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An End to Growthonomics

An End to Growthonomics: A brief review of the steady state economics movement

By Wendy Kellett

The evidence is rapidly accruing. Despite the fervent denials of many who should know better, humanity can no longer have it all.

Treating the world’s resources like a credit card account - switching suppliers on a regular basis to evade interest charges - is no longer viable. Nature’s resources have been plundered on an unprecedented scale over the past 200 years or so, matched by a soaring human population and a seemingly endless free lunch (at least for those in wealthy countries).

The concept of economic growth, which has now been elevated to an absolute good, divorced from the consequences for the natural world and the earth as a whole, has dominated mainstream political and economic thinking for many decades. “...it is still the dominant belief today that, whatever may have happened with earlier civilisations, our own modern, western civilisation has emancipated itself from dependence on nature.” (Schumacher, 1974)

Our own Prime Minister has recently proclaimed the need for ‘sustainable growth’ while simultaneously warning of the need for urgent action on climate change, in advance of the G20 Summit. It has become a dogma which brooks no opposition and which, judging from the PM’s remarks, does not rely on an underpinning of joined-up thinking. “The fantasy that it can be business as usual on the growth front without boiling the planet is the most dangerous of them all ... all gain, no pain.” (Elliott and Atkinson, 2007)

Nonetheless, a substantial body of thought has grown up in recent decades, led by such thinkers as Professors Brian Czech and Herman Daly in the USA, and Professor Tim Jackson in the UK. The need to acknowledge limits and to embrace a fundamental change in the relationship with the earth’s resources and fellow creatures is at the heart of the new thinking, together with a reassessment of what defines value in advanced western economies.

In other words, how should labour be valued? What constitutes well-being? How should wealth be distributed? Where and how should taxes be raised: on incomes and goods or on activities which damage the environment, such as the exploitation of natural resources? What value does a sense of communal cohesion have in a society? How should stability and decency and concern for others be quantified?

What is the measure of a healthy, sustainable society which minimises its impact on the environment?

The difference between growth and development is crucial. Unregulated growth in medical terms is accepted as malignant and potentially lethal: the invasive tumour, devouring the body’s healthy tissues, or the parasite, which proliferates at the expense of the host organism.

Economic growth has traditionally been accepted as being beyond limitation in that it will always provide more: more wealth; more goods; more progress; more jobs. The costs have been ignored in the race to the top of the economic heap.

Wealth creation in the free market universe which we now, by default, inhabit, relies on minimal regulation, a shrinking role for the state and the celebration of reckless risk-taking in the wilder shores of the finance industry, accompanied by prodigious rewards in pay and share options and pension arrangements - benefits beyond the reach of the bulk of the populace and having no relation to the social value of the transactions in question. Aggressive and competitive individualism has been disproportionately encouraged, with dire consequences for society and the environment.

The demands of business and progress and consumerism have fostered a greedy exploitation of natural resources; virtually all of nature’s assets have been commodified in accordance with the demands of market forces.” The market therefore represents only the surface of society … There is no probing into the depths of things, into the natural or social facts which lie behind them.” (Schumacher, 1974)

Globalisation has led to massive ebbs and flows in the movement of capital and people: the world is now under greater pressure than at any time in its history. Steady state theory evaluates the human economy in a different way; it relies on ecological economics – underpinned by sustainability, equity and efficiency. A steady state economy will acknowledge the limits set by the Second law of Thermodynamics and minimise the growth in entropy resulting from human demands on natural capital.

Classical economic theory rests on the notion that constant improvement in efficiency will result in economic growth without limits. The economy is seen as a system operating independently of the natural world.

The Second Law states that no process can achieve 100% efficiency and that entropy will increase irreversibly, as matter (ie natural capital) and energy are transformed by human activities. Waste, in the form of pollutants and expended materials will increase - even allowing for ingenious recycling methods. “All taken together, the entropy concept is relevant for Ecological Economics in various ways and on different levels of abstraction. It is essential for understanding to what extent resource and energy scarcity, nature’s capacity to assimilate human wastes and pollutants, as well as the irreversibility of transformation processes, constrain economic action.” (Baumgartner, 2003)

As per capita consumption and populations increase, human activities will approach barriers which cannot be surmounted: this challenge is now manifesting itself – climate change, resource depletion (oil, water, fertile land, forests) and species loss.

There are some predictable, but, inadequate responses now manifesting themselves: politicians, environmentalists and religious leaders are calling for urgent action to tackle climate change but no mention is made, except rarely, of population growth or the need to limit economic growth.

Furthermore, there is a prevailing assumption that technological expertise and innovation will allow for business as usual. The alternative is incomprehensible to many leaders, committed as they are to economic growth, religious dogma and human rights concerns.

As Professor Jackson writes: “With a growing (and ageing) population (recessionary) dangers are exacerbated. Higher levels of growth are required to provide … sufficient revenues for (increased) health and social costs.” The free market economy tends, by its nature, towards expansion or collapse: all too obvious in the UK at the time of writing.

How may an alternative, steady state-economic model be applied without a significant-and potentially lethal destabilisation of a densely populated society reliant on unsustainable economic growth?

It will be useful here to consider the formula produced by Ehrlich and Holdren some 40 years ago:

I = P x A x T
I - environmental impact;
P - total populati on;
A - affl uence or income level;
T - technology factor.

At the present time, ‘P’ is taken as a given, in that population growth is still, with a few enlightened exceptions, ‘off the radar’. Since the aim is to improve affluence for a constantly rising population and satisfy humanity’s aspirations, the only way in which human environmental impact -‘I’- may be reduced, is by constant reduction of the technology factor ‘T’. This would mean reducing carbon emissions to virtually zero to allow for projected increases in population and affluence.

