Policy Statement on Economic Growth Proposed for Adoption by the Ecological Society of America July 12, 2007
Proposed by ESA Members Warren Aney, Paul Angermeier, Robert Baldwin, Randy Bangert, Alice Bard, Terry Bowyer, Mark Boyce, Joel Brown, Peter Brussard, John Cairns, Joseph Cech, Jameson Chace, Dana Coelho, Christopher Craft, Brian Czech, Dominick DellaSala, David Ehrenfeld, Elmer Finck, Dan Fiscus, Edward Gates, Joseph Gathman, Rod Heitschmidt, Jeff Houlahan, Nicola Koper, Karin Limburg, Richard Lindroth, Michael Lowe, Michael Marsh, Carl McDaniel, Eliot McIntire, Guy McPherson, David Mech, Chris Papouchis, Kenneth Raedeke, Heather Reynolds, Winston Smith, Nicholas Stowe, Gerald Van Amburg, Skip Van Bloem, Robert Wagner, Mohan Wali, David Walls, John Yunger, and Richard York. Background Economic growth is an increase in the production and consumption of goods and services. It requires increasing population and/or per capita production and consumption. It is indicated by measures of production, income, and expenditure, most notably gross domestic product (GDP). Economic growth is a function of land, labor, and capital. Capital may be real or financial. Real capital includes natural capital, manufactured capital, and human capital. Natural capital may take the form of raw materials (e.g., oil, timber, fish) or services (e.g., solar radiation, water filtration, climate regulation). Manufactured capital includes the infrastructure, plant, and machinery that are used in the production of consumer goods or additional manufactured capital, or in the performance of services. Human capital refers to various aspects of the human condition that allow for higher productivity; for example, education, information, and health. The economic production process entails the conversion of natural capital into manufactured capital (including service facilities) and consumer goods and services by the application of labor, manufactured capital, and human capital. Some services may be performed with little manufactured capital, but natural capital in the form of energy and/or agricultural commodities are nevertheless required for such performance. Essentially, the human economy has a sectoral structure that reflects the trophic structure of the ecosystem. The ecosystem comprises an economy of nature that is founded upon the producers, or plants, which produce their own food in the process of photosynthesis. Among the animals, primary consumers eat plants, secondary consumers eat primary consumers, etc. In some ecosystems more than five distinct trophic levels may be identified. Omnivores consume in more than one trophic level, and many species are omnivorous to some extent. Some species, such as pollinators, detritivores, and scavengers, are aptly characterized as service providers in the economy of nature. The human economy is also founded upon producers, most notably the agricultural and extractive sectors. Surplus production in these sectors is what allows for the division of labor. Laborers and other individuals consume products from the agricultural sectors for sustenance, and manufacturing sectors transform energy and raw materials from the extractive sectors into consumer goods and manufactured capital. Service sectors, such as janitorial, transportation, and financial services, are an integral component of the full economy, as with the service providers in the economy of nature. Macroeconomic Policy and the Environment Of primary concern to the Ecological Society of America is the relationship of economic growth to the functional integrity and sustainability of the ecosystem, which in turn has implications for the sustainability of the economy itself. The Ecological Society of America is also concerned with the lack of public policy dialog on the implications of macroeconomic policy to ecological integrity and economic sustainability. Furthermore, in the limited dialog that does occur, there appears to be confusion about limits to economic growth and the tradeoffs between economic growth and environmental protection. The Ecological Society of America believes ecologists have a unique conceptual toolkit, as a result of their training and research, for helping to build understanding and awareness about the ecological effects of economic growth and for identifying policy tools conducive to ecological integrity and economic sustainability. To wit, the Ecological Society of America takes th! e position that: § There is a limit to economic growth, based upon the laws of thermodynamics and principles of ecology. The availability of matter and energy are limited in accordance with the first law of thermodynamics. The efficiency with which matter and energy may be converted into goods and services is limited in accordance with the second law of thermodynamics. Just as energy and biomass is lost in the economy of nature from one trophic level to the next, energy and materials are lost in the human economy from one sector to the next. For example, it takes more than 100 kilotons of vegetation to produce 100 kilotons of rabbits, and it takes many more kilotons to produce (via rabbits and other prey) 100 kilotons of foxes. This ecological principle is grounded in the second law of thermodynamics and is referred to