GEOG 352

Day 4: The History of An Alternative Economic Paradigm

ECONOMY

SOCIETY

NATURE, BIOREGIONS, ECO-SYSTEMS

ALTERNATIVE MODEL

Housekeeping Items We need to start thinking about the book

reports – we can start scheduling them today even if you're not sure which book you want to discuss (consult the list or other sources)

We also need to get started on planning the debates. Bob had some interesting suggest-ions: 1)that, once the topics are chosen, people be assigned randomly, and that the opposing teams meet to clearly define the debate question(s).

History of Alternative Economics My intention today was to review the Lutz article,

but I left it at school so I had to use a different source (mostly Frank Rotering). Please read it on your own. Anielski's book also discusses some of this.

As Raimo noted, the origin of the word economics comes from the Greek word “oikos” meaning household. Aristotle and the ancient Greeks made a distinction between oikos nomos (managing the household) and chrematistics (making money for its own sake). For them, exchange should have an ethical base.

History of Alternative Economics In the Middle Ages, traders and merchants were

often looked down upon, and Church took a strong position against usury – excessive interest. Although the high Church leaders did not walk the talk, they advocated a focus on matters spiritual, not material. They also advocated, to some degree, social justice, and these themes have echoed into the 20th century with various papal bulls (pronouncements). However, the new Protestant faith tended to be more materialistic.

History of Alternative Economics

In addition, in the Middle Ages there were numerous religious holidays where people took time off from work (more than we enjoy!), and there were guilds of tradespeople who practiced mutual aid – taking care of their members and their members' families.

The mercantile doctrine – that countries (such as Spain, Portugal, Britain, and France, etc.) should amass precious metals and trade surpluses ('national wealth') coincided with the age of exploration and early colonialism.

History of Alternative Economics The economists known as Physiocrats (1760s)

took the view that agriculture and extractive industries (mining and forestry) were the basis of all wealth, and they also favoured a laissez-faire economic order.

Adam Smith was the father figure of (neo) classical economics, publishing his “The Wealth of Nations” in the same year as the American Revolution (1776). He advocated public good through the expression of self-interest (the 'invisible hand'), and progress through division of labour. He was an ardent exponent of growth.

History of Alternative Economics

His doctrine of the 'invisible hand' notwithstanding, Smith had ethical components in his work that have been largely overlooked by modern economists.

Just before the turn of the century, approximately two decades later, Thomas Malthus published his essay on population. Although he was a strong, even vicious, supporter of existing hierarchies, he was the first modern economist to suggest that there were limits to growth – in this case, prophecying that food production would not keep up with population. In the short term, he was proven wrong.

History of Alternative Economics

Jean-Baptiste Say and David Ricardo were also important originators of classical economics, the latter having popularized the notion of comparative advantage, which is the idea that some nations can produce a good more cheaply or easily. Even if other countries can almost match the price, it may be to their advantage to trade for it and produce something in exchange that they have advantage in.

John Stuart Mill (mid-1800s) was a supporter of laissez-faire, but was also sympathetic to socialism and was one of the first to advocate the possible desirability of a steady-state economy.

History of Alternative Economics

Both before and during Mill's era, there were the utopian socialists who had various schemes for achieving human happiness through various cooperative and communist means. One of these, Robert Owen, practiced enlightened capitalism, making sure his workers were adequately clothed, housed and educated. He also founded Britain's system of consumer co-ops – and indirectly, producer co-ops – which have since spread all over the world.

A contemporary of his, Henry David Thoreau, would prove to be a later influence on Gandhi.

History of Alternative Economics

Marx and Marxist communism grew out of the utopian socialists, but went in a very different direction – advocating a state-managed economy under the control of the dictatorship of the proletariat.

Marx and his supporters fought a running battle with anarchists, Bakunin and Kropotkin and others, who did not want to achieve social and economic equality at the cost of political slavery, and who advocated various mixes of small-scale private property, co-ops, and worker-managed enterprises federated at a variety of scales.

History of Alternative Economics

John Ruskin, the English philosopher, in his 1860 essay “Unto This Last,” argued that there were higher values than growth and production for their own sake, and argued that economies should serve and not destroy beauty and nature.

John Jevons, in the 1870s, argued that England would run out of the coal to support continuous industrial expansion.

A decade later, Rudolf Clausis formulated the 1st and 2nd laws of thermodynamics, and in 1902 Leopold Pfoundler calculated the carrying capacity of the Earth for human beings.

History of Alternative Economics

In 1920, a chemist, Frederick Soddy, argued that all real wealth derives from solar energy (and resultant plant productivity), a point made earlier by the founder of urban and regional planning (and trained botanist), Patrick Geddes. As he wrote, “by leaves we live.” For him the economy was inherently green.

In the 1930s, John Maynard Keynes, while accepting many parts of classical economics, rejected strict laissez-faire, and argued that in recessions, governments must generate new demand through increased spending.

History of Alternative Economics

Gandhi, in his social justice and anti-colonial activism, was much inspired by Ruskin. As he famously said, “live simply that others might simply live.”

He also was an advocate of what he called “bread labour” -- namely, that everyone should do some essential work, be it growing food, baking bread, spinning cloth, or looking after children.

Ecologists – such as Frederick Osborne and William Vogt – followed in the late '40s and '50s and attempted to draw attention to the world's growing ecological problems, though without success.

History of Alternative Economics

In the '60s, Kenneth Boulding and Barbara Ward –now largely forgotten – developed the metaphor of “spaceship Earth”, meaning that we have to carefully steward the resources of the planet because, like the supplies on a spaceship, they are limited. They contrasted this with the “frontier economics” of the past – the view that nature's resources are limitless.

Canadian economist John Kenneth Galbraith also began writing books, even in the '50s, that were critical of a limitless growth economy and a consumerist society.

In 1971, Nicholas Georgescu-Roegen published a seminal essay that argued that, according to the 2nd law of thermodynamics, all economic activity is linear, not circular.

History of Alternative Economics In 1973, E.F. Schumacher published Small is

Beautiful, which directly challenged conventional economics, and Hazel Henderson began writing books that tried to turn economics on its head.

In 1977, Herman Daly – one of the most important figures in ecological economics – published Steady-State Economics and, in 1989, For the Common Good with John Cobb, Jr. He has since been joined by Paul Ekins, Bill Rees, Robert Costanza, Juan Martinez-Alier, and many other key thinkers.

This work was supplemented by Community Economic Development (CED) [see bibliography].

Principles of Ecological Economics The economy is an open subsystem of the natural

environment, and also of society; thus, its healthy functioning depends on natural and social capital.

Nature, and also the economy, is subject to entropic decay. Economic activity should be guided by ecocentric, as

opposed to anthropocentric, principles, and should also aim at sustainably meeting basic human needs.

The scale of the economy is limited by the carrying capacity of ecosystems and the biosphere.

There are limits to which human and physical capital (ingenuity and technology) can substitute for natural capital.

Markets can achieve efficiency, but not necessarily achieve equity or optimal scale (throughput).