WEversity

This is a question that continues to puzzle me.

Image from CASSE

On one side, steady-state economy makes very good sense for a civilization living on a finite planet:

A prosperous and dynamic economy does not have to be a growing economy. A steady state economy features stabilized population and consumption.  Such stability means that the amounts of resource throughput and waste disposal remain roughly constant.  The key features of a steady state economy are: (1) sustainable scale, in which economic activities fit within the capacity provided by ecosystems; (2) fair distribution of wealth; and (3) efficient allocation of resources.

On the other side, growth-based economy is so 'rooted' in the life of nations, their governments, and their people.

Should (and can) a steady-state economy replace the growth economy?

Here are some steps to that end taken from this article:

1. Cap-auction-trade systems for basic resources – Cap limits to biophysical scale according to source or sink constraint, whichever is more stringent. Auction captures scarcity rents for equitable redistribution. Trade allows efficient allocation to highest uses.

2. Ecological tax reform – Shift tax base from value added (labor and capital) and on to “that to which value is added,” namely the entropic throughput of resources extracted from nature (depletion), through the economy, and back to nature (pollution). Internalizes external costs as well as raises revenue more equitably. Prices the scarce but previously unpriced contribution of nature.

3. Limit the range of inequality in income distribution – A minimum income and a maximum income. Without aggregate growth, poverty reduction requires redistribution. Complete equality is unfair; unlimited inequality is unfair. Seek fair limits to inequality.

4. Free up the length of the working day, week and year – Allow greater option for leisure or personal work. Full-time external employment for all is hard to provide without growth.

5. Re-regulate international commerce – Move away from free trade, free capital mobility and globalization; adopt compensating tariffs to protect efficient national policies of cost internalization from standards-lowering competition from other countries.

6. Downgrade the IMF-WB-WTO to something like Keynes’ plan for a multilateral payments clearing union, charging penalty rates on surplus as well as deficit balances – seek balance on current account, avoid large capital transfers and foreign debts.

7. Move to 100 percent reserve requirements instead of fractional-reserve banking. Put control of money supply and seigniorage in hands of the government rather than private banks.

8. Enclose the remaining commons of rival natural capital in public trusts, and price it, while freeing from private enclosure and prices the non-rival commonwealth of knowledge and information. Stop treating the scarce as if it were non-scarce, and the non-scarce as if it were scarce.

9. Stabilize population – Work toward a balance in which births plus in-migrants equals deaths plus out-migrants.

10. Reform national accounts – Separate GDP into a cost account and a benefits account. Compare them at the margin, stop growing when marginal costs equal marginal benefits. Never add the two accounts.

Should an earnest attempt be made toward a stead-state economy?

Has such attempt been made anywhere on any economic scale?

Where do you start from the 10 steps mentioned above (and other steps if any)?

~Bowo

Hello,

Regardless is whether we should shift away from economic growth, we are going to. Logically there is no way to surpass the resources available.

I think our focus is severely broken. We think of monetary gain before human benefit, without remembering that it is humans who place value on goods and money. A change in discourse, a shift away from rating countries on GDP, is in order.

That being said. This is a difficult task to say the least. You cannot break traditional thought easily. What has become the norm for thinking of economy is a mountain not so easily ascended. I think a proper start would be to start using terms which place the value of humans and the environment above the value of money.  From there you might work out the institutional details of how taxing, income minimums, etc would work.

I kind of think that by trying to place, say, caps on income levels is like putting the cart before the horse. No one is going to just accept that, even if things continue to worsen and the environment is degraded to a nearly unlivable point.

I agree with the above post. I think it is going to take a serious shift in our lifestyle and our idea of the perfect lifestyle to make this change.

It is important for us as the human race to go back to a culture that values one another. That recognizes that we are interconnected instead of using each other for whatever kind of gain we can.

I also agree with the statement that capping income levels will never be accepted. I think the best way to do it is to start from the beginning and try to change the way people think, and how they feel the ideal life should be.

What I learned this week traveling the Hudson River Valley in the state of New York, USA.

Vanderbilt at his peek of wealth had the equivalent of the wealth of Bill Bates and Warren Buffett combined, about 100 billion dollars in today's money.

He like Gates was not overly bright, but smart.  Vanderbilt got a loan from this mother and bought a steamboat and ferried people from and to Staten Island.  From there he continued to expand his steamboat fleet and took over the boat transportation business on the Hudson River.

After that he changed to the new technology of the day, railroads and that was where he made that massive amount of money.

