circular economy economics growth

Four post growth philosophies

I’ve written plenty about my scepticism of GDP growth and our need for a more holistic economics. Unfortunately, there isn’t a sustainable alternative ready to go. (For those of you thinking it, that includes communism too – communism has been just as obsessed with maximising production as the capitalism.) There are some ideas however.

I tend to write about ‘post growth’ economics as a catch-all, a general term for whatever comes next, but there are several different ideas or streams of thought under the postgrowth umbrella. Here are four of them.

Steady State Economy
The best known alternative to growth economics is the ‘steady state’ school of thought, with Herman Daly as its chief architect. The defining characteristic of a steady state economy is that it is on a level, where the amount of material consumption stays the same. It is the material inputs that are capped here, rather than economic activity per se, so there is still room for innovation within the economy. It exists in a state of ‘dynamic equilibrium’ rather than being somehow frozen in time.

The steady state economy is an old idea, and it predates our current understanding of sustainability. Economists such as Adam Smith imagined a future economy that had finally met everyone’s needs. As traditionally conceived, the steady state is the natural end state of a successful economy. For more, see the Centre for the Advancement of the Steady State Economy (CASSE).

Degrowth
A slightly more radical approach, popularised by Serge Latouche and other (mainly European) theorists, is that of degrowth. Rather than guiding the economy onto a growth plateau, Degrowth proponents argue that if we overconsume at present, the economy needs to be dramatically downsized. Currently that’s disastrous, so degrowth is all about planning and managing contraction, designing an economy that can be scaled down in a controlled way.

Degrowth fits together rather nicely with the steady state economy, and more recent explorations of the steady state idea incorporate a degree of ‘degrowth’ too. You could see the steady state as the end goal, and degrowth as the path to it. For more on this, see degrowth.org or DeMagazine.

The Circular Economy
The Circular Economy is an idea being explored by the Ellen MacArthur Foundation, which advocates a revolution in the design of our industry. Almost all industry works on the basis of taking resources, making something, and selling it to be used and thrown away at the end of its lifecycle. In a circular economy, design would form a loop, so that all waste was accounted for and put to good use – ‘cradle to cradle’ rather than ‘cradle to grave’. Our designed objects would have multiple life cycles, our resources used and reused. We’d have a different relationship to our things in such an economy. We’d be more concerned with access to stuff than owning it outright, and there would be more leasing and sharing.

 The Circular Economy isn’t particularly critical of growth, and proponents of it might be concerned to find themselves on my list. Nonetheless, if the steady state is the destination and degrowth is the road, the circular economy is the way industry will travel. See the Ellen MacArthur Foundation for more.

The sufficiency economy
An alternative vision for a sustainable economy is the ‘sufficiency economy’, which aims for ‘enough, for everyone, forever’. The focus here is on sustainably providing a decent standard of living for everyone. If everyone has what they need, whether or not there’s further growth is irrelevant. Qualitative improvement, through leisure, art or sport, would be the eventual aim rather than quantitative growth. Championed by the Simplicity Institute, the sufficiency economy implies a much simpler and more localised way of life.

It also suggests that there will be no orderly transition from our current system to something more sustainable. The sufficiency economy is something that will emerge from what remains of it when it collapses, although we can start building pockets of resilience now. See the Simplicity Institute for more.

As far as I’m concerned, there’s no need to pick and choose between these general schools of thought. I personally think that we need to degrow towards a steady state economy, and that the circular economy is one of the ways to do that. The sufficiency economy is a genuine alternative and may turn out to be a more realistic scenario if our record on global cooperation is anything to go by.

For now, it remains an emerging debate and I’ll continue to write under the general term ‘Postgrowth’.

13 comments

  1. The problem with steady state, and especially with degrowth is that they are planned. History has a very poor record for economic planning of any-type. Who makes the decisions and why is only the first problem (its a rule of thumb that those who propose major changes to society want to be the ones doing the ordering, no the ones ordered about). The impossibility of anyone having enough knowledge is the real killer for planning.

    We could just have hit a wall and will clunk along, no need for people who want to reorder everyone else (which is what I see in lots of these ideas). A pessimistic view is found here: http://www.tullettprebon.com/Documents/strategyinsights/TPSI_009_Perfect_Storm_009.pdf

    1. This is the popular wisdom, but I don’t think history supports it. Of course history is littered with failed big ideas, but there are plenty of big ones that worked too. There’s loads of successful planning going on behind the rise of China or Singapore, Brazil or Russia, all pursuing a deliberate strategy to open specific markets and expand in different areas.

