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#625 - Sustainable Development -- Part 2, 18-Nov-1998

In his excellent short book, BEYOND GROWTH,[1] economist Herman Daly
says that every economy faces 3 problems: allocation, distribution, and
scale.[2] What do these terms mean?

Allocation refers to the apportioning of resources among different
products --in other words, deciding whether we should produce more
corn, more cars, more bicycles, more jelly beans, or more hospitals.
Because resources are limited, we can't have everything, so we must
allocate our resources in some way to provide the goods that people
want and can afford to pay for. The way we do this is "the market"
which sets relative prices for goods.[3] Prices act as signals that
cause people to put more (or fewer) resources into creating particular
products that other people are willing and able to buy.

The second problem faced by every economy is distribution --
apportioning goods (and the resources they embody) among different
people, not among different products. Nearly everyone agrees that goods
should be distributed in a way that is fair (though we may disagree on
the precise meaning of "fair"). If you don't believe this statement is
true, think of an extreme case. If one person received 99% of all the
benefits provided by the U.S. economy, and all other citizens had to
divvy up the remaining 1%, almost everyone would agree that this was
an "unfair" or unsatisfactory distribution of benefits. The vast
majority of people would say, "There is something wrong with this
picture." This extreme example is intended to show that nearly everyone
agrees that there are "fair" and "unfair" distributions of goods. What
is a "fair" distribution --and how we should achieve it --are the main
questions that give rise to "politics."

Unfortunately the market cannot solve the problem of fair distribution.
Left alone, a market economy tends to create inequalities that grow
larger as time passes. Both the economic successes and failures of
individuals tend to be cumulative --the successful tend to succeed
again and again while the unsuccessful tend to remain unsuccessful.
Marriages tend to result in further concentration of wealth.
Furthermore, as Daly says, dishonesty and exploitation are not
necessary to explain inequality but they certainly contribute to it.[4]
None of these statements is absolute --you can point to many individual
exceptions to each of them --but the tendencies that they describe are
well-recognized.

No, the market cannot solve the problem of unfair distribution. This
problem must be solved by people deciding what is fair, then making
public policies intended to achieve a fair distribution. After those
decisions have been made, then the market can allocate resources
efficiently[3] within the politically-established framework of fairness.

The third economic problem is the problem of scale --how large can an
economy become before it begins to harm the ecosystem that undergirds
and sustains it? Here again, the market does not --cannot --provide any
answer. The market offers no mechanism for deciding what is a desirable
scale or for achieving that scale. You can have an efficient allocation
of resources[3] and a just distribution of benefits, yet still have an
economy that grows too large and consequently damages the ecosystem.
(Each of the three problems --allocation, distribution, and scale --is
separate and each must be solved separately.)

The ecosystem provides us with two major services --it provides
resources that we can use (such as air, trees, copper deposits) and it
provides a place to discard our wastes. Within limits, the ecosystem
can regenerate certain resources (air and trees, for example), and it
can absorb a certain amount of wastes, recycling them via the services
of the detritus food chain. (See REHW #624.) Unfortunately, it is quite
possible for the economy to grow so large that it exceeds the capacity
of the ecosystem to regenerate itself and/or to absorb our wastes. At
that point, the economy has grown unsustainably large and further
growth will diminish the carrying capacity of the planet --the capacity
to support life, including human life.

As we saw last week (REHW #624), there is abundant evidence that the
human economy, worldwide, has already grown so large that it has
exceeded some of the ecosystem's capacity to regenerate itself, and has
already grown so large that it has exceeded part of the ecosystem's
capacity to absorb our wastes. These problems first appear on a local
scale (the U.S. has nearly exhausted its reserves of tin, nickel,
chromium, petroleum, and many other mineral resources,[5] and many U.S.
cities are presently unable to provide their inhabitants with healthful
air because of waste gases from automobiles). Eventually economic
growth reaches a point at which local problems become global. For
example, in recent years we discovered that we had inadvertently
damaged the Earth's stratospheric ozone layer with our CFC wastes, and
that most of the world's marine fisheries have been severely degraded
by overfishing. We are now making similar unhappy discoveries at a
steady (or perhaps accelerating) pace.

Economists, and business and political leaders, acknowledge only two of
the three economic problems outlined above --the problems of allocation
and distribution. The problem of scale --caused by growing quantities
of materials and energy flowing through the economy (see REHW #624) --
the problem of scale has still not been acknowledged by most
economists, business people, or politicians. To them, continued growth
can only be good. The vast majority of them deny that the scale of the
economy must be kept comfortably within the regenerative and absorptive
limits of the ecosystem (if they have thought about it at all).

There is a deep and abiding reason for their denial. For the past 400
years, growth has been the central organizing principle of all European
societies, and especially of American society. Economic growth has
substituted for politics, deflecting attention away from the
contentious problem of fair distribution: even a small slice of the pie
will grow larger each year if the total pie keeps growing larger. Thus
growth has allowed us to avoid confronting difficult ethical questions
about the fair distribution of income and wealth.[6] So long as the pie
kept growing we could accommodate the rising demands of slaves,
farmers, immigrants, industrial workers, women, and so forth.