as ecological efficiency. Likewise, it takes more than 100 kilotons of iron ore to produce 100 kilotons of steel, and more yet to produce 100 kilotons of auto chassis.! The efficiency with which consumer goods and services are produced from natural capital is called productive efficiency. § Assessing the limits to growth at local, regional, and national levels is complicated by the prospects for importing labor and capital. The ultimate limit to economic growth on Earth manifests at the global level because all labor and capital is accounted for at the global level. § The human economy grows as an integrated whole. Although particular processes and sectors may wax and wane as a function of technological progress, the basic collection of agricultural, extractive, manufacturing, and service sectors tend to grow and recede in unison. Furthermore, there is a limit to the proportion of services that comprise the human economy because of the land, capital, and consumption requirements of the service providers. Additionally, most services are used by or with other economic sectors such that growth in those service sectors requires growth in the other economic sectors. § Economic growth ultimately requires more agricultural and extractive surplus, resulting in the liquidation of natural capital. Increased productive efficiency may allow some economic growth to occur with less environmental impact per unit production, but efficiency is limited to less than 100% pursuant to the second law of thermodynamics. § Regarding the size of an economy, the basic alternative trends are growth, recession, and steady state. Because an economy may neither grow without limit nor recede into negative production, only a steady state economy is sustainable in the long run. § There is a fundamental tradeoff between economic growth and environmental protection, where environmental protection refers to the maintenance of ecosystem characteristics conducive to human welfare. These characteristics include but are not limited to: purity of air and water, soil productivity; naturally occurring biological diversity; capacity to buffer communities from natural disasters such as hurricanes, and composition of atmospheric gases associated with climates that humans and other species have adapted to and evolved with. This tradeoff is practically irrelevant for economies with abundant natural capital and ecological integrity, but becomes more policy-relevant as the economy grows, natural capital is liquidated, and ecological integrity is compromised. § Because of the tradeoff between economic growth and environmental protection, which is necessary for human welfare including economic sustainability, continued economic growth is certain to exceed a socially optimum level. The fact that such a level may be difficult to ascertain precisely, or may fluctuate as a matter of natural cycles or events, does not render the concept of optimum size less relevant to public policy. Given an adequate understanding of the tradeoff between economic growth and environmental protection, most citizens and policy makers will be capable of recognizing if an economy is far beyond the socially optimum size. Moving toward the optimum size or an acceptable range of an economys size should be a policy goal of the polity. § The economies of some localities, regions, and nations may have already surpassed optimum size. Ecological evidence for this exists in the form of water shortages, soil erosion and degradation, high levels of biodiversity loss, and lack of wild areas and green space, among other things. Broader evidence, including but not limited to ecological parameters, is found by using various indicators of human welfare, such as the Index of Sustainable Economic Welfare and the Genuine Progress Indicator, which in some nations have been declining while GDP has been increasing. It behooves nations and other political units to adopt alternative indices of welfare and monitor them along with GDP, attempting to parse out the net effects of economic growth, whether beneficial or detrimental. § In nations for which it is apparent that economic growth has proceeded beyond the optimum, in which case the expanding production process may more accurately be designated uneconomic growth, various policy tools should be carefully and gradually applied toward the goal of a more optimally sized economy. Many of these tools already exist, including fiscal, monetary, and trade policies. Although these policy tools have most often been used to stimulate growth or increase the growth rate, they may instead be used to lower the growth rate or stabilize the economy. Additional policy tools for achieving a stabilized (mildly fluctuating) steady state economy may be used to supplement the existing policy tools, including cap-and-trade systems in the energy and extractive sectors, graduated consumption taxes, and banking reforms that entail less debt (and therefore less pressure for economic growth) than the current fractional reserve system. Brian Czech, Visiting Assistant Professor Virginia Polytechnic Institute and State University Department of Wildlife and Fisheries Sciences National Capital Region, Northern Virginia Center 7054 Haycock Road, Room 411 Falls Church, VA 22043