Technology driven change is how he expanded, bought land, built mansions and rented out his land he accumulated in the Hudson River Valley to farmers.

But he had to start selling off portions of his estate when the tenet farmers revolted; little by little his holding shrank.

Massive amounts of money accumulate to the few when technology rapidly moves needs of people into new areas.  In the process it creates massive amounts of upheaval.  The example of Vanderbilt’s railroads totally changes the environment of his day.

The original Rockefeller and his technology leap through the use of oil, is just another example of that rearrangement of existing needs and the creation of new needs and massive disruption.

As technology moves a new, the existing needs get rearranged and in the rearrangement vast amounts of money is made and massive amount of disruption is created.

So where do we go from here?

Technology today is on the verge of changing another group of needs and like the previous examples where technology was the savior of the existing realm, nanotech is going to create and change the needs equation in ways we have no hint of.  For this technology advancement will change not just what we eat, what we put on our back, how we travel, it might change the very physical nature of future humans.

I have no idea where the radical transference of our environment and ourselves is heading, but I can assure you it is going to happen and is happening as I write this.

Our present and past system of human relationship organizing is not up to coping with this massive change as our past relationship organizing could not cope with the changing technology that ran the world in those days.

I can only assure you that someone out of left field will be the next marvelous marketer and vision-setting creator of the next techotrap.  For as we have progressed the environment that technology has provided for us has only created more and more of us – people.

Granted it has made life easier for many of us, yet it has created great damage to the ecosystem and the ecosystem is the underlying element that in reality makes it possible for us to exist on this planet.

Will technology be able to create more water?  How about more air?  Is our great hunger for more and more energy going to be answered by our continuous technology advancements?

When is enough, enough?

I think we have arrived at that answer – enough is enough.

We need to establish a new frame of reference that includes the understand of total balance, for technology development has no idea of what true balance is.  We need to develop the concept of total balance and apply it to all the miss adventures that lie ahead.

We have a beginning understanding of the whole, but we don’t understand the parts in the relationship to the whole and as had been said so many times before, the whole is greater than the sum of the parts.

How technology keeps degrading the whole by adding its parts to it, is the problem because it disrupts everything, it disrupts that mysterious whole with its unknown greater aspect that makes life on this planet wonderful for all things great and small, for all living things that are presently existing on this planet.

It’s our choice to except a new way of implementing new ideas so they fit in the existing ecosystem and I’m afraid free market capitalism is not the way to accomplish this.  It only has pointed to massive disruption in the past few centuries and if we continue with this hodgepodge of miss guided avarice, it will continue to point us to complete and unreturnable ecosystem collapse that will confront most if not all of future humans.

Vanderbilt, Rockefeller, Gates and Buffett had and have no concept of how to do this because it’s not in their conceptual understanding of how things should be done.  None of the Wall Street gang has a clue.  We needs new leaders, new thinkers and we need them now.

But the people in charge of how this economy works are not the new leaders and thinkers we need.  Where these leaders come from is the question.  Yes the system is broken and the usual crowd of investors, manipulators, governments and world leaders are coming up with the same old answers and continue to make the same mistakes.

Isn’t that the definition of insanity?

If civilisation can pick itself up from this era of stumbling and bumbling then the obsession with growth would be likely to fade, for a bunch of reasons. Few people might then care so much whether GDP grows steadily. However I'm still curious, John, what would be the limits to economic growth in a restorative, circular or positive development economy? Aside from cyclic fluctuations and after all the emergency investment flows have settled down, what might cause such growth to suddenly stop one sunny day in this hoped-for future?

The challenge you lay down is the big question that should concern society, rather than trying merely to restrict expansion of growth-as-usual. As you indicate, this involves global policy changes including new understandings of wealth and relating to nature. I'd suggest making a small set of fairly simple policy switches. Each switch creates conditions for continuing growth as a side-effect of reversing global problems. This should mean that politicians can just do it, instead of opposing it (or fiddling) as with green-as-usual. 

Thanks Klemen. The 1st presentation bundles all kinds of growth which brings us back to the political reason why sustainability hasn't happened. The 2nd presentation doesn't discuss growth but does hope that local actions can provide examples that change the global system. This might be possible but probably requires at least a bit of thinking globally about worldwiews and markets. Many analyses these days claim to be 'systems thinking': I usually agree if there is at least an attempt to consider Donella Meadows' leverage points. 

