2024 has been another year when mainstream economics detached itself from the climate reality.
In 1973, the Club of Rome published the Limits to Growth report. It highlighted our fascination with economic growth, which would, at some point in around 50 years, start to dismantle all of our progress as a society. After some initial engagement in the models being presented, interest died out. Our first warning was ignored. The world continued to reach for more stuff.
Twenty-five years later, Donella Meadows, one of the authors of the Limits to Growth report, wrote in Leverage Points - Places to Intervene in a System: “The world’s leaders are correctly fixated on economic growth as the answer to virtually all problems, but they’re pushing with all their might in the wrong direction.” In other words, growth is important as a level for change, but we already have too much of it.
Back in the here and now, we have just experienced the hottest year in 125,000 years. It’s almost ridiculous to write this line. Does it sound as mad to read it? Does it strike you as baffling why we continue to deliberately raise the temperature of the earth?
We are aware of the causes – burning fossil fuels, altering land use, and overconsuming resources – and we understand the solutions. Yet, instead of addressing these issues, we have allowed them to escalate. It is as if our economy demands the sacrifice.
There is nothing inherently wrong with a mixed market economy like the one we have in the UK. All the fundamentals are in place for our economy to work for people, place, and planet. The problem, as I see it, comes down to a misunderstanding of a very simple process: The creation of wealth.
All our wealth comes initially from our natural resources. We increase one form of wealth, like material wealth – let’s say a new car – by depleting other forms of wealth. In simple terms, some natural resources were used to create this shiny new car. Energy from fossil fuels, food to power the workers, and minerals from the earth were all transformed to create it. Our ecosystem disposed of and captured the excess from this transformation, including waste heat and pollution.
Even mainstream economists know some kind of transaction is going on; they are not blind to the transformation process. However, they only measure one side of the transaction. It is the outcome that matters. What have we created? And more importantly, what is its monetary value? Economists collect all this data and then aggregate it to create a nation's Gross Domestic Product.
In concentrating only on the exchange value (what someone will pay for it) of the product or service that has been created, we commit the crime of totally ignoring the use value of the inputs. A tree has no exchange value until it is chopped down. But can anyone argue that it has no use value?
Most people understand the difference between exchange value and use value, and perhaps a more serious error is being made. How many people believe that our wealth comes from one source: Our natural resources? And are you one of them?
Our current economic system ensures that we have taken our natural resources for granted. We believe that our natural resources are inexhaustible and that we can take forever. We also consider the earth's carrying capacity – its ability to deal with entropy and waste – insatiable.
When you burn a candle from both sides, you very quickly meet in the middle. Our society's current economic framework will ensure its complete collapse.
Unless we overcome this tiny barrier in our understanding, the wealth you have comes from the earth. We can only take so much before it becomes incapable of providing even the basic necessities of a life support system for you and your family.
Last week, a report from Breakthrough, the National Centre for Climate Restoration, called Collision Course, highlighted the huge challenges we now face in dealing with the last 50 years of excess. The report states: “Global climate policymaking is embedded in a culture of sustained failure with an emphasis on incremental market-driven processes that are structurally incapable of assessing unquantifiable risks or mitigating them. There is no longer any realistic chance of an orderly transition, and large-scale economic disruption, which markets handle poorly, is now inevitable."
After reading the evidence in the 50-page report, it is impossible not to reach the same conclusion: Global climate policymaking relies almost exclusively on a market that considers only exchange value. It places no value on the ecosystems where we extract our wealth and store our waste. It views both sustainable and non-sustainable resources, stocks, and flows simply as inputs.
There is no silver bullet to changing our economic system, and agreeing once again with the Collision Course report, “large-scale economic disruption ... is now inevitable.” In the seminal book Collapse, Jered Dimond wrote: "The prosperity that the first world enjoys at present is based on spending down its environmental capital.” The more people who can see this simple relationship, the greater the chance we have of avoiding that collapse.
The more people who can see this simple relationship, the greater the chance we have of avoiding that collapse. Because if time hasn't run out already, there is surely not much sand left in the hourglass.
