Is it time for neo-classical economics to give way to green IPE?

In this short essay I wish to discuss the importance and relevance of green International Political Economy (IPE) as a discourse and discuss its relative strengths and weaknesses. In the first section I discuss the most prevalent form of economic analysis in the world today, that of neo-classical/neo-liberal economics, and discuss its relationship to market-capitalism. I suggest that both the academic discipline and the economic system are not suited to the challenges of climate change and ecological degradation. I suggest that green IPE provides better answers to the problems of the day and explain some of the reasons why this is so. In the second section I discuss the strengths and weaknesses of green IPE by discussing a number of ideas that have developed within green IPE discourse. I conclude that green IPE provides a stronger and more compelling approach to the global economy.

Why Green IPE?

The global capitalist system of market economies is the economic system that is employed throughout almost the entirety of the planet. It has, over its centuries of slow gestation, become as much a macro-structure governing human interaction as the state has. However, like the state, the system of the market-capitalist economy is not primordial: while it may seem to have been reified it is not something contingent to the socio-economic interactions and existence of human beings. It is an economic system which seeks growth and material consumption as ends in themselves, which relies on tremendous amounts of energy – in the form of fossil fuels and the efforts of cheap labourers – to make production of material goods more efficient. Concepts of sufficiency, moderation, well-being, economic security, and work as being something more than a wage-slave existence are not the concern of market-capitalism.

Ecological security and environmental degradation are also not the concern of the predominant market-capitalist economic system. The tremendous productive capabilities of the capitalist system require constant expansion and growth into new market areas; when this growth is hindered and undermined the system cannot operate efficiently. Firms that do no revolutionise their productive energies and efficiency will be swept away by their more competitive rivals. The system cannot function in a finite environment because it requires constant growth. And yet Earth is not a planet of finite ecological resources and reproductive capabilities. There are thresholds to the Earth’s ability to remove carbon from the atmosphere and thresholds of pollution beyond which certain flora and fauna cannot survive extinction.

Global climate change and the ecological destruction that is happening at an increasing pace in the world are being driven by the insatiable productive demands of the market-capitalist economic system. The global economy growth model is no longer tenable because of the damage it is causing to the ecology of the planet – if it was ever tenable for this reason, not to mention a host of moral, ethical, and technical reasons. The belief that the ‘market’ can function as an apolitical and autonomous arbiter of the global economy must be shaken if humanity is to preserve the ecological integrity of the planet. But to do this neo-classical/neo-liberal economics must be revealed as not science, as it tends to proclaim, but as the ideological basis of market-capitalism.

Neo-classical economics favours gross domestic product (GDP) as the measurement of the economy. Political economist Tim Jackson (Jackson 2009) states that GDP measures the economy in three ways:

• Counting the, ‘sum of all the ‘final’ expenditures on goods and services in the economy’;
• Measuring incomes, ‘by adding up all the wages and dividends (including profits and rents) paid out within the economy’; and
• Measuring the output generated by productive activities – measured as the ‘value added’ by productive enterprises (Jackson 2009: 24)

He goes on to criticise GDP as a unit of measurement of the economy because of, ‘its failure to account properly for changes in the asset base, even when it comes to financial assets. Gross fixed capital investment is measured. But depreciation of capital stock goes unaccounted for and the GDP is almost completely blind to the levels of indebtedness…’ (Jackson 2009: 125). Another criticism, especially pertinent given Jackson’s interest in green political economy, is that GDP does not take into account the finite nature of the energy reserves – overwhelmingly declining reserves of fossil fuels – upon which it relies for its productive nature. The inability of GDP, and more broadly neo-classical economics, to take account of energy resources, pollution, and climate change has for many decades lead a growing minority of economists to search for a new economic system which, unlike the current market-capitalist incarnation, is sustainable.

The answer that many ecologically minded economists have come to is the discursive form of international political economy (IPE) known broadly referred to as green political economy. It would not be fair to refer to green political economy as a subject or ideology, but rather as a discourse which seeks to address the, ‘twin  challenges of climate change and energy security’ (Barry and Doran 2006: 107). How these factors will be addressed varies between scholars and so it would not be accurate to describe green political economy as a discipline in the sense neo-classical economics is. Interestingly the field of study is more true to older forms of political economy which drew in a variety of academics and thinkers from different subjects and interest areas; in green political economy one will find work by scientists, political scientists, economists, anthropologists and others.

