The Modern Corporation: Striking the Right Balance For True Prosperity

I recently wrote about a talk given by Juliet Schor at the New Economics Institute questioning whether profit-driven economic growth could be a solution to economic problems, even when that growth promoted the green economy.

Then I had a chance to talk with design engineer Amory Lovins of the Rocky Mountain Institute about his new book, Reinventing Fire: Bold Business Solutions for the New Energy Era, which promotes a profit-driven, pro-growth green technology model for solving our ecological crises. I also previewed the new film, “GrowthBusters: Hooked On Growth,” by Dave Gardner that advocates for a steady-state, or no-growth, economy to preserve the Earth’s ecosystems. Both afforded me an opportunity to think more deeply about these two points of view and whether they are entirely opposed to each other.

Let’s take Lovins’ first.

In Reinventing Fire, he claims the U.S. economy can produce 84 percent more while using nine to 13 percent less in resources than are currently consumed by using technologies that are either available now or in development. These range from realizing radical efficiencies to using strong, lightweight new materials and rapid advances in renewable energy (among others).

Lovins acknowledged to CSRwire that decreasing growth “would make the energy problem even easier and cheaper to resolve,” but that “technological solutions are powerful enough to cope even with [future growth] with much less risk.” (And without government subsidies, he added.)

On the Reinventing Fire website, Lovins points to efficiency gains, even as GDP has increased, arguing they have led to a drop in demand for fossil fuels:

“Peak oil” is now emerging in demand before supply…Making a dollar of U.S. GDP in 2009 took 60% less oil, 50% less energy, 63% less directly burned natural gas, and 20% less electricity than it did in 1975, because more efficient use and alternative supplies have become cheaper and better than the fossil fuels they’ve displaced.

However, while efficiency gains in the U.S. are undisputed, the drop in demand for oil is not, as this 2010 article shows: Global oil demand – led by the United States and followed by China, Japan, and India – will dramatically increase over the next two decades.

In April, 2011, the New York Times Green blog reported that U.S. greenhouse gas emissions were projected to grow over the same period, albeit more slowly than in the past. It’s hard to see how that could be possible without rising demand for fossil fuels.

So the question is: Can we transform our economy radically and quickly enough to curb resource use and avoid climate and environmental catastrophe? And is technology enough to do it?

Lovins says yes. At the end of his book he lays out an alluring scenario of America in 2050, with homes that produce more energy than they consume, a transportation system integrating electric cars, mass transit and Internet-enabled ride-sharing, and manufacturing taking recycling to new heights to generate inputs from waste. It’s a prosperous, post-petroleum world.

And I think it’s possible – but only if we also rein in growth.

Here’s where Dave Gardner’s analysis comes in. He points out in “GrowthBusters” that the U.S. already uses up the equivalent of three to five Earths (the average U.S. resident’s individual footprint is 5.3 Earths) – something it can only do by robbing future generations of their principle in ecosystems services.

So even the 13 percent reduction in resource use that Lovins offers with a rise in output of 85 percent would fall far short of bringing the U.S. economy toward long-term sustainability. Gardner supplies the analogy of a car speeding toward a cliff at 70 miles per hour. Even if you slow its speed down to 50 mph, it’ll still go over the cliff.

Then Gardner makes a crucial point: The profit-at-all-costs driven economy feeds on population growth, needing ever more people to consume at an ever-increasing rate in order to keep expanding markets.

Population growth alone could wipe out any savings from green technology. “GrowthBusters” interviews The Population Bomb author Paul Ehrlich: Those [like Lovins] who think you can concentrate on reducing each person’s consumption, Ehrlich says, are ignoring that we are already way above the carrying capacity of the Earth. If you managed to halve each person’s consumption but allowed population to double, you are back to where you started.

The other big elephant in the room is the control of finance capital over the economy. Since all money is created out of debt (Gardner’s film has a clip of Chris Martenson explaining this in clear terms), interest must be paid. And that demands growth.

In a review of the film, Marc Gunther agrees with much of Dave Gardner’s arguments about the environmental impact of consumption and population growth. But he parts ways with him on the prescription: no growth. He says it’s unfair to ask people in China and India to give up growth – and unlikely that:

Americans will ever be persuaded to make sacrifices so that people in China and India can live better. Better to find ways to prudently expand the pie than to fight over who gets which piece. Put bluntly, economic growth isn’t the problem. It’s the solution.

But, as Gardner reminds Gunther, the Earth’s resources are finite:

I’m suggesting, since growth is not a sustainable state, it ought not to be a goal. Sufficiency is a more realistic goal than perpetual growth. It ought to be the goal for those of us over-consuming today, and it ought to be a goal for those whose basic needs are unmet today.

Certainly the efficiencies that renewable energy can bring up will lengthen out the event horizon for total systems collapse – but presumably we want those renewables to be available not just to our children but to generations, centuries, if not millennia, into the future.

This is simply common sense.

Those who cling to economic growth as the pivot around which an economy must be organized are falling victim to wish fulfillment fantasies, much like the market boosters’ gleeful forecasts of “Dow 30,000” that shredded like confetti in the winds of the 2008 financial collapse.

But, you may ask, in a no-growth economy, where would the incentive come from to encourage prospective green investors and entrepreneurs to enter the field? They need to see a return on investment or the “green transition” is doomed.

The answer lies in balancing society’s needs and priorities. In other words (cue the gasp) – planning. Dave Gardner, who ran for city council in Colorado Springs, says planning happens all the time, even in a capitalist economy. Farm subsidies are planning. Oil and gas subsidies are planning. Corn ethanol subsidies are planning.

Planning that brought corporations and stakeholders (citizens, shareholders and workers) together to the table could help regions decide how to achieve a steady-state economy while supporting the growth and development of the green industries we need. (This is why Amory Lovins’ distrust of green subsidies is, I think, mistaken. There’s no reason why taxpayers should not support the development of industries that truly serve their needs, rather than those that trash the environment for themselves and their children.)

Both Lovins and Gardner hold vital pieces of the puzzle to solving our ecological crisis. We need to take all the technological genius of the Amory Lovins’ of the world to “reinvent fire” by developing and deploying sustainable technology, sustainably produced.

We also need to put the brake on population growth through promoting the educational and economic empowerment of women and making family planning universal. This is the most effective strategy to reduce carbon emissions and reverse the plundering of the Earth’s resources.

Finally, we need to redefine prosperity as grounded not in growth but in “sufficiency” – putting quality of life (for all) over endless growth. Only that will ensure a healthy future for all living beings.

Originally posted on CSRwire

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Francesca Rheannon is an award-winning journalist and managing editor for CSRwire’s blog, Talkback.