Economic planning in an age of climate crisis 9798357728739

Faced with an accelerating climate crisis caused by burning fossil fuels we have to change the way the economy works. We

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Table of contents :
Contents
List of Figures
List of Tables
Introduction
1 The physics of climate change
2 Climate change: history and prognosis
3 Combating climate change
4 Wartime planning
5 Post-war planning
6 Theory of optimal planning
7 Is planning tractable?
8 Planning and value
Appendix: Software tools
Bibliography
Index
Recommend Papers

Economic planning in an age of climate crisis
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CAPITALIST PRODUCTION, BY COLLECTING THE POPULATION IN GREAT CENTRES, AND CAUSING AN EVER-INCREASING PREPONDERANCE OF TOWN POPULATION, ON THE ONE HAND CONCENTRATES THE HISTORICAL MOTIVE POWER OF SOCIETY; ON THE OTHER HAND, IT DISTURBS THE CIRCULATION OF MATTER BETWEEN MAN AND THE SOIL, I.E., PREVENTS THE RETURN TO THE SOIL OF ITS ELEMENTS CONSUMED BY MAN IN THE FORM OF FOOD AND CLOTHING; IT THEREFORE VIOLATES THE CONDITIONS NECESSARY TO LASTING FERTILITY OF THE SOIL. BY THIS ACTION IT DESTROYS AT THE SAME TIME THE HEALTH OF THE TOWN LABOURER AND THE INTELLECTUAL LIFE OF THE RURAL ONE. BUT WHILE UPSETTING THE NATURALLY GROWN CONDITIONS FOR THE MAINTENANCE OF THAT CIRCULATION OF MATTER, IT IMPERIOUSLY CALLS FOR ITS RESTORATION AS A SYSTEM, AS A REGULATING LAW OF SOCIAL PRODUCTION, AND UNDER A FORM APPROPRIATE TO THE FULL DEVELOPMENT OF THE HUMAN RACE. MARX, CAPITAL, VOLUME 1, CHAPTER 1.

P. COCKSHOTT, A. COTTRELL, J. DAPPRICH

ECONOMIC PLANNING IN AN AGE OF CLIMATE CRISIS

Copyright© 2022 P. Cockshott, A. Cottrell, J. Dapprich

First printing, October 2022

Contents

21

1

The physics of climate change

2

Climate change: history and prognosis

3

Combating climate change

4

Wartime planning

67

5

Post-war planning

81

6

Theory of optimal planning

7

Is planning tractable?

8

Planning and value

A

Software tools

169

53

137 155

97

37

6

Bibliography

Index

195

183

List of Figures

t.1 Yearly mean total sunspot number from 1880 to 2020 showing ea. 11-year solar cycles and the modern maximum around 1958. Source: SILSO data, Royal Observatory of Belgium, Brussels 23 1.2 Annual temperature anomalies over land and oceans. The base period is 1901-2000. The record shows a clear warming trend. Source: NOAA National Centers for Environmental information 23 t.3 Global albedo anomaly as measured by CERES showing no clear trend. Image from NASA. 24 i.4 The propensity of a gas to absorb radiation of a specific wavelength can be measured by shining laser light through a sample. 27 t.5 The transmission and absorption of different wavelengths of electromagnetic radiation by the atmosphere of the Earth. Image from Wikimedia. 28 1.6 In equilibrium, incoming and outgoing radiant energy must balance. After allowing for 29°/o of light to be directly reflected back to space, the remaining energy must be lost as black body radiation. The effective temperature of the Earth that is required to radiate the remaining 71% of arriving solar energy is -18°C. This is not the surface temperature, it is the temperature of the upper layer in the atmosphere that eventually emits infrared radiation to space. 29

