GLOBAL ECONOMICS.
Time for Alternative models?
Conservation. Environment. Sustainability. Steady State.
Profit. Resources. Exploitation. Exhaustion.
Reuse. Recycle. Post Growth. Stability. Use Less.
The World Economic Forum concluded its latest gathering in Davos, Jan 27 2013.
There seemed to be an increasing acceptance of the consequences of the exploitation of raw materials:
that resources like iron ore, coal, petroleum, timber, fish, will run out, soon, at current levels of consumption; that finished goods are consuming iron, steel, aluminium, copper, tin, rare earth metals, as well as plastics at rates that cannot be maintained.; that greater efforts should be made to reuse, and recycle, all products and reduce the system of exploiting raw materials, producing new products; that mass production and constant growth is leading to the destruction of the natural environment.
We know that we operate a capitalist system based on the private ownership of capital goods and the means of production, with the creation of goods and services for profit, capital accumulation, competitive markets, and price systems. [Wikipedia]
During the Forum in Davos the debate about conservation and sustainability and environmentalism, and its implications for global economics, had been stimulated by the arguments of a number of think-tanks such as the New Economics Foundation, the Ellen Macarthur Foundation, the Product-Life Institute, the Bio-Mimicry Institute, and the Centre for Steady State Economics, as well as the Post Growth Institute.
In a recent newsletter, The Post Growth Institute argued for
Transformative Research by Amelia Byrne.
She argued that if our assumptions aren’t true…most of us today have grown up surrounded by a culture that believes that the earth has an unlimited capacity to provide us with whatever we humans might desire – more cars, more electronic gadgets, cheap meat, and so on. Not only that, but we have organized the way that our society works around this belief. The global economy, to which most of our livelihoods are tied, is based on the assumption that endless economic growth (which usually equals an increase in resource use and environmental degradation) is not only possible, but also desirable and even necessary. This kind of thinking has led us to think that unlimited capacity is more likely than peak supplies.
What if these fundamental assumptions of our society – endless growth, and endless resources – aren’t actually true? It seems more and more apparent that continual economic growth is not only not possible, but that we in fact must “de-grow” (use less) in order to bring our activities in line with planetary realities. This is a daunting thought because how we currently make our livings, and therefore provide food and shelter for our families, is often reliant on the economic growth model.
Sometimes this reliance is literal, primary – for example, owning a business that sells luxury goods: the business prospers the more you sell and does better when people have extra money to spend as a result of economic growth or higher credit limits.
This dependency on the growth model can also be secondary. For example, working for a company, an institution or clients that see the world from within the economic growth paradigm. In this case, one’s job, funding or income is dependent on the fact that you continue to do your work in a way that promotes, or at least doesn’t threaten this fundamental faith.
Turning our minds to the task. As an (applied) researcher Amelia Byrne falls into that second category. Presently many researchers are not officially supported in the work they do that is outside of (and challenging to) the economic growth paradigm. Participating in such research can be threatening to one’s career, whether one works in the corporate world, the non-profit sector, or even the academic one. What’s more, the financial underpinning of the modern university often depends on economic growth. Endowment investments are based on a growing economy. And, as governments throughout the world are attempting to reduce expenditures in light of tough economic times, publicly funded research money is cut. This further narrows the scope of research, since research funding becomes increasingly dependent on the private sector.
But, what if this wasn’t the case? What if researchers were in fact supported and publicly encouraged to address the great challenges we face?
This possibility isn’t unthinkable. Bill McKibben, for example, writes about Cuba which was forced away from industrial farming in the early 1990s with the fall of the Soviet Union — their source of cheap oil. Cuba was able to transition to more-or-less local, organic agriculture in part because of the fact that the country’s best scientists and researchers started focusing their work on how this could be done, and done better. So, McKibben points to the question: what if research money in the United States started to be put into organic agriculture research rather than industrial agriculture methods as has been the case for the last decades?
Or more generally, what if researchers, in many different disciplines, started putting their energy into addressing
post-growth/de-growth questions rather than doing research that supports the growth paradigm? Where this has happened, there have been attempts to render ‘post - growth’ more acceptable .
The different pressure groups and think-tanks that offer critiques of the current capitalist economic system have presented concepts of de-growth and environmentalism under different names. For example, the Ellen Macarthur Foundation at Davos talked about the ‘circular economy’: An opportunity to rethink our economic future
The Ellen MacArthur Foundation report on the Economics of a Circular Economy invites readers to imagine an economy in which today’s goods are tomorrow’s resources, forming a virtuous cycle that fosters prosperity in a world of finite resources.
