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Purpose – This paper sets out to investigate the potential contribution of the inter‐disciplinary field of ecological economics to the explanation of the current economic crisis. The root of the crisis is the growing disjuncture between the real economy of production and the paper economy of finance. Design/methodology/approach – The authors trace the epistemological origins of this disjuncture to the myths of economism – a mix of academic, popular and political beliefs that served to explain, rationalise and perpetuate the current economic system. Findings – The authors recommend ending with economism and developing new collective and discursive processes for understanding and engaging with ecological‐economic systems. Originality/value – The authors embrace the notion of sustainable de‐growth: an equitable and democratic transition to a smaller economy with less production and consumption.
Paper assets, real debts
An ecological-economic exploration of the
global economic crisis
Giorgos Kallis
ICREA and Institut de Cie
`ncia i Tecnologia Ambientals (ICTA),
Universitat Auto
`noma de Barcelona, Barcelona, Spain
Joan Martinez-Alier
Departament d’Economia i d’Histo
`ria Econo
`mica and
Institut de Cie
`ncia i Tecnologia Ambientals (ICTA),
Universitat Auto
`noma de Barcelona, Barcelona, Spain, and
Richard B. Norgaard
Energy and Resources Group, University of California at Berkeley,
Berkeley, California, USA
Purpose – This paper sets out to investigate the potential contribution of the inter-disciplinary field
of ecological economics to the explanation of the current economic crisis. The root of the crisis is the
growing disjuncture between the real economy of production and the paper economy of finance.
Design/methodology/approach The authors trace the epistemological origins of this disjuncture
to the myths of economism a mix of academic, popular and political beliefs that served to explain,
rationalise and perpetuate the current economic system.
Findings The authors recommend ending with economism and developing new collective and
discursive processes for understanding and engaging with ecological-economic systems.
Originality/value – The authors embrace the notion of sustainable de-growth: an equitable and
democratic transition to a smaller economy with less production and consumption.
Keywords Economic depression, Recession, Ecology, Economic theory
Paper type Conceptual paper
Benjamin M. Friedman, author of The Moral Consequences of Economic Growth, recalled that
when he worked at Morgan Stanley in the early 1970s, the firm’s annual reports were filled
with photographs of factories and other tangible businesses. More recently, Wall Street’s
annual reports tend to highlight not the businesses that firms were advising so much as
finance for the sake of finance, showing upward-sloping graphs and photographs of traders.
“I have the sense that in many of these firms” Mr. Friedman said, “the activity has become
further and further divorced from actual economic activity.” Which might serve as a
summary of how the current crisis came to pass. Wall Street traders began to believe that the
values they had assigned to all sorts of assets were rational because, well, they had assigned
them (David Leonhardt, New York Times, 21 September 2008).
Marx long ago observed the way in which unbridled capitalism became a kind of mythology,
ascribing reality, power and agency to things that had no life in themselves. [...] And
ascribing independent reality to what you have in fact made yourself is a perfect definition of
what the Jewish and Christian Scriptures call idolatry (Rowan Williams, Archbishop of
Canterbury, The Spectator, 24 September 2008).
The current issue and full text archive of this journal is available at
critical perspectives on international
Vol. 5 No. 1/2, 2009
pp. 14-25
qEmerald Group Publishing Limited
DOI 10.1108/17422040910938659
Immediate explanations pointing to proximate causes of the current financial crisis
dominate public discourse: the greedy bankers, the bad loans, the unregulated financial
products or the collapse of the housing market. Instead, we engage with the structural
causes of the crisis. The uneven temporal and spatial pattern of capital accumulation
has – deservedly – received much attention as a structural cause of the cyclical
repetition of economic crises. But less attention has been paid to ecological and
resource factors. This paper highlights some key ecological-economic insights
concerning the current economic crisis. We argue that:
.at the roots of the crisis is the growing disjuncture between the real economy of
production and the paper economy of finance;
.the costs of the financial crisis pale in comparison to those of current and
forthcoming ecological crises;
.the myths of economism a mix of academic, popular and political beliefs that
serve to explain and rationalise the economic system allowed and justified the
disjuncture between real and paper economies; and
.the current crisis provides opportunities at an epistemological level, to escape
from economism and at the practical level, to promote alternative socio-economic
paradigms such as de-growth and environmental justice.
But first let us explain the nature of ecological economics.
Ecological economics: bringing natural reality back into the economy
The field known as ecological economics (EE) was born out of the dissatisfaction of
economists and natural scientists with the treatment of environmental issues by
mainstream economics. Today EE involves a diverse field of researchers united by an
ambition to reclaim the classical economic tradition of putting nature as a key factor in
economic analysis. One might distinguish between a more conservative line of EE
which accepts the basics of neoclassical economics but works to couple better economic
with ecological models and a more critical, political-economic line of research, to which
the authors of this paper belong, which seeks new paradigms for understanding
ecological-economic systems as a whole and emphasises distributional, institutional
and power issues (Spash, 1999). Georgescu-Roegen’s (1971) seminal critique of
economics based on the laws of thermodynamics and in particular entropy and the
distinction between stocks and flows is often seen as the departure point of modern EE
(though there is a long lineage of related thinking before him; see Martinez-Alier, 1990).
Kenneth Boulding’s (1966) thesis on the bio-physical limitations of economic activity
and Karl William Kapp’s (1970) reframing of environmental externalities as the
pervasive social costs of free markets are also foundational EE contributions.
