Are Economic Growth and Environmental Sustainability Compatible?

Will Dubitsky’s November 29, 2013 article in Commonsense Canadian entitled, “Germany shows a thriving green economy is possible” argues that economic growth and environmental sustainability  can be pursued at the same time as evidenced by Germany’s thriving green economy.  See  http://commonsensecanadian.ca/germany-shows-thriving-green-economy-possible/.  However  the comments on his article contain huge disagreements about the numbers. They remind me of the old B movie, "Shootout at the OK corral".

Note that Prime Minister Harper's views about the incompatibility of addressing climate change and economic growth appear to be supported by David Suzuki -at least in the following quote from Margaret Wente's interview of him: 

"In fact, Mr. Suzuki believes the (environmental) movement has been going backward for 20 years: 'We didn't sell the right message.' Instead of arguing that environment responsibility could co-exist with economic growth he thinks, in effect, that the movement should have argued that we must abandon the quest for economic growth altogether". (Margaret Wente, "The agony of David Suzuki" Globe and Mail April 15, 20120 

But Harper's views don’t matter.  That is because the huge omission in Harper's argument is the fact that, for the last 25 years or more, virtually all of the economic growth in Canada has gone to the rich - that is the top 20% of income earners and the wealthiest 20% of Canadian households.  Economic growth has not provided material progress for the other 80% of Canadians. What little economic progress they might have perceived is largely due to their increasing debt.  Canadians' debt to income ratio now exceeds that of the Americans - the world's greatest shoppers.

There are several problems with the economy and the environment that are created by the rich. First they don’t invest enough in business plant and equipment to keep the economy going at full employment.  Second they save too much rather than spending it on consumption and their low rates of consumption reduce economic output with consequent increase in unemployment and underemployment. Third some of their savings tend to get invested in housing so as to drive up the prices of housing and the cost of living for the poor and middle classes - well beyond the general rate of inflation as measured by the CPI. Fourth the rich tend to invest their savings in existing financial assets like stocks which create bubbles that periodically burst.  Fifth a considerable amount of what the rich do spend on consumption involves purchases of overpriced uneconomic status goods. Sixth the carbon imprint of the rich is at least 10% higher than the rest of society.

What most folks don't realize is that the rich are overpaid in the sense that parts of their high income and wealth are not earned from hard work, innovation, or entrepreneurship as the Harperites would have us believe. Rather parts of their income and wealth are due to the Harper government policies that give businesses partial monopolies (patent legislation, copyright laws, and other non compete regulations in telecommunications companies) that enable them to charge higher prices for greater profits and income. On top of that Harper and other previous governments in Canada have eliminated, through taxation, most of the “economic rent” for oil extraction companies, provided subsides to a host of businesses and levied zero taxation on the capital gains of developers that arise from inflation in the price of urban land (not buildings) that is generated by public infrastructure spending and population growth. And of course governments have picked up the costs of pollution that businesses generate. All these supportive government policies have enabled the owners and shareholders and senior employees in businesses to be paid extra with no effort, skill or entrepreneurship required whatsoever.

So the solutions for the majority 80% of Canadians and the country's environment are (1) greater taxation of high income and wealth (closer to the levels in the 1960s) (2) redistribution of income to reduce poverty, (3) cuts in the consumption of uneconomic luxury goods, (4) reduction in useless financial speculation in existing assets from stocks, real estate, art, collectibles etc.. and (5) a reduced rate of economic growth in exchange for a slight increase in leisure time for a better work life balance and a better balance between the supply and demand for labour and hence lower unemployment.  See environmentalist economist Peter Victor's book, Managing Without Growth: Slower by Design Not Disaster for the economic model for achieving all this.

But none of the above solution has a ghost of a chance of happening unless we introduce compulsory voting in order to can get all (80%) of the poor and middle class to vote and unless we can combine that with a new electoral system based on the principle of proportional representation. With these changes we will at last have a set of government policies that are aligned with the interests and priorities of the majority of Canadians - as opposed to the 24% of the electorate who are largely rich. In this scenario the tasks of the several progressive think tanks in Canada are to destroy the current conventional economic propaganda that has been advanced by Harper and businesses and replace it with a progressive narrative that actually works for the economy and the majority of citizens. The task of the organizations like Leadnow is to communicate the public priorities and pressure all political parties to get up the courage to introduce the above solutions.  And the task of the political parties is to work very hard to empower the 80% of Canadian to vote not only for their own interests but for the interests of their fellow citizens.  Because, as the old saying goes "If we don't hang together we shall hang separately". Anyway this is how I have tried to connect the dots between the economy, tax and fiscal policies, and the restoration of the health of a very ill democracy to finally deal with climate change. Let the revolution begin!

And if the Germans are right about the compatibility of a green economy with economic growth, that will be a bonus.                 

J. Peter Venton is an economist.  He earned his BA in Economics from the University of Western Ontario and his MA in Economics from Queen’s University.  For 24 years he worked in the Ministry of Finance of the Government of Ontario as an economist, senior economist and senior policy advisor in the administrations of Premiers Robarts, Davis, Peterson, Rae and Harris.  From 1979 to 1984, he was Vice President Administration and Finance at Wilfrid Laurier University in Waterloo.  From 2001 to 2009 he was Bursar at the University of St. Michael’s College in the University of Toronto from which he retired in December 2009.  Since his retirement he has been writing about economic inequality, globalization, environmental sustainability and democracy.