Ecological Economist Brian Czech’s Supply Shock: A Persuasive Road Map to a Steady-State Economy

• David Simcox
• January 8, 2014
• Forum Papers
• 0 Comments

Looking back on 2013, my pick for the most useful and incisive book on our lethal addiction to economic growth and the alternative of a steady-state economy is Brian Czech’s Supply Shock: Economic Growth at the Cross Roads and the Steady-State solution (New Society Publishers, 2013, 389 pages).

If you are among the millions of Americans concerned about the destructive course of perpetual economic growth – and its corrosive effects on the natural world on which we depend, you will feel a mixture of outrage and occasional hope in reading Czech’s book.    He writes from a strong grounding in ecological economics, seasoned by his experience as a career wildlife biologist, with an impressive record of research in the workings and failures of the 1973 Endangered Species Act (ESA).

For Czech, the continuing loss of species since ESA highlights that legislation’s subordination to the over-growth of the U.S. economy.  Had the act been enforced as written, he speculates, rigorously curbing the advances of economic development that alters or destroys vital habitat, the U.S. would be now on its way toward a steady-state economy.  Instead, the Act has more often been a target of derisive condescension by growth-comes-first political leaders and expedient maneuvers of the executive branch to limit its coverage.

If you are yearning for a more benign way for humans to curb the devastation of unbridled economic growth, you will find hope and guidance in Czech’s alternative:  the steady-state economy, complete with his suggested stepping-stones for the world to ease into it.

With a laudatory foreword by Herman Daly, dean of today’s environmental economists, Supply Shock chronicles how the growth paradigm inherent to neo-classical economics came to dominate the perspective of U.S and world economic policy-makers.  The earlier classical economics dating to the dawn of the industrial revolution, the author argues, had a clearer sense of the critical contribution of natural capital, considering land (along with capital and labor) as a factor of production.

Neo-Classical Economics:  Opium of the Corporations?

Some early classical thinkers – such as Adam Smith, John Stuart Mill, and Alfred Marshall – saw possibilities for a steady-state economy.  They acknowledged that economic growth could not go on forever:  growth of production and consumption of goods would cease at some point, with mankind turning toward a greater emphasis on social and spiritual growth.  Even growth stimulator par excellence John Maynard Keynes expected the eventual “maturing” of western industrial economies.

Henry George, often dismissed by modern economists as an eccentric theorist, is hailed by Czech as a prophet.  George saw that the land – as the source of food and, along with oceans, a storehouse of natural capital – was the basis for all wealth.  He advocated a single-tax on land to serve as a major source of revenue, a promoter of greater economic equality, and an incentive to optimal use and conservation of natural resources.

Neo-Classical economic policy makers, allied with major corporations, have called the tune in the U.S. and major industrial nations since the depression and ensuing global wars of the 1930s and 1940s.  Czech cites the Full Employment Act of 1947 as an early post-war milestone in Washington’s commitment to keep the U.S. and world growing.  Neo-Classical views reign triumphant in the major treaties and multilateral institutions shaping the world economy:  the World Bank, International Monetary Fund, and World Trade Organization.

On the U.S. domestic scene there is a corresponding array of growth promotion agencies:  the Federal Reserve, the Departments of Commerce, Special Trade Representative, and –the President’s own in-house economic growth cheerleader – the Council of Economic Advisors.  Czech might have noted that the economic development imperative is even stronger among state governments in their fierce use of subsidies and tax breaks to compete intensely for “jobs,” private and public sector investments, and federal spending.

Population stability is hardly a goal among the Neo-Classical economists.  A growing labor force and technological progress are considered drivers and indicators of growth.  Indeed a major sector of Neo-Classical thought, represented by cornucopian economist Julian Simon, regards population growth as essential in producing the new ideas and innovative people that drive technological progress.

Natural capital (farms, mines, forests, waterways, etc.) is a given for Neo-Classicists, limited not by nature’s endowments but only by man’s creative ability.  Thus, shortages of any commodity are self-healing, stimulating investment in technological progress that would expand the supply, or reduce the need for resources in production, or would find substitutes.  That’s the ultra-optimistic answer of Neo-Classical economists to depletion of natural capital.