EE positions the economy as a subsystem of a larger local and global ecosystem
(Daly, 1991). Ecological and economic systems are seen as mutually constitutive,
metabolically related (Giampietro, 2003) and coevolving (Norgaard, 1994). EE rejects
the rational, “homo-economicus” assumptions of mainstream economics and their
liberal-utilitarian normative counterpart, which privileges market and cost-benefit
mediations of human wants. Multiple, incommensurable values are recognised and
deliberative-democratic mediation advocated (Martinez-Allier et al., 1998; Norgaard,
1994). Nonetheless, many ecological economists understand also the tactical use of
Paper assets,
real debts
economic valuation of environmental services and negative external effects in a society
where the generalised market is king.
EE is particularly critical of the notion of growth-as-progress (Norgaard, 1994).
Gross domestic product (GDP) is criticised both technically (van den Bergh, 2006) and
fundamentally as hiding the social – environmental and distributive – costs of
economic expansion (Martinez-Alier, 2002). From an EE perspective, externalities are
not accounting problems, but social cost-shifting successes predicated upon
institutional and power inequalities that allow some peoples’ values to count and
others’ not (Martinez-Alier, 2002).
But how is all this relevant to the present crisis?
Real wealth versus paper wealth
Rather than focusing on the immediate level of finance, from an EE perspective the
economy must be analysed at three levels. At the top there is the financial level that can
grow by loans made to the private sector or to the state, sometimes without any
assurance of repayment as in the present crisis. The financial system borrows against
the future, on the expectation that indefinite economic growth will give the means to
repay the interests and the debts. Then there is what the economists describe as the
real economy, the GDP at constant prices. When it grows, it indeed allows for paying
back on some or all the debt, when it does not grow enough, debts are defaulted.
Increasing the debts forces the economy to grow, up to some limits. Then, down below,
underneath the economists’ real economy, there is the ecological economists’ real-real
economy, the flows of energy and materials whose growth depends partly on economic
factors (types of markets, prices) and in part from physical and biological limits. The
real-real economy also includes land and the capacity of humans to do work.
The EE explanation of the crisis is simple. The upper level of finance grew way too
fast and too large for the real economy beneath to catch up. Frederick Soddy, a Nobel
Prize winner in Chemistry, had made this point in his book Wealth, Virtual Wealth and
Debt (Soddy, 1926) published in 1926 (Martinez-Alier, 1990). Soddy argued that it is
easy for the financial system to increase the debts (private or public debts), and to
mistake this expansion of credit for the creation of real wealth. However, in the
industrial system, growth of production and growth of consumption imply growth in
the extraction and final destruction of fossil fuels. The obligation to pay debts at
compound interest could be fulfilled by squeezing the debtors for a while. Other means
of paying the debt are either inflation (debasement of the value of money), or economic
growth which is falsely measured because it is based on undervalued exhaustible
resources and unvalued pollution.
According to ecological economist Herman Daly, the current crisis is due to the
overgrowth of financial assets relative to the growth of real wealth; there is too much
liquidity, not too little. “Paper exchanging for paper is now 20 times greater than
exchanges of paper for real commodities” (Daly, 2008). As a consequence the value of
present real wealth is no longer sufficient to serve as a lien to guarantee the exploding
debt and debt is being devalued (Daly, 2008).
Can the real economy catch up with debt? Ecological economists have argued with
neo-classical economists whether continuous growth is possible (see Ecological
Economics, Vol. 22), let alone desirable. Ecological economists have scrutinised the
optimistic assumption of neo-classical economists (and most Marxists as well) that
resource substitution and technological innovation will always surpass biophysical
limits (Daly, 1991). This is not to posit a simplistic notion of absolute bio-physical
limits to growth, but to take seriously the possibility that the depletion of stock
resources, the degradation of “sinks”, such as the global atmosphere and the increasing
occupation of Earth’s space, may limit the continuous expansion of the scale of the
economy and condition future human activity decisively (Norgaard, 1994). Adaptation
to the changing environmental conditions may not be gradual or reversible: resources,
sinks and ecosystems have thresholds which, once surpassed, lead to dramatic and
very fast changes. Humans may adapt to whatever the future might bring, but the
question is how many will survive and which, at what level of subsistence they will
live, and what pain will be suffered along the way.
Bio-physical constraints and the bottom level of the economy condition the rate at
which real wealth can increase. In addition to financing and housing, high oil prices
also triggered the present crisis. These were due not only to the OPEC oligopoly and oil
market speculation but also due to the approaching peak-oil (Deffeyes, 2001) and
market expectations of it. Also while in the 1920s the price of commodities decreased
for a few years before 1929, this time the increase in commodity prices (also driven by
the misguided subsidies to agri-fuels) continued for some months after the strong
decline in the stock exchange started in January 2008. In late 2008 the prices of oil and
commodities were declining, but this is because of declining demand, not increasing
supply. Consumption of oil is going down (Financial Times, 2008).
