The Green Economy: a Technological option against economic crisis?
Edoardo Pizzoli
Institut national de la statistique et des études économiques (STATEC), Luxembourg
Please cite the paper as:
Edoardo Pizzoli, (2018), The Green Economy: a Technological option against economic crisis?, World Economics Association (WEA) Conferences, No. 2 2018, The 2008 Economic Crisis Ten Years On, 15th October to 30th November, 2018
This paper has been included in the publication
“The 2008 Crisis Ten Years On: in Retrospect, Context and Prospect Paperback”
Abstract
The global economic crisis is long-lasting and seems without prospects. The ‘green economy’ proposes an alternative basket of products with respect to the standard one that is actually available for consumption in the 21st century industrial economies.
Is it the green economy a smart solution for an alternative growth path that allows also a sustainable economic development?
It is a very topical issue. What will be your next steps on that matter?
the next step is to find a plausible solution to moving forward. the topic is debatable, though very viable.
I’ve testified on these issues several dozen times. There is one stumbling block that seems always to show up. We begin with the basics for the consumer. Most consumers aren’t interested in policy issues or economic vs. ecological balancing. The want as the aphorism says, “an easy chair to watch the big screen TV show a local favorites football game with lots of beer and pizza.” And on the bigger side they want that new car with all the bells and whistles and enough left over for a great vacation each year. Can green production and products provide all this? If yes, then this sort of economy is likely to blossom. If not this sort of economy is likely to fail.
Perhaps it is important to underscore that – whatever be consumers’ awareness of these aspects – the actual trend of consumerism is untenable also for environmental reasons, This aspect was accurately set forth by N.Georgescu-Roegen. The contradictions and unsustainability of this system were also analysed by J.K.Galbraith in “The Affluent Society”.
In complement with the above aspects, there are other formidable contradictions of mature capitalistic economies (already pointed out in another comment) which push these systems towards some kind of steady state (or even de-growth).
Among other factors, I would underscore the following, which can also account for the chronic tendency of effective demand to lag behind the supply of full employment:
(I) As analysed by various authors – a classic in this sense is Skidelsky, R. and Skidelsky, E. (2012), “How Much Is Enough? Money and the Good Life” – since the needs of consumers are becoming increasingly tied to the immaterial and the intellectual side of consumption, their fulfillment tend to depend less and less on the “material and quantitative” aspects of consumption.
In fact, we do not buy books by kilos and cultural activities by mere numbers. Also, if we buy a high-tech product, we are likely to be more interested in learning how to use it, rather than in changing it with every new model.
These aspects constitute a significant explanation of the tendency – underlined also by J.M.Keynes in the “Essays in Persuasion” – of the socio-economic systems to move from work activities resting on “the economic motive” to activities (social, cultural, scientific, artistic) more based on the expression of the real needs and inclinations of persons.
(II) What are the effects of technological progress on job creation? On the one side, the increase in productivity originating in process innovation requires a growing amount of goods for guaranteeing the same level of employment.
On the other side, firms can introduce new products on the market, but this would not solve that structural issue. In fact, even if new jobs are created in these fields, the increase in productivity extends also, and perhaps even more, to the new products. This could help explain that every innovative wave tends to create fewer and fewer jobs (or even a jobless recovery). For instance, it is easily observable that, whereas the durable goods typical of 1960’s and 1970’s involved hundred thousand workers, innovative cycles of today high-tech products would employ (at the best) some thousand workers.
All this suggests that a kind of “forced” over-consumption is the only and very imperfect way, in our present economies, for attaining some kind of full employment level. How many high-tech items, cars, clothes, etc., should we buy to sustain the effective demand? For a host of economic, social and environmental reasons, this system is untenable in the long run.
Perhaps only an effective policy coordination – like the one being implemented in the UN Agenda 2030 for Sustainable Development – leading to a kind of democratic planning (in the meaning given to it by “original institutional economics”) can help achieve the objectives of a sustainable and equitable society.
Dear Pizzoli,
Your article on the green economy was well written. It shaped the stimulation and expressed a transformed appetite and potency in the research field concerning green economy, which would enhance growth and limit environmental effluences. This is expressly significant considering the current high level of CO2 emissions globally. Even so, to pursue a green technology is one thing; and, to overcome unemployment in the pursuit of a green technology in the geographical regions where the non-green productions are located is something else. This was clearly stated in your article. Even if this were conceivable, researchers should endeavor to discover procedures to support the possibility of a green economy. This is now becoming crucial, especially with the upward moving climate change in the world. In any event, your research has provoked a debate on green economy and its sustainability, as an alternative to non-renewable energy technology.
Surely, green technologies will be our future, if we want to survive, but their promotion requires a well crafted policy action. What are the most relevant initiatives in this respect at the EU level?
