Stairway to Sustainability: Defining the New Economy in the Age of Austerity

A recent conference organized by the New Economics Institute asked two questions: What does a sustainable economy look like? How do we get there? Answering them is a matter of some urgency—and opportunity

While many may think that the modern environmental movement began in the 1960s—the decade that saw the publication of Rachel Carson's landmark book Silent Spring and the creation of the Environmental Protection Agency—you could go back to FDR's New Deal, which has generally been left out of America's environmental history. During the Depression, when President Roosevelt visited the Great Plains, stymied by dust bowls and droughts, and the Tennessee Valley, overwhelmed by floods, he saw firsthand the intimate connection between economic and environmental disasters. Indeed, one of the major public works projects of his New Deal was the Tennessee Valley Authority (TVA), established in 1933 to control floods and generate electrical power along the Tennessee River.

"[L]ong before I went to Washington, I was convinced that the long road that leads to green pastures and still waters had to begin with reasonable prosperity," he said in his address at the Green Pastures Rally in Charlotte, North Carolina, on September 10, 1936.[1] "Rather than considering environmental problems in isolation as we often do today, the New Dealers thought in terms of relationships between humans and the land," asserts Dan Farber, who heads the Environmental Law Program at the University of California at Berkeley. "Restoring our memory of the New Deal," he argues, "may be a key step toward a more integrated view of environmental and social problems."[2]


So it was rather apropos that one of the speakers at the recent New Economics Institute (NEI) conference "Strategies for a New Economy" was Robert Johnson, who, in addition to serving as the executive director of the Institute for New Economic Thinking (INET) in New York, is a senior fellow and director of the Global Finance Project at the Franklin and Eleanor Roosevelt Institute, also in New York. "Water and air are priced at zero," said Johnson in one of the 40 video interviews with conference speakers that were recently posted on Vimeo. "On the other hand, if you cut off my air and water, I would be willing to pay to get it turned back on. So there's something amiss in a theory of value that doesn't value these common resources, the common pool on which we all base our lives."[3]

Dolf de Groot, head of the Research Program on Integrated Ecosystem Assessment and Management at Wageningen University in the Netherlands, calculated the annual loss in economic value caused by humans' degradation of the global environment, and the figure is mind-boggling. "Every year we lose three to five trillion dollars' worth of natural capital," he said, "roughly equivalent to the amount of money we lost in the financial crisis of 2008-2009."[4] Frustratingly, there hasn't been the kind of aggressive response to climate change and other environmental crises as there was following the financial crisis. Also frustrating is the fact that we don't have a fully-functional sustainable model. It has yet to be created. And it must be done soon. But, as Albert Einstein once observed, "In the middle of difficulty lies opportunity."


In December 2011, I interviewed Cheryl Heller, the founding chair of the Design for Social Innovation MFA program at the School of Visual Arts in New York, which launches this fall. "We don't really know what a sustainable company looks like," she told me. "We've never seen one because it doesn't exist. We don't know what a truly just society looks like, or an equitable economy, for the same reason." The three-day NEI conference, hosted by Bard College, asked two important and complex questions precisely to help figure that out. One was theoretical: "What would an economy built on principles of fairness and sustainability look like?" The other was practical: "How do we get there from here?"[5]

The more than 120 speakers included such leading figures in the burgeoning "new economy" space as Edgar Cahn, Ashoka fellow and founder of the timebanking movement; Lew Daly, director of the Sustainable Progress Initiative and senior fellow at Demos; Severine von Tscharner Fleming, director of the documentary film The Greenhorns about America's young farming community; John Fullerton, president and founder of Capital Institute; Hazel Henderson, author of the 2006 best-seller Ethical Markets: Growing the Green Economy; and Andrew Revkin, author of the popular DotEarth environmental blog on The New York Times.