One could argue that oil at $US150 a barrel is in fact cheap from the point of view of
its fair inter-generational allocation and the externalities it produces. As the crisis
deepens, the price of oil goes down but it will recover in real terms if and when the
economy grows again. Declining prices will cause some expensive sources to stop
production (Alberta oil sands, for instance) and will also lead to lack of investment in
new extraction sites. OPEC will try and reduce oil extraction during the crisis. The
scheduled OPEC meeting of mid-November 2008 was brought forward to 24 October,
when it decided to cut oil extraction by 1.5 mbd. Should oil prices increase again (aided
by speculation in the futures market), then this will make economic recovery more
difficult. Peak-oil does not mean immediate scarcity. It means that it is less easy to find
oil than before, and that supply cannot increase any further above the previous level.
Something like half the reserves are still there, but extraction will take place at a
declining rate. We are not sure, however, whether we have already passed the peak or
not, and we cannot be certain about the economics of other energy sources. This means
that the current rate of fossil fuel-driven growth may be unsustainable.
Even if one is not convinced that limits and peaks have been reached, the subtle fact
remains that there is no way the economy can grow fast enough in real terms to redeem
the massive increase in debt (Daly, 2008). As Daly (2008) argues, “spatial displacement
of old stuff to make room for new stuff is increasingly costly as the world becomes
more full, and increasing inequality of distribution of income prevents most people
from buying much of the new stuff except on credit”. More crucially, with projected
(desired) growth rates, the change in the global atmosphere due to greenhouse gas
emissions will have such catastrophic impacts that will more than offset any growth
(Intergovernmental Panel on Climate Change, 2007). Wishful thinking about
de-materialised growth has proven elusive (Martinez-Alier, 2002; Polimeni et al., 2008).
Paper assets,
real debts
The real toxic debts
The assets that take the form of claims to debts that will remain unpaid have been
given the funny name of “toxic assets”. But what about the liabilities, like the
enormous “carbon debt” that is owed to future generations, and to the poor people who
have produced little greenhouse gases (Srinivasan et al., 2008)? Large environmental
liabilities are due by private firms. Chevron-Texaco is being asked to pay back 16
billion dollars in a court case in Ecuador. The Rio Tinto company left behind large
liabilities since 1888 in Andalusia where it got its name, and also in Bougainville, in
Namibia, and in West Papua together with Freeport McMoran (Martinez-Alier, 2002).
These are debts to poor or indigenous peoples, also like those of Shell in the Niger
Delta. These real poisonous debts are in the history books but not in the accounting
books. New fossil fuels and mineral sources have a low EROI (energy return on
investment) and high marginal costs. Diplomatic and military pressure on the
exporting countries intensifies; although the rate of oil extraction could still increase
somewhat, the coming down from the peak will be steeper and more conflictive still.
We do not need to subscribe to a dollars game to argue that in all likelihood the
economic costs from global ecosystem degradation and climate change (Millennium
Ecosystem Assessment, 2005; Intergovernmental Panel on Climate Change, 2007) will
be an order of magnitude higher than the accumulated debt that belies the present
crisis. We should be even more concerned about forthcoming ecological crises than we
rightly are about the present financial crisis.
Ironically, economists are advocating the same recipe for ecological problems to the
one that belies the present financial crisis: commodify unpriced ecological goods and
let the free markets regulate their provision without state intervention. Karl Polanyi
(1944), in The Great Transformation, saw the parallels between the deregulation of
money supply and the commodification of nature and the double danger these posed.
Money and nature (alongside labour), he argued, are fictitious commodities, that is
things that circulate in the market as though they are commodities originally produced
for it, when clearly they are not. Like Polanyi, many ecological economists have
insisted on the impossibility and undesirability of nature’s commodification (Vatn and
Bromley, 1994). But such voices are against the current: new fictitious markets, from
trading carbon to pollution permits, water rights or payments for ecosystem services,
are increasingly imagined and enacted (Kosoy, 2008). The risks of linking the value
and level of protection of ecosystem services to the ups and down of markets and
currencies go unnoticed (Harvey, 1996; Kosoy, 2008).
To understand how these myths of self-regulating markets, perpetual growth and
the disjuncture of the fictitious, paper economy from the real economy came to be, we
need to turn to the realm of ideas and their interaction with politics and economics.
The myths of economism
Let us distinguish between an economy that is “out there” and the complex of myths
that people, both individually and in order to act together, have developed to aid them
in living within the economy. This distinction is roughly parallel to nature as a reality
of its own and the complex of myths traditional peoples hold about nature and their
relation to nature. In traditional societies, myths provide explanations for natural
phenomena, facilitate individual and collective decisions, and give meaning and
coherence to life. As people act on their myths, their societies and the natural
environment are shaped and co-evolve around them. Today, as we act on scientific
understandings that were first mechanical, then chemical, and more recently
biological, we see agricultural soils and rural communities transforming and
co-evolving with the path of science (Norgaard, 1994). As modern people, we also act on
comparable beliefs about our world (a world that is largely economic), that are rooted
in the discipline of economics. We refer to this complex of myths as economism, and
like traditional beliefs and scientific understanding, economism explains phenomena,
facilitates individual and collective decisions, and gives meaning and coherence to our
lives. Similarly, our economy is driven by and coevolves around economism.
With a 25-fold increase in global market activity during the twentieth century, the
economy became the cosmos of roughly half the world’s people. The rise of the market
economy in everyday life, with exchange occurring over ever greater distance, can be
thought of as a wedge between our contact with nature and with the moral
consequences of the decisions we make. The growth of the economic cosmos is both
facilitated and rationalised in public discourse by economic reasoning, albeit typically
quite simplified. Simplification is also key to the dominant approach of rational
thinking and the nature of disciplines. The history of scholarly economic thought can
be understood as a process of boundary keeping, a process of rationalising arguments
that either ignored entirely or entailed gross simplifications about the natural world
and broader questions of right and wrong.
