{"id":10553,"date":"2015-12-22T00:00:00","date_gmt":"2015-12-22T05:00:00","guid":{"rendered":"http:\/\/localhost\/thenewatlantis.com\/publications\/the-flawed-economics-of-laudato-si"},"modified":"2020-09-26T14:04:25","modified_gmt":"2020-09-26T18:04:25","slug":"the-flawed-economics-of-laudato-si","status":"publish","type":"article","link":"https:\/\/www.thenewatlantis.com\/publications\/the-flawed-economics-of-laudato-si","title":{"rendered":"The Flawed Economics of Laudato Si’<\/em>"},"content":{"rendered":"

Laudato<\/i> Si\u2019<\/i> provides a moral framework for addressing climate change based on Christian obligations to help the global poor most affected by it. In stressing these obligations, the encyclical fills a large gap in discussions of climate policy, which are replete with statements of what should be done but tend to lack a convincing moral framework for explaining where such obligations comes from or why they should be accepted when they conflict with particular interests.<\/p>\n

While the encyclical considers pollution, waste, and the loss of biodiversity as key aspects of what it calls \u201cthe present ecological crisis,\u201d climate change is a central concern because<\/p>\n\n\n

its worst impact will probably be felt by developing countries in coming decades. Many of the poor live in areas particularly affected by phenomena related to warming…. They have no other financial activities or resources which can enable them to adapt to climate change or to face natural disasters, and their access to social services and protection is very limited.<\/p><\/blockquote>\n\n\n

For instance, when plants and animals cannot adapt to a warming climate, the encyclical explains, the poor depending on them for their livelihood are forced to migrate, with consequences not unlike those that refugees face. This image is based on one of the few propositions about climate effects that is widely accepted in the scientific community \u2014 that harm is likely to be concentrated in poor countries in equatorial regions \u2014 even if there is little agreement on what should be done about it.<\/p>\n

Unfortunately, the encyclical\u2019s presentation of the roots of the ecological crisis mostly blames industrial countries for all the world\u2019s ills, implying that restorative justice is the reason for action. In particular, the encyclical insists that wealthy nations must reduce not only their greenhouse gas emissions but also their standard of living in order to aid the global poor. It emphasizes the harm that the \u201cunsustainable\u201d consumption of wealthy countries does to the global poor, and at the same time broadly condemns the technological advances and political and market institutions that have made that wealth possible.<\/p>\n

This view of the situation is deeply flawed. Despite Pope Francis\u2019s intention to propose actions that will benefit the poor, his sweeping condemnations of markets and technology and his proposals for climate policy are more likely to keep the global poor in their current state or make them worse off than they are to help alleviate poverty. Even the encyclical itself recognizes that the measures it endorses will increase the cost of energy where they are adopted, and that increases in energy costs are regressive \u2014 that is, that they harm the poor more than the rich. Furthermore, the encyclical acknowledges that it is doubtful that any measures to reduce greenhouse gas emissions would improve the plight of the global poor during their current lifespans, because reducing emissions will have no effect on the climate-related disasters currently plaguing them, such as droughts and floods. It will take at least several decades for even drastic reductions in emissions to make any difference to global temperatures.<\/p>\n

The flaws of Laudato Si\u2019<\/i> are not in its statements about the ends we should strive for \u2014 to help the poor most affected by climate change and to properly care for the natural goods we share \u2014 but in its choice of means for achieving them. Thankfully, the encyclical\u2019s proposals are not logically tied to its moral basis for action \u2014 principles of Catholic social thought that include respect for the human person, the common good, improving the plight of the poor, and solidarity with past and future generations. Indeed, the encyclical could have taken a different route based on these principles, if it had recognized the key role of economic and political freedom in promoting economic growth in even the poorest countries. This route would demand support for private-sector investments in poor countries that would increase their adaptability to climate change and reduce their vulnerability to natural disasters, combined with consistent advocacy and support for the changes in their political and economic systems that are necessary to produce sustained economic growth. Those changes must occur within the developing countries; to focus instead only on slowing economic growth or reducing carbon emissions in the more developed world will harm the poor rather than help them.<\/p>\n

