Can economy and ecology be reconciled?

Can economy and ecology be reconciled?
by Heiner Flassbeck
[This article published in Oct 2021 is translated from the German on the Internet, https://www.westendverlag.de/kommentare/was-auf-dem-spiel-steht/.]

Man has subjugated nature with unparalleled brutality. We are currently feeling the consequences acutely. On a planet with limited resources, unlimited growth with continuous resource consumption is not feasible. Ecology must become an indissoluble part of the economy, with a permanent place in our order of values and consumption. This is possible, but it requires a competent global community of states that acts in the interest of the majority and is capable of cushioning the economic consequences of ecological transformation. In his new book, Heiner Flassbeck identifies the most important problems and challenges we must face in the 21st century. And he shows in concrete terms how we can achieve the turnaround if we reconcile ecology and economy.

Much is at stake. Some say it's about everything. Indeed, it is about the question of whether a growing and wealth-hungry human race is capable of settling down on a limited planet in such a way that nature, which surrounds humans and is indispensable for their own survival, also has a chance. But it is also a question of whether the "settling down of people" can be brought into line with democratic processes and with an economy that gives the vast majority of people a chance to improve their personal living conditions in an ecologically sustainable development. If the latter does not succeed, there will be no democratic majorities globally for the massive change in living conditions that is necessary in any case to lead humanity onto a path compatible with nature.

The insights of the natural scientists are clear and cannot be refuted. They rightly point out that on a finite planet with finite resources, there cannot be unlimited growth and continued consumption of resources. According to the growth critics, three Earths would be needed if mankind were to continue like this for another hundred years. Since that obviously does not exist, one must turn back immediately, because otherwise the damage, which humans inflict on this planet, cannot be repaired.

Also the human population, that seems just as obvious from natural-scientific view, cannot continue to grow indefinitely. Whether the planet can cope with more than ten billion people is at least a very open question. But even with this statement, nothing is gained. Who should and must adapt? This is the question at issue, and it is not an easy one to answer. Western-Northern notions of how to "convince" "the developing world" to rely on population growth to a lesser extent are, in any case, completely misplaced. Again, one cannot deny the poorer countries to do what the developed countries have done before, namely to aim at the very moment when population growth levels off because a certain standard of living has been achieved.

Nonetheless, the scientific arguments are, on the whole, convincing. When the last liter of oil has been scraped from the desert sands and the last hundredweight of coal has been lifted, no one can retrieve the fossil resources that have formed over billions of years. No one can recycle them and consume them all over again. The law of entropy has taken hold of them. Although the materials are still there, they will never again be in a form that can be used by humans. Many other materials, too, will sooner or later be so incorporated into human products and constructions that they could only be recovered at economically unjustifiable cost. Even sand, which is suitable for construction, is already in short supply on this planet.

The fear of the consequences of rapid human economic activity is not new. As early as the 1950s, economist Kenneth Boulding wrote about the economic conditions of planet Earth and warned of the finite nature of resources. In the seventies, it was the Club of Rome that initiated a study that postulated "limits to growth" and is considered by many to be the beginning of the green movement. Since the nineties, it has been climate research that warns of the consequences of unrestrained CO2 emissions and predicts a warming of planet Earth in the coming decades that could have unimagined negative consequences for humanity.

No reasonable person can deny that Homo sapiens (the knowing man) has already dealt with his planet in a way that can only be called pathological. With a brutality unparalleled he has subjugated nature, has formed the landscape according to his wishes, has pushed back nature, has exterminated innumerable animal species and has not stopped even before the enormous seas his destructive power. This has been made possible by the availability of energy, primarily the easy availability of fossil fuels.

Now the world has experienced the greatest economic shock imaginable in peacetime, and the climate debate has temporarily fallen silent. The economic shutdown imposed by the governments of most of the world to slow the spread of the Corona virus is having an unimagined dramatic negative impact on economic activity and is likely to set back the climate movement for many years to come. Yes, set back, not promote!

True, there are some who believe that the majority of people saw during the shutdown how beautiful the world could be when everything was less hectic and agitated and there were no contrails from airplanes in the sky. But this is a grandiose misconception. Those who have enjoyed the standstill simply forget the others who have been plunged into existential hardship by the standstill, be they entrepreneurs who have been unable to save their companies, be they workers who have lost their jobs.

The Corona-related shutdown, imposed by the state and whose effects are to be dampened by the state with enormous sums of money, will go down in history as the classic example of how states create unhappiness and unemployment with unilateral interventions in the economy, without governments really being able - even with the use of enormous sums of money - to prevent the worst from happening. Anyone who comes along in the future with the claim that an economic activity must be stopped by the state because it is harmful to the climate and the environment will be confronted with the Corona Shock and its consequences.

Unemployment is, so to speak, the natural enemy of the environmental movement. Those who want to impose structural change on people, which will cost many individual jobs, must be able to provide enough new jobs elsewhere to make the change bearable for the mass of people. The economic policy failures of governments in the Corona crisis and the subsequent rise in unemployment dramatically diminish the credibility of any policy that demands adaptation to natural constraints while promising compensation by the state.

Ecology must become an indissoluble part of the economy, must be firmly anchored in people's order of values and consumption, in which, up to now, demand for economic goods has been quite predominant. This anchoring is possible, but it requires a competent global community of states that is capable, on the one hand, of cushioning the economic consequences of the ecological transformation of the economy and, on the other, of pursuing a general economic and distribution policy with which majorities can be won in democratic elections in the nation states.

Unfortunately, the international community of states is infinitely far from fulfilling these conditions today. However, this is not even primarily because there is no functioning international community of states, but because there is no viable economic policy concept either at the world level or in the nation states. Without really beginning to understand how a mixed economy of state and private actors works, we are simply unable to do what would be necessary and possible on ecological grounds.

Here, in the inability of the international community to agree on a coherent and empirically validated economic model, lies the main obstacle to the unwillingness of policymakers to take up the environmental challenge. The fear of expecting people to adapt more quickly and radically to an ecologically sensible way of life, which can be observed everywhere in the politics of the Western industrialized countries, is due quite directly to their inability, even in times of radical structural change, to set in motion an economic dynamic that will relieve the mass of people of their fear of the future and, in particular, their fear of losing their jobs.

The imperative for the next two decades, therefore, is to adapt to changing environmental conditions and help those affected according to the motto: "Those who cannot prevent the flood must raise the dams." This time, too, man will probably do what he does best, namely act only after the situation forcing him to act has already occurred.

Heiner Flassbeck worked at the United Nations in Geneva from 2000 to 2012, where he was chief economist at UNCTAD, responsible for globalization and development policy. Prior to that, he was State Secretary at the German Federal Ministry of Finance. In 2005, Flassbeck was appointed honorary professor by Hamburg University. He is the founder of makroskop.eu, where he regularly writes topical analyses and commentaries. His books published by Westend Verlag include "Handelt jetzt. The Global Manifesto to Save the Economy" (2013), "The Euro Disaster" (2018) and most recently "The Limited Planet and the Unlimited Economy" (2020).