Increasingly, modern people, few of whom are trained in the natural sciences, must
peek through the economy to see how we relate to the natural world. Economists have
pioneered and encouraged this approach. Barnett and Morse (1963) provide a clear
example of trying to understand the state of nature and our relation to it through the
economy. They argued that resources could not possibly be scarce because resource
prices declined from the late nineteenth century through much of the twentieth. Rising
prices indicate resource scarcity whether simply thinking in terms of supply and
demand between two periods, using Ricardo’s argument about how the best land is
used first, or exploring Hotelling’s far more sophisticated model of optimal resource
use over time. These patterns of thinking can be summarised by the simple argument:
If resources are scarce,
If market participants know that they are scarce,
Then resource prices will rise.
Barnett and Morse, and numerous economists and non-economists since (Simon, 1981;
Lomborg, 2001) have simply reversed the argument, declaring that since resource
prices have been falling, resources cannot be scarce. But the minor premise of their own
argument, the part that connects economics to reality, has been forgotten. If market
participants do not know resources are scarce in some real sense, the economic
argument is invalid. If they do know, we should simply ask them. Surely it is better to
learn from the differences in understanding between participants and thereby learn
about the risks and conditions under which their understandings are more likely true.
Prices simply blend the complexities of their understanding to a single directional
indicator with no other information (Norgaard, 1990).
The critically important point, however, is that for markets to work well, sufficient
market participants need to understand independently the reality behind the markets.
Economists, however, are arguing that we can understand reality through markets
Paper assets,
real debts
apart from whether the actors in the market understand reality. This presumption
explains how trouble arose in the USA through the housing market. Judging reality
through the market, home buyers and banks were confident that housing prices would
continue to go up because housing prices had “always” gone up. Lenders made loans to
home owners whose abilities to pay were marginal and contingent upon both a healthy
economy and their beliefs that home prices would always rise. Lenders knew that these
new home owners might not be able to make their mortgage payments, but this was
not seen as a problem because the banks thought they would simply be left holding an
asset whose value was still greater than the mortgage that remained to be paid. Then
Wall Street investment banks repackaged the risky mortgages as equities, portraying
them as hot stocks in a rising market. The mass deception worked, indeed the
increased perception of wealth helped drive up home prices by adding to the demand
for homes. Everything was going up until energy prices also went up and the economy
began to be less healthy. Mortgage payments were not made, banks foreclosed, but as
they did so in increasing numbers, housing prices dropped, and the assets of the banks
became “toxic”. The problem was that all the actors in the process had been looking at
what they thought was reality through trends in market signals rather than looking at
the underlying reality.
For the same reasons that the financial crisis arose, managing it is difficult because
economic actors are looking at crashing equities prices rather than underlying real
conditions, which surely have not changed that drastically, and as they do, the market
crashes ever more rapidly in a self-fulfilling prophecy.
When we do try to assess the underlying ecological basis of our economy, the
situation looks very bleak. By a fairly simple measure, the ecological footprint, the
global population needs to reduce consumption by 25 percent to consume and process
our wastes sustainably (Wackernagel et al., 2002). The assessment by the
Intergovernmental Panel on Climate Change (2007) indicates that we need to reduce
greenhouse gas (GHG) emissions by 80 percent globally by 2050 to avoid harmful, if
not catastrophic, climate change. Hansen et al. (2008) argue that we have already
passed the point of catastrophic climate change and need to reduce the existing level of
GHGs in the atmosphere. The Millennium Ecosystem Assessment (2005, p. 1) argues:
The changes that have been made to ecosystems have contributed to substantial net gains in
human well-being and economic development, but these gains have been achieved at growing
costs in the form of the degradation of many ecosystem services, increased risks of nonlinear
changes, and the exacerbation of poverty for some groups of people. These problems, unless
addressed, will substantially diminish the benefits that future generations obtain from
Making these adjustments in how we use the earth so as to not impose unjust costs on
future generations while responding to the global injustices already at hand will be a
major effort. Not surprisingly, however, some economists are arguing that the
alignment will not be that difficult because gross domestic product will only be
marginally reduced. Again, assessing whether the accommodation with reality will
entail hardships cannot be determined by looking at markets. GDP went up during the
Second World War while thousands died, millions lost relatives and were themselves
displaced, and additional millions died early of hunger and disease.
Beyond economism
We need to put much more effort into being informed of underlying conditions for
markets to work well, and this is both more critical and difficult when markets entail
great distances and complex transactions. How can a society taking advantage of the
gains from specialisation and exchange, a process that wedges people apart from
reality and the moral implications of their decisions, be both informed and moral? One
answer is clearly that being informed and moral are necessary for market stability,
sustainability and justice, and put some serious limits on the optimal extent of
exchange (Norgaard and Liu, 2007; Norgaard and Jin, 2008). While economists are fond
of noting that there are always tradeoffs and optima, one of the myths of economism
has been that expanding the extent of trade is always good. There are costs to
expanding markets that offset the benefits, and optimal markets may be quite
constrained compared to those of today.
To be better informed of reality and more moral, we probably need to deliberately
set up some new institutions to facilitate these goals. The Millennium Ecosystem
Assessment (MA) proved to be an interesting example of a collective process for
assessing reality, discussing morality, and confronting economism (Norgaard, 2008).
