Green Economic Ideas

Prepared by Bill Hulet of the Guelph Greens.

The “Miracle” of Compound Interest

3% Annual Growth 20 years: 1.8 times 40 years: 3.3 times 60 years: 5.9 times 80 years: 10.6 times 140 years: 62.7 times

8% Annual Growth 20 years: 4.7 times 40 years: 21.7 times 60 years: 101.2 times 80 years: 472 times 140 years:

47,788.8 times!

As an economy grows, the demand for natural resources and distress to nature grows with it. Even at the modest rate of 3% per annum, it is impossible for Canada's economy to grow without destroying our environment.

World Population Growth

1960 2000

Billions

3

6

9

2050

(Economic Growth) x (Population Growth) = (Environmental Stress)

Economic and population growth are closely linked. Population growth is a key part of economic growth, which is

why governments and businesses tend to support it. They also multiply together to increase the damage to the ecosystem. It

isn't just how big our impact is individually, it is also how many of us

there are doing it.

Key Fact One

The earth is only so large and it will not grow any larger. At some point the

human population, and the economic activity it generates, will stabilize and

live within these limits. It will either do so through a conscious choice by the human population to live within the

bounds of our ecosystem or else we will overshoot it and suffer a “die off”.

Human Perception and Geometric Progression: a Practical Example

Purple Loosestrife

A Biologist notices a new plant---

Year One

A Paper Gets Presentated at a Learned Conference---

Year Two

An Application for Further Research is Written---

Year Three

An Article is Published in the Popular Media---

Year Four

An Environmental Group Protests Government Inaction---

Year Five

A Political Party Makes the Issue Part of their Policy Platform---

Year Six

Government Action. Oops! Too Late---

Year Seven

Key Fact Two:

One half of all exponential growth happens in the last doubling cycle. This means that human institutions that are

reactive instead of proactive, will always be blindsided by the last doubling cycle. This means that human society needs to

develop the ability to think ahead instead of simply reacting.

Steady-State Economy

A steady state economy is one where the total amount of goods and services

produced in a nation is stable over time. It is not a situation where no economic activity happens, but rather one where

the total amount amount does not increase because additions and

subtractions added together equal zero.

Compound Interest and Pensions: a Practical Example

Invest $50 per paycheck and do it for 40 years at 5% interest and you get $330,000 when you retireAt 4% you get $257,0003% is $202,0002% is $160,0000% is only $104,000 The closer an economy comes to a steady state, the less people can rely upon compound interest to support their retirement!

Key Fact Three

An end to economic growth will require a massive restructuring of retirement

programs because it will not longer be possible to fund pensions with the

surplus from compound interest. This is such a scary prospect that it has frozen key sectors of the government, business

and academic communities into a dangerous form of denial.

Cornucopianism

Cornucopianism is the belief that all the environmental problems facing the

human race can be solved by the free market and technological innovation. People who support this point of view tend to oppose programs to deal with

environment problems because they can see no reason for change or sacrifice.

Introducing, the Jevons Paradox

Jevons Paradox

History has shown that whenever technological innovation has increased the output from a natural resource, the capital freed from this has been used to

find new ways to use the natural resource in question. The result is a net social increase in the use of that resource as technology allows individuals to use it

more efficiently in specific applications.

A Practical Example of Jevons' Paradox

Insulation in Frank's house cuts his natural gas use by three quarters, which saves him $750

He then uses this money saved on a yearly trip overseas

As a result, the carbon saved on heating is then burnt as jet fuel

The end result is no gain whatsoever for the earth, no matter how much more efficient it is to now heat Frank's home!

Key Fact Four

People who believe that technological innovation will save the planet don't

understand that because of the Jevons Paradox we will also have to develop mechanisms to control the demand for

natural resources. Otherwise, new technology will increase demand for

other goods and services that will use up all the resources saved.

Growth in Government Programs is Based on Growth in Tax Base

In order for a government to expand the services it offers to citizens, it

needs to find new sources of revenue. Since there is a limit to the percentage of income a citizenry can pay in taxes,

this means that the economy must grow if the government is going to

expand services.

Growth in Canadian Government Spending per Capita

Deficit

Surplus

Key Fact Five

Expansion of government programs is dependent on expansion of the tax base,

which depends on expansion of the GNP. This means that any government

that seeks to create a steady-state (or environmentally sustainable) economy

will have to freeze and cut back government programs.

“Standard of Living” vs “Quality of Life”

Standard of Living Income “things” Doesn't count public

goods Totally individualistic Measured by “Gross

National Product”, GNP

Quality of Life Standard of living

plusAmount of spare time

Interpersonal relationships

Environmental quality Social goods Aesthetic qualities

Measured by “Genuine Progress Indicators”, GPI

Gross National Product vs Genuine Progress Indicators

1950 1960 1970 1980 1990

18000

16000

14000

12000

10000

8000

6000

4000

Dollars

per

Capita

GPI

GNP

Key Fact Six

Growth in the economy is not synonymous with human progress. It should be possible to create a society with a growing quality of life, even

though the standard of living is constant or in decline. This offers a way out of the dilemma humanity faces---but only if we accept significant change in our

lives.

Building That New World

New Political Model + New Technology = Hope

Future modules will focus on two important topics: the need to create a new type of politics, based on public mobilization instead of just elections;

and; the role that modern technology can play in this and the organizational model provided by the Open Source software

movement.