What’s the Keynesian eco-plan?

Published 15 August 2010.

This question dates back to a conversation I had some time ago with bobswern, who advocates some form of Keynesianism, as to the efficacy of a renewed economic stimulus.  The problem here is that the current industrial society is based on a foundation of oil consumption, so more economic growth = more oil consumption = higher gas prices = more global warming.  I want to know, then, what’s the Keynesian plan for the environment?  I am not trying to attack here — but I’m curious as to how well thought out the “stimulus” plan is.  My own advocacy involves the transition to a more humane economy, rather than a mere renewal of “economic growth.”

(crossposted at Docudharma)

So, OK, Keynesianism.  You have a number of writers here on DailyKos.com (and elsewhere) who advocate for a bigger stimulus and “more economic growth,” among which bobswern is my favorite.  Over at firedoglake, moreover, there is letsgetitdone, who writes against the deficit hawks with regularity.  I suppose the most visible of the mainstream media’s Keynesians is Paul Krugman, who has been vocal about the need for a “second stimulus.”  And then you have a couple of economic writers with books recently out on this topic: e.g. Robert Skidelsky’s Keynes — The Return of the Master, or Paul Davidson’s The Keynes Solution — The Path to Global Economic Prosperity.

To these writers it must be amazing that so little is being done to stimulate the ground level economy as it threatens to tank again, or should I say tank further.  But this isn’t really about bobswern, whose diaries I typically enjoy reading — what I wish to examine, here, is the idea that more economic stimulus, and more economic growth, will solve the world’s ecological problem, its problem with the “metabolism of society and nature.”  I don’t see it.  The Keynesians, then, need a plan for the Earth’s ecosystems.

A few brief words about Keynesianism — the notion at stake with the advocacy of a stimulus is that of increasing economic circulation — the exchange of goods and services — by putting money in the hands of those who are most likely to spend it.  From the Wikipedia page:

Keynes argued that the solution to the Great Depression  was to stimulate the economy (“inducement to invest”) through some combination of two approaches: a reduction in interest rates and government investment in infrastructure. Investment by government injects income, which results in more spending in the general economy, which in turn stimulates more production and investment involving still more income and spending and so forth. The initial stimulation starts a cascade of events, whose total increase in economic activity is a multiple of the original investment.

*****

Thus the Keynesian solution to the Great Depression was to reinflate the economy through government programs, target to stimulate the circulation of goods and services among the public at large, just as the Keynesian solution to the current Great Recession is to intensify the “stimulus.”

The book by Skidelsky and the book by Davidson (cited above) have a lot of historical review and “mainstream” economic debate.  I am still looking them over.  They both endorse the capitalist system, though what interests me are their most humanistic moments.  Skidelsky:

Keynes had a political objective.  Unless governments took steps to stabilize market economies at full employment, the undoubted benefit of markets would be lost and political space would be opened up for extremists who would offer to solve the economic problem by abolishing markets, peace and liberty.  This in a nutshell was the Keynesian ‘political economy.’ (xviii)

I’m sure such a message would appeal to plenty of readers here, who are concerned that the forthcoming November elections will result in Democratic losses and Republican victories.  As for the Davidson book:

The government has an important role in ensuring a recovery that is as quick as possible from our current recession by promoting increased market demand for the products of business firms, thereby creating profit opportunities that will encourage enterprises to create more job opportunities.  This role requires the government to reject the idea that all that may be necessary is a little pump priming or jump-starting to get the recovery going.  A fiscal spending policy that ensures strong and persistent recovery with less worry about the size of the deficit and total government debt incurred is essential. (27)

Now, of course, there’s been plenty of government spending over the last couple of years — but it hasn’t really stimulated much demand.  Instead, people are paying off debts.  Davidson is recommending the sort of spending that would fuel economic growth.

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— Analysis —

Some kind of further economic stimulus would be beneficial, to America and to the world, if it ameliorated the plight of the worst-off.  But the primary necessity at this point is the humanization of the economy.  In this regard I am referring to the idea of a return to local production for local use, to sufficiency in the basic necessities for everyone, and to meaningful work toward a sustainable future.  This would be a “utopian” economy in the good sense, as a goal of our aspirations.