Some 1,400 scientists from around the world participated in a review and evaluation of
the existing literature on the status and importance of ecosystems and their services
and the drivers forcing their degradation. Participants from developing countries
repeatedly pointed out that the values of environmental services as determined
through market prices or behavior were heavily weighted by who had the income to
pay for them. The prices of ecosystem services reflected the tastes and concerns of the
rich more than the poor. The dollars of rich ecotourists spent on international airfares
are weighted the same as the dollars of the poor spent on bus fares to get to work. Thus
MA participants readily saw how markets to save trees to sequester carbon, for
example, are being established in poor nations where the poor are “willing” to stop
using forests because the rich have the economic power to buy up the rights of the poor
to stop them from using other ecosystem services of the forest. As a consequence,
carbon sequestration is cheaper than it would be in a world with less income disparity.
The rich can continue to drive their SUVs because the poor are willing to forego using
their forests for little. Once this was made clear within the MA process, it was very
difficult to use prices generated in markets as neutral values. In short, the open
participatory process of the MA began to deconstruct economism (Norgaard, 2008).
Another major contradiction of market-based valuation appeared in the Millennium
Ecosystem Assessment. Several scientists noticed that for there to be any rationality to
relying on stated preferences or behaviour to derive the values of environmental
services, one would have to assume that lay people were sufficiently informed of the
very ecological complexities the MA scientists were struggling to understand. This
assumption contradicted the objective of the MA to provide much needed knowledge to
the public and policymakers. In short, as with the problem of measuring resource
scarcity by looking at prices over time (Norgaard, 1990), the problems of using
monetary values to weight ecosystem services are tightly embedded in the very
socioeconomic system driving the problems of ecosystem degradation the MA sought
to understand in order to design better socioeconomic policies. This circularity
highlights how difficult it is to understand nature without looking through the
economy with the aid of economism. Yet MA participants were able to share their
Paper assets,
real debts
expertise into a very rich understanding of reality while also holding serious moral
The experience that Pavan Sukhdev (with Haripriya Gundimedia and Pushpam
Kumar) gained in India trying to give economic values to non-timber products from
forests, and to other environmental services (such as carbon uptake, water and soil
retention), has been an inspiration for the Economics of Ecosystems and Biodiversity
(TEEB) process sponsored by DG Environment of the European Commission. As the
TEEB team states, a monetary representation of the services provided by clean water,
access to wood and pastures, and medicinal plants, does not really measure the
essential dependence of poor people on such resources and services. In their project
“Green Accounting for India” they found that the most significant direct beneficiaries
of forest biodiversity and ecosystem services are the poor, and the predominant impact
of a loss or denial of these inputs is on the well-being of the poor. The poverty of the
beneficiaries makes these losses more acute as a proportion of their “livelihood
incomes” than is the case for the people of India at large. Hence the notion of “the GDP
of the poor”: for instance, when water in the local river or aquifer is polluted because of
mining, they cannot afford to buy water in plastic bottles. Therefore, when poor people
see that their chances of livelihood are threatened because of mining projects, dams,
tree plantations, or large industrial areas, they complain not because they are
professional environmentalists but because they need the services of the environment
for their immediate survival (see
Regional ecosystem assessments are now under way and there are numerous other
fora that bring people together to debate underlying conditions and appropriate
collective behaviour. We need to expand these and enter into them with a larger
perspective on their role in offsetting the simplicities of economism.
Beyond growth
The economic crisis will reduce CO
emissions and it might slow down the accelerating
route to biodiversity destruction and climate change. On the other hand, it might also
lead to the reduction of public and private expenditure on green technologies or
pollution control. There is no doubt also that recession will hit lower-income groups
and countries unevenly. But the problem with the above framing is that it is still
couched in the terms of economism and growth. There is a sense of de
`vu with the
interest rate debate (where high interest rates are supposed to make environmentally
destructive projects uneconomical but also slow down environmental investments).
Environment and jobs, environment and the poor are positioned at opposing ends,
eco-friendly growth supposedly being the only way to reconcile them. But these are
false dilemmas.
What we need is an altogether different vision and framing along the lines of an
Aristotelian buen vivir (as the World Social Forum proclaims) guided by oikonomia
rather than chrematistics. Here we emphasise the transformative potential of an
economic crisis, a crisis that many ecological economists said would come sooner or
later given the unsustainable pattern of capitalist growth. Now it is the moment to
generate new social visions of living well and being happy without the imperative of
economic growth. Visions that render compatible living well, working satisfactory and
maintaining our local and global ecosystems.
The concept of de
´croissance soutenable, or socially sustainable economic de-growth,
which Georgescu-Roegen started 30 years ago, is relevant (Latouche, 2004). De-growth
is not about decreasing GDP because we might always change accounting conventions
and include in GDP other items (unpaid domestic and voluntary work) and deduct the
negative externalities of biodiversity destruction, climate change, loss of human
cultures. Sustainable de-growth is about creating an alternative, smaller economy,
suitable to the physical needs of humans and ecosystems. With the economic crisis, la
´croissance est arrive
´ein Europe, the USA and Japan. This is an opportunity for
moving with the socio-ecological transition. The challenge is how to manage the
transition to a smaller economy in a socially equitable way, where those that levy the
greater burden are those that already “have” and who benefited the most from the past
pattern of unsustainable accumulation. At first sight, Southern countries have
something to lose and little to gain from de-growth in the North: fewer opportunities for
commodity and manufactured exports, less availability of credits and donations. But,
the movements for environmental justice and the “environmentalism of the poor” of the
South are the main allies of the sustainable de-growth movement of the North. These
movements complain against disproportionate pollution (at local and global levels,
claims for repayment of the “carbon debt”) and waste exports from North to South (e.g.