There is clearly much need for an alternative to neo-classical IPE today: not only is market-capitalism literally destroying the planet, but neo-classical economics is not providing any possibility of an alternative. Green political economy has a broad agenda that focuses on creating a new economic system that considers the ecology and environment of the earth as its main variable, crafting an economic system based around environmental needs. In the next section I will consider some of the central tenets of green IPE and their relative strengths and weaknesses as a form of IPE.

The main concerns of green IPE

Green IPE holds economic and ecological sustainability as its central concern. This requires revising the capitalist mode of production as it is today: growth can no longer be held as an end in itself, growth must only be acceptable where it does not endanger sustainability. Whether there can be economic growth in the way it is currently understood – i.e. GDP growth – is a central question of green IPE. Tim Jackson (Jackson 2009) has suggested that we must question what is more important to societies: GDP growth and ‘traditional’ economic prosperity or life-satisfaction. A traditional view of economic prosperity values quantity over a more qualitative conception of prosperity. Jackson states, ‘Quantity is not the same thing as quality. Opulence is not the same thing as satisfaction’ (Jackson 2009: 39).

Growth is driven by consumption, which is fuelled by the psychological effects of an essentially global consumer society that has been gradually created since the rise of the middle classes around the turn of the 20^th century in Europe and continuing today in countries such as China and India. Jackson explains the existence of this consumer society as being focused around the, ‘”evocative power of thing” [that] provides the dominant arbiter of societal progress’ (Jackson 2009: 52). In this way the material dimensions of prosperity, based upon shared understandings and ideas of wealth, are linked to the non-material dimensions of prosperity through a language of goods (Jackson 2009: 52).

The real issue with consumption is, ‘how to reduce it rather than simply focusing on making it “greener” or lessen its environmental impact,’ (Barry and Doran 2006: 260). As consumption is a culture it would seem likely that a profound cultural change is necessary to reduce consumption. Barry and Doran suggest that sufficiency is the key to reducing consumption, which will, ‘require the embedding of new normative commitments at the heart of the democratic social contract between government and people,’ (Barry and Doran 2006: 261). The issue of consumption must be met because undifferentiated economic growth – such as that measured by GDP – does not give a clear picture of the effects that growth is really having on the planet: while production and consumption may increase a country’s GDP there must also be a measurement of the ecological damage that is cost, thus detracting from GDP growth in future costs, financial as well as environmental.

So, in a post-growth economy, what could productive economic activity look like? Jackson suggests: selling energy services, not supplies; selling mobility, not cars; recycling, reusing, and fixing, not rebuying and reproducing (Jackson 2009: 129). The question raised by this proposition is: will these kinds of activities really raise sufficient revenue? Jackson: ‘However much material efficiency you squeeze out of the economy, eventually you’ll reach a limit, at which point continual growth will push material throughput up again,’ (Jackson 2009: 130). Jackson cannot provide all the details of what such an economy would look like, but he does state that, ‘low-carbon activities that employ people in ways that contribute meaningfully to human flourishing have to be the basis for it,’ (Jackson 2009: 130).

A major debate in green IPE is how such an economy would be run. Jackson (2009) and Barry and Doran (2006) seem to point toward a community-based, ‘bottom up’ approach to the organisation of a post-growth economy. There is an interest in separating the notions of capitalism and the ‘market’, so that there can be a more democratic approach to the ‘market’ and a place within the ‘market’ to include, ‘social, informal and non-cash economic activity,’ as well as a, ‘progressive role for the state (especially at the local/municipal level),’ (Barry and Doran 2006: 253). Others, such as Richard Smith (2010), suggest that the market and capitalism are completely incompatible with post-growth economy. Smith criticises Herman Daly’s notion of the ‘steady-state’ economy for believing that capitalism could exist without growth. For Smith, growth is not optional for capitalism, but is entirely contingent to it: ‘[C]apitalism cannot exist without constant revolutionizing of productive forces, without constantly expanding markets, without ever-growing consumption of resources,’ (Smith 2010: 29). If capitalism stopped growing the result would be mass unemployment, which can be empirically seen in the present day: while growth has stalled in the western world there has been a huge increase in unemployment. Smith does not believe that the markets will rationally work out what is best for the planet or for humankind; he believes that, ‘the ecological crisis that we face is not only caused by the overall scale of consumption and production, it is just as much caused by the specific irrational, inefficient, wasteful and destructive nature of the capitalist market’s “allocation of resources” – and equally by the market’s failure to allocate resources to things we do need,’ (Smith 2010: 36).

