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Steven Cohen

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We Don't Really Know How to Stimulate Sustainable Economic Growth

Posted: 08/08/11 09:33 AM ET

This has been a summer of bad and even scary economic news. We are finally focusing on the huge percentage of Americans that are out of work. The official number of 9.1% is only the tip of the iceberg -- even government data report a number that tops 16% when you add discouraged and underemployed workers to the mix. The debt disaster, the stock market decline and the potential for European financial collapse are all a backdrop to this summer of discontent. Missing from much of the discussion of causes and impacts is a persuasive presentation of the fundamentals. What is going on here? How much do we really understand? To what extent are we in new, uncharted territory, where we really do not know the answers?

Let's start by reviewing a few new realities that are the reason the old answers may not be sufficient:

  • There are nearly seven billion people on the planet. When I was growing up there were about 3 billion people here. Does anyone seriously think that doubling the population in less than half a century is a trivial issue?
  • The economic output of the world has grown dramatically. Emerging economic powerhouses like China and India are rapidly increasing their consumption of the planet's resources, and despite today's economic stagnation, the typical American family consumes far more today than they did in 1960.
  • The increased automation of production. Factories require less human labor per unit of production. Containerized shipping has automated a job that was once done by human muscle. Construction is increasingly mechanized. The modern economy runs on brainpower and energy-driven technology.
  • The technology of destruction is more widely available than ever before. The destructive potential of terrorism has never been greater.
  • The growing size of the globally interconnected economy. Products are no longer made in a single place, and capital flows with fewer and fewer obstacles from nation to nation. Can America truly control its own economy with China holding over a trillion dollars of our debt? Given the size of its holdings and the amount of stuff it sells us, China must also take care to ensure America's economic health. While U.S. economy, military, media and educational institutions remain dominant, our ability to influence is declining.
  • The continued stress on the planet's natural resources. Water, food and energy are at the heart of the issue. Seven billion people require more of that stuff than three billion ever did. To the extent that we use finite resources such as fossil fuels or geologic sources of water, we are on the road to economic oblivion.


In America's classrooms and an increasing number of its corporate boardrooms, "sustainability" is the mantra of the moment. Even the casual observer sees a planet under growing stress. Young people have this nagging sense in the back of their mind that we older folks may have used everything up. Despite the clear sense that new facts require new thinking, the old paradigm dominates Washington and the U.S. national media. We are still fighting the ideological war between communism and capitalism and many continue to believe that we need to trade off economic growth and environmental protection.

The Republican right wing is attacking EPA and federal funding for fundamental earth science. What chance do we have to solve these complex problems when many in our governing elite believe that the science of climate change is a hoax? We also see the Obama Administration giving the Shell Oil Company conditional approval to drill for oil on Alaska's North Slope. Our advancing technology enables us to find and mine fossil fuels from increasingly distant and ecologically fragile places. Has anyone noticed the trend? This stuff is not as easy to get out of the ground as it used to be. These days we find ourselves drilling deeper for oil, removing mountains for coal or just exploding a piece of the planet to release natural gas. No, we are not running out of these resources, yet. We probably won't for a long time, but isn't there a smarter, cleaner and hopefully cheaper way to power our economy? Why aren't we working to develop that technology? That would be something worth going into hock for if we had to.

That is where the idea of sustainability comes in. We may generate short-term solutions to economic needs by drilling in the Arctic. It may help Shell's shareholders in the short term, but in the medium and long term, it seems like a retreat to yesterday's technology. Like a data system using an old computer language. It reminds me of that old video game, Pong. When people talk about sustainable economic development, they are talking about wealth that is generated by renewable resources: the sun, the hydrologic cycle, sustainable systems of food production. The one-time use of a finite resource is by definition not sustainable.

All of which leads to a set of questions that we do not really know how to address:

  1. How does America stimulate economic growth when we are part of a globally interconnected economy?
  2. How do we restore investor and consumer confidence in a shared economic future? FDR said: "The only thing we have to fear, is fear itself," and we need to learn how to convey confidence and certainty in a vastly more complex global economy.
  3. As productivity increases through the use of more advanced technology, how do we ensure that we have enough jobs for the number of people who want to work?
  4. How do we get corporations, governments and their leaders to forgo short-term one-time gains for long-term sustainable benefits?
  5. How do we fund the fundamental science needed to develop renewable technologies and the capital cost of diffusing those technologies throughout the economy?

Eventually, just as cell phones are replacing landlines in America's households, new technology replaces old when it delivers something that is cheaper and better. The problem with waiting for the market to do this on its own is that if it takes too long, climate change will submerge our cities, and the process of extracting fossil fuels from the planet will cause irreversible damage to critical ecosystems. The same ecosystems that provide us with food and water.

As I look on this changing and uncharted economic and environmental landscape, I see more questions than answers. I am amazed when I hear economists, scientists, pundits and politicos arguing with great certainty that they have the answers. Who are they kidding? It is time to roll up our sleeves and get to work transforming our economy from one designed for the 20th century to one capable of thriving in the 21st. It's well past time to admit that there are no easy answers and we really don't know how to do this. Yet.

 

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