This change in perspective is important if we are to address many of today’s fundamental challenges. Traditional linear consumption patterns (‘take-make-dispose’) are coming up against constraints on the availability of resources. The challenges on the resource side are compounded by rising demand from the world’s growing population. As a result, we are observing unsustainable overuse of resources, higher price levels, and more volatility in many markets.
As part of their strategy for Europe 2020, the European Commission has chosen to respond to these challenges by moving to a more restorative economic system that drives substantial and lasting improvements of our resource productivity. It is our choice how, and how fast, we want to manage this inevitable transition. Good policy offers short- and long-term economic, social, and environmental benefits. But success in increasing our overall resilience ultimately depends on the private sector’s ability to adopt and profitably develop the relevant new business models.
The Ellen MacArthur Foundation’s report paints a clear picture: our linear ‘take-make-dispose’ approach is leading to scarcity, volatility, and pricing levels that are unaffordable for our economy’s manufacturing base.
As a compelling response to these challenges, the report advocates the adoption of the circular economy, and provides an array of case examples, a solid framework, and a few guiding principles for doing so. Through analysis of a number of specific examples, the research also highlights immediate and relatively easy-to-implement opportunities. On the basis of current technologies and trends, it derives an estimate of the net material cost saving benefits of adopting a more restorative approach—more than $ 600 billion p.a. by 2025, net of material costs incurred during reverse-cycle activities. The corresponding shift towards buying and selling ‘performance’ and designing products for regeneration should also spur positive secondary effects such as a wave of innovations and employment in growth sectors of the economy, whilst increasing Europe’s competitiveness in the global marketplace. Many business leaders believe the innovation challenge of the century will be to foster prosperity in a world of finite resources. Coming up with answers to this challenge will create competitive advantage.
While The Foundation’s first report has taken a European perspective, its lessons are relevant at a global level. It will not be possible for developing economies to share the developed world’s level of living standards and provide for future generations unless we dramatically change the way we run our global economy.
The Foundation’s report offers a fresh perspective on what a transition path to a circular economy at global scale could look like. It is time to ‘mainstream’ the circular economy as a credible, powerful, and lasting answer to our current and future growth and resource challenges.
New Economics Foundation, and the Centre for the Advancement of the Steady State Economy,[CASSE] promote the concept of the ‘Steady State Economy’.
The
“steady state economy” originated from ecological economics, most notably the work of
Herman Daly. The steady state economy is often discussed in the context of
economic growth and the impacts of economic growth on ecological integrity, environmental protection, and economic sustainability.
Economic growth is generally indicated by increasing gross domestic product (GDP). Economic growth entails increasing
population x per capita consumption, higher throughput of materials and
energy, and a growing
ecological footprint.
The size of an economy may undergo one of two trends:
growth or recession. Otherwise it is stable, in which case it is a “steady state economy.”
Therefore, “steady state economy” connotes constant populations of people (and, therefore, “stocks” of labor) and constant stocks of capital. It also has a constant rate of throughput; i.e.,
energy and materials used to produce goods and services.
Within a given technological framework these constant stocks will yield constant flows of goods and services. Technological progress may yield a more efficient “digestion” of throughput, resulting in the production of more (or more highly valued) goods and services. Conflicts with ecological integrity and environmental protection occur long before a steady state economy is maximized.
Neither
economic growth nor economic recession
are sustainable; therefore, the steady state economy remains the only sustainable prospect and the appropriate policy goal for the sake of sustainability.
Rules for a Steady State Economy
Good economic policies strive to achieve societal goals like sustainability and fairness with the least amount of impingement on individual freedoms. Following this principle, achieving a steady state economy requires adherence to only four basic rules or system principles that are hard to argue with:
(1) Maintain the health of ecosystems and the life-support services they provide.
(2) Extract renewable resources like fish and timber at a rate no faster than they can be regenerated.
(3) Consume non-renewable resources like fossil fuels and minerals at a rate no faster than they can be replaced by the discovery of renewable substitutes.
(4) Deposit wastes in the environment at a rate no faster than they can be safely assimilated.
Friends of the Earth want to identify a ‘green economy’, and develop a ‘sustainable economy’.
. As an organization, it wants to fight the oppression and exploitation of native communities, and work for systemic changes that make the polluters pay, and end all subsidies for polluting industries such as coal and iron mining, oil drilling, or fracking, chemical manufacture of pesticides and herbicides. It promotes a cleaner, low carbon economy, encouraging investment in clean alternatives. At the moment, Friends of the Earth is running a campaign to force corporations such as Samsung and Apple, that make electronic goods, to admit how many rare earth minerals they use, and acknowledge how they destroy sensitive environments, as in Indonesia. For example, Smartphones sold by best-selling brands almost certainly contain tin from Indonesia where mining is devastating forests and farmland, coral reefs and many communities, a Friends of the Earth investigation reveals today, Jan 2013. Our research shows that Samsung and Apple deal with companies that use tin mined on Bangka island in Indonesia. They may not have known this, nor about the devastating effect of mining on the island. Tin is used as solder in all phones and electronic gadgets. Around a third of the world's tin comes from Bangka and neighbouring island Belitung.