Innovation will undoubtedly allow for increased efficiency and reduction of pollutants and emissions, but in the dominant model of endless economic growth, it is unlikely that reductions would be sufficient to minimise the impact of more people and rising incomes.

The transition to a steady state economy would seem to offer a viable alternative to an otherwise inconceivable future, but the process will not be easy and will need full commitment on the part of rulers and policy makers accompanied by informed acceptance from the public: a genuine and lasting consensus.

Economic shock absorbers would need to be in place to absorb the consequences of a far-reaching change in the way we do business: setting of limits; changing priorities for investment, taxation and expenditure; a new definition of social norms.

A change in work patterns and status, income distribution and the balance of power and influence between the state and private sectors will be called for. Rather than increasing labour productivity by increased working hours and efficiency savings, per capita working hours would be reduced and spread more equitably across a wider portion of the population: spreading of labour, rather than concentration.

Income distribution and wage differentials would be adjusted to reduce inequalities - which have been demonstrated in several recent studies to increase social malaise and anomie. (Wilkinson and Pickett , 2009; James, 2009)

“Inequality increases status competition and adds to the desire to consume. Inequalities determine the social environment.” (Wilkinson and Pickett , op cit)

Housing would become more mixed in that rented accommodation would become more plentiful and no longer viewed as the ‘poor relative’ of the privately-owned dwelling. This change would release many from the drive to buy their own homes, regardless of the costs involved and remove the stigma associated with rented homes.

Innovative investment in low carbon industries, in recycling and renewables would require long term investments with a necessarily important role for public finance. Creation of jobs in these sectors would provide employment with a positive environmental role: integrated public transport networks; protection of such resources as wetlands and national parks; pedestrianisation; energy saving conversions for buildings; community centres for learning and socialising; improved and integrated recycling schemes.

Redistribution through taxation and a shift from the taxing of ‘goods’ - incomes, to ‘bads’- reckless speculation, exploitation, pollution and waste.

A shift of emphasis within the banking industry - which has a lot of egg on its face at the time of writing - to a more responsible and sustainable model. Regulation of speculative ‘casino’ activities and an emphasis of responsible lending based on deposits held and matched by the obligatory holding of substantial reserves. The Triodos and Cooperative Banks abide by these principles and have been unaffected by the recent meltdown. Both invest heavily in socially and environmentally sound projects and are increasing their profit margins and customer numbers accordingly.

A viable and coherent population policy is also an essential component of the transition process. A steady state economy would be a stable but not staticentity; a flourishing population would of necessity be a stable one, which existed in harmony and balance with nature’s limits. Judging by the extent to which denial still persists in this area, much effort will be required to bring about a change in attitudes.

The conspicuous consumption which drives modern liberal economies will have to be replaced by a less driven and needy attitude to possessions and ‘stuff ’. Consumerism needs to be demoted. Built-in obsolescence, designer labels, ‘bigger and better’ and endless innovation and variety to be replaced by longer-lasting, more reliable goods and services available on rental or leasing terms and amenable to repair and servicing by trained experts. It is claimed that this change could provide a labour-intensive system which would not be reliant on endless growth to mitigate the risk of unemployment. Innovation and creativity would be fostered and encouraged but directed into environmentally and socially valuable areas of research and development.

A more inclusive and equitable society would, it is suggested, be less reliant for the provision of contentment on the consumption and indebtedness and competition which characterise laissez-faire economies.

Gross Domestic Product - GDP - would be replaced by a differing set of measures, indicative of a shift from a valuefree purely quantitative index to a more qualitative scheme, reflecting the social and ecological values which are absent from traditional measures of GDP.

The UK’s Sustainable Development Commission has suggested 3 indices for use as qualitative measures of a society’s overall health (Jackson et al 2007): societal wellbeing; environmental wellbeing; economic wellbeing.

Much work is being done to elaborate on these suggestions and to provide an acceptable alternative to GDP. As to the future success of these ideas, it is suggested that the Nordic countries, with their small and relatively stable and homogeneous populations, their affluence and their strong commitment to social democracy would be able to make the transition most effectively. They are also, because of their favourable location in Northern Europe, likely to be protected from the more deleterious effects of climate change.

The UK and the US, with their ballooning populations, ineffectual immigration policies and profoundly unequal societies, may not fare so well.

Nevertheless, much of the best and most progressive work on steady state economics and the unforeseen social and epidemiological consequences of inequality have been done in this country and the US. Mr Spock’s memorable phrase could be aptly applied to the steady state society: “Live long and prosper”.

REFERENCE SOURCES
A Steady-State Economy: Herman Daly; Sustainable Development Commission 2008
Prosperity Without Growth: Tim Jackson; Earthscan 2009
Affl uenza: Oliver James; Penguin 2007
Small is Beauti ful: E F Schumacher; Abacus 1974
Entropy: Stefan Baumgartner; 2003 PDF document
Living Well-Within Limits: Jackson et al; Sustainable Development Commission 2007
Hold Steady: Deborah Rich and Jason Mark; Earth Island Insti tute 2009
Debunking The Objecti ons To a Steady State Economy: Rob Dietz; the steady state blog CASSE November 2008
The Gods That Failed: Larry Elliott and Dan Atkinson; Vintage 2009
The Economics of Innocent Fraud: J K Galbraith; Penguin 2005
The Spirit Level: Richard Wilkinson and Kate Pickett ; Penguin 2009
Fantasy Island: Larry Elliott and Dan Atkinson; Constable 2007
Equality Trust Blogs: RSS feed from Google Reader 2009

Thank you to the Jackdaw an Optimum Population Trust Publication for this article from the www.optimumpopulation.org February 2010 Edition

Article originaly published here: http://www.ourfutureplanet.org/news/366-an-end-to-growthonomics-a-brief-...

wendyk