Outgrowing “Growthist” Orthodoxy

Czech scores the short-sightedness of these Neo-Classical views.  He notes their disregard for the Laws of Diminishing Returns and the clear limits implicit in the Laws of Thermodynamics for the world economy’s vast throughput of materials and energy and resulting output of massive toxic wastes beyond the ability of our natural systems to absorb and neutralize.

The author examines and rejects the major Neo-Classical and corporate nostrums against limits to growth.  Consider the claim, beloved of politicians in both parties (even environmental latecomer Al Gore once embraced it), that there is no inconsistency between economic growth and protection of the environment.  Rather they are complementary, as economic growth reaches a point where it both evokes demands for environmental protection and produces the wealth to pay for its implementation.  But the record since the 1970s surge of environmental concern shows continuing deterioration in quality and availability of our clean air, oceans and species and, at best, perfunctory political tokenism in addressing these trends.

Another nostrum Czech scorns is that technological progress can ease the pressures of economic growth on the environment.  He rejects the concept of “green growth,” seeing the all growth is “brown.”  Our only hope is that growth will be in lighter shades of brown.  The inner logic of the growth imperative favors finding profitable technology that will increase the access to nature’s resources and reduce the costs of their extraction – not conserve them.

One needs only to consider the high technology of the world’s modern fishing fleets, their efficiency in finding the fish and scooping them up wholesale.  The result:  collapse of major maritime food species.  Or consider the breakthrough of the “green revolution”:  production, for a while, increased markedly (as did the population of food consumers).  But the more productive food crops require more water and fertilizers, leading to “supply shocks” of dwindling aquifers and spiraling fertilizer costs for major grain-producing nations.

Steady-State:  Making Today’s Heresy into Tomorrow’s Survival Creed

Czech lays out wholesome ideas about how the U.S. and the world might begin to move toward a steady-state economy – some familiar, some original.  But he recognizes that winning domestic and international acceptance of ending growth demands vast attitudinal and political changes.

On the political side, like Herman Daly he favors policies that will slow growth at the outset among the U.S. and other developed nations, while allowing the less-developed world to continue growing until those populations have a “decent” life, but without the overconsumption of the West.

Similarly, the developed nations (even as they bring their growth to a halt) should adopt income policies that would shrink the wealth gap between the very rich, whom he calls the “Liquidators,” and very poor.  Tax policy and subsidies would be critical for these goals.

The actual shrinkage of U.S. and other developed economies, he suggests, might best begin with production and pollution tradable caps on the energy sector.  Czech believes that energy is so fundamental, so pervasive, that limits on it would ramify throughout the economy, leading to reductions in most other sectors.  He would not rule out other cap and trade regimes for other sectors (e.g. agriculture, construction, and transportation) if needed.

Other institutions and practices sacred to growthists – such as foreign trade, massive extension of credit through fractional reserve banking, and most advertising – would face severe limitation or abolition outright.  Since the number of jobs in the economy would be static in a steady-state economy, sufficient employment would be secured through:  shorter hours, more vacation time, job-sharing, earlier retirement, allowing the dedication of the increased personal time to family life, and self-improvement.  Acknowledging the distortions of GNP as a measure of true economic well-being, Czech still regards real GNP as the best available indicator to steady-state planners of the growth or shrinkage of the human economy.

Population Policy:  Reduction, or Just “Stabilization”

On population, Czech recommends prompt stabilization, brought about by tight controls on immigration from labor-surplus areas to industrialized nations, heavy investment in family planning, and fiscal and social incentives to keep fertility low.  Groups such as NPG, which favor early population reduction, are naturally concerned that mere stabilization of America’s (and the world’s) already unsustainable numbers would prolong planetary overconsumption and fatally delay reaching true long-term equilibrium between population and resources.

Czech himself is the first to recognize – bringing about such profound changes in a world economy programmed to grow will require radical changes in our thinking.  Just negotiating a world consensus of allocating the disruption and hardship of this transition seems incredibly complex.

Czech discusses the need for a “steady-state paradigm” to compete with and ultimately supplant our present growth dogmas.  He advocates bolstering the steady-state paradigm through the installation of steady-state academic programs at major universities, creation of top-level steady-state think tanks, more representation of this viewpoint in major media, and, of course, a greater presence of steady-state advocates in politics.

As the devastation of the planet’s natural capital becomes more apparent to the world’s citizenry, the steady-state economy – the vision of the future projected by Czech, Herman Daly, and NPG – will begin to seem less like heresy, and more like a welcome route to survival.