Death by GDP

Why we need a consumer strike to save the world

Our planet is doing miserably. Whether we consider the loss of biodiversity, the acidification and pollution of the oceans, or climate change, the signs are alarming. We are about to destroy the only habitable planet in the known universe, making it unsuitable for human existence. Why?

This is a perfectly relevant question. After all, there are currently no external threats to our planet. The sun is still shining and we are not being attacked by aliens. We also know exactly what is causing the problems and what is needed to solve them. In spite of this, humanity has decided to continue down the path of self-destruction.

To understand what is going on, it is useful to consider the correlation between global carbon emissions (CO2) and gross domestic product (GDP). The figure below shows the historic data on global GDP (blue) and CO2 emissions (red) from 1960 to 2015 as solid lines. To say that these two curves are strongly correlated is somewhat of an understatement: the correlation coefficient turns out to be +0.99, where a value of +1 represents perfect correlation. In other words, economic growth in the past was entirely based on our ability to extract more fossil fuel from the ground. Using more energy made us richer, and being richer allowed us to consume more.

DeathByGDP

Carbon emissions and global GDP. Historic data provided by the World Bank (data.worldbank.org)

Now consider the future. The dashed blue line represents G20 target of 2% annual economic growth. On the other hand, climate scientists tell us that we need to reduce CO2 emissions by at least 5% per year to have any chance of staying below +2°C global warming. This reduction is indicated by the dashed red line. Clearly, the two curves pose an important question:

Is it possible to prevent catastrophic climate change without significantly reducing the size of the global economy?

Most likely, the simple answer is no. What is very worrying, however, is that we are not even allowed to ask the question. No politician – left or right – seriously advocates lowering GDP to save the environment. Rather, they either deny the existence of the problem outright or team up with large corporations in hoping for an energy miracle through research and technological development.

In 1633, Galileo Galilei was sentenced to house arrest by the Inquisition for claiming that the Earth revolves around the Sun. People tend to forget that there were very good reasons for this. The power of the Catholic Church was based on its absolute monopoly on the truth and allowing the inquisitiveness of scientists would have been bad for business. For the church, asking questions was already a crime.

Today we are facing a similar situation, with the infallibility of the Pope replaced by the Washington Consensus. We know that economic growth cannot go on forever and that we are already using too much of the world’s non-renewable resources. We also know that the GDP is a very flawed measure of human well-being, which “measures everything except what is really important” as Robert F. Kennedy put it. Nonetheless, governments worldwide continue to fight for economic growth with an almost religious fervor. For lack of better ideas, they keep feeding the monster that is growing up to kill us all.

The reason is again very simple: capital income is directly related to economic growth as measured by the GDP. As long as the economy is growing, we can define a risk-free rate of interest, meaning that anyone with access to capital is entitled to an income. With zero growth, money would not grow, making investing a zero-sum game. With negative growth, the financial sector would be completely pointless.

Economic growth also allows us to perform other miracles, such as discounting the future. One argument against dealing with climate change now is that future generations will be so much richer than we are and will therefore be able to deal with the consequences. To put this in more technical terms, if the discount rate is high enough, the net present value (NPV) of future environmental costs can safely be ignored.

Unfortunately, climate change is not a financial problem but a real one. It is time to forget about profits and money and start caring about the future of humanity. After all, you do not negotiate the water price when your house is on fire. Currently, no nation in the world has a credible strategy for dealing with the problem. The reason is that their governments have tried to square the circle by promoting economic growth while trying to stop climate change. Unfortunately, this is physically impossible. Unless we are willing to lower our consumption and the size of the economy, we will not be able to prevent an environmental disaster. The damage we are doing to the Earth’s ecosystem is directly proportional to the size of the economy. To put it bluntly: one cannot eat more and shit less.

Miraculously, as soon as we drop the demand for economic growth, all the problems and contradictions vanish. It is very simple to lower our impact on the Earth’s environment by driving less, flying less, consuming less, and eating less meat. A global carbon tax (www.giseco.org) would ensure that those destroying the environment would pay for the damage and would automatically lead to less waste. The rising energy price would trigger inflation, thereby solving the problem of wealth inequality. It would also stop the trend of replacing humans with machines and robots. Suddenly, honest human work would be appreciated again.

Fortunately, global capitalism has painted itself into a corner through excessive greed. According to the IMF, global debt now amounts to 215% of the world’s GDP. In other words, the global financial system is essentially bankrupt. In order to maintain the illusion that the money will someday be repaid, very high economic growth is required. The other options, such as high inflation or debt relief, would be very painful for the banks.

What would happen if consumers worldwide went on strike and refused to buy more stuff? This would be perfectly doable and legal. Nobody can force you to go shopping and you probably have enough stuff at home that you do not have to. Once you get used to not shopping, it turns out to be very relaxing. You have more time for yourself, family, and friends, and you have more money left at the end of the month. By not shopping and not travelling, you also contribute directly to saving the environment and you get to keep the money you do not spend.

If enough of us participate in a consumer strike, it should be possible to bring the world economy into recession. A reduction of global GDP by 5% would break the power of big business and force governments to do the right things. Suddenly, it would not be possible to continue with business as usual anymore. In addition, it would reduce CO2 emissions by 5%, which is exactly what we have to do anyway.

Is this a radical idea? In December 2015, 197 countries came together to pass the Paris agreement on climate change. It is now obvious that no country on Earth is taking this document seriously. The reason for this failure is fundamental: rather than asking how we can maintain economic growth while protecting the environment, we should ask how we could reduce the size of the economy while maintaining a decent quality of life.

Consumers of the world, unite! If you care about the planet and the future of your children, stop shopping! It is good for you, for the environment and would lead to the required changes of the political system and the global economy.

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3 Responses to Death by GDP

  1. Steven says:

    I love this idea of changing from GDP to other indicators, but the idea of not purchasing things only works for the small developed part of the world. And even then you’re probably only putting off purchasing and not avoiding it. You can’t really suggest that the largest proportion of the population who are in ‘developing countries’ stop buying, a lot of them live day to day only being able to afford food for that day. The Chinese and Indians alone make up around 30% (at a guess) of the worlds population- I wouldn’t want to be the ones who have to tell, say 50% of them they can’t buy anything while I large it up with the comforts I already brought. A bit negative but actually I do get the point and it’s a good idea. I also like the correlation between GDP and energy use. Is there any evidence to relate this to include predicted renewable energy use?

    • Thanks for your remarks, Steven. The point would be to avoid unnecessary spending. Poor people mainly spend on necessary things. I am all in favor of renewable energy but research into renewables will not make fossil fuel more expensive.

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