Green new deals, ecological scarcity and the lessons of history

The history of natural resource use and development, from the Agricultural Transition 12,000 years ago to the present, suggests that humankind has had to surmount successive scarcity problems:  From Malthusian population-land “traps” to fossil fuel scarcity, and now, ecological scarcity.

In any age of natural resource scarcity, there also appear to be winners and losers.  The winners adjust to the changing economic conditions imposed by scarcity, innovate before other economies do, and end up dominating trade and economic relationships as a result.  Over a thousand years ago, China, India and other Asian Empires were among the most powerful economies in the world, because their rulers adopted long-term strategies to parlay their vast agricultural and resource-based wealth into regional and then global dominance.  Today, modern China, South Korea and other Asian economies look to green and clean energy investments and technologies as propelling their economies to the forefront of global trade and development, as well as securing a more sustainable economic future.

The result is that China’s status as a world economic leader will depend less on its current efforts to manipulate its exchange rate and generate trade surpluses than on its long-term goals of dominating clean energy markets and technologies.  In this regard, China understands how economic development should respond to natural resource scarcity better than Europe and the United States.  China invested one third of its fiscal stimulus over 2008-9 on green measures, is now the leading global producer of solar cells, wind turbines, energy-saving lights, and solar water heaters, is aiming to be the world market leader in fuel-efficient cars, and is experimenting with green pricing measures and regulations.  Europe is cutting back government spending, including on its green stimulus, and has failed to reform its inefficient carbon-trading scheme.  The US declined to back the 15% of its fiscal stimulus devoted to green measures with any meaningful carbon tax or cap-and-trade measures.  The result is that the West can only watch as its lead in green innovations and industries is overtaken by the East.

Nothing reflects more this disparity in approaches to natural resources scarcity and economic development than how the East and West view and use the term a “Green New Deal”.   Of course the original New Deal was the serious of far-reaching policies and programs launched by the US Roosevelt administration in response to the Great Depression of the 1930s.  In response to the current Great Recession of 2008-2010, a Green New Deal is supposed to represent an equally comprehensive set of policies and spending initiatives, which aims to stimulate economy-wide jobs and recovery while protecting the environment, boosting clean energy and encouraging low-carbon development.  Whereas in Asia, the concept of a Green New Deal has been taken seriously, in Europe and the United States the terms is employed only as a public relations ploy.

For example, in February 2009, South Korea announced a national Green New Deal plan of spending from 2009 to 2012 amounting to US$36 billion, with the aim of creating 960,000 jobs, through investments in developing railroads and mass transit, fuel-efficient vehicles, clean fuels, energy conservation, environmentally friendly buildings, water management and environmental improvements.

In July 2009, the South Korean government announced expanding its Green New Deal into a five-year development Green Growth Plan, allocating another $60 billion to the same priority areas for clean energy and environmental investments.  The prevailing view in East Asia, as expressed in an article written by Professor Norichika Kanie of the Tokyo Institute of Technology for the East Asia Forum (see http://www.eastasiaforum.org/2010/03/20/green-growth-and-a-new-world-order/) is that “green growth” in the region will be the basis for “a new world order” in the global economy.

In contrast, in the UK, the Cameron coalition government calls its national plan to insulate millions of British homes a “Green New Deal”.  In the United States, the term “New Deal” – whether “Green” or not – appears simply to have become “politically incorrect”.

History has shown that an economic strategy fostering incentives and innovation in response to scarcity has occurred successfully many times before, and those economies that have invested in the transformation first have emerged as leaders.  China, South Korea and the rest of Asia seems to understand this lesson; the United States, the United Kingdom and the rest of Europe clearly do not.

Edward B. Barbier is the John S. Bugas Professor of Economics at the University of Wyoming, USA.  He is the author of two recent Cambridge University Press books, Scarcity and Frontiers: How Economies Have Developed through Natural Resource Exploitation and A Global Green New Deal: Rethinking the Economic Recovery. His next book, Capitalizing on Nature: Ecosystems as Natural Assets will be available in November 2011.

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