TOPICAL ISSUES

     
  A steady State economy  


A STEADY STATE ECONOMY
On 19th June 2010 in Leeds, UK, the Center for the Advancement of the Steady State Economy (CASSE) and Economic Justice for All organised a conference with the title Enough is Enough. The conference and the report that followed was highly relevant to the philosophy of FIOH and not only outlined the failings of the current economic growth approach to development, but also presented implemental policies for an alternative Steady State Economy.
Keynote speakers at the conference included:
· Peter Victor - Professor in Environmental Studies, York University (Canada)
· Tim Jackson - Professor of Sustainable Development, University of Surrey
· Andrew Simms - Policy Director, NEF (the New Economics Foundation)
· Dan O'Neill - European Director, CASSE

The main proposals in this report come from the conference's ten interactive workshops, which explored specific areas where change is needed to achieve a steady state economy. Workshop speakers included Kate Pickett (co-author of The Spirit Level), Franny Armstrong (Director of The Age of Stupid), Roger Martin (Chair of the Optimum Population Trust), Molly Scott Cato (Economics Speaker for the Green Party), David Fell (Director at Brook Lyndhurst), and many others.
The need for steady state economies (no economic growth) is based on the premise that unlimited economic growth is not possible on a finite planet. All of the inputs to the economy come from the environment and all of the wastes produced by it return to the environment. As the economy grows it requires more resources and discharges more wastes. The accelerating scale of growth is illustrated by the fact that between 1900 and 2005, world economic output increased by a factor of 24, from $2 trillion to $47 trillion and yet 2.7 billion people live on less than $2 per day. Someone is profiting from global economic growth, but it's not the world's poor.
Resources like forests and fish are being harvested faster than they can regenerate and wastes like carbon dioxide are produced faster than they can be absorbed. The result is the steady erosion of the stock of natural resources and the supply of ecosystem services upon which our economies and societies ultimately depend.

Even in a rich country like the UK it is becoming clear that continuously increasing consumption of goods and services is (a) not environmentally sustainable and (b) not improving peoples lives. However, although the limits to growth may be increasingly accepted by the general public they may not be able to support the idea of steady state economies unless there are clear policies in place defining the implications of a change from the present system. A detailed system will be required to measure not only the material throughput of the economy, but also its the social and environmental consequences.

Any new resource use policy would need to apply reducing caps on essential ecological resources and life support systems so that all members of society receive a fair share of the available supplies. This approach should also apply to the essential need to reduce carbon emissions. One such scheme named Cap and Share offers a simple way of achieving both of these objectives and is described in the campaigns section of this web site.
One of the workshops at the conference presented this scheme and the general feeling was that such schemes were likely to be the most effective policy tool for many natural resources.

Each individual in the scheme effectively owns a share of the given resource and receives payment from the sale of permits to producers wishing to generate value from the resource. This shared income compensates individuals for the increased prices that result from limiting the supply of the resource. Although cap and share schemes have many benefits, they would still need to be accompanied by "citizen level" indicators and public education if they are to generate increased understanding of material throughput and the sustainable consumption of natural resources.

The Diminishing Social Returns of Economic Growth
While economic output per capita has more than tripled in countries like the UK and U.S. since 1950, data from surveys of life satisfaction reveal that people have not become any happier. Data compiled across multiple countries suggest that once people's basic needs are met and they have enough goods and services, economic growth fails to improve people's well-being.

The Desirable Alternative to Economic Growth
The challenge then is to figure out how to sustain economies that already have enough goods and services, without relying on consumption growth.
A steady state economy represents a positive alternative. It is an economy that aims to maintain a stable level of resource consumption and a stable population. It is an economy where energy and resource use are reduced to levels that are within ecological limits, and where the goal of maximising economic output is replaced by the goal of maximising quality of life.

Population
All else being equal, the total resource use of a country will increase when either the number of people living in the country increases, or the amount that each of these people consumes increases. To achieve a steady state economy, it is therefore necessary to stabilise - not just per capita resource use - but also population numbers. We need smaller footprints, but we also need fewer feet. Government should promote incentives to limit family size to two or fewer children.
To stabilise population globally, the UK should support policies that provide education, access to birth control, and equal rights for women everywhere. There are roughly 80 million unplanned pregnancies per year worldwide - a number that is almost equal to annual global population growth. If access to family planning could be provided to all women worldwide, this single step would go a long way towards stabilising global population.

