Herman Daly, a leading expert on ecological economics, believes that the current economic system is the root of the climate collapse. He has been a pioneer in the fight to shift economics towards environmental sustainability for many decades. For his contributions to economics and the environment, Daly has received numerous prestigious awards, including Sweden’s Honorary Right Livelihood Award, the Heineken Prize for Environmental Science awarded by the Royal Netherlands Academy for Arts and Sciences, the Leontief Prize for contributions to economic thought, and the Medal of the Presidency of the Italian Republic. This exclusive interview is for Truthout, Daly — who is now professor emeritus at the University of Maryland School of Public Policy and who once served as a senior economist at the World Bank — explains why the current economic system is destroying the environment and outlines the policy steps that the world must take in order to achieve a sustainable future.
C.J. C.J. Polychroniou This message is only now being heard by the wider public because of growing awareness about the connection between fossil fuels, the climate crisis, and it’s not too long ago. Can you briefly discuss the impact of the current economic system on the global ecosystem, and how it is responsible for the climate crises?
Herman Daly Today’s economy impacts our environment in the same way that a size 12 foot impacts a size 10 shoe — it stretches the shoe out of shape while painfully squeezing the foot. The ecological-economic term for this is “overshoot,” consisting of excessive TakeoverLand capable of supporting the current flow of solar power by photosynthesis and excessive drawdownThe fossil fuels are the stored solar energy of Paleolithic Summers, as well as other mineral resources. These are the physical resources that human labor transforms into a psychic experience of the pleasure of life and into physical waste. If the rate at which the transformation takes place exceeds the rate at which renewable resources are being regenerated, the environment’s absorptive ability for wastes or the rate at which resource-saving technologies are being improved, it is considered excessive.
Our current excessive rate of transformation of resources into wastes, the “metabolic throughput,” is driven by the excessive scale of population times the excessive scale of per capita resource consumption, relative to the finite and entropically constrained biosphere in which we live. While climate change is a major symptom of overshoot it is just one. Other signs of overshoot include biodiversity decline, disruption of biosphere with novel substances (tetraethyl Lead, endocrine perturbors, radioactive material, etc.). The biosphere has no evolutionary experience and is often plagued by increasing inequality, poverty, and violence.
Despite all the evidence regarding the disastrous effects of burning fossil-fuels on the climate, the planet continues to emit carbon emitted into the atmosphere. Why is it so difficult to develop a reasonable policy to limit the use fossil fuels?
Because fossil fuels contain so much energy in a small and convenient amount, they are more efficient than other energy options. Because fossil fuels are extracted underground, they do not compete with the agricultural land surface for human food. Given the enormous stocks of fossil fuels, we were able for many years to live off of past accumulated “capital” rather than current solar “income.” This enabled the excessive scale of the human economy, the overshoot that is now coming to a forced end thanks to the combined costs of depletion and pollution that we could ignore in the empty world before we filled it with goods, “bads” and people.
Transitioning to renewable resources is possible, but it will require a reduction of the human economy to a lower level that could be maintained more or lesser in a steady state. If renewable resources are used beyond sustainable yield, they become non-renewable. The growthist values of the past must be replaced with a culture of sufficiency, sharing, and qualitative development. To retain their huge resource rents, and monopoly profits, fossil fuel industries resist this change. Although it is important to promote the transition to renewable energy, there are many people who believe that renewables will be affordable and plentiful enough to replace the existing fossil fuels without any reduction in the economy’s scale or rate of growth. Primarily, the need to reduce human scale is essential. We must reduce the human scale. If we don’t also reduce the macroeconomy’s size to a sustainable level we will be making the most of an ever-worsening economic situation. This is because growth has become uneconomic.
The economic scale is the sum of per capita resource use and population. It is either population growth or per capita consumption that is responsible. This is where a lot ideological ink is wasted. This is similar to arguing about whether it is length or width which determines the area of rectangles. My lifetime has seen the world’s population quadruple (from 2 billion to 8 billion). [highly variable and unequal]Per capita consumption has increased even more, possibly nine-fold depending upon how you measure it. Both of these factors cannot be ignored.
You have introduced the concept of uneconomic growth to indicate that “growth is uneconomic when it increases environmental and social costs by more than it increases production benefits.” Indeed, you have rejected the idea that economic growth is a good measure of human well-being, and, in contrast, you call for a transition to a steady-state economy.
When the world was empty of us, our stuff, growth was economic. It is full now and further growth in our economy into the finite ecosphere leads to increasing marginal costs for preempted life support services. To satisfy decreasing marginal benefits from trivial consumption, which has to be aggressively marketed to be sold, these marginal costs are increasing. While growth in rich countries is now more expensive than it is worth, it’s uneconomic. However, it’s still economic for poor countries until they reach a similar level. The rich can’t make enough room for the poor to achieve sufficiency.
