Wednesday, July 02, 2014

Supply Shock, Economic Growth at the Crossroads and the Steady State Solution

Brian Czech’s Supply Shock, Economic Growth at the Crossroads and the Steady State Solution, 2013, New Society Publishers, brings the “dismal science” to life as a luminous discipline. Czech, founder of the  Center for the Advancement of the Steady State Economy, begins where Herman Daly’s 1996 Beyond Growth leaves off, bringing ecological economics into the present turbulent economy while explaining how we got here.

In addition to an enlightening and enjoyable history of economics, and projections for the economic future, Czech makes two significant contributions to our understanding of steady state ecological economics.

Czech tells us the story of Henry George, whose 1897 Progress and Poverty, brought land back into the equation of the means of production, alongside capital and labor. George promoted the idea of a single land tax, thus fostering the enmity of industrialists of the time who were busy locking up land along the expanding railroads for their personal profits. George’s work not only encouraged the burgeoning agrarian and socialist political movements, but also engendered the reactionary slide from classical to neoclassical economics.

Czech’s explication of  this largely forgotten economic history tells us that our present economic system is not carved in stone, and that we can indeed craft a new economic system more in keeping with modern realities of a finite, fully populated world.

Czech’s important contribution to ecological economics is his trophic model of human economies. Just as non-human economies can be organized on trophic levels, based on their relationships to primary producers (those who directly transfer energy from the sun to nutritional needs), human economies can be organized on trophic levels, based on their relationship to human primary producers (farmers and those who produce directly from the land).

The importance of this model lies in its explanation of production within our modern services and information economies, which professes to have a smaller impact on the environment because they exploit fewer resources and produce less waste than manufacturing economies. Czech points out that, just as large fierce animals are rare in non-human economies because they require a very large base of primary producers, service and information economies require a large base of primary producers (farmers) creating an excess of produce for its support. In an economic growth scenario, the expanding secondary production economy requires an expanding base of primary producers from a land and resource base that is constantly shrinking.

Therefore, continued net economic growth in a world of finite resources is impossible.

Czech’s trophic model of human economies firmly marries economic theory with ecological theory, exploring human economies as a subset of the broader natural economy, leading the way to a unified theory of steady a state economy that can function in perpetuity within natural cycles of resource availability.

Supply Shock is a significant contribution to economic theory that offers a path through and beyond the inevitable limitations of economic growth.