As William Ophuls has said, "We have justified large differences in
income and wealth on the grounds that they promote growth and that all
would receive future advantage from current inequality as the benefits
of development 'trickled down' to the poor. (On a more personal level,"
Ophuls says, "economic growth also ratifies the ethics of individual
self-seeking: you can get on without concern for the fate of others,
for they are presumably getting on too, even if not so well as you.)
But if growth in production is no longer of overriding importance the
rationale for differential rewards gets thinner, and with a cessation
of growth it virtually disappears.... Since people's demands for
economic betterment are not likely to disappear, once the pie stops
growing fast enough to accommodate their demands, they will begin
making demands for redistribution," Ophuls says.[6]

The end of growth will change American (and European) politics
fundamentally, forcing us to confront basic ethical questions of
economic fairness. For this reason, the environmental dangers of growth
are ignored by those who think they have the most to lose --our
business and political leaders (and their academic support staff, the
mainstream economists).

Now stay with me as we probe a little deeper into growth. This may seem
obscure, but it is important.

Growth --the central organizing principle of our society (we could also
call it the main ideology of our society) has been grounded in an
ethical principle developed by the English philosopher Jeremy Bentham
and elaborated by John Stuart Mill in the 1830s. Bentham argued that
the goal of public action was "the greatest good for the greatest
number" --a goal that most people would probably embrace today without
thinking about it very carefully.

Now that the end of growth is in sight (because we have begun to hit
nature's limits), we can no longer pretend that we can achieve the
greatest good for the greatest number.[7] Confronting the limits of the
planetary ecosystem, we are forced to ask, how much good can we achieve
for how many people for how long? As Daly says, we can have "the
greatest good for a sufficient number" or we can have "sufficient good
for the greatest number" but the "greatest good for the greatest
number" we cannot have.[8] Daly favors seeking "sufficient good for the
greatest number" --meaning the greatest number of humans that can be
supported year after year into the indefinite future. If your goal is
to maximize human welfare, this is the formula that does it. If we live
sustainably, without exceeding the planet's capacity for regeneration
and the absorption of waste, billions or trillions of humans will
ultimately be able to enjoy the good life on planet Earth, world
without end. The alternative (which is the path we are presently on) is
to load up the planet with 12 to 20 billion people in the next century
until the ecosystem collapses, thus diminishing the carrying capacity
of the planet and greatly reducing the total number of humans who can
ever enjoy a good life on Earth. If you want to maximize human
enjoyment of the good life, the choice is clear.

An essential step toward sustainable development --offering the
greatest number of people a sufficiency of resources for the good life -
-will be policies explicitly aimed at reducing huge economic
inequalities. Growth will no longer substitute for ethical public
policies.

One of the main features of the modern world that creates and sustains
inequality is the high human birth rate. An abundance of people
provides a pool of cheap labor to do the world's work. A high birth
rate creates steady pressure driving wages down. In ancient Rome the
word "proletariat" meant "those with many children" and the main role
of the proletariat in Roman society was to procreate to serve the
patricians. Failure to help people control their own numbers --then as
now --is a implicit cheap labor policy. A high birth rate tends to
maintain inequality, and a reduced birth rate has the opposite effect,
tending to equalize incomes and wealth.

Small wonder, then, that so many of the world's people are denied the
knowledge and the means for voluntarily eliminating unwanted fertility.
In too many societies (including our own) the knowledge and means for
voluntarily controlling fertility are as inequitably distributed as
income and wealth. The wealthy have little difficulty controlling their
numbers; the technologies are readily available to them. The poor find
it not so easy. There is a reason for this.

More next week.

--Peter Montague (National Writers Union, UAW Local 1981/AFL-CIO)

=====

[1] Herman Daly, BEYOND GROWTH (Boston: Beacon Press, 1996). ISBN 0-
8070-4708-2. Hereafter cited as Daly.

[2] Daly, pg. 159

[3] Relative prices measure marginal opportunity costs; see Daly pg.
222. Efficient allocation is an allocation that corresponds to
effective demand, i.e., the relative preferences of citizens as
weighted by their relative incomes. An inefficient allocation is one
that uses resources to produce items that people will not or cannot
buy, and it fails to produce items that people want, can afford to buy,
and would buy if they could find them. See Daly pgs. 159-160.

[4] Daly, pg. 207.

[5] U.S. Bureau of Mines, MINERAL FACTS AND PROBLEMS [Bureau of Mines
Bulletin 675] (Washington, D.C.: U.S. Government Printing Office, 1985).

[6] William Ophuls, ECOLOGY AND THE POLITICS OF SCARCITY (San
Francisco: W.H. Freeman, 1977), chapter 6.

[7] As a matter of logic and mathematics, we never could achieve the
greatest good for the greatest number because it is impossible to
maximize two variables in a function.

[8] Daly, pg. 220.

Descriptor terms: growth; sustainable development; economics; herman
daly; beyond growth; population; human poipulation; prices; markets;
allocation of resources; distribution of resources; scale of the
economy;