the preserve of the middle and upper-classes. Green growth strategies tend to entrench some of the social inequalities that the capitalistic economic model has thus failed to tackle (Jackson, 2009).


The policies of a green economy are founded on ‘green’ technological and social advancements. The expansion of renewable energies is largely based on the same business principles of non-renewable energy sources. Green energy economics is based on centralized ownership and employs commercial procedures of energy production and supply that are unsustainable.  The environmental and social impacts of enormous off-shore wind farms and solar energy panels, electric cars, are largely negated as these industries are largely controlled by political elites who use these new opportunities to further affirm existing power inequalities. Green growth strategies could also result in the erosion of democratic principles if it advocates authoritarian forms of solutions to ensure ecological sustainability (Buko, 2019).


Opponents of green economics maintain that green policies advocate for the commodification of the environment under the pretense of environmental defense. Green policies turn natural resources such as water, wildlife, minerals, oil deposits, and air into commercial possessions. This is because, at the heart of their argument, nature’s features are viewed as resources with assigned property rights that have to be enforced. The common supposition of Green Economics is that corporations and markets function best when the government provides the correct framework (Buko, 2019).


The green economy favors market-based tools to rival the over-use of assets, bio networks, and natural sinks. Global capitalism has transformed the atmosphere and biosphere into natural sinks.  Green growth strategies are founded on economic feasibility and environmental sustainability. Greenhouses gas emissions are priced at ‘carbon auction houses’ but it has not resulted in a reduction in toxic emissions (Buko, 2019).


Conclusion


Green growth strategies promote the comprehensive revamping of the traditional economic growth model for an environmentally maintainable prototype that will guide how organizations and governments invest to match the rising demand for fuel, products, water, and natural resources to spur economic growth. Green economics is viewed as a way of stimulating economic growth without wanton environmental destruction. Green economic proposes radical measures that are geared at reducing poverty levels through the creation of ‘green’ products and services.


The main challenges of implementing green economics are mainly government bureaucracies, opposition from multinationals, and entrenched power relations. Green economics focuses on individual and societal growth as a measure of economic growth which differs from the classical economy where economic growth is measured as an aggregate of total products and commercial surpluses. This deviation makes it difficult for green economists to provide accurate measurements about the community and the ecological impact of green growth policies. The present economic policies are fixated with driving economic growth at all regardless of the environmental costs linked with the production of the products and services. Capitalism instills a culture of ‘mercantilism’ which favors ‘ownership’ of physical goods over ecological conservation (Schumacher and McKibben, 2010).


References


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