Other scholars of green IPE, such as Peter Newell and Matthew Paterson (2010) are particularly strong in their support for a green IPE that would take a purportedly ‘realistic’ – one might say concessionary – approach to proposing economic solution to the economy and climate change. The authors favour keeping the capitalist system in place but simply making it cleaner, suggesting that markets which trade in carbon is a positive thing: trading carbon credits, ‘creates the possibility of economic winners from decarbonization,’ (Newell and Paterson 2010: 10).They also believe that decoupling economic growth from carbon intensive industry is possible, counter to others such as Jackson (2009). The discrepancies of how change in the macro-economic system can be changed are perhaps a weakness of green IPE, although it is perhaps a strength that such varying opinions can co-exist.

The difficulty of imagination is a key issue within green IPE, and more so outside of it. Most people seem to find it incredibly difficult to imagine a post-growth world and the picture that many are immediately drawn to is unsuccessful and oppressive communist states that existed in the USSR and Maoist China. Providing a credible vision of a post-growth world economy and society is one of the greatest weaknesses of green IPE. Partly the problem is institutional, in the form of being credited as being unrealistic by neo-classical economists and politicians; partly it is in it being impossible to provide a vision of a world based on green economic policies and principles. Providing a viable alternative to GDP growth is precisely what Jackson tried to achieve in Prosperity without Growth (2009). Jackson is interested in human flourishing, which is not concerned with financial prosperity, but rather with issues such as life expectancy, educational participation, low infant mortality, and happiness, none of which correlate with GDP, the neo-classical model of measuring the economy. He asserts that money really doesn’t bring happiness after a certain point, collating data regarding GDP rates and data regarding the issue areas just mentioned. He finds that, ‘the advantage of being richer as a nation shows diminishing returns. As income rises, the additional benefits in terms of increased life expectancy are reduced substantially,’ (Jackson 2009: 56). Barry (2012) concurs that, ‘A long-standing green commitment is to reorient the economy towards enhancing and being judged by its capacity to promote ‘quality of life’, ‘well-being’, and ‘happiness’ rather than orthodox economic growth,’ (Barry 2012: 163). This focus on ‘flourishing’ or ‘well-being’ is a great strength of green IPE, which moves debates about what constitutes economics and social interaction out of the abstract language of neo-classical IPE and into a much more relevant and human language.

While the list of green IPE concerns could be much larger than is possible in this short essay, I wish to finally mention another important strength in the green IPE analysis, that of the concept of work. Under capitalism work has come to mean employment: whereas employment ought to be considered a subset of work, it has subsumed the concept of work and the two are synonymous under capitalism. I would draw on a discussion between Adorno and Horkheimer on the subject:

Adorno: In Marx’s chapter on fetishism, the social relation appears in the form of the exchange principle, as if it were the thing in itself.

Horkheimer: The instrument becomes the main thing (Adorno and Horkheimer 2010: 33).

They go on:

Horkheimer: Work is the key to making sure that ‘all will be well’. But by elevating it to godlike status, it is emptied of meaning.

Adorno: How does it come about that work is regarded as an absolute? Work exists to control the hardships of life, to ensure the reproduction of mankind. The success of labour stands in a problematic relationship to the effort required. It does not necessarily or certainly reproduce the lives of those who work but only of those who induce others to work for them. In order to persuade human beings to work you have to fob them off with the waffle about work as the thing in itself (Adorno and Horkheimer 2010: 33).

This is in line with much thinking on the subject of work in heterodox IPE and green IPE. Feminist IPE, for example, seeks a distinction between work and employment because this could reveal the impact that informal, voluntary, unpaid, and household work contributes to the economy – which is not a feature of GDP, regardless of the huge contribution it clearly makes to economies. Regarding green IPE, Barry has stated that, ‘work should not be conflated with employment and denotes its own, more direct form of provisioning. Both employment and work are forms of provisioning and both involve human labour and the use of natural resources,’ (Barry 2012: 187). The point is that work, in the broader heterodox understanding, should be figured into analysis of economies: without it, as feminists have long known, the economic analysis is incomplete and inaccurate. This is an important strength of green – and other forms of heterodox – IPE.

Conclusion

In this short essay it has been impossible to draw out many of the facets of green IPE, to differentiate it from other forms of IPE, and to critique the subject area. Rather, I have instead focused on a small number of ideas and interests within green IPE, considering the perspectives of a variety of scholars and suggesting the general trends of the discourse. I have hoped to suggest that the greatest strength of green IPE is that it is not an abstract form of economic analysis based on outdated and compromised modes of analysis, but instead a heterodox approach that is grounded in scientific data about ecology, climate change, and humankind. Green IPE is, I believe, considerably better placed to approach questions of the macro-economic than, for example, is neo-classical economics.

Bibliography

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