Inequality
The richest tenth of the UK population now earns 14 times more than the poorest tenth. Such high levels of income inequality are associated with a variety of health and social problems, including decreased trust, increased mental illness, and higher crime rates. Policies that directly address inequality are required to alleviate these problems, especially in a non-growing economy.
Policies that promote employee ownership, co-operatives, and other models of democratic control should be pursued to reduce inequality over the long term. Such models allow people to determine wages and salary differentials for themselves, and thus move towards a steady state democracy.
Progressive taxation and generous social programmes may also help to reduce inequality and eliminate poverty, particularly in the short term. A citizen's income would fight poverty by providing an unconditional, automatic payment to every individual as a right of citizenship. A maximum pay differential would reduce
inequality by limiting the income of the highest paid employee in an organisation to a certain multiple of the lowest paid employee.

Monetary reform
Almost all of the money in circulation in the UK is created by private banks in the form of interest-bearing loans. Banks are able to create money because they can issue loans far in excess of their deposits. This debt-based monetary system drives four things: (1) economic growth, as the need to pay back an increasing amount of debt requires an increasing amount of economic activity, (2) inflation, as the money supply tends to increase faster than the volume of goods and services produced, (3) instability, because if the banks stop lending, the economic system collapses, and (4) inequality between countries, as the currencies of a small number of nations have become the dominant "reserve currencies" around the world. If the economy is to be stabilised, then the money supply must be as well.
Private banks should be prohibited from creating money out of thin air, and control of the money supply - a public resource - should be transferred to a public authority such as the Bank of England. This public authority should decide the amount of money necessary to facilitate exchange in the economy, create it debt- free, and transfer it to the government to spend into existence. To prevent inflation, government taxation and expenditure should be linked to the system of money creation. At the same time, communities should be encouraged to create their own currencies to support local economic activity, and the UK should promote and participate in a global negotiation to create a neutral international currency to replace the reserve currencies in use today.

Measuring progress
The main economic indicator in use today is gross domestic product (GDP). GDP is a good measure of economic activity - of money changing hands - but a poor measure of progress or well-being. It lumps desirable expenditures (e.g. spending on food, entertainment, or investment in education) with undesirable expenditures (e.g. the costs of war, crime, pollution, and family breakdown). New indicators that do a better job of tracking what we truly care about are required.
A new system of indicators should be created that separates ends (i.e. goals) from means (i.e. the way to achieve these goals). The key goal to strive towards in a steady state economy would be sustainable and equitable human well-being, instead of GDP growth.

Employment
In a steady state economy, it would not be possible to increase production and consumption if this resulted in an increase in resource use and waste emissions. All else being equal, with less production, there would be less work to be done in the economy, which would result in rising unemployment unless new policies were adopted to prevent this from happening.
Instead of using technological progress to produce more goods and services (as we tend to do today) we should use it to increase leisure time by gradually shortening the paid working day, week, year, and career. Individuals should be given the freedom to adjust their working patterns to their preferences, while support and incentives should be offered to encourage an overall reduction in working time. The gradual reduction of working time would help keep unemployment low by distributing available work more equally.

If unemployment were still a concern the government could act as "employer of last resort", and guarantee jobs in the same way that it guarantees primary education and medical care. A guaranteed jobs policy would provide incomes to those unable to find employment, allow useful public works to be completed at relatively low cost, and relieve the social and psychological problems that arise when people want to work but are unable to find a job.

New forms of business and production
Conventional businesses strive to increase financial profits by reducing costs and competing for market share. The pursuit of ever-increasing profits drives firms to boost production, which increases resource use. Investors tend to put their money into expanding sectors of the economy, encouraging even more growth. This business-as-usual approach cannot continue. Firms, with the support of government, must adapt in order to operate within ecological limits.
Instead of attempting to maximise and continually grow profits, firms should aim to achieve "right-size profits". A firm's total revenue should be large enough to allow it to be financially viable (i.e. to meet capital costs), but not so large as to
cause environmental damage. An individual firm would require two new pieces of information to determine whether it was achieving right-size profits: (1) a measure of its total ecological impact, and (2) an ecological allowance to compare this impact to. This information would help businesses rescale their level of economic activity to be sustainable.
A steady state economy will also require a shift towards alternative forms of business organisation such as co-operatives, foundations, and community interest companies. These organisational forms are not pre-occupied by growth in the same way as profit-maximising shareholder corporations. The primary goal of community interest companies, for example, is to achieve a socially beneficial aim; financial profit is a secondary motive. Policy makers should encourage these alternative forms of business by (1) making it simpler to set up (or change to) these forms, and (2) by taxing away excess profits in shareholder corporations.