Thank you very much for your stimulating comments.
I am more convinced that there is room for and urgency to more economic research on this area.
I find that the representative consumer of neoclassical microeconomics depicted by Ken Zimmerman is not fully convincing. At the world level, I do not know if the lazy gourmand final consumer can be applied to analyse any part of the world and to any cultural context. Even in reach capitalistic countries, there is a significant part of consumers that has other ethical values and behaviours: they care of pollution and, at least, of their health trough quality consumption (e.g. think about the success of biological goods in Europe) and a good style of life (e.g. the proliferation of sporting centers in urban areas). Finally, many other people are only interested to simple and basic consumption to just satisfy their ‘stomach’ needs.
In any case, even if we accept this type of consumer as a stereotype towards which human nature like to collapse into, this is not the main problem. The supply side provides the shelf of commodities that he find at the supermarket and only among them he chooses to fill his ‘bag’ for final consumption. If different commodities are available, he chooses those he likes more and only relative prices count to get substitution effects.
Furthermore, he does not care about how his pizza is produced, his favourite TV program arrives on his screen or if his car goes with petrol or water. So the production processes and intermediate consumption of industries, together with energy sources, can be changed if knowledge and alternative technologies are available.
The main question is left: can be the market mechanism alone sufficient to allow the economy to implement the changes needed in the due time? And are the standard instruments of economic policy strong enough to push the capitalist economy to change? Mahmud A. Mansaray is right that we have to study more.
At this first step we are talking about the need we have to meet the environmental urgency and possibly to reach environmental sustainability that will allow the earth to survive even if people were not happy.
At the second step we do not know if this kind of economy will be a satisfactory solution for economic sustainability in the long run: regional and world imbalances, uneven income distribution, high unemployment rates need still to be solved. How to reach this result? Which will be the effect of new technologies and green economy implementation? As Arturo Hermann says, there is a contradiction between the need for more growth and consumption to keep alive the capitalist economy and, to the other side, even de-growth to save the planet.
Next step will be to set up a research agenda which must have a short-run policy return on western barely living economies. EU policy initiatives need at least careful monitoring.
Support and contributions are warmly welcome from all of you.
Dear Pizzoli, I agree with your approach and would underscore some additional factors (in part already put forward in other comments) which call for a widespread adoption of green technologies:
(I) As analysed by various authors – a classic in this sense is Skidelsky, R. and Skidelsky, E. (2012), “How Much Is Enough? Money and the Good Life” – since the needs of consumers are becoming increasingly tied to the immaterial and the intellectual side of consumption, their fulfillment tend to depend less and less on the “material and quantitative” aspects of consumption.
In fact, we do not buy books by kilos and cultural activities by mere numbers. Also, if we buy a high-tech product, we are likely to be more interested in learning how to use it, rather than in changing it with every new model.
These aspects constitute a significant explanation of the tendency – underlined also by J.M.Keynes in the “Essays in Persuasion” – of the socio-economic systems to move from work activities resting on “the economic motive” to activities (social, cultural, scientific, artistic) more based on the expression of the real needs and inclinations of persons.
Also the John Kenneth Galbraith, in his important book “The Affluent Society” underscores the economic and environmental unsustainability of a system based on ever-growing consumption – pushed by an organised process of massive advertising and creation of consumers’ debts – of mostly useless and pollutant products.
(II) In addition to these aspects, a consumeristic system is unfit also for securing full employment (however defined). In this regard, a central question comes to the fore: what are the effects of technological progress on job creation? On the one side, the increase in productivity originating in process innovation requires a growing amount of goods for guaranteeing the same level of employment.
On the other side, firms can introduce new products on the market, but this would not solve that structural issue. In fact, even if new jobs are created in these fields, the increase in productivity extends also, and perhaps even more, to the new products. This could help explain that every innovative wave tends to create fewer and fewer jobs (or even a jobless recovery). For instance, it is easily observable that, whereas the durable goods typical of 1960’s and 1970’s involved hundred thousand workers, innovative cycles of today high-tech products would employ (at the best) some thousand workers.
All this suggests that a kind of “forced” over-consumption is the only and very imperfect way, in our present economies, for attaining some kind of full employment level. How many high-tech items, cars, clothes, etc., should we buy to sustain the effective demand? For a host of economic, social and environmental reasons, this system is untenable in the long run.
In this respect, the problem becomes to realise an effective coordination between the various policies (in particular, macroeconomic and structural) and institutions (supranational, national, regional, local) implied in the promotion of green techologies.
Very interesting topic! I also believe that we should look at micro-level dynamics not in a neo-classical perspective but rather following the Schumpeterian legacy.