In looking for concrete recommendations for action, the reader of the encyclical finds two quite different approaches. One approach proceeds from a discussion of consumerism, technology, and scarce resources and sees only a drastic reduction in rates of economic growth as sufficient to avoid catastrophe. The second approach is conventional and relatively pragmatic, addressing policies to replace fossil fuels with renewable energy and international negotiations to impose binding limits on greenhouse gas emissions. This essay will take up both approaches and their respective problems in turn.<\/p>\n\n

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L<\/span>audato Si\u2019<\/i> claims that the roots of the ecological crisis have to do primarily with economic and technological growth. Resources are limited, the argument goes, which means that the present levels of consumption and waste in developed countries are unsustainable. \u201cThe exploitation of the planet has already exceeded acceptable limits and we still have not solved the problem of poverty.\u201d Technology, which has provided many benefits and about which \u201cit is right to rejoice,\u201d is itself also part of the problem. Quoting Pope John Paul II\u2019s 1981 address to scientists<\/a>, Pope Francis writes that \u201cscience and technology are wonderful products of a God-given human creativity.\u201d But technology has also served a rampant consumerism by providing goods that are not needed and supporting a business system that encourages unnecessary levels of consumption. In one example that many commentators have jumped on, Pope Francis mentions the \u201cincreasing use and power of air-conditioning. The markets, which immediately benefit from sales, stimulate ever greater demand. An outsider looking at our world would be amazed at such behaviour, which at times appears self-destructive.\u201d<\/p>\n\n\n\n

But the roots of the problem concerning technology are even deeper, the encyclical explains. We operate in a \u201cparadigm\u201d that \u201cexalts the concept of a subject who, using logical and rational procedures, progressively approaches and gains control over an external object.\u201d This attitude of manipulation of the world around us \u201chas made it easy to accept the idea of infinite or unlimited growth, which proves so attractive to economists, financiers and experts in technology. It is based on the lie that there is an infinite supply of the earth\u2019s goods, and this leads to the planet being squeezed dry beyond every limit.\u201d<\/p>\n\n\n\n

Furthermore, the effects of over-consumption and the over-exploitation of resources are made dramatically worse by the fact that the global population is growing. Pope Francis writes that some people falsely imagine that the only solution is a reduction in birth rate, while ignoring that the real issue is the \u201cextreme and selective consumerism on the part of some.\u201d Blaming population growth instead of consumerism \u201cis an attempt to legitimize the present model of distribution, where a minority believes that it has the right to consume in a way which can never be universalized, since the planet could not even contain the waste products of such consumption.\u201d<\/p>\n\n\n\n

The encyclical concludes that the solution to this set of problems at the heart of the ecological crisis \u2014 involving economic and technological progress, consumerism, and population growth \u2014 is to restrain economic growth in some countries so that it can develop in others.<\/p>\n\n\n\n

If in some cases sustainable development were to involve new forms of growth, then in other cases … we need also to think of containing growth by setting some reasonable limits and even retracing our steps before it is too late. We know how unsustainable is the behaviour of those who constantly consume and destroy, while others are not yet able to live in a way worthy of their human dignity. That is why the time has come to accept decreased growth in some parts of the world, in order to provide resources for other places to experience healthy growth.<\/p><\/blockquote>\n\n\n

This means, Pope Francis explains, that we stop being content with trying to balance the protection of nature with economic and technological progress; rather, \u201cit is a matter of redefining our notion of progress. A technological and economic development which does not leave in its wake a better world and an integrally higher quality of life cannot be considered progress.\u201d All too often, economic growth involves a lower quality of life, for instance when the environment is harmed and food quality drops. Instead of talking about \u201csustainable growth,\u201d which \u201cusually becomes a way of distracting attention and offering excuses,\u201d we need to rethink the meaning of progress itself and find ways to correct the flaws of our current economic system.<\/p>\n