“Clemenceau” to Alang in Gujarat, or electronic waste). They resist biopiracy and
Raubwirtschaft, i.e. ecologically unequal exchange, destruction of nature and human
livelihoods at the “commodity frontiers”. They claim the socio-environmental liabilities
of transnational companies (Martinez-Alier, 2002). Their objectives are to have an
economy that sustainably fulfils the food, health, education and housing needs for
everybody. This transition to a smaller, human and ecological-scale economy is not
easy. The question is how to manage it smoothly and redistribute its costs to those that
most benefited by the unsustainable path that brought us here. De-growth is not
apolitical. It calls for a radically new polity with a redistribution of political and
economic power to allow it to be fulfilled.
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About the authors
Giorgos Kallis is an ICREA fellow at the Autonomous University of Barcelona. He previously
held an EC Marie Curie Outgoing Fellowship at the University of California at Berkeley. He
researches the co-evolution of ecological-economic systems, environmental justice and
adaptation to climate change. Giorgos Kallis is the corresponding author and can be
contacted at:
Joan Martinez-Alier is Professor at the Department of Economics and Economic History, at
the Autonomous University of Barcelona. He is among the founders and a former president of the
International Society for Ecological Economics. His current research focuses on ecological
economics and languages of valuation, political ecology, environmental justice and the
environmentalism of the poor.
Richard Norgaard is Professor of Energy and Resources at the University of California,
Berkeley. He earned his PhD in Economics at the University of Chicago, has been a constructive
critique of neoclassical economics, and is among the founders and a former president of the
International Society for Ecological Economics. His current research stresses how scientists
collectively and discursively understand complex systems and the implications of this for
democracy and ecological governance.
Paper assets,
real debts
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... Projections of crisis resulting from the pursuit of infinite economic growth have played a key role in environmentalist discourse dating back to the influential Limits to Growth report (Meadows et al 1972), and are being extended and updated by contemporary ecological economists (Kallis 2011;Jackson 2009;Daly 2010;Martinez-Alier 2009). Tom shares a similar analysis: ...
... And yeah, like I was saying before, to stop the destruction of our environment, we need to stop capitalism and all of the terrible things that it does alongside destroying the environment. Kallis et al. 2009) . It is important to restate, however, that the critiques of capitalism outlined in this section were not shared by all participants, but rather formed some of the largest clusters of opinion around the perceived drivers of ecological crisis. ...
... Though participants do not explicitly frame their critiques as such, I suggest therefore that they invoke social metabolism and material throughput analyses which play a key role in contemporary critical scholarship in ecological economics, political economy and the degrowth movement. In addition to these material analyses, participants also problematise the political and social prioritisation of 'the economy' over ecological and social wellbeing in capitalist societies such as the UK, which degrowth scholars have referred to as economism (D'Alisa et al. 2015;Kallis et al. 2009; Latouche 2012). ...
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Environmental movements have evolved and expanded across recent years in response to escalating ecological crisis. Developments include an increasingly prominent role for young people, more concerted efforts to integrate environmental and social struggles, and renewed critiques of global capitalism and its growth imperative. Underexplored throughout extensive scholarship in this field is how young environmental activists are (re)imagining socio-ecological crisis and transformation. This thesis aims to develop a deeper understanding of how young environmental activists envisage crisis and the types of futures they seek. The project draws on 30 semi-structured interviews and participant observation with young environmental activists (aged 16-28) in North East England. I develop an open case study approach in which data collected through local, low-impact empirical research is analysed through a theoretical lens centred around the burgeoning transnational academic-activist discourse of degrowth. The project evolved from a (pre)embedded position within this local activist milieu. In contrast with earlier environmentalist discourse, the narrative analysis in this thesis reveals how young activists pursue ecologically sustainable and socially just futures as an integrated ambition. Such approaches reflect the ascendant influence of climate justice frames which foreground the intersections of climate breakdown with existing social-geographical inequalities and oppressions. Bound up with these framings, however, are risks: I caution against the neglect of dimensions of ecological crisis beyond climate, as well as the underappreciation of complex interdependencies between human and non-human wellbeing. I also uncover a predominant oppositional orientation characterising both the forms of action young activists engage in and how they envisage transformation(s). Tensions between antagonistic and imaginative politics are manifest in the way that many activists appear to defer the development of alternative socio-ecological imaginaries until an abstract future moment. For some this deferral is unconscious whilst, for others, it is expressed as a deliberative prioritisation of an oppositional politics in the present. I argue, however, that this
... At the institutional level, the use of GDP indicators is considered another growth driver (van den Bergh 2009), as a collective focal switch to other measures might reduce attention to economic growth (Roth 2017). In contrast, a fundamentally structural growth imperative hypothesis is based on credit creation, which dates back to the work of Soddy in 1926 (Kallis et al. 2009). The obligation to repay debts, including interest, would require unconstrained credit creation and therefore continuous economic growth. ...
