Sustainable economy: Salvation gets cheap

Paul Krugman wrote an important column on the economy and environmental sustainability titled, Salvation gets cheap.

This is based on the IPCC’s recent report that suggests a green technological revolution is happening, especially in solar energy which has dropped 75% since 2008.

Sustainable market economy

Krugman debunks the fallacy that economic growth is tied to pollution and resource extraction.

Fact is, it’s possible to have an economy that is based 100% on renewable energy and recyclable materials. We just need to develop the right government regulations.

Under such an economy, we can have indefinite economic growth (increasing individual wealth) without any adverse effects.

Centrist system

What’s required is the centrist, Keynesian economic system we used in the post-WW2 era.

It works in two ways: first “big government” spending on infrastructure projects and social programs creates jobs and redistributes wealth so all segments of society benefit from GDP growth (wealth creation) and productivity growth (machines doing more of the work.)

Second, strong regulations and infrastructure spending on green energy projects and mass transit make the economy increasingly sustainable.

Free-market nihilism

The real threat to humanity is the right-wing, free-market ideology that has plagued us over the past 30 years. It’s based on economic anarchy: that is, people acting on greed and self-interest somehow balances itself out. This nihilist philosophy is not only self-serving, it’s self-destructive.

Conclusion

In order for society to act responsibly we need the right economic system to govern our mass behaviors. The centrist Keynesian system gives us the right tools to clean up our act while preserving our democratic freedoms.

Krugman

Other things equal, more G.D.P. [economic growth] tends to mean more pollution. ... But other things don’t have to be equal. There’s no necessary one-to-one relationship between growth and pollution.

People on both the left and the right often fail to understand this point. ... On the left, you sometimes find environmentalists asserting that to save the planet we must give up on the idea of an ever-growing economy; on the right, you often find assertions that any attempt to limit pollution will have devastating impacts on growth. But there’s no reason we can’t become richer while reducing our impact on the environment. ...

The sensible position ... has always been that ... if we give corporations and individuals an incentive to reduce greenhouse gas emissions, they will respond.

So is the climate threat solved? Well, it should be. The science is solid; the technology is there; the economics look far more favorable than anyone expected. All that stands in the way of saving the planet is a combination of ignorance, prejudice and vested interests.