We need also to \u201creject a magical conception of the market,\u201d according to which profit incentives for companies or individuals could help abate the ecological crisis. \u201cIs it realistic to hope that those who are obsessed with maximizing profits will stop to reflect on the environmental damage which they will leave behind for future generations?\u201d<\/p>\n\n

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W<\/span>hile the moral<\/i> intent of the encyclical\u2019s critique of the market and of consumerism is well worth our attention \u2014 more on this later \u2014 its economics<\/i> are dangerously false. Even if, following Pope Francis\u2019s logic, the wealth of the poorest rises for a time while that of the richest declines, there will come a day when incomes of the rich and poor have leveled out. From then on, there is no direction for global wealth to go but down. The logical conclusion is that, as long as resources are limited and population increases, the only possible future is of an inexorable decline of wealth per person.<\/p>\n\n\n\n

This is precisely the progressive immiseration that Thomas Malthus foresaw: When each person\u2019s share of the Earth\u2019s resources falls below the level necessary to sustain life, the result is starvation and an end to population growth due to rising death rates. This cannot be a future that the Holy Father intends, but it arises directly from his contentions about resources, growth, and technology.<\/p>\n\n\n\n

Fortunately, Malthus\u2019s forecast has failed, because the market systems and technological innovations that Pope Francis questions have succeeded in creating sustained income growth in all the countries where they took hold. This fundamental blindness to the roles of technological change and the market economy in the history of material progress is the central failing of how Laudato Si\u2019<\/i> treats environmental policy.<\/p>\n\n\n\n

The encyclical rejects the possibility that a market economy can reduce pollution through policy and regulation, and suggests that environmental degradation will become worse and worse unless entirely different economic systems and models of economic growth are adopted. This conclusion derives from a misunderstanding of how markets can be regulated to deal with pollution and other environmental effects, a distorted view of political economy in the major economies of the global North, and a consistently pessimistic view of environmental trends.<\/p>\n\n\n\n

The economic theory that the encyclical takes to task is a straw man \u2014 a distorted version of market economics in which no government intervention is ever needed for markets to produce socially and ecologically beneficial conditions: \u201cSome circles maintain that current economics and technology will solve all environmental problems, and argue … that the problems of global hunger and poverty will be resolved simply by market growth.\u201d While some people certainly subscribe to such a theory, it is not how current market economies work in reality. In fact, advanced market economies have adopted effective policies to improve air and water quality, to control misuse of toxic substances and wastes, and to manage land use. The result of these measures, which have been applied vigorously and systematically in the United States since the 1970s, has been a combination of both sustained economic growth and reduced environmental damage.<\/p>\n\n\n\n

Consider the evidence: Average concentrations of particulate matter in the United States have been cut by 40 percent<\/a> since 1988. Peak ozone concentrations have been cut almost in half<\/a> since 1980, and ozone levels in the smoggiest city, Los Angeles, are about 40 percent<\/a> of what they were in the mid-1970s. The nation\u2019s average emissions of sulfur dioxide have been cut by 80 percent<\/a> since 1980, while emissions of nitrogen oxides have been cut by more than half, and carbon dioxide emissions per capita are the lowest since 1964<\/a>. All of these improvements occurred with the help of regulatory programs and market incentives, while the economy grew robustly. For instance, according to a 2015 report on California\u2019s air quality<\/a>, since 1990 the state\u2019s population and registered vehicles have each grown by about 30 percent and the economy by over 80 percent, while toxic emissions have decreased by 80 percent and smog-forming emissions have been cut in half.<\/p>\n\n\n\n

