Musings on a Green Economy pt1: After the Crash
I’m officially on holiday for the next two weeks, but due to the size of the bump on my pregnant partner, we’re holidaying at home – the dreaded “staycation”. Because holiday is time for relaxation and reflection, I’m going to run a series of blog posts about how we get to a Green Economy. Here’s the first.
When the run on Northern Rock bank started in 2007, signalling the start of the implosion of the over-inflated economy, I was in the South of England at a political conference. On the silent screens showing BBC24 around the venue, we watched images of queues outside Northern Rock branches in my adopted hometown of Newcastle and it was clear that something was very, very wrong.
About a year later, I was drafted onto a “task and finish” panel which had been tasked with drawing up a plan for what local Government could do in the North East of England to help rebuild the economy. In my opening remarks, I spoke about how I thought we should be looking at the crash as an opportunity not to put the economy back as it was, but as we’d like it to be – and I made the case for a green economy. This received appropriate murmurs of assent around the table, but as the panel listened to the invited ‘experts’ on economic recovery, I grew frustrated with the lack of any real ambition from anyone to change anything.
Five years on from the crash and the economy is, on the face of it, stagnating. However I am one of those who believes the UK economy is much stronger than the headline figures suggest and that we’re just looking at what’s left when you remove the debt-driven bubbles in the financial services and construction industries which gave us the illusion of wealth in the pre-crash era. But a big factor which most mainstream commentators seem to be ignoring is the price of oil. As I have argued before, it was probably the price of oil which forced up the cost of living and burst the debt bubble and according to Fatih Birol of the International Energy Agency, the continuing high price of oil is a big contributor to that economic stagnation. So it is not a question of ‘green or growth’, so much as ‘green or stagnation.’
Many of you will be reading my analysis and thinking “Aha, but he’s still working in the old economic paradigm of ‘growth is good'” and you’d be right. We do need to take a step back and ask the most important question you can ever pose – “Why?” The current economic growth paradigm is like the proverbial shark – if it doesn’t keep moving forward, it dies. Economic growth may not increase our standard of living, but economic decline destroys it. And of course there is a close correlation between economic growth (in terms of GDP) and carbon emissions/other environmental strains. The alternatives are 1. switch our main measure of well-being away from GDP, 2. move to a ‘steady state’ economy which is designed not to grow, or 3. make the decoupling happen.
My concern about a steady state economy is no-one has any experience of how to make this work nationally or internationally. In fact you could argue we have a steady state economy, and Germany and Japan have gone through their own recent periods of stagnation, and nobody seemed to enjoy the experience. A revolutionary approach cold backfire in a time of great uncertainty and instability.
In terms of replacing GDP, a number of ‘happiness indexes’ have sprung up which try to combine a whole range of factors into a single figure. The problem with such indicies is their complexity makes it very difficult to link them to particular policy interventions. I suspect a simple ‘GDP plus’ (or minus as the case may be) measure which factors out ‘harmful’ economic figures might be more practical in the short to medium term for managing the economy, with the happiness indicies used to monitor the wider health of society. And going back to the link between growth and carbon emissions – I can’t help thinking we have never really tried to decouple the two and that the price of oil is now forcing us to do so.
So, GDP plus and rapid greening of the economy is my recommended remedy to repair the economy – next time, I’ll be ruminating on some visions of what that green economy might look like – click here for pt2.