Download Key Fact One - Green Party of Canada

Green Economic Ideas
Prepared by Bill Hulet of the Guelph Greens.
The “Miracle” of Compound
Interest

3% Annual Growth
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20 years: 1.8 times
40 years: 3.3 times
60 years: 5.9 times
80 years: 10.6 times
140 years: 62.7 times
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8% Annual Growth
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20 years: 4.7 times
40 years: 21.7 times
60 years: 101.2 times
80 years: 472 times
140 years:

47,788.8 times!
As an economy grows, the demand for natural resources
and distress to nature grows with it. Even at the modest
rate of 3% per annum, it is impossible for Canada's
economy to grow without destroying our environment.
World Population Growth
9
6
3
Billio ns
1960
2000
2050
(Economic Growth) x (Population
Growth) = (Environmental Stress)
Economic and population growth are
closely linked. Population growth is a key
part of economic growth, which is why
governments and businesses tend to
support it. They also multiply together to
increase the damage to the ecosystem. It
isn't just how big our impact is
individually, it is also how many of us
there are doing it.
Key Fact One
The earth is only so large and it will not
grow any larger. At some point the
human population, and the economic
activity it generates, will stabilize and
live within these limits. It will either do
so through a conscious choice by the
human population to live within the
bounds of our ecosystem or else we will
overshoot it and suffer a “die off”.
Human Perception and Geometric
Progression: a Practical Example
Purple
Loosestrife
A Biologist notices a new plant---
Year One
A Paper Gets Presentated at a
Learned Conference---
Year Two
An Application for Further
Research is Written---
Year Three
An Article is Published in the
Popular Media---
Year Four
An Environmental Group Protests
Government Inaction---
Year Five
A Political Party Makes the Issue
Part of their Policy Platform---
Year Six
Government Action. Oops! Too
Late---
Year Seven
Key Fact Two:
One half of all exponential growth
happens in the last doubling cycle. This
means that human institutions that are
reactive instead of proactive, will always
be blindsided by the last doubling cycle.
This means that human society needs to
develop the ability to think ahead instead
of simply reacting.
Steady-State Economy
A steady state economy is one where the
total amount of goods and services
produced in a nation is stable over time.
It is not a situation where no economic
activity happens, but rather one where the
total amount amount does not increase
because additions and subtractions added
together equal zero.
Compound Interest and Pensions:
a Practical Example
Invest $50 per paycheck and do it for 40 years at 5%
interest and you get $330,000 when you retire
At 4% you get $257,000
3% is $202,000
2% is $160,000
0% is only $104,000

The closer an economy comes to a steady
state, the less people can rely upon
compound interest to support their
retirement!

Key Fact Three
An end to economic growth will require a
massive restructuring of retirement
programs because it will not longer be
possible to fund pensions with the surplus
from compound interest. This is such a
scary prospect that it has frozen key
sectors of the government, business and
academic communities into a dangerous
form of denial.
Cornucopianism
Cornucopianism is the belief that all the
environmental problems facing the
human race can be solved by the free
market and technological innovation.
People who support this point of view
tend to oppose programs to deal with
environment problems because they can
see no reason for change or sacrifice.
Introducing, the Jevons Paradox
Jevons Paradox
History has shown that whenever
technological innovation has increased the
output from a natural resource, the capital
freed from this has been used to find new
ways to use the natural resource in
question. The result is a net social
increase in the use of that resource as
technology allows individuals to use it
more efficiently in specific applications.
A Practical Example of Jevons'
Paradox

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Insulation in Frank's house cuts his natural gas use
by three quarters, which saves him $750
He then uses this money saved on a yearly trip
overseas
As a result, the carbon saved on heating is then
burnt as jet fuel
The end result is no gain whatsoever for the
earth, no matter how much more efficient it is to
now heat Frank's home!
Key Fact Four
People who believe that technological
innovation will save the planet don't
understand that because of the Jevons
Paradox we will also have to develop
mechanisms to control the demand for
natural resources. Otherwise, new
technology will increase demand for
other goods and services that will use up
all the resources saved.
Growth in Government Programs is
Based on Growth in Tax Base
In order for a government to expand
the services it offers to citizens, it needs
to find new sources of revenue. Since
there is a limit to the percentage of
income a citizenry can pay in taxes,
this means that the economy must
grow if the government is going to
expand services.
Growth in Canadian Government
Spending per Capita
Surplus
Deficit
Key Fact Five
Expansion of government programs is
dependent on expansion of the tax base,
which depends on expansion of the GNP.
This means that any government that
seeks to create a steady-state (or
environmentally sustainable) economy
will have to freeze and cut back
government programs.
“Standard of Living” vs “Quality of
Life”

Standard of Living
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
Income
“things”
Doesn't count public
goods
Totally individualistic
Measured by “Gross
National Product”,
GNP

Quality of Life

Standard of living
plusAmount of spare
time
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

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
Interpersonal
relationships
Environmental quality
Social goods
Aesthetic qualities
Measured by “Genuine
Progress Indicators”,
GPI
Gross National Product vs Genuine
Progress Indicators
D
o
l
l
a
r
s
p
e
r
C
a
p
i
t
a
18000
16000
GNP
14000
12000
10000
8000
6000
GPI
4000
1950
1960
1970
1980
1990
Key Fact Six
Growth in the economy is not
synonymous with human progress. It
should be possible to create a society
with a growing quality of life, even
though the standard of living is constant
or in decline. This offers a way out of the
dilemma humanity faces---but only if we
accept significant change in our lives.
Building That New World
New Political Model + New
Technology = Hope
Future modules will focus on two
important topics: the need to create a new
type of politics, based on public
mobilization instead of just elections; and;
the role that modern technology can play
in this and the organizational model
provided by the Open Source software
movement.