... Meanwhile, some scholars base their growth imperative hypotheses on the credit principle and interest payments (Binswanger 2009, Kallis et al. 2009). As the act of credit creation produces only the amount required to redeem the debt (principal), continuous credit expansion would be necessary to enable interest payments. ...
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Growth dynamics are often explained by insatiable wants or anthropological constants, modelled as preferences and behavioural axioms. By contrast, structural perspectives postulate a growth imperative due to macroeconomic or monetary system-inherent properties. Reconciling both perspectives, we develop a relational structure–agency framework to evaluate growth imperative hypotheses. We analytically separate the credit structure (including balance-sheet mechanics and nominal uncertainty) from institutional structure, and describe decision norms for households, entrepreneurs, commercial banks, central bank, and the state. Our framework suggests that the interplay of credit principles, income-dependent saving and portfolio saving rationales prevent the interest rate from adjusting downwards and thereby cause mature credit economies to stagnate. Underemployment results in growth policies becoming the dominant norm – seeking, under budget constraints, to overcome declining growth rates. Our method helps identifying agency to resolve this imperative. Preventing real asset inflation to relieve monetary policy at the effective lower bound appears essential.
... Over the past decade, ecological economists and political scientists have proposed degrowth (e.g., Kallis, 2011;Demaria et al., 2013) and managing without growth (e.g., Jackson, 2009) as a solution for achieving environmental sustainability and socioeconomic progress. Such concepts are a deliberate response to concerns about ecological limits to growth and the compatibility between growth-oriented development and sustainability (Kallis et al., 2009). Sustainable degrowth is not the same as negative GDP growth, which is typically referred to as a recession (Kallis, 2011). ...
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Indigenous knowledge refers to the understandings, skills and philosophies developed by societies with long histories of interaction with their natural surroundings (UNESCO, 2018; IPCC, 2019a). Local knowledge refers to the understandings and skills developed by individuals and populations, specific to the places where they live (UNESCO, 2018; IPCC, 2019a). Indigenous knowledge and local knowledge are inherently valuable but have only recently begun to be appreciated and in western scientific assessment processes in their own right (Ford et al., 2016). In the past these often endangered ways of knowing have been suppressed or attacked (Mustonen, 2014). Yet these knowledge systems represent a range of cultural practices, wisdom, traditions and ways of knowing the world that provide accurate and useful climate change information, observations and solutions (very high confidence) (Table Cross-Chapter Box INDIG.1). Rooted in their own contextual and relative embedded locations, some of these knowledges represent unbroken engagement with the earth, nature and weather for many tens of thousands of years, with an understanding of the ecosystem and climatic changes over longer-term timescales that is held both as knowledge by Indigenous Peoples and local peoples, as well as in the archaeological record (Barnhardt and Angayuqaq, 2005; UNESCO, 2018).
... Τα οικολογικά οικονομικά, εντάσσουν την οικονομική διαδικασία σε ένα ευρύτερο σύστημα που τροφοδοτείται από ενέργεια και πρώτες ύλες, και μετά τις επιστρέφει στο περιβάλλον ως απόβλητα και ρύπους. Αυτή η διαδικασία ονομάζεται και κοινωνικός μεταβολισμός (Haberl et al. 2011), ή η «πραγματική» πραγματική οικονομία (Kallis et al. 2009). Δεν αποτελεί εξαίρεση, αλλά μια εγγενή σχέση συνεξέλιξης μεταξύ κοινωνίας και περιβάλλοντος. ...
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Η παρούσα εισήγηση εξετάζει τη συμβολή των πρακτικών της Κοινωνικής Αλληλέγγυας Οικονομίας (ΚΑΛΟ) στη διαδικασία του κοινωνικο-οικολογικού μετασχηματισμού. Στην πρώτη ενότητα, θεωρούμε σκόπιμο να ξεκινήσουμε από τον εννοιολογικό προσδιορισμό του κοινωνικο-οικολογικού μετασχηματισμού και να προχωρήσουμε στην αποσαφήνιση των όρων που περιλαμβάνονται μέσα στη σύνθεση της ΚΑΛΟ. Στη δεύτερη ενότητα, η συμβολή της ΚΑΛΟ στη διαδικασία του κοινωνικο-οικολογικού μετασχηματισμού θα διερευνηθεί μέσα από τρία αλληλένδετα επίπεδα: α) τη διερεύνηση ενός μεμονωμένου συνεταιρισμού εργαζομένων ως διαφορετικού μοντέλου οργάνωσης της παραγωγής σε σχέση με μια τυπική καπιταλιστική επιχείρηση, β) την εξέταση της ΚΑΛΟ ως στρατηγικής μετασχηματισμού, γ) τη θέση των πρακτικών της ΚΑΛΟ στη μετακαπιταλιστική κοινωνία. Στην τρίτη ενότητα, θα διερευνήσουμε τους κοινούς τόπους και τις αποκλίσεις ανάμεσα στην ΚΑΛΟ και τα κοινά, ως θεωρία και πρακτική. Στην τέταρτη ενότητα, θα εξετάσουμε την ΚΑΛΟ μέσα από την οπτική του φύλου σε μια προσπάθεια να ανοίξουμε περισσότερο τη σχετική συζήτηση παρά να δώσουμε απαντήσεις. Στην τελευταία ενότητα, θα διερευνήσουμε τη σχέση της ΚΑΛΟ με τη δημοκρατία και τις δημόσιες πολιτικές.
