Critique of REMI

I went to a talk about Carbon Pricing and what it might do to the RI economy by Scott Nystrom of REMI today.  I read the report yesterday.  The report was fine, said a carbon tax would not in any way hurt the RI economy.  But I learned some stuff about how REMI works that help me understand how the state of Maine got a report that did not answer any useful questions about how banning clearcutting was going to affect the economy.

One of the keys was openly stated.  The report stated it absolutely did not take into account the effect of climate change on the economy.  That jarred me into realizing that the report the State of Maine used against our campaign stating the effect of banning clearcutting on the Maine economy absolutely refused to use any data on the health of the forest and its depletion rate at that time.

Given that cutting practices in Maine changed dramatically in the years after the failed attempts to ban clearcutting, primarily because of the health of the forest and the depletion of the woods, clearly the REMI report , the use of the REMI model in situations involving natural systems that are being degraded, leaves much to be desired and provides truly false information to the public looking at the policy implications.

Given this flaw, maybe what we need is a study looking at the types of studies REMI has done over the last 30+ years to see how accurate they are.  Obviously they must have that information since they must use it to refine their methodology and equations.  I would love to see a report by REMI discussing which situations are the hardest for them to get right over time with a special emphasis on natural resource systems subject to depletion.  I did notice that the map in the presentation today did not include any studies done in Maine, so maybe REMI is in denial.

 

The Economic Growth Machine and Rhode Island

The Economic Growth Machine and Rhode Island  Greg Gerritt
I have a great deal of concern about the techniques the political elite in Rhode Island use in their efforts to elevate the rate of economic growth. My concerns come from the likelihood that the gyrations they perform are likely to do more harm than good to most of the people in our community. The reason the prescriptions of the elite are unlikely to work is that they are based on a misreading of the underlying conditions of the economy and a misreading of trends in the economy. The basic assumption of the RI political elite is that there can be extended periods of 3+% economic growth per year. Periods long enough to return Rhode Island to “full employment” so that the state’s coffers are filled.

I find this rather odd because a more honest assessment of the RI economy ( and I have been observing closely for 18 years) and its place in the global and national economies makes it rather clear that Rhode Island is not going to be a global growth leader, it does not have any of the conditions that would boost Rhode Island into an above average growth rate. And improving the “business climate” will improve the growth rate no more than 5%, in other words from 2% to 2.1%

For the last 50 years the average growth rate of the human economy on planet Earth has been 3.8% per year. No other 50 year period in the history of the planet has had a growth rate as high. Prior to the industrial revolution (1759 the year the development of the steam engine gave a jump start to the mining of coal in very large quantities) global growth rates were about 1%. Since 1759 they have averaged about 2%, and more and more reputable observers have written about how hard it will be to keep growth rates much above 2% going forward. In the last few years the growth rate globally has been 3.4% ( China is not likely to see a 10% growth rate ever again) and the US has had growth rates of 2.3, 2.4, and 2.2% the last 3 years, years touted as prime for economic recovery.

If growth rates are slowing, and what else could happen as the world’s resources and sinks come closer and closer to the brink of depletion, then half the world’s people will be experiencing growth rates above average and half of the people will experience growth rates below what is now a 3.4% global growth rate that will diminish going forward. Careful study has revealed what kind of places will be experiencing above average growth and which areas are likely to be experiencing below average growth.

In all likelihood places rapidly bringing on line new sources of minerals (fossil fuel and hard rock) will have high growth rates. Places rapidly destroying their forests will have fairly high growth rates. Places that are rapidly urbanizing ( moving people off the farms and out of the forest and into factories ) will have above average growth rates. Financial centers and very large urban areas (megacities) with one of a very few high tech or financial industry clusters will have above average growth rates. Everyone else is out of luck unless they learn to use less and share more. Adding to this trauma is that in many places well over 90% of the growth in income is ending up in the hands of 1 or 2% of the population, so even if RI reached 3% growth, 95% of us would still be getting poorer.

Given that RI does not have any of the four characteristics of rapidly growing areas ( despite our best attempts to convince high tech and advance life sciences companies to move here) it is likely that the people of Rhode Island are going to be among the 4 billion people living with less than average growth. We are not a basket case, so our growth rates are likely to be in the 1.8 to 2.2% area for the next few years unless we let our growing inequality go crazy, or we get slapped even harder by climate change, in which case our growth rate will slow further. We should also note that one of the key industries RI seems to want to hang its hat on, the medical industrial complex, is going to be unable to grow in any way that helps us if health care costs are out of control and drawing money away from other sectors of the economy.

Given this scenario, that RI will experience slower than average growth and only hold our position if we make sure our inequality does not get worse and we improve the health and resilience of our ecosystems, the realistic goal for Rhode Island is how do we get the greatest prosperity under conditions of relatively slow growth. Unfortunately the obsession with the business climate, the cutting of taxes and regulations, the running roughshod over communities and ecosystems, the further marginalization of the poor are likely to make our chances of achieving prosperity even more remote.

Rhode Island has a chance to create a more resilient and fairer economy. But tax breaks and giveaways to the already wealthy will lead to further deterioration of our communities, not an economic bonanza. It is time for an economy for the people, not the plutocrats, with food security and climate resilience at its center based on a clear understanding of how to live in a low growth environment.

I have been involved in the political process for over 30 years, and I understand that politicians must promise peace and prosperity to get elected, especially in the big money media frenzy politics we now endure, but it is time that some truth about growth rates and the long term trends in the economy entered the debate. If the truth is not part of the debate, I truly worry for Rhode Island.