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i.7 Infrared radiation can be understood in terms of the behaviour of photons of different energies. Type A photons are strongly absorbed and re-radiated by the atmosphere, undergoing multiple captures before diffusing to space. Type B photons can escape directly from the ground to space without absorption by the atmosphere. Type C photons are less likely to be absorbed and re-radiated, with perhaps only a single event occurring before escape [Keating, 2009]. 31 2.1 The shoreline of Europe was radically different as recently as around 10,000 years ago, with icecaps over Scandinavia and parts of Britain. Drawn by the authors. 38 2.2 Ecological zones in Europe as of 15,000 BP. Icecaps are much larger than in Fig 2.1 and only the very south of Europe had a temperate climate. Drawn by the authors. 39 2.3 Temperature record from the Greenland ice sheet. Horizontal axis years BP, vertical axis degree C. 39 2.5 Map of world under projected 10°C rise in temperature. Shading shows the maximum wet bulb temperature (CW) reached for at least one day a year. Based on Sherwood and Huber. 46 2.6 Incursion of the North Sea if deglaciation proceeds at B0llingAllerecl rate.Derived from interactive map software http:/ I flood.firetree.net/. 2.7 Potential increases in yield exhibited by wheat and soybean under elevated levels of C02. Source Parry et al.. 51 3.1 UK electricity generation 2018. Coal use was negligible and has fallen further since then. Chart derived from Statistics. 54 3.2 If you include non-electric energy, fossil fuels made up a much larger part of UK energy use. Derived from Statistics. Note that the oil and gas figures are not directly comparable to the nuclear and renewable ones because of thermal inefficiencies in conversion to electricity or mechanical energy. 55 3.3 The growth of labour productivity has been shrinking over the last half century in the UK. Growth rates computed as moving average over previous 5 years fron ONS data for output per worker for the whole economy. 59 3.4 The stagnation of real wages in the uk. 59

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3.5 Coppicing was a technique of trimming trees near ground level to provide a sustainable supply of fuel. In the pre-fossil fuel iron industry, coppiced charcoal was used to reduce the iron ore. 63 3.6 Producing steel by direct reduction of ore using hydrogen allows C02 emissions to be eliminated. 64 4.1 Reallocation of labour in Britain from 1938 to 1943, figures in thousands of workers. Data from Aldroft's British Economy. 76

5.1 Calder Hall Power Station in 1956. The first commercial nuclear power station was operational just 3 years after it was approved by the cabinet. 85 5.2 During the period of semi-planned mixed economy UK labour productivity grew at a much faster annual rate than in the preceding and succeeding liberal periods. Calculated from the Bank of England database A milleni11m of macroeconomic data. 90 5.3 Size of sectors as percentages of UK economy over time. Liberal and neo-liberal periods saw a decline in the productive sector and rise of financial services and rents as a share of the economy. Calculated from the Bank of England database A mille11i11m of macroeconomic data. The curves are smoothed to show long-term ten91 dencies. 5.4 During the period of the mixed economy house building was much higher than in the neo-liberal period. Source ONS House building data, UK: update to October to December 2019. 93 5.5 Capital stock of the country grew significantly faster each year during the period where there was at least some economic planning. Calculated from the Bank of England database A milleni11m of macroeconomic data. 94 5.6 The period of regulation saw a secular rise in the share of value added going to employees, and a corresponding fall in the share going to property owners. The neo-liberal period saw a strong decline in the wage share. 95

to

6.1 Kantorovich's example as a diagram. The plan ray is the locus of all points where the output of As equals the output of Bs. The production possibility frontier is made of straight line segments whose slopes represent the relative productivity of the various machines for the two products. As a whole these make a polygon. The plan objective is best met where the plan ray intersects the boundary of this polygon. 99 6.2 Comparison of the Western and Soviet versions of linear programming. In the Western formulation the problem is to find P the maximal intersection of the production possibility frontier with lines of constant relative price for the outputs (A and B). In the Soviet formulation the problem is to find Q the intersection of the plan ray with the production possibility frontier. 102 6.3 A possible data flow to move from published spreadsheets to an economic plan using linear programming. 121 6.4 The blue squares indicate the degree to which fulfilment of plan targets is achieved by the lpsolve program discussed in the text. The orange squares show the performance of an alternative program, csvplan. j l, which is described in the Appendix. 124 6.5 Comparison between goals and achievable consumption rates for agriculture and construction. 125 6.6 Trend in real consumption in the USSR under the first 5 year plans showed a dip as a high proportion of output went into fixed capital formation. This allowed a subsequent rapid rise in output. The dotted line shows child growth rates over the period, a good proxy for real food consumption. 125 6.7 The trend of total accumulation in the projected plan. 126 6.8 A possible harmony function h(x) = x/(1.1 + x). 129 6.9 A disadvantage of using a projection measure like ~ as a goal. If we wish to produce equal quantities of food and electricity, then output vectors A and B appear to perform equally well as they have the same projection onto the plan ray. But output B involves producing a negative net output of food. In general there will be a set of vectors ending on the dotted line that all appear equally good on this metric. 130 6.10 Decline in harmony with no investment. Parameters: I= Labour used, g= Consumption goal, H% = Harmony %, s=Stock of fixed capital, o=Total output. Mean harmony over the period is 48%. 131

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6.11 What happens to output and capital stocks when the harmony algorithm is used. Note that harmony is equalised for all years.

