Friday, April 10, 2009

The Great Transition

The present economic crisis is widely acknowledged to be the worst since the Great Depression. Some have taken to calling the current downturn the Great Recession. But today’s crisis has important differences, including growing resource pressures, particularly with energy sources, as well as the effects of climate changes brought on by global warming. Unlike previous recessions, this downturn will require fundamental changes—a Great Transition to a more sustainable society.

Today’s recession and the Great Depression share some characteristics: a precipitous decline in the stock market, major bank failures caused by wave of deregulation, and a deflationary market (at least in housing) that worsened the position of debtors. Although today’s crisis has not yet reached the magnitude of the 1930s, millions of people have lost their jobs, millions have fallen into poverty, tent cities have appeared, reminiscent of the Hoovervilles of the 1930s.

Economists and politicians, like generals who prepare for the last war, have been determined not to make the same mistakes that were made 8 decades ago, and are flooding the market with liquidity while spending billions to create new jobs to bolster consumer demand.

Yet there are unique problems today not present in either the Depression, or any of the recessions since. Growing resource pressure played no small part in causing the present downturn. Worldwide production of oil has been flat for four years and is expected to soon roll over into permanent decline. Economist James Hamilton examined last year’s downturn and concluded that nearly all of it could be explained by the oil price shock. The housing boom saw home buyers moving ever farther out into the suburbs to buy cheaper homes. Then high energy prices helped burst the bubble by making these long commute suburbs unaffordable.

Food stockpiles have declined over the past decade causing prices to rise. Growing demand for bio-fuels aggravated the situation by taking acreage away from food production. While rising prices in the U.S. added to recessionary pressures, third world countries faced both price spikes and shortages of food and fuel, throwing people into poverty and sparking riots.

None of these problems will be solved by the economic policies of the 1930s. Energy and food prices have fallen due to the recession, but the underlying problems have not gone away. Long term solutions will require a major move away from fossil fuels; it will be a tremendous task. Our suburban/exurban way of life, with its ever bigger houses and ever more powerful cars, is inextricably bound up with oil. Our agribusinesses rely on fossil fuels for everything from fertilizer and pesticides to gas powered tractors and irrigation pumps. The typical food item is shipped some 1,500 miles or more before it is sold.

Although it would have been better if we had faced these problems before they brought the economy down, the recession has seen hints of a transition to a lower carbon lifestyle. Oil consumption has declined for the first time since the oil shocks of the 1970s. The total number of cars registered in the US is predicted to decline in 2009, the first time since World War II. Less driving and a slower economy have resulted in the first significant reduction in the amount of greenhouse gases emitted.

Another World War II phenomenon, the victory garden, is making a comeback, a small move toward more self sufficiency as well as lower energy use. The number of backyard farmers is increasing at a double digit rate; some seed companies are having difficulty keeping up with demand. Even those icons of suburbia, the McMansion and the big box store, are getting a makeover. Abandoned big box stores are no longer automatically torn down to make way for new development, but are being transformed into charter schools, health centers, a chapel, a library, even a spam museum. At least one developer of McMansions has subdivided the homes into “quartets;” four family homes offering the affordability of a condominium along with a smaller carbon footprint.

Thus far the transition to a lower energy/lower carbon future has been haphazard, in response to higher energy prices and the economic downturn. The cost to those who have been laid off or whose savings has disappeared has been tremendous. The challenge for Greens is to make this incipient transition permanent, and to create a new green economy to replace the old. Instead of bailing out the auto industry, we must transform it for the low carbon future. Instead of saving failed banks so that they can return to business as usual, we must reorient them away from speculative derivative trading toward funding smaller scale, sustainable, local businesses. Green jobs and a zero waste economy must replace our planned


At 12:13 AM, Blogger Sandy Wiggins said...

Thanks for your blog. I’d offer that the present economic crisis and the challenge of “The Great Transition” actually creates enormous opportunity for businesses willing to engage in the shift from the old consumption-based, take-make-waste economy to an economy that celebrates and supports natural, economic, and cultural abundance.

The most powerful catalyst for this transition is a fundamental shift in our business paradigms. Adopting frameworks like the Triple Bottom Line and Ecological Economics can drive us toward a future of prosperity and vitality that is robust, sustainable, and not dependent on dead end paradigms like limitless growth.

Sandy Wiggins
Chairman, e3bank
Past Chair, U.S. Green Building Council

At 1:13 PM, Blogger Dr.Rutledge said...

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