If we look at it merely as an economic program, however, I do not see how the Keynesian prescription for the current economic “Great Recession” can attempt to produce anything besides “economic growth.”  Whether it actually produces such growth is another question.  The economy is not a bunch of numbers, but rather a living, breathing thing, just as the planetary ecosystems upon which it depends are also living, breathing things.  Moreover, there are some problems with the idea of more “economic growth” in this era.  The Great Depression of 1929-1932 took place in an earlier era of capitalism, in which much of the United States and of the world was relatively “undeveloped.”  We, on the other hand, live in an era in which capitalist development inches closer each decade to a state of exhaustion, both of nature and of the working class.

In our era, as economic growth rebounds, so also does the price of oil.  Ian Welsh has noticed this:

After all, if the government can print money for banks, why not for jobs?

The reason not, folks, is that if you do that, oil will go back to levels which will crash out the economy.

The real, actual, economy, is not one spreadsheet.  It consists of people doing things, and the vast majority of those things require energy.  The ur-energy is still oil.  And no, there is not enough oil to go to full capacity utilization—because doing so will kick gasoline well over $5/gallon.

Until that problem, among others, is fixed, the economy is never going to be really good for Americans ever again.  Every attempt to fix things which does not fix energy, will not work for any useful length of time.

I suppose that one way around this would be for the Federal government to create a stimulus that would be entirely devoted to creating an “alternative energy” economy.  This itself, however, would solve only half of our problem with fossil fuels.  Government programs promoting “alternative energy” typically promote solar, wind, geothermal, and so on as a supplement to the fossil fuel economy which dominates our civilization now: nobody is yet proposing that we phase out fossil fuels altogether.  The problem is that the fossil fuel economy is ideal for the capitalist system; fossil fuels are the cheapest option in terms of energy return on energy investment, and when they become so expensive that other options are cheaper, the whole system will very likely be in trouble.

Thus providing a “stimulus” which does something about the oil bottleneck (as Welsh mentioned it) is only half of the problem.  The other half of the fossil fuel problem is that of abrupt climate change, and I don’t see it being solved so easily.

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At present, I do not see how the problem of abrupt climate change can be resolved with the problem of an expanding, capitalist economy.  At minimum, we are asking the global economy to ignore its fossil fuel “assets.”  This will require, at some eventual point, an international agreement to keep the grease in the ground — to plug up the oil and natural gas wells, to abandon the coal mines, and to give up on future exploration — in short, to phase out the fossil fuel industry altogether.  By the logic of the capitalists this represents an enormous “opportunity cost” — witness, for instance, the Saudi Arabian reaction to last year’s Copenhagen conference — they would like to profit whether we use the oil or not.

Ultimately what I am suggesting is that “economic growth” will have to be reversed if we are to do anything about our abrupt climate change problem, or for that matter about any of our other ecological problems.  For a sustainable future we will need a shrinking economy, an economy which will compensate for its year-by-year reduction of throughput in “goods and services” by becoming a more humane, more ecologically sustainable economy in each successive year.  Saral Sarkar suggested such a thing in his book “Eco-socialism or eco-capitalism?”  The late Teresa Brennan suggested an economy which, though it be otherwise permissive of small business, had slowed down enough to conform to the rhythms of the natural world.

Now, the economist Minqi Li has already given up on the growth paradigm in this regard.  Li suggests:

After centuries of global capitalist accumulation, the global environment is on the verge of collapse and there is no more ecological space for another major expansion of global capitalism. The choice is stark—either humanity will permit capitalism to destroy the environment and therefore the material basis of human civilization, or it will destroy capitalism first.

You’re going to save capitalism from this outcome, bringing us back into the growth paradigm while saving the Earth at the same time.  How?

*****

So from here I concede the stage to the Keynesians.  Dear Keynesians: what is your eco-plan?  How do you plan to resolve the contradiction of an expanding capitalist system grinding up the world into “goods and services” with that of a finite planet Earth vulnerable (at least) to abrupt climate change through the salting of the atmosphere with carbon dioxide from exhaust pipes?  I’d like to hear your solutions.

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