Global cooperation
Global resource use is already at an unsustainably high level. Yet many nations need to increase their consumption of resources to alleviate poverty and allow people to meet their basic needs. These nations stand in stark contrast to wealthy countries like the UK where the benefits of growth have already been realised. The UK and other wealthy countries must stabilise, or reduce, their economies in order to provide the ecological space needed for poorer nations to grow.
Problems could arise if some nations make the transition to a steady state economy, while others are still pursuing growth. Wealthy, non-growing economies and developing, expanding economies must therefore work together on the specific mechanisms that will allow them to co-exist and co-develop in a mutually supportive, fair, and flourishing manner.
International organisations such as the United Nations, World Bank, International Monetary Fund, and World Trade Organisation should be democratised so that they represent the interests of the majority of people on the planet. Wealthy nations should promote technology transfers to developing nations, to eliminate the harmful dependency of the South on the North.
Where practical, goods and services should be produced locally. Tariffs should be used to protect industries in steady state economies from competition with industries in countries where environmental and social costs are not being internalised. The revenue from these tariffs could be used for international aid to developing countries, in particular to help them develop in less materially intensive ways. Capital controls, and minimum residency times for foreign investment, could be used to prevent capital flight if this were a problem.

Consumer behaviour
The social norm of consumerism, which values "consuming" over "doing", "being", or "producing", dominates society. This dominance is problematic for several reasons: (1) consumerism requires that people forever consume more, which is not possible on a finite planet; (2) happiness derived from consumption is transitory; no matter how much individuals consume, they never achieve fulfilment; and (3) consumerism creates and reinforces systemic inequalities. The challenge for a steady state economy is to create a new social norm in which the vast majority of citizens routinely choose enough instead of more.

The shift towards a "mass behaviour of enoughness" will require the rapid diffusion of new values through the multiple networks that make up society. Some actions that could help change behaviours include: recruiting influential individuals as agents of change, supporting organisations with objectives that challenge or contradict consumerism, promoting the benefits of non-materialistic lifestyles, creating the infrastructure to allow new forms of corporate and civic entities to emerge, and overcoming resistance from large corporations and the state.
There is an implied acceptance across most of society that the self-seeking, individualistic values that form the backdrop to consumerism are reasonable and necessary. This acceptance needs to be reversed. Ordinary people can set a positive example by living values that reject consumerism. Motivation is also key to achieving behavioural change. Consumerism only appeals to some of the core human motivations (i.e. hedonism, status, and achievement). Values such as sharing, cooperation, fellowship and compassion are also powerful sources of motivation, and it is crucial to tap into these.

Engaging Politicians and the Media
Substantial academic research indicates that economic growth cannot and should not remain the policy goal of wealthy nations, and yet politicians and the media rarely discuss this viewpoint or the potential of the steady state alternative. In order to build an inspiring movement aimed at achieving a steady state economy, politicians and the media must end their silence on the alternative to perpetual economic growth.
New forums should be identified (or created) to engage decision makers and opinion influencers in an active debate about the problems of growth and potential economic solutions. There are many places where limits to growth are already recognised or discussed in policy (e.g. green belts, rejection of "predict and provide" road policy, carbon budgets, etc.). Expanding the dialogue in these forums could help bring steady state economics into the mainstream.
There is also a need for more rigorous modelling and elaboration of how a steady state economy would work in practice, and how ecological limits can be reflected and respected in policy. Agreement should be sought among leading business schools and economics departments to include compulsory coverage, within degree courses, of the different views concerning sustainability and the limits to growth.
Finally, steady state economics needs a more public and accessible image, as well as a new name that resonates with the public. The production of an independent film that takes people on an emotional journey could be a powerful way to break into the public consciousness.
The above notes are a summary of some of the lectures presented at the Leeds conference, but in order to gain a full understanding of all the issues it is necessary to read the full report.

Please read the full report, and watch the keynote presentations

 

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