· Dangerous and unregulated tin mining on Bangka
Police figures show that in 2011 an average of one miner a week died in an accident: that is, more than 52 miners a year.
· Coral and sea life threatened
Silt from tin mining is killing seagrass eaten by turtles, and coral reefs, driving away fish and ruining fishermen's livelihoods.
· Farmers struggling to grow crops
Soil has become acidic after the destruction of forests for tin mining.
When we asked Samsung and Apple if they used tin from Bangka, they neither confirmed nor denied it.
Friends of the Earth's Executive Director Andy Atkins said: "Though Apple and Samsung may not have realised it, our research shows that mining tin to make both companies' smartphones may come at a terrible cost to people and the environment."
Samsung sold around 95 million smartphones in 2011, and Apple around 93 million. Analysts say there are likely to be more than 2 billion smartphones in use within the next 3 years. Experts say that innovative design and better reuse of old phones could cut demand for tin.
Of course, whatever is said at any World Economic Forum gatherings, the principal corporations such as Shell, Esso, BP, Walmart, Toyota, Volkswagen, Glencore, Apple, Samsung, Ford, General Electric, operate within a ‘capitalist economy’ based on annual growth, designed for mass production with low labour costs and economies of scale, generating maximum profits.
This growth business model provides for the accumulation of wealth by an elite, [11 million people] and the poverty of the majority [6.9 billion people]. The capitalist system that has operated for hundreds of years has meant that poverty is normal, and that growth benefits only the owners of capital [based on findings of World Wealth Reports].
DIFFERENT CONCEPTS OF 'ECONOMY':
Different versions of economic development are all based on different notions of environmentalism, expressing the need to conserve and preserve the environment and the biosphere, while at the same time maintaining profit levels.
As we have already considered, the latest version, a circular economy, explores the possibilities of designing production and industry and products so that they are reusable with limited waste. Growth is no longer the key to development. The key is a ‘steady state’ in which products are designed to maintain production levels, and conserve the environment.
Circular Economy: an industrial economy that is, by design and intention, restorative and in which material flows are biological nutrients designed to re-enter the biosphere safely, and technical materials which are designed to circulate at high quality without entering the biosphere; an economy in which today’s goods are tomorrow’s resources, forming a virtuous cycle that fosters prosperity in a world of finite resources.
Ecological economy is based on the interdependence and evolution of human economies and natural ecosystems over time and space. This model treats the economy as a sub-system , proposing to preserve natural capital.
Environmental economics
This approach undertakes theoretical and empirical studies of the economic effects of national and local environmental policies around the world
The Green Economy is one that results in improved human wellbeing and social equity, reducing environmental risks and ecological scarcities.
Sustainable Development
A mode of human development in which resource use aims to meet human needs, and preserve the environment so that these needs can be met now, and in the future.
The Brundtland Commission said: development that meets the need of the present without compromising the ability of future generations to meet their own needs.
Some politicians will argue that these different economic models will require government legislation and regulation.
Global Socialism may be necessary: it is a system of social ownership of the means of production and cooperative management of the economy with common ownership , and state ownership This definition assumes that officers of government will ‘look after’ the environment, and not destroy it. But this assumption is not always wise! There are instances, as in Brazil recently in which Governments have been directly involved in selling forestry and farmlands to the oil companies or other multi-national corporations.
The International Cooperative Alliance thinks that the future lies with a ‘cooperative economy’.
Their alternative approach is cooperative economics. A cooperative is a company owned and democratically controlled by its members. Its members can be producers, or consumers or employees of its products and services [ http://ica.coop].
1. Co-operative societies must have an open and voluntary membership. According to the ICA's Statement on the Co-operative Identity, "Co-operatives are voluntary organisations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination."
Anti-discrimination : to discriminate socially is to make a distinction between people on the basis of class or category. Examples of social discrimination include racial, religious, sexual, sexual orientation, disability and ethnic discrimination. A Co-operative society should not prevent anyone willing to participate from doing so on any of these grounds. However, this does not prohibit the co-operative from setting ground rules for membership, such as residing in a specific geographic area or payment of a membership fee to join, so long as all persons meeting such criteria are able to participate if they so choose.
Motivations and rewards
Given the voluntary nature of co-operatives, it requires a motivation to encourage people to participate. Each person's motivations will be unique, and will vary from one co-operative to another, but will often be a combination of the following:
F
inancial - Some co-operatives are able to provide members with financial benefits.