      It’s what we’ve done too in the past. We’re just cynical about it because we’re the victims of bad planning, from the deregulation of finance under Thatcher to Brown et al holding down interest rates during the boom years and flooding the economy with cheap money.

      It’s a myth that you can’t plan or draw up boundaries for an economy, as Ha Joon Chang has explored: http://makewealthhistory.org/2011/09/06/the-myth-of-the-free-market/

      It’s just about where those boundaries are, and we’re more able to guide the economy towards sustainability than you think.

      1. The degree to which planning works, it only works for catch up growth, when there is a successful model to follow. It doesn’t work for countries at the technological and economic frontier. It is easy for China to see what has worked for the West and what markets are available to supply. It doesn’t work for fully developed countries since we don’t know what the next big thing is. In 1980 a planner wouldn’t have predicted the PC revolution, in 1990 a planner wouldn’t have foreseen the internet.

        Now I suppose given planning’s failure to grow developed economies you could plan a no-growth economy just by planning full stop. The trouble is that you may kill growth but you won’t get those other things you want. The reason being that planners never can have enough and timely enough information to make the right decisions, especially compared to the free market which is fantastically good at processing the billions of bits of information about products and supply and the likes and wants of people.

        Te idea that Russian planning is successful if very amusing. Putting aside the total failure of Soviet planning, can you point me to any successful recent Russian planning?

        1. I refer to Russia because it’s an interesting case – and I’m talking about modern Russia, not Soviet era planning. In 1991 Russia opened its markets, and the effect was immediate: complete economic collapse. Not a very good demonstration of your idea of letting the market decide everything.

          What got Russia growing again was a deliberate plan to re-industrialise and wrestle back control of oil and gas assets. I don’t approve of their methods and there are massive problems with Putin’s leadership style, but as far as economic planning goes, it worked. The economy grew by 7% a year throughout the 00s.

          The key is to let the market do what markets do best, and let other players do what the market can’t. The market can’t provide social care or end poverty, for example.

          In no way am I advocating some centrally planned economy – but what a postgrowth economy would need to do is set some new conditions for markets to work within. It would need to price in negative environmental effects, set caps on CO2 emissions for example. You set the parameters, and then let the market do it’s thing.

          That’s what we do already, by the way. We set boundaries that the market operates in and then police them, without seeking to micromanage what happens within that space. Take the labour market – there’s a minimum wage, you can’t employ children, there are border controls and a retirement age, etc. Within the established boundaries, the market then sets its values on time and expertise according to its own movements.

          That’s the kind of thing we’re talking about – new boundaries on energy and materials use. Those that innovate best within that new framework will grow and succeed, just as they do now.

          1. I think the 1998 default and the bull run of the commodities market, especially oil are what raised Russia’s economy, not Putin’s grab for control of the oil & gas market. If anything that slowed the recovery as it holds back investment.

            Fine to price in externalities but most of the philosophies you outline above are more proscriptive, setting arbitrary levels of consumption. Power to those who think they know best, but don’t.

  2. I’d say degrowth is the only one that’s seriously proscriptive, because it calls for growth to be actively curbed. Even there, it’s not attempting to micromanage the economy. A degrowth or steady state economy still relies on innovation and efficiency in business to get where it wants to be.

    And when caps are in place, they’re not arbitrary. You start with where you are and scale back in percentage terms, you don’t pluck a number from the air and declare that to be the sustainable level everyone needs to achieve overnight.

    1. Oh, and thanks for the Tullett Prebon link, by the way. I’m working on a short series on why I think postgrowth is inevitable, and that could feed into it quite nicely.

  3. Good day! This is kind of off topic but I need some advice from an established blog.
    Is it very hard to set up your own blog? I’m not very techincal but I can figure things out pretty fast. I’m thinking about creating my own
    but I’m not sure where to start. Do you have any tips or suggestions? Appreciate it

  4. I believe we see post-growth economies already today. think of the automotive industry. how many more people in industrialized countries need a car, and how many years it has been that cars are essentially not very different from past models (except from bells & whistles, the technology that makes a car move is essentially the same…). still, there is a market and there is space for innovation (see tesla & the likes) but it is very limited. the industry is still in the hands of the same old people it was several decades ago (ford, …) and the IPO of tesla was the first in many years in this industry. is this where many other sectors of our economy are heading?

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