Subject: New Perspectives on Economics and Ecology
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Comments:
Herman Daly - senior economist for the World Bank and one of the
founders of the new International Society for Ecological Economics -
shares his perspective on the state of American Capitalism and our
penchant to champion "growth" above all else. His perspective, and
mine, is that we have blinded ourselves to very real limits to growth
in our environment, and that we are sacrificing quality of life on an
alter of so-called economic growth. The sacrifice is bourn by all
the species that inhabit the earth. Daly champions qualitative
development goals over "growth for its own sake." He would
have us balance "development" alongside "community", "the
environment", and "the common good." Four pages follow. Dve,
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ECO-WATCH
5/8/91
>>- BOUNDLESS BULL -<<
Herman E. Daly*
If you want to know what is wrong with the American economy it is not
enough to go to graduate school, read books and study statistical trends--you
also have to watch TV. Not the Sunday morning talking-head shows or even
documentaries, and especially not the network news, but the really serious
stuff--the commercials. For instance, the most penetrating insight into the
American economy by far is contained in the image of the bull that trots
unimpeded through countless Merrill Lynch commercials.
One such ad opens with a bull trotting along a beach. He is a very
powerful animal--nothing is likely to stop him. And since the beach is empty
as far as the eye can see, there is nothing that could even slow him down. A
chorus in the background intones: "to...know...no...boundaries..." The bull
trots off into the sunset.
Abruptly the scene shifts. The bull is now trotting across a bridge that
spans a deep gorge. There are no bicycles, cars or 18-wheel trucks on the
bridge, so again the bull is alone in an empty and unobstructed world. The
chasm, which might have proved a barrier to the bull, who after all is not a
mountain goat, is conveniently spanned by an empty bridge.
Next the bull finds himself in a forest of giant redwoods, looking just
a bit lost as he tramples the underbrush. The camera zooms up the trunk of a
giant redwood whose top disappears into the shimmering sun. The chorus chirps
on about a "world with no boundaries."
Finally we see the bull silhouetted against a burgundy sunset, standing
in solitary majesty atop a mesa overlooking a great empty southwestern desert.
The silhouette clearly outlines the animal's genitalia, making it obvious even
to city slickers that this is a bull, not a cow. Fadeout. The bull cult of
ancient Crete and the Indus Valley, in which the bull god symbolized the virile
principle of generation and invincible force, is alive and well on Wall Street.
The message is clear: Merrill Lynch wants to put you into an
individualistic, macho, world without limits--the U.S. economy. The bull, of
course, also symbolizes rising stock prices and unlimited optimism, which is
ultimately based on this vision of an empty world where strong, solitary
individuals have free reign. This vision is what is most fundamentally wrong
with the American economy. In addition to TV commercials it can be found in
politicians' speeches, in economic textbooks, and between the ears of most
economists and business journalists.
No bigger lie can be imagined. The world is not empty; it is full! Even
where it is empty of people it is full of other things. In California it is so
full that people shoot each other because freeway space is scarce. A few years
ago they were shooting each other because gasoline was scarce. Reducing the
gasoline shortage just aggravated the space shortage on the freeways.
Many species are driven to extinction each year due to takeover of their
"empty" habitat. Indigenous peoples are relocated to make way for dams and
highways through "empty" jungles. The "empty" atmosphere is dangerously full
of carbon dioxide and pollutants that fall as acid rain.
Unlike Merrill Lynch's bull, most do not trot freely along empty beaches.
Most are castrated and live their short lives as steers imprisoned in crowded,
stinking feed lots. Like the steers, we too live in a world of imploding
fullness. The bonds of community, both moral and biophysical, are stretched,
or rather compressed, to the breaking point. We have a massive foreign trade
deficit, a domestic federal deficit, unemployment, declining real wages and
inflation. Large accumulated debts, both foreign and domestic, are being used
to finance consumption, not investment. Foreign ownership of the U.S. economy
is increasing, and soon domestic control over national economic life will
decrease.
Why does Merrill Lynch (and the media and academia and the politicians)
regale us with this "boundless bull"? Do they believe it? Why do they want you
to believe it, or at least to be influenced by it at a subconscious level?
Because what they are selling is growth, and growth requires empty space to grow
into. Solitary bulls don't have to share the world with other creatures, and
neither do you! Growth means that what you get from your bullish investments
does not come at anyone else's expense. In a world with no boundaries the poor
can get richer while the rich get richer even faster. Our politicians find the
boundless bull cult irresistible.
The boundless bull of unlimited growth appears in economics textbooks
with less colorful imagery but greater precision. Economists abstract from
natural resources because they do not consider them scarce, or because they
think that they can be perfectly substituted by man-made capital. The natural
world either puts no obstacles in the bull's path or, if an obstacle like the
chasm appears, capital (the bridge) effectively removes it.
Economics textbooks also assume that wants are unlimited. Merrill
Lynch's boundless bull is always on the move. What if, like Ferdinand, he were
to just sit, smell the flowers, and be content with the world as it is without
trampling it underfoot? That would not do. If you are selling continual growth
then you have to sell continual, restless, trotting dissatisfaction with the
world as it is, as well as the notion that it has no boundaries.
This pre-analytic vision colors the analysis even of good economists, and
many people never get beyond the boundless bull scenario. Certainly the media
have not. Would it be asking too much of the media to do what professionals
economists have failed to do? Probably so, but all disciplines badly need
external critics, and in universities disciplines do not criticize each other.