FROM ACADEMIA TO ACTIVISM, A MULTIPLICITY OF VOICES founder Bill McKibben stoked the fire of grassroots activism with his conference keynote address, entitled "Money and Climate: Can Both Exxon and the Planet be Healthy?" McKibben, a tireless activist who spent three days in jail last summer for publicly protesting the Tar Sands XL pipeline outside the White House, told the audience of about 300, "We are never going to have enough money to match [the fossil fuel industry], dollar for dollar. We need another currency: passion, spirit, creativity." Passion was certainly in the house: Some 30 attendees raised their hands to say they were among those arrested at the same event.[6]

But with such a multiplicity of voices, it's not surprising that not everyone at the gathering agreed that corporations are necessarily the bad guys. "It's sometimes fashionable in the new economy movement to say that business is corrupt or business is evil, but I don't share that view at all," said conference speaker Rebecca Henderson, co-director of the Business & Environment Initiative at Harvard Business School. "I think a business that's well run is an enormous instrument for human good and a major source of prosperity and freedom—business is a part of the solution, playing a partnership role with civil society and government so that we build an economy that's in balance with the social and natural worlds."[7]


Economists thinking like ecologists? Ecologists thinking like economists? It's the kind of silo-busting approach that has fueled the development of a compelling hybrid: "ecological economics," a transdisciplinary field founded on the work of such modern out-of-the box thinkers as Herman Daly, a professor at the University of Maryland School of Public Policy and expert in "steady state economy" who helped outline sustainable development policy at the World Bank; Nicholas Georgescu-Roegen, the late Romanian-American mathematician who argued that physical laws (in particular the second law of thermodynamics) also governed the mechanisms of economics in his seminal 1971 book The Entropy Law and the Economic Process; and Kenneth E. Boulding, the late English economist who introduced in 1950 the concept of "psychic capital" to describe mental states that, like economic capital, were desirable, could be accumulated and served as highly effective sources of motivation. The growing interest in eco-economics is timely, considering that the International Energy Agency (IEA) said that the world is on track to reach "irreversible climate change" by 2016 if countries don't move from fossil-fuel based economies to low-carbon ones[8] and also the recent finding by Ernst & Young that global austerity measures stemming from the credit crisis will likely result in a USD 45 billion gap in climate change funding. Troubled Spain, for example—which agreed last month to accept up to EUR 100 billion (USD 125 billion) to recapitalize its banks—is forecast to spend USD 5.1 billion less on climate change by 2015.[9][10]

"We are seeing a rapidly merging trend of blending theory and practice toward sustainable, resilient economic solutions," said Bob Massie, NEI's president and CEO.[11] In an age of austerity, more careful spending requires more careful and multidisciplinary thinking that can help limited capital create social and environmental ripple effects. "The challenges that we face are interrelated," wrote United Nations Secretary-General Ban Ki-moon in a 2009 opinion piece. "So, if we are smart about it, if we spot and utilize the inter-connections among these problems, solutions to each problem can be solutions to all."[12]


Connecting the smart investment dots—between sustainable aquaculture and poverty alleviation in Africa, for example—is a cornerstone of sustainable finance strategy. One recent example of the finance sector stepping up to the eco-economics plate is the launch of the Natural Capital Declaration, a landmark agreement officially unveiled at Rio+20 and signed by almost 40 chief executives of financial institutions around the world who have agreed to incorporate the value of ecosystem services into their investment strategies. Andrew W. Mitchell, the founder and director of the Global Canopy Programme, a forest protection non-profit based in Oxford that co-convened the NCP with the UNEP Finance Initiative and the Center for Sustainability Studies at the Getulio Vargas Foundation in Sao Paulo, said that the declaration "for the first time commits financial institutions to take natural capital considerations into account in their future investment and lending decisions."[13]

Disappointingly, none of CEOs of the world's largest banks have signed the declaration, but adopting its philosophy is absolutely necessary to achieve a sustainable future. (The document does boast some heavy hitters, such as Calvert Investments, Caledonia Wealth Management, the International Finance Corporation, UniCredit and National Australia Bank. Click here for a complete list.) The CEOs who have signed it deserve praise for showing their commitment to "economics as if the people and the planet mattered," to borrow the tagline of the New Economics Foundation (NEF), a London-based "think-and-do tank," which the NEI also borrowed for a tweet promoting their conference under the hashtag #NEI2012. (For a Storify version of the conference, click here.)