First, what are the policies suggested for steady-state economics. Second, is a steady state economy a green one? Third, how can a steady-state economy balance growing human needs with conservation?
Below are ten strategies to help you move toward a steady state economy. Although many policies can be implemented independently or gradually, they all work together in the sense that they compensate for the weaknesses of others. Effective policies must consider local, regional, global and global environmental limits. Ten is an arbitrary amount to be specific and focused. The reader is invited subtract, add, or consolidate.
- Cap-Auction-Trade systems to develop basic resources (especially for fossil fuels) The following three rules are used to set caps on basic natural resources: (1) Renewable resources must not be depleted quicker than they regenerate; (2) Nonrenewable resources should be depleted slower than renewable substitutes are created; and (3) Wastes from all resource use should be returned to the ecosystem no faster than it can absorb and reconstituted by natural processes. This approach ensures market efficiency and sustainable scale, and avoids the Jevons rebound effectIncreased resource efficiency results in greater use of the resource and higher auction revenue for progressive distribution.
- Tax shifting Shift the tax base from “value added” (labor and capital) to that to which value is added, namely natural resource throughput, which has become the limiting factor. These taxes will increase the price of the limiting factors, improve allocative efficiency, inducing resource-saving technology and provide government revenue.
- Limiting inequality’s range:Limit income to a minimum and maximum level, while preserving incentives but limiting the tendency to plutocratic market economies that have become extreme. Tax them for the public good and remove any rival goods or services from the open-access communies (e.g. atmospheric waste absorption). Non-rival goods, such as knowledge and information, are exempted from artificial scarcity that is necessary to make them fit the price structure. This means that you should stop treating the scarce like it were free and treat the free as if they were scarce.
- Reforming the banking industry: Moving from a fractional reserve banking to 100 percent reserve requirements for demand deposits. Money would not be mainly interest bearing debt created by private banks but would instead be non-interest bearing government debt issued by Treasury. Every dollar borrowed to invest would be a dollar saved by someone else. This would restore the classical balance between investment & abstinence from consume, and dampen boom and bust cycles as well.
- International trade management for the public goodMoving from free trade and capital mobility to balanced, regulated international commerce. Although interdependence is inevitable, global integration is not. Free trade encourages low-labor policies and domestic cost-internalization, which leads to a race for the bottom. The basic comparative advantage argument against free trade in goods is also nullified by free capital mobility.
- Expanding leisure time:Part-time work, personal work, and leisure can be substituted for traditional work hours. This will promote well-being and reduce the need to produce endlessly. From a welfare perspective in our society, the freedom of choice between the basic options of leisure and work time is restricted. However, we have the freedom of choosing from over a thousand brands for breakfast cereal.
- Stabilizing populationStrive for a balance in which births + in-migrants equals death plus out-migrants. In which every birth is a wanted and every immigrant has the legal documentation.
- Reforming national accountsSeparate GDP into a benefit account and a cost account to stop throughput growth when rising marginal costs equal falling marginal profits. This will make it uneconomic for future growth. Accurately measuring costs and benefits is difficult, but even inaccurate measures and comparisons makes a lot more sense than simply conflating them under the rubric of “economic activity.”
- Restoring full employment To make full employment a temporary reality, restore the U.S. Full Employment Act of 1995 and its equivalent in other countries. Un/underemployment is the price that we pay for growth through automation, off-shoring and deregulated trade, as well as a cheap-labor immigration program. In steady-state conditions productivity improvements would lead more to leisure time than unemployment.
- Promoting just global Governance Seek world community as a federation of national communities, not the dissolution of nations into a single “world without borders.” Globalization by free trade, free capital mobility and [mass crisis-driven]Migration destroys the national community and leaves no place for federation. Such globalization is individualism writ large — a post-national corporate feudalism in a global commons. Instead, support the original Bretton Woods vision, which envisioned interdependent national economics, and resist the World Trade Organization vision, which envisions a single integrated global economic system. Respect the principle of subsidiarity. While climate change and arms reduction require global institutions, law enforcement and maintenance of infrastructure and basic law enforcement remain local issues. Our limited global cooperation capacity should be used to achieve what is truly necessary.
What are the best practical steps to make the transition from a steady-state to sustainable economy? How can activism help us make that transition?
Good policies based upon sound scientific and moral understandings are necessary, but not sufficient. While passionate activism is necessary to support the policies, it is not sufficient. We need both — both mind and spirit, both intellectual understanding and moral inspiration — if we are to sustain with justice the miraculous world we have inherited, and which is now under very serious threat of self-destruction.
This interview was lightly edited to improve clarity.