Even philosophy, which historically was the critic of the separate disciplines,
has abdicated that role. Who is left? Economist Joan Robinson put it well many
years ago when she noted that economists have run off to hide in thickets of
algebra and left the really serious problems of economic policy to be handled
by journalists. Is it to the media that we must turn for disciplinary
criticism, for new analytic thinking about the economy? The thought does not
inspire confidence. But in the land of the blind the one-eyed man is king. If
journalists are to criticize the disciplinary orthodoxy of economic growth, they
will need both the energy provided by moral outrage and the clarity of thought
provided by some basic analytic distinctions.
Moral outrage should result from the dawning realization that we are
destroying the capacity of the Earth to support life and counting it as
progress, or at best as the inevitable cost of progress. "Progress" evidently
means converting as much as possible of Creation into ourselves and our
furniture. "Ourselves" means, concretely, the unjust combination of
overpopulated slums and overconsuming suburbs. Since we do not have the courage
to face up to sharing and population control as the solution to injustice, we
pretend that further growth will make the poor better off instead of simply
making the rich richer. The wholesale extinctions of other species, and some
primitive cultures within our own species are not reckoned as costs. The
intrinsic value of other species, their own capacity to enjoy life, is not
admitted at all in economics, and their instrumental value as providers of
ecological life-support services to humans is only dimly perceived. Costs and
benefits to future humans are routinely discounted at 10 percent, meaning that
each dollar of cost or benefit 50 years in the future is valued at less than a
penny today.
But just getting angry is not sufficient. Doing something requires clear
thinking, and clear thinking requires calling different things by different
names. The most important analytic distinction comes straight from the
dictionary definitions of growth and development. "To grow" means to increase
in size by the accretion or assimilation of material. "Growth" therefore means
a quantitative increase in the scale of the physical dimensions of the economy.
"To develop" means to expand or realize the potentialities of; to bring
gradually to a fuller, greater or better state. "Development" therefore means
the qualitative improvement in the structure, design and composition of the
physical stocks of wealth that results from greater knowledge, both of technique
and of purpose. A growing economy is getting bigger; a developing economy is
getting better. An economy can therefore develop without growing, or grow
without developing. A steady-state economy is one that does not grow, but is
free to develop. It is not static--births replace deaths and production
replaces depreciation, so that stocks of wealth and people are continually
renewed and even improved, although neither is growing. Consider a steady-state
library. Its stock of books is constant but not static. As a book becomes worn
out or obsolete it is replaced by a new or better one. The quality of the
library improves, but its physical stock of books does not grow. The library
develops without growing. Likewise the economy's physical stock of people and
artifacts can develop without growing.
The advantage of defining growth in terms of change in physical scale of
the economy is that it forces us to think about the effect of a change in scale
and directs attention to the concept of an ecologically sustainable scale, or
perhaps even of an optimal scale. The scale of the economy is the product of
population times per capita resource use--i.e., the total flow of resources--a
flow that might conceivably be ecologically unsustainable, especially in a
finite world that is not empty.
The notion of an optimal scale for an activity is the very heart of
microeconomics. For every activity, be it eating ice cream or making shoes,
there is a cost function and a benefit function, and the rule is to increase the
scale of the activity up to the point where rising marginal cost equals falling
marginal benefit--i.e., to where the desire for another ice cream is equal to
the desire to keep the money for something else, or the extra cost of making
another pair of shoes is just equal to the extra revenue from selling the shoes.
Yet for the macro level, the aggregate of all microeconomic activities (shoe
making, ice cream eating and everything else), there is no concept of an optimal
scale. The notion that the macro economy could become too large relative to the
ecosystem is simply absent from macroeconomic theory. The macro economy is
supposed to grow forever. Since GNP adds costs and benefits together instead
of comparing them at the margin, we have no macro level accounting by which an
optimal scale could be identified. Beyond a certain scale growth begins to
destroy more values than it creates--economic growth gives way to an era of
anti-economic growth. But GNP keeps rising, giving us no clue as to whether we
have passed that critical point!
The apt image for the U.S. economy, then, is not the boundless bull on
the empty beach, but the proverbial bull in the china shop. The boundless bull
is too big and clumsy relative to its delicate environment. Why must it keep
growing when it is already destroying more than its extra mass is worth?
Because: (1) We fail to distinguish growth from development, and we
classify all scale expansion as "economic growth" without even recognizing the
possibility of "anti-economic growth"--i.e., growth that costs us more than it
is worth at the margin; (2) we refuse to fight poverty by redistribution and
sharing, or by controlling our own numbers, leaving "economic" growth as the
only acceptable cure for poverty. But once we are beyond the optimal scale and
growth makes us poorer rather than richer, even that reason becomes absurd.
Sharing, population control and true qualitative development are difficult.
They are also collective virtues that for the most part cannot be attained by
individual action and that do not easily give rise to increased opportunities
for private profit. The boundless bull is much easier to sell, and profitable
at least to some while the illusion lasts. But further growth has become
destructive of community, the environment and the common good. If the media
could help economists and politicians to see that, or at least to entertain the
possibility that such a thing might be true, they will have rendered a service
far greater than all the reporting of statistics on GNP growth, Dow Jones
indexes and junk bond prices from now until the end of time.
* Herman E. Daly is senior economist at the World Bank. This article is from the
Gannett Center Journal 4(3):113-118, Summer 1990. The views presented are those
of the author and should in no way be attributed to the World Bank.
Related Reading:
For the Common Good - Redirecting the Economy Toward Community, the
Environment, and a Sustainable Future. Herman E. Daly and John B. Cobb, Jr.
Beacon Press, Boston, 1989.
Filters Against Folly - How to Survive Despite Economists, Ecologists, and the
Merely Eloquent. Garrett Hardin. Penguin Books, New York, 1986.
The Economy of the Earth. Mark Sagoff. Cambridge University Press, New York,
1988.
Small is Beautiful - Economics as if People Mattered. E.F. Schumacher. Harper
and Roe, New York, 1989. First Edition: 1973.