Why solutions to climate, cost-of-living and economic crises may lie in Second World War

The big question facing us is what economic vision should we pursue to solve these interlinked crises? Because what is currently being done in the name of climate change, poverty alleviation and business confidence isn’t working at the scale required. Indeed, it’s causing our problems.

The UK and Scottish governments are in lockstep about the solution. More of the same and ‘grow baby grow’. Their belief is that a growing economy is the only way to produce the tax revenue to pay for the infrastructure and services required to address the crises.

To do this they must take the brakes off, invest and let the market deliver the goods and services we want. So, UK Labour has lifted restrictions on banker’s bonuses and funded the oil and gas, chemical, and cement industries £21.7 billion for unproven carbon capture technology. It now wants a third Heathrow runway, days after the LA wildfires where some insurers withdrew cover for climate-related risks.

Economic growth causes climate change

This article focuses on solutions rather than reiterating the extensive evidence against neoliberal GDP-focused economic growth. But before presenting suggestions, please consider these points:

One, economic growth causes climate change. Generating every £1 of GDP requires environmental resources and creates pollution; hence growth exacerbates pollution and depletes resources faster.

Two, green growth isn't feasible at the scale and speed needed. Contrary to Chancellor Rachel Reaves' claim, there is a trade-off between economic growth and net zero. You cannot decouple economic growth from greenhouse gas emissions globally quickly enough to prevent catastrophic warming. Being able to do it in some rich regions isn’t enough. That conclusion is based on meta-analysis of 835 papers.

Three, if economic growth is the answer to child poverty, then why have poverty rates remained broadly static for over 20 years? This is despite increasing tax revenue as a percentage of GDP and an economy that has nearly doubled in size.

Destroying economy’s foundations

Instead of relying on subjective belief in economic growth, we should address the climate and biodiversity crises, the fossil fuel cost-of-living crisis, and the challenges faced by small-to-medium companies with evidence-based solutions. These solutions should be drawn from successful responses to past crises.

Leaders must recognise the crises are real and understand the basis of our economy is being destroyed and that frequent, powerful climatic events will destroy more than just the insurance industry. They must also acknowledge the economy's primary role is to deliver what economist Kate Raworth calls the "social foundations": decent affordable housing, meaningful work, sufficient food, and spaces for socialising, culture, and sport.

However, all these things depend on a stable climate. So, what is required if we are to scale technology to the size needed to keep global warming below two degrees Celsius?

We need to start at what systems-change guru Donella Meadows calls the “mindset level”. After the bombs fell on Pearl Harbour, the US experienced a mindset change that saw it join the Allies in the Second World War and radically alter its economy and manufacturing in support of the war effort.

A study in 2022 by academic Adrian Odenweller and others concluded that this was one of two examples of the sort of radical shifts that are required to tackle climate change and the other interlinked crises facing society effectively. The second was the global effort to create and deploy Covid vaccines.

Responding to existential crises

So, if we want to understand how to proceed, we can look at how the US was reorganised, so it was able to launch 2,710 liberty cargo ships in less than four years, from 18 yards at a top rate of two every three days.

Having recognised the existential crises faced, their government ruthlessly prioritised the goods and services needed for the war effort and for those still at home. It enforced cooperation between companies, bosses and workers, ensuring collaborative innovation was the norm.

The need for labour brought women and marginalised groups into the workforce. Small-to-medium businesses thrived, they had stable markets, supply chains and prices – but society carried a big stick if they profiteered. It made finance available and encouraged social cohesion. Money wasn’t siphoned offshore, it was reinvested into communities and the economy. Resources weren’t wasted.

In Scotland, this could resemble the concept of ‘mission-oriented market-making’, inspired by Professor Mariana Mazzucato, and think tanks Future Economy Scotland and Commonweal. Using this system, countries set national missions and powerfully align their economic and industrial policies to achieve them.

Scotland’s missions should address the three interlinked crises and focus on providing warm homes, food, transport, meaningful work, sense of purpose, community, and socialising. This starts with national conversations ensuring public support.

Instead of laissez-faire growth at all costs, our response would involve ruthless prioritisation. Governments would make tough long-term decisions about market support and regulations to unleash the competitive spirit of small-to-medium firms and entrepreneurs on the necessary products.

History offers a blueprint

It would be based on land reform and government reform. We need more democracy, not less, to ensure fair and workable implementation. We must create institutions that empower all of Scotland.

Past successes provide a blueprint for how we can quickly insulate buildings, manufacture heat pumps and batteries, build railways and active travel networks, and develop farming innovations. History provides a blueprint for effective action at scale and for gaining the social licence to act as individuals and ensure communities will benefit.

We could do this, or we could stick with the approach that is causing these crises and eroding trust in democracy.

Professor Iain Black, Strathclyde Business School