The Kuznets curve is a graph depicting the economic hypothesis that as market forces develop income inequality first increases before decreasing.<\/i><\/span>Princess Tiswa \/ Wikimedia<\/a> [CC<\/a>]<\/span> <\/span>There is even a strong correlation globally between economic development and performance in reducing certain kinds of environmental damage, such as from emissions. This relationship \u2014 dubbed the \u201cenvironmental Kuznets Curve<\/a>\u201d \u2014 is represented in a graph with an inverted U shape. In poor countries, the first stages of economic growth involve increasing emissions; during the transition to the middle-income range, countries\u2019 emissions level off; and as countries reach high-income status their emissions begin to decline. Whether this is due to a change in the structure of economies as they grow or to changing preferences of their citizens to embody more \u201cpost-materialist\u201d values, the result is the same: income growth is related to a decline in environmental harm.<\/p>\n\n\n

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P<\/span>erhaps the main reason the encyclical misrepresents how a market economy can respond to environmental problems and to poverty is that Pope Francis does not envision a free-market alternative to the \u201ccrony capitalism\u201d that plagues many Latin American countries, as well as China and Russia, to name some extreme examples. Here is how he describes the working of politics today:<\/p>\n\n\n\n

Often, politics itself is responsible for the disrepute in which it is held, on account of corruption and the failure to enact sound public policies. If in a given region the state does not carry out its responsibilities, some business groups can come forward in the guise of benefactors, wield real power, and consider themselves exempt from certain rules, to the point of tolerating different forms of organized crime, human trafficking, the drug trade and violence, all of which become very difficult to eradicate. If politics shows itself incapable of breaking such a perverse logic, and remains caught up in inconsequential discussions, we will continue to avoid facing the major problems of humanity.<\/p><\/blockquote>\n\n\n

With all of the faults of the American economic system, its performance is not nearly as bad as this description of crony capitalism, in which private property and economic opportunity are reserved for the political elite, and in which violence and civil unrest occur repeatedly. It is the correction of these conditions, not the rejection of economic freedom, that is necessary to lift countries from poverty.<\/p>\n

This corresponds with the predominant view among experts in economic development, which is that the structure of a society\u2019s institutions is the most important determinant of whether that society will be able to achieve sustained income growth per capita. According to this position, the main reason for poverty in the global South is not environmental damage, resource poverty or exploitation, or ecologically harmful actions of the industrial world. Most poor countries remain in poverty because they are ruled by coalitions that exclude any but their favored members from access to markets, from secure ownership of land and property, and from participation in organized politics. By doing so, the rulers can capture whatever economic surplus their country can generate, and use that wealth to buy the support that they need to retain power. (Notable dissenters from this mainstream view include Jeffrey Sachs and Jared Diamond, who tend to focus on geography, not politics, for explaining poverty.) By contrast, in countries where the barriers to entering markets and politics are low, freer markets spur economic growth, and more open politics limit the scale of destructive rent-seeking. The economy grows, and growth legitimates the society\u2019s institutions.<\/p>\n

Far from causing harm around the world, growth in industrial countries creates markets for exports and provides foreign direct investment that has contributed to income growth in countries with open access and favorable investment climates. A market-based approach to helping the global poor suffering from climate change would require policies and institutions in their countries favorable to investment in infrastructure, agriculture, and other areas where vulnerability can be reduced, the basis for which needs to be economic freedom and property rights. Throughout Laudato<\/i> Si\u2019<\/i> there are moments when Pope Francis seems to recognize how these prerequisites for economic growth are related to the inherent dignity of persons created in the image of God, but they are overwhelmed by questionable theories of the failure of markets and technologies and of limits to growth.<\/p>\n

More open societies also adapt better to change, including the challenge of climate change. In its fifth report<\/a>, published in 2013 and 2014, the Intergovernmental Panel on Climate Change (IPCC) explains<\/a> that \u201cAdaptation constraints, particularly pronounced in developing countries, result from lack of access to credit, land, water, technology, markets, information, and perceptions of the need to change.\u201d Also, reducing vulnerability to climate change and increasing the ability to adapt is especially challenging \u201cin regions that have shown severe difficulties in governance.\u201d<\/p>\n