Purpose This research investigated whether corporate social responsibility (CSR) can alleviate the negative effect of non-performing loans (NPLs) on bank performance. Design/methodology/approach The research employed a sample of European banks over the 2008–2017 period. To resolve endogeneity and heterogeneity problems, the system generalized method of moments (SGMM) model was employed. Findings First, bank NPLs were negatively and significantly associated with bank performance as measured by the Q-Tobin ratio and the return on assets (ROA). Second, CSR scores exerted a negative and significant effect on the level of NPLs. Finally, the results indicated that bank performance could benefit from the interactional effect of CSR and NPLs. Research limitations/implications This study fills the gap in the debate over the mediating role of CSR in the NPLs – bank performance interrelation. In addition, our SGMM analysis yielded more robust and efficient results while resolving endogeneity and heterogeneity problems concerning CSR and bank performance or risk in corporate finance. Practical implications CSR practices can play an essential mediating role in the NPLs–bank performance relationship. CSR activities in the European context may reduce the level of NPLs and increase bank performance. Originality/value To the best of the authors’ knowledge, studies of the implications of CSR activities on the banking sector are very limited. Indeed, this paper shows that CSR mediates the relationship between CSR practices and NPLs. The results suggest that bank performance could benefit from the interactional effect of CSR and NPLs.
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In view of the problems heterodox economists have faced in predicting, explaining and finding solutions to the financial and ecological crises facing humanity, the paper takes a wide-angle view of the question of what the role of an economist might be in a sustainable society. I argue that the role of an economist is one of an intermediary between people and the resources they need for survival, a role that in less rationalist societies might have been performed by a priest or shaman. I propose three central responsibilities for an economist in a sustainable society: supporting a process of re-embedding the economy in the environment; negotiating a respectful—even reverential—relationship between humans and non-human species; ensuring a means of acquiring resources that minimises the entropic impact of the human community.
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This Cross-Chapter Box highlights the intersecting issues of gender, climate change adaptation, climate justice and transformative pathways. A gender perspective does not centre only on women or men but examines structures, processes and relationships of power between and among groups of men and women and how gender, particularly in its non-binary form, intersects with other social categories such as race, class, socioeconomic status, nationality or education to create multi-dimensional inequalities
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The paper makes a literary review of degrowth pedagogy. Degrowth has become one of the fundamental approaches posed to survive in a world of limited resources and to face the profound causes of the current crisis. Learning to live better with less turns out to be not a moral postulate but a vital necessity of our species. The paper analyses the current investigations in the field, as well as the relevant publications in 88 peer review articles, focused on degrowth published between 2006 and 2019, including 41 proposals for action, among which 14 are specialized in the field of education. The conclusions point to the urgent and imperative need to change economic and environmental policies, but also mentalities. Decolonising the collective dominant imaginary trapped in consumerism and individualism; educating in a collective and shared lifestyle of voluntary sobriety; deconstructing the productivist reason and adopting an alternative model of eco social future in the unique world we have. The education and the school, as discussed in the paper, has a fundamental role to play in this endeavor.
Modernity promised control over nature through science, material abundance through technology and effective government through rational, social organization. Instead of leading to this promised land it has brought us to the brink of environmental and cultural disaster. Why has there been this gap between modernity's aspirations and its achievements? Development Betrayed offers a powerful answer to this question. Development with its unshakeable commitment to the idea of progress, is rooted in modernism and has been betrayed by each of its major tenets. Attempts to control nature have led to the brink of environmental catastrophe. Western technologies have proved inappropriate for the needs of the South, and governments are unable to respond effectively to the crises that have resulted. Offering a thorough and lively critiques of the ideas behind development, Richard Norgaard also offers an alternative co-evolutionary paradigm, in which development is portrayed as a co-evolution between cultural and ecological systems. Rather than a future with all peoples merging to one best way of knowing and doing things, he envisions a future of a patchwork quilt of cultures with real possibilities for harmony.
Bjørn Lomborg, a former member of Greenpeace, challenges widely held beliefs that the world environmental situation is getting worse and worse in his new book, The Skeptical Environmentalist. Using statistical information from internationally recognized research institutes, Lomborg systematically examines a range of major environmental issues that feature prominently in headline news around the world, including pollution, biodiversity, fear of chemicals, and the greenhouse effect, and documents that the world has actually improved. He supports his arguments with over 2500 footnotes, allowing readers to check his sources. Lomborg criticizes the way many environmental organizations make selective and misleading use of scientific evidence and argues that we are making decisions about the use of our limited resources based on inaccurate or incomplete information. Concluding that there are more reasons for optimism than pessimism, he stresses the need for clear-headed prioritization of resources to tackle real, not imagined, problems. The Skeptical Environmentalist offers readers a non-partisan evaluation that serves as a useful corrective to the more alarmist accounts favored by campaign groups and the media. Bjørn Lomborg is an associate professor of statistics in the Department of Political Science at the University of Aarhus. When he started to investigate the statistics behind the current gloomy view of the environment, he was genuinely surprised. He published four lengthy articles in the leading Danish newspaper, including statistics documenting an ever-improving world, and unleashed the biggest post-war debate with more than 400 articles in all the major papers. Since then, Lomborg has been a frequent participant in the European debate on environmentalism on television, radio, and in newspapers.