Greenback Warming: The Impending Crisis of Climate Change on the Economy

The narrative of climate change and environmental policy in the world has followed in the footsteps of Germany’s “harmony clause.” The clause states that the preservation of the environment should be in harmony with the development of a healthy economy, and as such a majority of environmental policy has been cast and seen as limits and regulations on the economy. In his chapter, “Economic Collapse” from The Uninhabitable Earth, David Wallace-Wells hopes to dispel the notion that pro-environmental policies are destructive to the economy and are in fact net positive investments that not only ensure our survival as a species but our economical survival as well. In this analysis, I will identify and explain the key points in Wallace-Wells’ chapter that propel his case for making the environmental a focal point of economic discussion.
Wallace-Wells begins the chapter with a discussion of what he believes is an often overlooked aspect of the industrial revolution: the discovery of fossil fuels. Known as “fossil capitalism”, the hypothesis that Wallace-Wells points to suggests that the vast economic development of the industrial revolution would not have been possible without the uncovering of the new source of raw material power. This, Wallace-Wells states, led to the end of subsistence living and enabled newer generations to enjoy a standard of living better than those enjoyed by previous generations, an opportunity not granted to previous generations. It is precisely this higher standard of living that has, in a sense, draped a veil over the eyes of those in the West. The faith in the economic system to consistently improve and innovate was built on the back of the dependence of oil, yet with oil reserves depleting and the world nearing an ecological collapse, Wallace-Wells makes the case that the dependence on oil has gone too far and that it could eventually lead to an economic crisis stating that, “Earlier empires had boom years, too.”
After making the case for “fossil capitalism” and its production benefits and ecological/economic disadvantages, Wallace-Wells shifts his case to a more research based approach using study conducted by Solomon Hsiang, Marshall Burke, and Edward Miguel. Wallace-Wells does not sugarcoat their analysis and offers a very bleak future if business is to continue as usual writing, “[…] every degree Celsius of warming reduces growth, on average, by about one percentage point[…] compared to the trajectory of economic growth with no climate change, their average projection is for a 23 percent loss in per capita earning globally by the end of this century.” Hsiang and his colleague’s research then goes on to estimate that by 2100 there is a 50% chance that total global output will be reduced by 20% and a 12% chance of per capita GDP declining by 50%. In order to contextualize this decline at the hands of climate change historically, Wallace-Wells informs the reader that the Great Depression only lowered per capita GDP by 15% and the fresher wound of the Great Recession lowered it by 2% (these numbers are said to be lower estimates by more recent research conducted by Thomas Stoerk in 2018). Before continuing in his research and quantitative based approach, Wallace-Wells pauses to reflect on the consciousness of those living in the post industrialist West writing, “within the postindustrial nations of the wealthy West, where economic indicators such as the unemployment rate and GDP growth circulate as though they contain the whole meaning of life in them [..] we’ve become so used to economic stability and reliable growth that the entire conceivability stretches from contractions of 15 percent [..] to growth about half as fast-about 7 percent.” Here, Wallace-Wells makes it clear that overtime citizens of developed nations have accepted contractions and growths as part of the economic system that they live in and see no reason to raise the alarm when faced with these numbers again. Wallace-Wells is quick to be wary of this and says that the effects of climate change would push the economic crisis to that of an entirely new category.
The crisis is different to each country, as Wallace-Wells points out. Seemingly contradictory to the claims made so far, climate change can be good for some countries. Wallace-Wells positions Russia and Canada as benefactors of increasing global temperatures that would allow for their agribusiness and related industries to boom, not to mention general economic productivity associated with more temperate climates. For however much global warming helps colder climate countries, it pales to the destruction of the economies of mid-latitude countries. The main producers of the world, United States and China, are key examples of these mid-latitude countries suffering as estimates show that potentially half of all output could be lost. This is just the tip of the metaphorical (and literal) iceberg, as equatorial countries face losses up to 100% with India alone being predicted to face 25% of total global economic setback caused by climate change. These severe and impending economic depressions will half almost all of global production and resources while also pushing millions back into poverty, especially those in newly developed/developing countries. With no Marshall Plan or New Deal in place to help offset the permanent economic damages, Wallace-Wells states that we are not running the risk of a encountering a Great Depression or a Great Recession but a Great Dying.
In continuing with his trend in discussing countries, Wallace-Wells turns his attention to the United States’ problem with climate change and the ripple effect it has on the global economy. After a brief overview of the potential non-economic effects of climate change such as natural disasters, flooding, and public health crises, Wallace-Wells then dives into quantifiable examples. Starting with agribusiness, Wallace-Wells writes that 40% of all farm yields can decrease almost to the point of disappearing sending ripple effects throughout the entire industry and effecting 3 million farmers and 2 million farms. The drying up of agriculture is not the only effect as the opposite effect would occur in Wallace-Wells next example, south Florida. Wallace-Wells writes that by 2045 14% of Miami Beach real estate will be underwater and that this is only a fractional representation of the almost endemic problem of flooding that the United States will face by 2100 creating almost $1 trillion in damages. Another issue that is brought up by Wallace-Wells is the damaging effects of heat in our day to day life as a result of climate change. His examples range from the warping of train tracks and grounding of airplanes which halt trade and transportation industries to a much more far-fetched claim considering the effects of the heat negating advancements made in the technological sector including email and Microsoft Office programs. He backs the latter idea by pointing to research on ideal temperatures for work production and how increases not only halt economic production but translate to GDP loss as well, which the effects of are constantly compounded. Wallace-Wells, then, furthers the discussion by saying that though wealthy nations like the US are the most primed to last climate change, they still face challenges that threaten the lives of its citizens and the global economy as a whole.
In closing, David Wallace-Wells evokes a call to action. While previous green measures were seen as impediments to progress and economic growth, it has now been empirically shown that the entire economic system is on the verge of collapse at the hand of climate change. Though solemn in tone, there is an opportunity for hope in this chapter. Wallace-Wells says that limiting warming to between 2.5 and 3 degree Celsius could help curb the tremendous cost (around 15–25% instead of 30% at 4 degrees) that would have occurred by doing nothing. In the end, Wallace-Wells warns that the scale and veracity of climate change’s negative effects on climate change could be double the Great Depression, an economic crisis that introduced the world to fascism, reintroduced authoritarianism, and led to genocide; however, if we act now there may be a future to salvage for our grandchildren.