However, I also believe that “green technology” is still a fuzzy concept. Just to make an example, I have read well written papers about “green patenting” where “green” means assigning an environmental-related label to a set of IPC codes, thus considering “green patents” those having one or more of such IPC codes in their application. And, as a consequence, “green firms” the applicants of those patents.
This methodologically correct approach is however limited. The real challenge is to find a more substantial “green link” within the production function: is there a “greener way” to use labour and capital in the production process? I guess it is very hard to say…
The latest comment in particular calls for a detailed definition of (i) green technologies and (ii) of policies for their promotion.
As a matter of fact, we should not overlook the fact that the adoption of green technologies is a necessary, but anything but easy, step towards sustainability, as it involves a massive transformation of our way of producing and consuming.
A worldwide initiative in this respect is the UN Agenda 2030 for sustainable development,
https://sustainabledevelopment.un.org/post2015/transformingourworld
Considering the “Sustainable Development Goals” (SDGs),
Goal 1. End poverty in all its forms everywhere
Goal 2. End hunger, achieve food security and improved nutrition and promote sustainable agriculture
Goal 3. Ensure healthy lives and promote well-being for all at all ages
Goal 4. Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all
Goal 5. Achieve gender equality and empower all women and girls
Goal 6. Ensure availability and sustainable management of water and sanitation for all
Goal 7. Ensure access to affordable, reliable, sustainable and modern energy for all
Goal 8. Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all
Goal 9. Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation
Goal 10. Reduce inequality within and among countries
Goal 11. Make cities and human settlements inclusive, safe, resilient and sustainable
Goal 12. Ensure sustainable consumption and production patterns
Goal 13. Take urgent action to combat climate change and its impacts*
Goal 14. Conserve and sustainably use the oceans, seas and marine resources for sustainable development
Goal 15. Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss
Goal 16. Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels
Goal 17. Strengthen the means of implementation and revitalize the global partnership for sustainable development
We can easily note that at least SDGs 7, 9, 12 are focused on the creation and diffusion of green technologies.
A bright step forward could be the analysis of progress so far realised in the various Countries in the attainment of these goals, and of the strong and weak aspects of the related policy measures.
It is not only the name ‘green economy’ or ‘green technology’; it is about something else, what really is it, what content we should talk about. If we talk about ‘crisis evolution’ it would first be necessary to know well what the crisis of the capitalist ‘mode’ of production actually consist of. The green economy, as a possible alternative to the industrial economy of the monopolies, clashes with their strength: Don Quijote y la lucha contra los molinos de viento! Obviously, the real problem seems shifted to the consumption of use values. Of course, climate change and the need to reduce carbon dioxide emissions and the destruction of natural resources do not have scientific awareness (human consciousness, before ‘class’) that they deserve. In the last decades, due to the great climatic changes, scientific results have been obtained and the international initiatives (UN, OECD, CE) testify for projects on the ‘green economies’; but the mass consensus still has a long way to go, we are always far away from being able to talk about promoting the transition to alternative economies to the dominant economic model that has the economy as a strategic priority. The ‘enlightened-conservative-progressives’ economists with the ‘green economy’ risk deluding that we are facing a ‘historical trend at the beginning of the XXI century’ but if we arrived at the XXII century, without first collapsing everything in a mass extinction (it would be the sixth of the planet), would be to celebrate! Revitalizing the economy through a renewed final consumption, promoting environmental sustainability, risks that do not take into account the real functioning of the capitalist economy.
Thanks you for your last critical comments: they help to focus better the issues and the research needs. What is a ‘green technology’ and how to measure the real impact on the environment is challenging but scientific and engineering studies are available. Next, how to transform our way of production and, more important, the speed to reach this objective with our available instruments is a key issue. There are several institutions and reports that periodically measure the progress of policies: anyway data and analysis are still limited in some critical areas. Finally, the real functioning of the capitalist system at world level have to be seriously taken into account to not propose ‘surface’ solutions without a real impact to long run trends. Another fact to consider is that the reaction time of people seems quite slow too. It is true, we have to take into account the limits of our current instruments and the possibilities of policy we have. That means, further space and need to research.
Just a few remarks: green technologies are not a brand new fashion, but a stable trend that has been going on at least since the shock oil of the 1970s. And this not only for the sake of environment but also because energy-saving techniques are definitely more profitable. The problem then becomes to steer up a process already well in motion. Also in this case, there are good reasons for fostering such perspective, which can be located in the massive contradictions of capitalistic systems.
Theoretical perspectives like Original Institutional Economics, post-Keynesian contributions, Ecosocialism, Green Economics, Elinor Ostrom’s notion of “Commons” and John Kenneth Galbraith’s account of “The Affluent Society” – although different in several respects – cast light on the relevant contradictions of the system and on the need to embrace a path of “democratic planning” in order to move towards an equitable and sustainable economy.