Rethinking our economic future

Founder and President of the Earth Policy Institute*

Pressures on the earth’s resources are building, but is the current economic model reaching breaking point? What can be done? 

Many earlier civilisations at some point found themselves on an economic path that was environmentally unsustainable. Some understood what was happening and were able to make the needed adjustments and survive, even flourish. Others either did not understand the gravity of their situation or, if they did, could not adjust in time. They collapsed. Our global civilisation today is also on an economic path that is environmentally unsustainable, a path that is leading us toward economic decline and collapse.

Environmental scientists have been saying for some time that the global economy is being slowly undermined by the trends of environmental destruction and disruption, including shrinking forests, expanding deserts, falling water tables, eroding soils, collapsing fisheries, rising temperatures, melting ice, rising seas and increasingly destructive storms.

Although it is obvious that no society can survive the decline of its environmental support systems, many people are not yet convinced of the need for economic restructuring. But this is now changing with important new evidence from China.

For some decades the United States, with 5% of the world’s people, consumed a third of the world’s resources. But now China has become the top consumer of most basic resources except for oil. The western economic model—the fossil fuel-based, auto-centred, throwaway economy—is not going to work for China. If it does not work for China, it will not work for India, which by 2031 is projected to have a population even larger than China’s.

Nor will it work for the 3 billion other people in developing countries who are also dreaming the “American dream.” And in an increasingly integrated world economy, where all countries are competing for the same oil, grain and steel, the existing economic model will not work for industrial countries either. It is time for Plan B, time to build a new economy and a new world.

Plan B has three components: restructuring the global economy so that it can sustain civilisation, an all-out effort to eradicate poverty and stabilise population–in order to elicit participation of the developing countries–and a systematic effort to reverse the trends of environmental destruction.

Glimpses of the new economy can be seen in the wind farms of western Europe, the solar rooftops of Japan, the fast-growing hybrid car fleet of the US, the reforested mountains of South Korea and the bicycle-friendly streets of Amsterdam. Virtually everything we need to do to build an economy that will sustain economic progress is already being done in one or more countries.

In this economic restructuring, the biggest changes will come in the energy economy as the world strives to stabilise atmospheric carbon dioxide levels and reduce dependence on oil. Over the last five years, oil and coal production have expanded by 2% annually while the use of wind and solar energy have grown by more than 30% per year. The energy transition is already under way. But it is not moving nearly fast enough.

Among the new sources of energy–wind, solar cells, solar thermal, geothermal, small-scale hydro, biomass–wind is breaking through into the big time. In Europe, which is leading the world into the wind era, some 40 million people now get their residential electricity from wind farms. The European Wind Energy Association projects that by 2020, half of the region’s population–195 million Europeans–will be getting their residential electricity from wind. Wind energy is growing fast for six reasons: it is abundant, cheap, inexhaustible, widely distributed, clean and climate-benign. No other energy source has this combination of attributes. Although corn growers support the production of corn-based ethanol as an automotive fuel, this pales beside wind as an energy source. A large, advanced-design wind turbine sited on a quarter-acre of land in northern Iowa can easily produce $100,000 worth of electricity per year. The same quarter-acre in corn would produce 40 bushels of corn, yielding 100 gallons of fuel ethanol worth perhaps $200.

For the US automotive fuel economy, the key to greatly reducing oil use and carbon emissions is gas-electric hybrid cars. This would involve no change in the number of cars or miles driven, only a shift to the most efficient automotive propulsion technology now available. Beyond this, a gas-electric hybrid with an additional storage battery and a plug-in capacity would allow us to use electricity for short distance driving, such as the daily commute or grocery shopping. This could cut US gasoline use by an additional 20%, for a total reduction of 70%.

Building an economy that will sustain economic progress requires a co-operative worldwide effort. This means eradicating poverty and stabilising population–in effect, restoring hope among the world’s poor. As Jeffrey Sachs regularly reminds us, the world now has the resources to do this.

A strategy for eradicating poverty will not succeed if an economy’s environmental support systems are collapsing. This means putting together an earth restoration budget, one to reforest the earth, restore fisheries, eliminate overgrazing, protect biological diversity and raise water productivity to the point where we can stabilise water tables and restore the flow of rivers. Adopted worldwide, these measures require additional expenditures of $93 billion per year. Restructuring the economy does not require its own budget, primarily because it is mostly a matter of shifting existing subsidies from, for example, fossil fuels to renewable energy sources.

Combining social goals and earth restoration components into a Plan B budget requires an additional annual expenditure of $161 billion. Such an investment should not be seen as a charitable act but as an investment in the world in which our children will live. If we fail to build a new economy before decline sets in, it will not be because of a lack of fiscal resources, but rather because of outdated priorities.

The world is now spending $975 billion annually for military purposes. The military threats to national security today pale beside those posed by the trends of environmental destruction and disruption, which threaten the sustainability of the existing economic system and thus of global civilisation itself. New threats call for new strategies. The threats now are environmental degradation, climate change, the persistence of poverty and the loss of hope. Restructuring the global economy to avoid economic decline and collapse is challenging, but we know from history that rapid economic restructuring is possible.

Of all the resources needed to build an economy that will sustain economic progress, none is more scarce than time. With climate change and Arctic ice melting fast, we may be approaching the point of no return. The temptation is to reset the clock. But we cannot. Nature is the timekeeper. It is decision time. Like earlier civilizations that got into environmental trouble, we can decide to stay with business as usual and watch our global economy decline and eventually collapse. Or we can shift to Plan B: building an economy that will sustain economic progress. In this situation, inaction is actually a decision to stay on the decline-and-collapse path.

* This article is adapted from a presentation by Lester Brown to the OECD on 2 February 2006. A full version of the presentation entitled “Will China Force the World to Rethink its Economic Future?” is available at www.oecd.org/env.

References

See also Lester Brown’s book, Plan B 2.0: Rescuing a Planet Under Stress and a Civilization in Trouble (2006), W.W. Norton & Co., NY, ISBN 0393325237.

©OECD Observer No 255, May 2006




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