However, the process of opening markets and political systems to freer entry can be destabilizing. Violence may ensue, and it can forestall and even reverse the emergence of a stable open-access order, as happened in the 1990s when political reforms in Rwanda, Burundi, and other African states were followed by horrific civil wars. The authors of Violence and Social Orders<\/a><\/i> (2009) estimate that only 15 percent of the world\u2019s population lives in countries that have adopted the full logic of open access. And as William Easterly observes in The White Man\u2019s Burden<\/a><\/i> (2006), financial assistance given to countries with corrupt regimes tends to enrich those countries\u2019 elites, rarely achieving any of its intended purposes for the poor.<\/p>\n

Pope Francis recognizes the baleful influence of corruption, crony capitalism, and government by exploitative elites. For example, he writes that \u201cFor poor countries, the priorities must be to eliminate extreme poverty and to promote the social development of their people. At the same time, they need to acknowledge the scandalous level of consumption in some privileged sectors of their population and to combat corruption more effectively.\u201d The value of this type of condemnation should not be ignored just because it is incorrectly extended to all market economies. But it could have led to a more explicit warning about the folly of supporting exploitative regimes, which the encyclical fails to provide.<\/p>\n\n

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T<\/span>he encyclical is not only shortsighted in its view of what market economies can do to help alleviate both poverty and environmental damage; its recommendations for climate policy are similarly myopic. Pope Francis explains that \u201cthe Church does not presume to settle scientific questions or to replace politics\u201d and that \u201cthe Church has no reason to offer a definitive opinion\u201d on the various policy proposals that are possible. Accordingly, the encyclical offers only general recommendations, not detailed proposals. But these recommendations are all run-of-the-mill \u2014 including support for renewable energy and phasing out the use of fossil fuels \u2014 and they show a preference for command-and-control regulation over market-based approaches to climate policy, such as emission trading systems. The encyclical strongly endorses international agreements both to help reverse global warming and to reduce poverty: \u201cA more responsible overall approach is needed to deal with both problems: the reduction of pollution and the development of poorer countries and regions.\u201d The global economy has weakened the power of national politics so that it is now \u201cessential to devise stronger and more efficiently organized international institutions, with functionaries who are appointed fairly by agreement among national governments, and empowered to impose sanctions.\u201d<\/p>\n\n\n\n

Furthermore, the encyclical endorses the notion of \u201cdifferentiated responsibilities\u201d \u2014 the idea that countries that have benefited from industrialization and that have therefore produced a greater amount of emissions are responsible for reducing their own emissions first and funding efforts by developing countries to reduce theirs.<\/p>\n\n\n\n

But what effect does reducing emissions have on the global poor? There are two points to consider: first, the economic effect on the poor, which will be felt immediately, and, second, the effect on the climate \u2014 a long-term process that one hopes would benefit the poor in future generations. In both cases, the encyclical does not sufficiently acknowledge that the poor today would not benefit from reducing emissions, and that the long-term effect on the climate is far from guaranteed.<\/p>\n\n\n\n

Pope Francis recognizes that actions to reduce emissions in poor countries, such as switching to environmentally friendlier fuels, \u201cwould risk imposing on countries with fewer resources burdensome commitments to reducing emissions comparable to those of the more industrialized countries. Imposing such measures penalizes those countries most in need of development.\u201d But this leads in the encyclical only to a recommendation that industrial countries shoulder the extra cost, not a broader strategy for reducing poverty. And if rich countries pay poor countries to phase out fossil fuels and to adopt alternative sources of energy, such a move will do nothing for the current plight of the poor. Indeed, since non-fossil fuels are more expensive than fossil fuels, the poor will be stuck with higher energy costs after the transition than before \u2014 unless those costs are also subsidized by rich countries.<\/p>\n\n\n\n