Inflation versus the Environment

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Why on earth am I talking about inflation in an environmental blog?

deforestationPhoto:

Because moving to a sustainable economy could help reduce, or even eliminate, inflation.

According to economists, there are several causes of inflation. One, apparently, is when commoners like you and I have too much money – then we spend it and drive prices up. For some reason, rich people having too much money has been decided not to be a problem.

In addition to excess money supply, inflation can also be caused by shortage or increased cost of creation. That is, if there is a lack of programmers, then the programmers’ wages increase. If oil becomes more difficult to extract, its cost goes up.

Now, considering that we have had over 100 years of technological advancement that have been making it much less costly to produce just about everything…why are prices still going up?

If we were managing our resources sustainably, prices could be going down. Take forestry, for example. Current practice is to clearcut all the readily available trees, replant (as the topsoil washes away, thus reducing the productivity of the future forest), and complain to the government that you need more financial assistance because the remaining trees are harder to get at (and that the new growth for some reason is not producing the same yield as the original growth). Of course, the difference in costs must be covered by either an increase in the price of wood or by taxpayers ‘helping’ the company.

Instead, consider a sustainably managed forest. Because trees are harvested continually while the forest remains intact, and assuming we get more efficient at taking those trees, the cost to do so goes down over time. It is also worth building substantial infrastructure, like mills and towns and railroads, because everything will be used indefinitely. There are many other benefits, both social and economic: mill towns no longer go bust; future forest growth rates become predictable; more carbon is tied up in the soil, and so on. Each of these benefits also contributes to stable or falling prices.

Similar reasoning applies to most resources. Currently, it is ‘cheaper’ to landfill than to recycle. However, think about this for a moment: does that really make sense? Think about what is involved in creating a pop can from scratch:

  1. Mining: dig a massive hole in rock in a remote location, using huge and hugely expensive equipment
  2. Mineral extraction: crush the removed rock, soak it in toxic chemicals, subject it to intense levels of heat
  3. Refining: purify the ore that is extracted with more heat and toxic chemicals
  4. Transport the metal to the manufacturing plant
  5. Final product: Remelt the metal and form it into a pop can

Compare this to creating a can from recycled materials:

  1. ‘Mining’: Collect raw material (used cans) from curbside and take it to the manufacturing plant
  2. Final product: Remelt the metal and form it into a pop can

Creating a can through recycling uses 5% of the energy compared to creating one from raw materials. Put another way, creating a pop can from raw materials uses twenty times as much energy – 1,900% more energy – than from recycled materials. Reusing, of course, is cheaper still.

So how is it ‘cheaper’ to dump stuff in a landfill than to recycle or reuse? It is partly because ‘externalities’ such as pollution and environmental degradation are free to corporations. There is no penalty to corporations that consume environmental capital; there is only a penalty to those who must live with the results, from local residents to future generations.

The other reason it is cheaper to pollute and pillage than be responsible is that we, the taxpayers, give very large subsidies to mining, energy, transportation, and other companies. In Canada, for example, our federal government gives one billion, four hundred million dollars each year to Big Oil. In my own province of British Columbia, our provincial government thinks that isn’t enough and donated an additional two hundred sixty three million dollars to Big Oil. When the subsidies for roads, mining industries, and so on are added in, it is cheaper for corporations to pollute because we, the taxpayers, are paying them to pollute.

If these subsidies were removed, the costs of products made from nonrenewable raw materials would shoot up – but the cost of sustainably made products would decrease and remain stable. And if our population remains stable, then we should have declining prices and an increasing standard-of-living.

A sustainable economy means a stable economy, including no overall inflation.

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