But is the concept of eco-economics really that new? Even before the resource conservation inherent in FDR's New Deal, one can find the basic principles of environmental justice in the ideas of Adam Smith, the "Father of Economics." In his 1776 magnum opus Wealth of Nations, the Scottish economist wrote about his belief that "every successive generation" has "an equal right to the Earth."[14]

Still, while there is a solid foundational theory and some commendable action in the realm of the "new economy," we've only built the first few, tentative steps on the stairway to sustainability. Sadly, Rio+20 produced few actual promises, deepening the growing belief that a multilateral approach to saving the planet won't work because there's little state-to-state parity when it comes to making the kinds of sacrifices that are required. Rich nations have a lot more to lose in the short term by migrating to low-carbon economies than poor nations do. Rich nations also won't have to suffer as much as poor nations, at least in the near future, from treating the environment poorly. As the saying goes, when the rich world sneezes, the developing world gets the flu. New York is far more capable of managing a rise in sea level than, say, the Maldives. (In 2009, Maldivian president Mohamed Nasheed and his cabinet held a meeting underwater to call attention to their country's situation.)


It could be that a unilateral approach is necessary. And considering the increasing chatter about the "green race" between China and the United States—not to mention the fact that China has held onto its Number One ranking on the 2012 Foreign Direct Investment Confidence Index, while the U.S. has slipped from second to fourth place—whoever is in the White House could do worse than to make winning that race a national priority. In 2010, China solidified its first-place rank in clean energy, attracting a record USD 54.4 billion in clean energy investments, while the U.S. was bumped to third place with USD 34 billion. Germany is now in second place in what has become a three-horse race.[15] President Obama's clean energy report card is in dire need of burnishing. The Solyndra scandal planted a seed of doubt in his administration's ability to pick a clean energy start-up winner. And now Colorado-based Abound Solar, which received a USD 400 million loan guarantee from the Department of Energy in July 2010, has announced it will close its doors this week and file for liquidation, a move that will affect 125 workers and could cost taxpayers USD 60 million.[16]

"While disappointing, this outcome reflects the basic fact that investing in innovative companies—as Congress intended the Department to do when it established the program—carries some risk," explains Damien LaVera, deputy director of public affairs at the DOE.[17] If Obama is willing to risk taxpayer money "investing in innovation," he should consider risking his legacy on a broader national challenge, the victory of which will have positive effects for the whole of humanity and indeed, all living things—way beyond the some 40 million Americans the Urban Institute's Health Policy Center estimates will have health insurance coverage thanks to Obamacare.[18] That challenge is to create the first truly sustainable nation—and that means creating a new economy.


In a speech to Congress on May 25, 1961, President John F. Kennedy challenged America to send a man to the moon. Just eight years later, when Neil Armstrong stepped foot on the lunar surface, something that had only existed in the realm of science fiction had become a reality. America beat the Soviet Union in the space race and launched the nation's aerospace industry, which continues to lead the world today. At its peak, NASA's Apollo program employed 400,000 Americans and involved the participation of over 20,000 businesses and universities.[19]

As Obama himself noted in an April 2009 address to the National Academy of Sciences, "The enormous investment of that era—in science and technology, in education and research funding—produced a great outpouring of curiosity and creativity, the benefits of which have been incalculable."[20] Looking at the sorry states of the environment and the economy, it's clear that America needs another moon shot, a "green shot" that will put the nation on top of the new economy. "There is deep interest in a new and different future for America," said Gus Speth, founder of the World Resources Institute and NEI board member. "The conventional approach to economics is not serving the American people and is actively depleting the planet."[21]

Imagine if, in fifty years—when the world population tops out at a terrifying 9.2 billion, according to United Nations projections[22]—the American president could say the same thing about this era that Obama said about his moony-eyed predecessor's. But it might happen even without a clarion call from the White House. As Speth points out, "Americans, as innovators, are aggressively pursuing new solutions around the nation."[23]

FROM THE NEW DEAL TO THE NEW ECONOMY, BOLDNESS REQUIRED To be sure, there is no sustainable silver bullet. But at the very least, we must set our sights on the same target. By asking two important questions, the NEI conference has helped to do just that. Now the real work—getting "there from here"—begins. "This is the time to be bold, to dream," said conference speaker Stuart Wallis, executive director of the NEF. "But we've got to make our dreams come true."[24]

That's a spirit yesterday's New Dealers and today's New Economists share. "The country demands bold, persistent experimentation," FDR told graduating students of Oglethorpe University on May 22, 1932, in his commencement address. "It is common sense to take a method and try it: If it fails, admit it frankly and try another. But above all, try something."[25]

He knew full well that the "long road that leads to green pastures and still waters" would not be built on good intentions. And neither will the stairway to sustainability.



