The Connection between Economy and Ecology
Many people believe that government bailouts of ailing businesses are necessary, because these businesses employ most people, and without the bailouts all would be jobless, homeless and might even go hungry. They suggest that the bailouts are a necessary evil in order to provide for the greater good.
Many of the same people who support the bailouts for economic reasons are concerned about ecological issues. They see that our forests are being denuded, that wildlife is dying out, that entire species are going extinct. They call for government intervention for the sake of ecology.
When I tell people that bailouts in the economic sector are fueling the ecological disasters we are experiencing, they accuse me of being intellectually dishonest. Many assume that all I want is lower taxes and higher interest rates, and I don't really care about the environment. It's not true. Economy and ecology are intertwined. I care about both.
How does the economy affect ecological issues? The higher the level of industrialization, the more quickly natural resources are depleted. The fewer natural resources you have per capita, the more likely it is that a country will turn to socialism. I also think that during the twentieth century much of America's industrialization was subsidized by the government.
I'm going to give you my own historical economic background, so that you'll have some idea where I'm coming from. Then we'll talk about the big picture.
My parents and I emigrated to the United States in 1970, and my father spent a year at the University of Michigan in Ann Arbor getting a degree in aerospace engineering. He already had a Ph.D. in physics and had been a tenured physics professor at the Weizmann Institute in Israel for a number of years.
There were many reasons for this move, some of them directly to do with the political situation in Israel. But the change from physicist to engineer was an exercise in "downward mobility." My father gave up a higher position for a lower, for ideological reasons. He wanted to do something useful.
In 1971, my father accepted employment at LTV in Grand Prairie, Texas. LTV was founded by James Ling. The letters stood for Ling Temco Vought. Vought was the aerospace division. The company had seen better years, but now it was being mismanaged, and in time it would be dismantled and entirely destroyed. It was not a good time and place to be joining the aerospace engineering profession, but my father did not know it.
When we moved to the area, people told my father that though the plant was in Grand Prairie, he should choose a different place to live. Grand Prairie was where the shop workers lived. Engineers lived in Arlington or North Dallas.
My father was amused by this "snobbishness", as it seemed to him, and he did not accept the advice. For nearly twenty years, from 1971 to 1991, my parents lived in Grand Prairie, Texas.
We lived in a rented house for a year, and then my parents bought a four bedroom, two bath home with a large corner lot just south of Highway 303 and west of Corn Valley Road. The neighborhood was fairly new, but we bought the house on an assumption, and it had been lived in before. The land in that area had been used for cotton fields until quite recently.
It was a working class neighborhood, we gathered, but it was a very nice place to live, and we had never lived anyplace better. This was the first home my parents ever owned. Before, they had either rented or lived in university housing. The house was valued at about $30,000, and today on Zillow they have it down as worth $108,000. I assume that most of the difference is accounted for by inflation.
All our neighbors were very nice people. They were friendly and helpful and always took very good care of their houses, their lawns and their cars. We realized that these people must have an income much lower than my father's, and yet they obviously spent a great deal more than we did.
They watered their lawns and fertilized them so as to keep them in peak condition. Sometimes they used so much fertilizer that they killed the small trees that were growing in their front yards. They washed and waxed and babied their cars, and then every few years they would trade in their old car for a new one. They would change the wall-to-wall carpeting in their houses and paint the walls and redecorate and buy new furniture. They went out to dinner frequently, and as I grew older, I got to babysit for some of them as they went off to dinner and a show.
Meanwhile, we watered the lawn a great deal less.We never fertilized. We watched over the little stick-like trees in our yard, and eventually they grew big enough to give shade. During the twenty years that my parents lived there, they never once changed the carpets or remodeled. My father painted the exterior every five years or so, keeping costs down to a minimum. We kept our old cars for years. We had a 1970 Ford Maverick that my parents bought new , in cash, back in Ann Arbor, that was still around twenty years later. Our neighbors were buying new cars every few years -- on credit!
During most of those years, we lived on a single income. My brother was born soon after we moved to the new house. My mother clipped coupons and prepared meals and found ways to make the dollar stretch without ever compromising the excellent meals she prepared. She used only the best ingredients, but she never bought them unless they were on sale. We did not eat out much. My parents hardly ever went out.
The House Where We Lived
The Kool sail boat
I don't want to give the impression that we didn't have fun. That's not the point at all. We had fun on a budget. We went swimming at the lake. We even went sailing.
Kool cigarettes ran a promotion in which they sold a small sailboat for a very reduced price. Even though neither of my parents smoked, my father got an empty carton from friends at work and he got that boat. The bottom was made of something very much like styrofoam and it seated only two people and a dog, but it was a real sailboat and we got a lot of mileage out of it.
My father enjoyed owning firearms and using them for target practice. In the U.S,, this could be done legally, whereas in Israel it would have been illegal. He loved to fly planes. In Israel, private airplanes were very expensive, due to regulation. In Grand Prairie, my father at one time even owned three airplanes. He bought them used. They were very old, but not quite old enough to be antiques. He defrayed the expenses of keeping them by renting them out to others and by giving flying lessons in his spare time.
LTV went through a series of hard times, and eventually my father was laid off, like many other people working at the plant. The difference between my father and all the other laid off workers was that while many of them had to scramble around and look for a new job right away, my father could afford to wait. He had what he called "breathing space." His breathing space was the savings my parents had accumulated over years of exercising thrift.
The issue is not one of shop worker versus engineers. All the other engineers were living in much more expensive neighborhoods than ours in more "socially upscale" municipalities. No matter what their education, walk of life or level of income, most of the Americans we knew were spending nearly all they earned on their day to day living. Because of this, they were tremendously dependent on their jobs.
