What we are currently experiencing with increased inflation and a likely recession is something we must get used to as we face climate change’s effect on the economy.

With more extreme weather, such as drought and floods, it is unlikely that we will be capable of producing the same amount of food under these extreme conditions. We have already seen the first examples of this with the current floods in Australia, the droughts in Europe and farmers in Florida facing Hurricane Ian and its effect on citrus farms. While the energy prices due to the war in Ukraine and covid-19 are responsible for some of the increased costs, most price hikes in the last years have been due to climate disasters and extreme weather conditions. Climate disasters do devasting damage; the damages in North America are estimated to be 415 billion dollars, much of it due to wildfires and hurricanes. 2022 also saw a supply chain problem, next year there might be an actual food shortage.

Growthism

Our economic system is based on measuring GDP, which includes measuring food prices. When we produce less food, but the demand stays the same, this can cause increased inflation. Increased inflation leads to rate hikes, increased prices of goods and less purchasing power.

From Less is more by Jason Hickel:

Gross Domestic Product (GDP). Growth is the prime directive of capital. Not growth for any particular purpose, mind you, but growth for its own sake. And it has a kind of totalitarian logic to it: every industry, every sector, every national economy must grow, all the time, with no identifiable endpoint.

And

Under capitalism, global GDP needs to keep growing by at least 2% or 3%
per year, which is the minimum necessary for large firms to make aggregate profits. That might seem like a small increment, but remember, it’s an exponential curve, and exponential curves have a way of sneaking up on us with astonishing speed. Three per cent growth means doubling the size of the global economy every twenty-three years, and then doubling it again from its already doubled state, and then again, and again. This might be OK if GDP were just plucked out of thin air. But it’s not. It is coupled to energy and resource use, and has been for the entire history of capitalism.

Neo-liberal capitalism depends on exponential growth, and we get a recession when the economy does not grow. This leads to piling up of debt, and people lose homes and jobs.

GDP is a faulty measure when we are facing climate change. According to the Swiss Re Institute April 2021 – The economics of climate change, climate change will hurt GDP, and when climate disasters get worse, the recession will be more substantial and last longer. 

The results of a deep recession can lead to even more polarizing politics, fascism and more resource-based wars. Capitalism needs growth (GDP) and will find ways to exploit humans and natural resources for that growth to be realized. As long as GDP is the measurement of our economy, we will not effectively reach the Paris agreement. 

According to the Climate Action tracker, most countries are not reaching their pledged agreement of a 1.5-degree celsius increase. Even more alarming is that the reported numbers from each country are most likely underreported. This is alarming because a 1.5-degree celsius increase might happen faster than we have predicted.

From Countries’ climate pledges built on flawed data, Post investigation finds

An examination of 196 country reports reveals a giant gap between what nations declare their emissions to be vs. the greenhouse gases they are sending into the atmosphere. The gap ranges from at least 8.5 billion to as high as 13.3 billion tons a year of underreported emissions — big enough to move the needle on how much the Earth will warm.

Uncertain solutions

Several propositions exist to solve the problem of GDP connected to the economy. Most of them are about regulating capitalism and limiting emissions (decoupling, green growth). This does little to stop the emissions as capitalists will still try to maximize exponential growth under a new set of regulations. Capitalists will try to find new areas to exploit, lessening human rights, start wars with private armies, outsource emissions, use carbon offsets with little proven results and increase technology use to protect and control the weather conditions to maximize growth.

Degrowth proposes to abandon GDP and move away from growth as a measurement of the economy. It’s not growth that matters; it’s how income and resources are distributed. The problem with neo-liberal capitalism is that the income and resources from its global extraction are not distributed based on fair principles. When we abandon neo-liberal growthism, we can take more rational decisions regarding climate change, and we do not need to extract human labour and natural resources for exponential growth.

From Less is more by Jason Hickel:

Consider this: over the past 40 years, 28% of all new income from global GDP growth has gone to the richest 1% (all of whom are millionaires). This is astonishing, when you think about it. It means that nearly a third of all the labour we’ve rendered, all the resources we’ve extracted, and all the CO2 we’ve emitted over the past half-century has been done to make rich people richer.

According to Oxfam, the richest 1% are responsible for more than twice as much carbon pollution as the 3.1 billion people who make up the poorest (financial) half of humanity.

There are many aspects to this proposition that needs to be examined, and I will try to go through the different elements in later posts.