[1] Franklin Delano Roosevelt. Address at the Green Pastures Rally, Charlotte, North Carolina. September 10, 1936. The American Presidency Project. University of California at Santa Barbara. Accessed June 29, 2012.

[2] Dan Farber. Review of FDR and the Environment. January 11, 2005. Accessed June 29, 2012.

[3] Robert Johnson. Video Interview: Robert Johnson at the New Economics Institute Strategies for a New Economy Conference. 3BL Media. June 27, 2012. Accessed June 29, 2012.

[4] David C. Holzman. Accounting for Nature's Benefits: The Dollar Value of Ecosystem Services. Environmental Health Perspectives. 120:a152-a157. April 1, 2012. Accessed April 4, 2012.

[5] New Economics Institute. Facebook blurb. May 31, 2012. Accessed June 29, 2012.

[6] New Economics Institute. Conference Storify. June 8-10, 2012. Accessed June 22, 2012.

[7] Rebecca Henderson. Video Interview: Rebecca Henderson of Harvard Business School at the New Economics Institute Strategies for a New Economy Conference. 3BL Media. June 27, 2012. Accessed June 29, 2012.

[8] Fiona Harvey. World headed for irreversible climate change in five years, IEA warns. The Guardian. November 9, 2011. Accessed June 29, 2012.

[9] Charles Forelle and David Enrich. Bulls Retreat on Spain Bailout Plan. The Wall Street Journal. June 12, 2012. Accessed June 29, 2012.

[10] Ernst & Young. Eurozone crisis could lead to US$45 billion climate change funding gap. November 17, 2011. Accessed June 29, 2012.

[11] New Economics Institute. Sold-Out Summit June 8-10 Gathers Experts and Citizens to Advance Movement for A New Economy. May 7, 2012. Accessed June 13, 2012.

[12] Ban Ki-Moon. Sustainability Equals Prosperity. Project Syndicate. May 18, 2009. Accessed June 29, 2012.

[13] Andrew W. Mitchell, Global Canopy Programme. Email received June 15, 2012.

[14] Adam Smith. An Inquiry into the Nature and Causes of the Wealth of Nations. 1776. Book 3. Chapter 2. p. 23.

[15] Pew Charitable Trusts. Investing in Clean Power. March 29, 2011. Accessed June 29, 2012.

[16] Mark Jaffe. Bankruptcy of Colorado's Abound Solar could cost taxpayers $60 million. Denver Post. June 28, 2012. Accessed June 29, 2012.

[17] Damien LaVera. Solar Manufacturing: To Compete or Not To Compete. United States Department of Energy. June 28, 2012. Accessed June 29, 2012.

[18] Urban Institute. Eliminating the Individual Mandate: Effects on Premiums, Coverage, and Uncompensated Care. Health Policy Center. January 12, 2012. Accessed June 29, 2012.

[19] NASA. NASA Langley Research Center's Contributions to the Apollo Program. January 31, 2001. Accessed June 29, 2012.

[20] Barack Obama. Remarks by the President at the National Academy of Sciences Annual Meeting. White House Press Office. April 27, 2009. Accessed June 29, 2012.

[21] Ibid., 11.

[22] United Nations. World Population in 2300 - Draft. Department of Economic and Social Affairs, Population Division. December 9, 2003. Accessed June 29, 2012.

[23] Ibid., 11.

[24] Ibid., 6.

[25] Franklin Delano Roosevelt. Address at Oglethorpe University, May 22, 1932. The New Deal Network. Accessed June 29, 2012.

image: Nové Mesto, Bratislava Forest Park, Bratislavsky, Slovakia (credit: Gilderic Photography, Flickr Creative Commons)