What does any of this have to do with ecology, you might be asking yourself at this point. Well, just imagine that everyone in Grand Prairie and in Texas and in the United States as a whole exercised the same degree of thrift as my parents. No matter what their level of income, let's say everybody saved a big percentage of it. What would this have done to the economy?
We were living in a working class neighborhood on a fraction of our income. But no matter where they lived, most of the people at the time were living on most of their income, spending rather than saving.
If everyone lived as we did, then about half as many cars would be manufactured. A lot fewer and less elaborate houses would be built. Restaurants would close. Whole lines of clothing and makeup would go completely bankrupt. Entire industries would have to either close down or reduce their work force.
As a result, many would be unemployed, especially those in industrial manufacturing and the construction industry. They would all have to go back to the countryside to the family farms that they abandoned a generation earlier.
With all of these changes in effect, thanks to everyone following our thrifty example, there would be a lot fewer trees cut down, less fossil fuel burned, less ecological damage. Oh, and also, I think the population would be reduced, too, since part of my parents' thrifty way of life was not having more children than they could afford to feed.
But what makes me think that our neighbors would ever have followed our example? Well, to some extent, if not for government intervention they would have had to. They bought all major big ticket items on credit. They would get a new car before they ever finished paying for the old. The government encouraged these habits by the following interventions:
- keeping interest unnaturally low.
- administering special programs to allow everyone who had an income easy access to home ownership loans
- encouraging spending by printing more money and inflating the currency.
If not for these government interventions, all of us would have had less money to spend, because the economy would have been more sluggish. There would have been fewer jobs. Those jobs would have paid less. We would all have had less money to play with. Even my family would have had to live in a more modest house, because the assumption that we took on was of a government sponsored home owner's loan.
"But you're just buying all of Keynes's arguments," a friend said to me recently, when I suggested that without government bailouts there would be less industry and hence less ecological damage.
"Yes, you are, because Keynes said that without stimulus the economy would collapse, but really it's the stimulus that makes it collapse!"
The truth is that I've never read Keynes, and while I generally find myself on the opposite side of the political compass, I have a very foggy notion of what he actually said. "And you think Keynes was wrong about this?"
"Yes, he was wrong. Without government intervention, the economy would achieve a natural equilibrium between supply and demand. The situation would bring about optimal productivity."
Well, that sounds good. But what is "optimal productivity"? Is it the most productivity? Or is it the most sustainable productivity?
My friend said that the most sustainable productivity is also the most productivity -- in the long run. But how long is the long run? And why should any particular market participant care about maintaining productivity? Are we supposed to just assume that productivity is something we all want -- and the more, the better? What if "the long run" turns out to be more than a single human lifespan? What is to keep people who think productivity is the goal from considering only sustainability during their own lifespan and to hell with the rest?
According to the wikipedia article on Keynes: "In the 1930s, Keynes spearheaded a revolution in economic thinking, overturning the older ideas of neoclassical economics that held that free markets would automatically provide full employment as long as workers were flexible in their wage demands. Following the outbreak of World War II Keynes's ideas concerning economic policy were adopted by leading Western economies. During the 1950s and 1960s, the success of Keynesian economics was so resounding that almost all capitalist governments adopted its policy recommendations."
I can't help but be confused by this statement of what neoclassical economists held: that the free market would provide full employment? What is full employment, and why should providing it be a measure of whether an economic system is successful? And for that matter, what is the relationship between employment and productivity? Is there a conflict between those whose goal is "optimal productivity" and those whose goal is "full employment"?
Isn't the whole point of a free economy that each person gets to decide how to spend his time, money and resources without any pressure from the government? Isn't a natural economy characterized by periods of growth followed by periods of rest, when nothing much happens? Isn't it also natural for there to be times when more businesses close than are opened, and when people spend more time at home than outside the home?
Sometimes we cut down trees to clear land for agriculture and to build homes and even cities. Sometimes the process reverses itself, and houses that are abandoned fall into disrepair, and nature re-establishes itself, when man leaves the area. As long as every period of growth is followed by a similar period of rest, then we will never run out of land, and our way of life is sustainable.
But how will we feed our burgeoning population? Aren't we dependent on industrialization to feed ourselves? Well, everybody comes from someplace. Why assume they can't go back to that other place and that other way of life, if the need arises?
Also, from a historical perspective, aren't periods of population growth naturally followed by reduction in population? Whether the reduction happens as a result of migration, lower birth rate, or a combination of those elements, isn't fluctuation in population size always tied to the amount of production that is going on in the marketplace? Isn't the birth rate really an integral part of the economy?
Lately, I have heard lamentations both from left wing and right wing Hubbers about the loss of productivity. The left winger said that we are still feeling the impact today of the regrettable loss of productivity that America suffered during the great depression. The right winger said that we are feeling the loss of the millions of unborn citizens who were never conceived because their mothers were on the pill. In both cases, I was quite shocked.
Do we have the right to expect any particular level of productivity or of reproduction from past or future generations? Isn't the whole point of the free market that we can do business with others -- but only if they want to do business with us?
In fascist or communist nations, it is considered the patriotic duty of women to produce future citizens and of workers to maintain maximal productivity. In a free country, there is no such duty. Children are born to people who want children. People work when they choose to and spend their money and their time as they see fit.
The whole point of a free economy is that whatever the economy is doing is okay, because that represents what each market participant chooses for himself!
I do believe that without government intervention the economy would be more stable than it currently is. However, in order for the economy to be free, stability can't be the goal. Productivity can't be the goal. Employment cannot be the goal. In a free economy, the only goal is freedom of choice!
(c) 2009 Aya Katz
Punctuated Equilibrium and Public Policy Changes
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