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7.1 The BESM6 was a 48-bit computer used in leading scientific labs and universities in the Soviet bloc from the late 196os to the 'Bos. CC image Victor R. Ruiz 147 7.2 A graphics workstation computer circa 2013, with 10,000 times the floating point performance of the BESM6. 147 7.3 Recursive construction of successively more sparse simulated 10 tables from an original real table. A black pixel indicates a non zero value. These were the sort of tables used in the evaluations of Figures 7.4 and 7.5. 148 7.4 Time taken by the Julia solver to evaluate (I-Al\ f for simulated sparse technology matrices of different sizes. Compute time shown in blue, number of matrix elements in orange, and number of non-zero elements in grey. Log scales on both axes. Note that the slope of the time plot is lower than n 2 . 148 7.5 How the time to run the solver varies as a function of the number of non-zero elements in the matrix. As can be seen the trend is almost linear. This run was done on a Chuwi Lapbook Pro clocked at 2.4GHz. 150 7.6 As the US I/O table is successively disaggregated the number of non-zero elements in the matrix initially grows at an increasing rate but then growth levels off. The dashed curve shows what one would expect if NNZ = x log x. The actual growth (circles) is lower than this for x > 300, as would be expected for a small world network. Redrawn from the data obtained for [Reifferscheidt and Cockshott, 2014]. 152 A.1 A Western factory facing Kantorovich's problem would formulate it as follows. 171 A.2 Kantorovich's example in the notation of lp_solve. 172

List of Tables

2.1 Rise in sea levels associated with changes in deep ocean temperature. 48 2.2 Potential sea rises from melting of ice sheets. 48 3.1 Calculation of residual carbon emission allowances from 2021, using data supplied by Stocker et al.. 53 3.2 Amount of electricity required to replace fossil fuels for transport, industrial and domestic use. 56 3.3 The load efficiency of different types of installed power in the UK in 2018. Computed from Statistics. 57 3.4 Capital investment needed to provide electricity to replace all carbon emissions in the UK under different scenarios. 58 4.1 Indices of physical output for selected products in 1942, 1938=1.o. Data taken from Aldcroft [1986). 69 5.1 Nuclear electric power produced in 1968 by the Western Nations with the most developed nuclear industries. 85 5.2 The public sector held a large proportion of total productive assets in the UK in 196o. Computed from Bank of England A milleni11m of macroeconomic data, Totals of Other land and buildings +Plant and equipment +Stocks and work in progress. 87 6.1 6.2 6.3 6.4 6.5

Kantorovich's first example 99 Kantorovich's examples of output assignments. 99 Variables in the example economy 1o6 Resource constraints and productivities in our example economy Economic plan for the example economy obtained using lp_solve, as described in the Appendix 107

1o6

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6.6 The economic plan if the labour supply is reduced by about half. 6.7 Consolidated input/output table for the European Union 2oo6, 110 Source: Eurostat (naio_17_agg_6) 6.8 The EU table reorganised in more strictly Marxian form. 112 115 6.9 Old and new final demand mixes for the EU in € millions. 6.10 Gross output needed to support the modified European consumption pattern shown in Table 6.9 116 6.11 Interpolated fixed capital stock data for the EU in 2oo6. 120 6.12 Hypothetical depreciation rate table for the capital stocks in Table 6.11. This table is purely for illustrative purposes. 120 6.13 For each year we have a plan ray or Leontief demand function which specifies the desired mix of final output. Year 1 is based on actual figures for 2oo6. The last column specifies the labour resources available. These are based on the actual growth of the EU labour force up to 2009 (year4) after which it is held constant. In the unplanned reality, employment fell after 2009 due to the financial crisis. Food demand is assumed to grow linearly with the workforce, demand for industry and construction also rises relative to services. 123 8.1 Variables in the example economy 162 8.2 Resource constraints and productivities in our example economy A.1 Solution to Kantorovich's original problem via lp_solve A.2 Solving Ricardo's problem with lp_solve 174 176 A.3 Contents of plancode directory

173

108

163

Dedicated to those who, over the years, have helped or encouraged us in our work. Part of the work for this book was supported by Initiative Demokratie und Moderne e. V.