- Quality of life – serving the community through a co-operative because doing service makes one's own life better - is perhaps the most significant motivation for volunteering. Included here would be the benefits people get from being with other people, staying active, and above all having a sense of the value of ourselves in society that may not be as clear in other areas of life.
- Giving Back – many people have in some way benefited from the work of a co-operative, or more generally, and volunteer to give back.
- Altruism – volunteering for the benefit of others.
- A sense of duty – some see participation in community as a responsibility that comes with citizenship – in this case they may not describe themselves as volunteers
- Career Experience - Volunteering offers experiences that can add to career prospects.
2. Democratic member control Co-operative societies must have democratic member control. “Co-operatives are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary co-operatives, members have equal voting rights (one member, one vote) and co-operatives at other levels are also organised in a democratic manner.”
3. Member economic participation is one of the defining features of co-operative societies. Co-operatives are enterprises in which “Members contribute equitably to, and democratically control, the capital of their co-operative. At least part of that capital is usually the common property of the co-operative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing their co-operative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the co-operative; and supporting other activities approved by the membership.” This enshrines democratic control over the co-operative, and how its capital is used.
Limitations on member compensation and appropriate use of surpluses Unlike for profit corporations, co-operatives are a form of social enterprise. Given this, there are at least three purposes for which surplus funds can be used, or distributed, by a Co-operative.
- “Members usually receive limited compensation, if any, on capital subscribed as a condition of membership.”
- “Developing their co-operative, possibly by setting up reserves, part of which at least would be indivisible;” in other words, the surplus can be reinvested in the co-operative.
- Benefiting members in proportion to their transactions with the co-operative;” for example, a Consumers' Co-operative may decide to pay dividends based on purchases (or a 'divvi').
- “Supporting other activities approved by the membership.”
4. Autonomy and independence Co-operative societies must be autonomous and independent. According to the ICA's Statement on the Co-operative Identity, “Co-operatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organizations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their co-operative autonomy.”
5. Education, training, and information
The fifth principle states that co-operative societies must provide education and training to their members and the public. “Co-operatives provide education and training for their members, elected representatives, managers and employees so they can contribute effectively to the development of their co-operatives. They inform the general public – particularly young people and opinion leaders – about the nature and benefits of co-operation.”
6. Cooperation among cooperatives
The sixth principle states that co-operatives cooperate with each other. “Co-operatives serve their members most effectively and strengthen the co-operative movement by working together through local, national, regional and international structures.”
7. Concern for community
The seventh principle states that co-operative societies must have concern for their communities. “Co-operatives work for the sustainable development of their communities through policies approved by their members.”
Whatever approach you take, the destruction of the natural materials must stop; along with the emission of green house gases. If they are not stopped, the natural environment will be exhausted, and polluted, and climate change will continue.
Herman Daly declares that in place of the growth economy he would put a steady-state economy.
At the moment, we are subject to growth mania - literally not counting the costs of growth. One of the most popular arguments against limiting growth is that we need more growth in order to be rich enough to afford the costs of cleaning up pollution and discovering new resources. Economist Neil Jacoby says, "A rising GNP will enable the nation more easily to bear the costs of eliminating pollution" (1970, p. 42). Yale economist Henry Wallich makes a similar point: The environment will also be better taken care of if the economy grows.
Kenneth Boulding has for many years been making the point that Gross National Product is largely Gross National Cost, and has never been taken seriously.
But most advocates of the steady state accept and proclaim the absolute necessity of limits to inequality in the distribution of both wealth and income. Indeed, many people who have long favored less inequality in the distribution of wealth on ethical and political grounds have reached the same conclusion on ecological grounds. As Wallich so bluntly put it in defending growth, "Growth is a substitute for equality of income. So long as there is growth there is hope, and that makes large income differentials tolerable" (1972). We are addicted to growth because we are addicted to large inequalities in income and wealth.
These inequalities result in the control of finances and investments by a significant minority of 1225 billionaires, supported by
11 million $millionaires.
Unfortunately, this means that the revision of global economies, and the development of alternatives may well be mediated by those whose vested interests are in the capitalist system!
Sources
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Daly, Herman. 1991. Steady-State Economics. Island Press, Washington, DC. 286pp.
Daly, Herman and Joshua Farley. 2003. Ecological Economics: Principles and Applications. Island Press, Washington, DC. 450pp.
Mill, John Stuart. 1909. Principles of Political Economy. William J. Ashley. Library of Economics and Liberty.
Daly, Herman. 2005. “Economics in a Full World.” Scientific American, September 2005,100-107.
Global Footprint Network. 2009. Data and Results Website. http://www.footprintnetwork.org.
McKibben, Bill. 2007. Deep Economy: The Wealth of Communities and the Durable Future.
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