Introduction This book is devoted to two topics that have been subject to profound political controversy: climate change and economic planning. The reality of anthropogenic climate change and the feasibility of economic planning have both been subject to vehement attack from the right wing. The possibility that humans might change the climate by burning fossil fuels was recognised by the Swedish scientist Svante Arrhenius in the last decade of the 19th century, but at that time it was anticipated that it would be many centuries before the effect would be visible. From measurements started in the 1957 international geophysical year it became evident that carbon dioxide levels were really rising. Through the 196os it became a matter of increasing concern in the scientific community. When one of the authors attended first-year physics lectures at a North American college in the late 1960s global warming due to carbon dioxide emission was already being taught as accepted scientific knowledge. It took considerably longer for politicians to take notice. By 1988 the Intergovernmental Panel on Climate Change (IPCC) was established by the UN to look into the issue. In 1990 the UN General Assembly started intergovernmental negotiations to arrive at a convention on climate change. In 1992 a convention was adopted but that was just a prelude to further lengthy negotiations leading up to the Kyoto Protocol of 1997. Proposals to limit carbon dioxide emissions threatened powerful economic interests, most obviously in the oil and coal industries. This opposition meant that the Kyoto Protocol was honoured more in the breach than the observance. Under the influence of fossil fuel lobbies the USA persistently dragged its feet,

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refusing to sign up to firm commitments to phase out fossil htel. Although President Clinton signed the Kyoto Protocol the Senate prevented ratification. President Obama signed the later Paris Agreement only to have the next President unilaterally withdraw from it. But opposition to climate protection measures was not just restricted to special interests in the oil and coal industries; it spanned a wide spectrum on the right of US and UK politics. The right saw climate protection as the thin end of a wedge of state intervention. If they conceded state intervention on this issue, what would come next? It is humanity's misfortune that the danger of climate change was just coming to notice at the very time that the planned economy of the USSR was being dismantled by Gorbachev and Yeltsin. The economic collapse, and resultant mass mortality [Cockshott, 2020, last chapter], did slightly slow the rise in atmospheric C02, but in the intellectual realm the effect was to discredit state planning of the economy for a long period. Research into the topic almost came to an end. We argue in this book that the scale and speed of economic reorganisation necessary to avert climate disaster are so great that attention must be paid to the methods used in the past when similarly drastic changes were accomplished-whether that be the rapid industrialisation of Russia or the wartime reorganisation of the British and US economies. Both required a high level of state direction. The book comprises two main parts, the first three chapters dealing with climate change as such, and chapters 4 to 8 dealing with planning. Since arguments against the very reality of human-induced climate change are still widely circulated in right-wing media we start with two chapters explaining the scientific background. Rather than citing complex simulation models-whose assumptions and methodologies are bound to be somewhat debatable-Chapter 1 relies on first principles of physics to explain how the Greenhouse effect actually works, a mechanism which is somewhat more complex than most popular accounts admit. We follow up with a chapter on the prehistory of climate change, ex-

plaining what geology teaches about previous episodes when greenhouse gas emissions resulted in much hotter climates. Chapter 3 then assesses the scale of the economic restructuring that will be needed if IPCC limits on C02 emissions are to be met, taking the UK as an example. We show that the necessary capital investment is well above what has historically been achieved by UK private industry. The political situation in the UK today being very different from, say, Russia in the 196os, it's clear that full-scale state planning is unlikely to be undertaken in the early stages of the climate crisis. Chapters 4 and 5 therefore focus on the British experience of planning during World War II, and in the postwar period up to the mid-197os. This was an era in which even Conservative politicians accepted that the state should take on the overall direction of the economy. We present data showing that when compared to previous and subsequent periods, these years had the best economic performance on record. The wartime experience in particular shows how much can be achieved in a short time via planning--even without comprehensive state ownership. The theory of economic planning is no longer much taught, so in Chapter 6 we give an introduction to the mathematical and algorithmic techniques that can be used to plan national economies. This is somewhat technical in parts, but should be understandable for anyone with a background in economics or the natural sciences. Chapter 7 addresses objections to planning that have been raised by economists of the Austrian school, among others (in the so-called socialist calculation debate), and goes on to examine the computational tractability of detailed planning, arguing that the task is well within the capability of modern 'big-data' technology. Today's computing machinery makes possible much more detailed and consistent planning than was conducted between 1939 and the 1970s. Chapter 8 examines the implications of environmental planning for the pricing of goods. We address the question of how, if plan overrules market, prices can be set to reflect the objective environmental and social costs of different technologies.

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Finally, a technical appendix describes open-source software, written by us and others, that can be used to demonstrate and explore the various planning techniques described in Chapter 6.

1

The physics of climate change

This chapter explains the science behind climate change in more detail than most popular explanations. At the same time we aim to keep explanations straightforward enough that they can be understood by a broad audience. We will begin by considering solar radiation and the radiation balance of Earth. We will see that a simple model for a planet without an atmosphere gives a temperature estimate for the surface of Earth which is much colder than what it really is. We will then continue to explain the higher temperature on Earth's surface through the absorption of infrared radiation by gases in the atmosphere, most importantly by water vapour and carbon dioxide. This effect is known as the greenhouse effect and it is a natural part of the Earth's climate system. Without the greenhouse effect, Earth would be too cold to support human life. The cause for concern is that temperatures can be expected to rise further as concentrations of greenhouse gases in the atmosphere are increased due to emissions from human activity, such as the burning of coal and petroleum. We will therefore consider a simple explanation of the enhanced greenhouse effect, which describes how temperatures rise further as carbon dioxide concentrations in the atmosphere are increased. We will also consider various climate feedback mechanisms which can be expected to further amplify this effect.

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ECONOMIC PLANNING IN AN AGE OF CLIMATE CRISIS

Solar Radiation and Observed Wanning The Sun is the dominant source of all energy on Earth. Energy enters the Earth's climate system in the form of electromagnetic radiation emitted by the Sun. So it should come as no surprise that variations in the amount of energy received from the Sun are a major driver of Earth's climate. Several important factors influence how much energy the Earth receives from the Sun and we will look at these in turn. The output of energy from the Sun, the amount of radiation received on Earth based on the position and orientation of Earth relative to the Sun, and the amount of radiation reflected into outer space due to the albedo, or whiteness, of Earth all vary over time and affect average global temperatures. Variations in solar output follow a roughly 11-year solar cycle. During a single cycle, solar activity will go from a minimum to a maximum and back to a minimum. The activity of the Sun is measured by the number of observed Sunspots, but this cycle also correlates highly with the radiation output of the Sun. As of this writing, the last completed solar cycle, named Solar cycle 24, began with a minimum in the year 2oo8, reached its maximum in 2014, and then ended with another minimum in 2019 after almost exactly 11 years (Figure i.1). While such an 11-year cycle can contribute to temperature variation over the length of the cycle, it clearly cannot explain longer-term temperature trends. The Sun does, however, exhibit longer-term trends in its activity. One cycle's maximum might be higher than the last, and the same goes for minima. But more importantly, we can observe trends with high or low activity over several decades. Somewhat confusingly perhaps, these periods are also called maxima or minima. The so-called 'modern maximum' started in 1914, peaked in 1958, and ended in 2oo8, giving way to the current modem minimum (Figure 1.1). During any maximum we would expect temperatures on Earth to be somewhat higher. But while solar activity has declined since the 195os, global temperatures started to increase quite significantly in the 196os (Figure i.2). So solar activity cannot explain recent warming trends. It certainly cannot explain why temperatures continue to remain high and

THE PHYSICS OP CLIMATE CHANGE

Figure 1.1: Yearly mean total sunspot number from 188o to 2020 showing ea. 11-year solar cycles and the modern maximum around 1958. Source: SlLSO data, Royal Observatory of Belgium, Brussels

Yearly mean total sunspot number 300

~

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250

0

~ 200