Given where we are, the future might be unavoidably abrupt. Let's hope civilisation will be in the driver's seat rather than under the wheels. Good to have you aboard with wiserearth!

Bowo great topic thanks,

I agree first with Frank assessments regarding the need for a evolutionary radical revolution that breaks the elite ownership mindset open to another possible possibility I call a new symbolic value system altogether.  The conversation assumes that economy (dollars) is the core engine of growth, prosperity, innovation and sustainability.  I invite you to consider that it is not fundamental to our problem formation or problem resolution.  The assumption of economy is part of the "party line" operating in leadership that blinds us to the both formation and resolution of domains of permanent human concerns.  We don't want policy changes and incremental changes in laws, regulations and control over our lives.  We want to knock the ball out of the park and change the directionality of human history.  (Do we all agree that taking all the facts about the truth about everything converging in this moment the possibility of our disappearance is gaining velocity in the moment in more domains of human concerns than economy?  Do you agree?)

My assessment is that leadership is offering us a trojan horse and its a disaster anyway you look at it.  I was an entrepreneur for 22 years and if a creditor, banker or insurance company came ask me "where is the money" and i responded with "I don't know" i would be arrested and thrown in jail.  In  the past 18 months game changing events are happening where the largest "to big to fail" elite financial institutions are given government assurances with no contracts, agreements or restraints to the tune of trillions of dollars.  We are in very deep deep global financial crisis and this is only the first inning and there is only 'one out.'  As long as we participate in the "party lines" we are participating in a swept-along-historic-drift incapable of changing and is dragging us into quicksand moment to moment.

Right now we need to begin to design, build and deliver a new value system not based in government, commerce, religion, education or science but designed on human values we embody in the social revelatory networks we are participating in.  We need to take charge of our check books as taxpayer, insured, and consumers and wake up to the reality of the gaming going on in the global economy and change our behaviors as global ethical citizenry.  We need to stand upon spiritual principles and declare our freedom even if we are atheists.  I am pointing to the notion of creative radical revolution where create an independent third party of global civil citizenry that instead of arguing and fighting decides to take effective actions in every domain of permanent human concerns with the power and authority of its own self-organizing mass.   You want to see gas prices at $1 a gallon quit buying Exxon gas.  You want to see Wal-Mart Unionized boycott products from China.  You want to see single payer healthcare delivery design a 3rd party independent mutually held innovative community administrator and compete with the fat hogs.  Shit id we cut out what insurers make on gaming system our costs would drop by 8% and women having babies could take the first two years to be home with pay.

We need to change values and the symbols will follow.  Like MADD who changed the drinking and driving.  Only today we need global civil citizenry saying enough let's all get to work in a mood of joyful concern and release the suppressed denial (outrage and indignation) that is operating in the network of global conversation called the "economy."  Its time for the poor to have a seat at the decision making table as equal partners in designing a future.  And if this breakdown continues to be denied the game changing events become worse, the entropy more deadening, and the predatory financial global chaos fragments into a your worst competitive nightmare.

David Martin is a clear thinker that is recognizing the possibility of a new value system and it is to the rich man's benefit to help design, build and deliver a world that is sustainable for millions of year to come. 

David Martin “Recognizing Financial & Dollar Realities”

http://www.modavox.com/voiceamerica/vepisode.aspx?aid=39099

David Martin Cayman Institute “Current Economic Picture”

http://caymaninstitute.blogspot.com/2009/03/dr-david-martin-of-arlington-institute.html

Thnks patric

Hi James - excuse late reply to your question on what would be the limits to growth in a circular restorative economy (and thanks for the links you sent me by the way). In my simple grasp of economics I guess there are economies based on consumption and economies based on services (including things like creative industries, social services and so forth, which still use resources but are not about resource consumption).  For economies based on consumption we need a combination of lines in the sand to say this is the absolute limit of what we can take safely and morally take from natural systems together with the ability to continuously cycle resources within the system.  So the limits to this part of the economy are those lines in the sand.  This would require very strict regulation I imagine to effect.  I think there is great scope for our ingenuity to find many new ways to create economies within society that are not based on consumption per se.  The key challenge is setting the linits of resource use and having mechansims to ensure we stay within those limits - I think unles we can achieve this we will never succeed in achieving long term sustainbility.  The big question is of course where do we draw the lines in the sand and how do we enforce it - this is esspecially challenging given we have already crossed a number of lines. Within this framework there is of course scope for great inequity - so that is another layer of consideration.

I suppose it comes back to a realisation that if we are serious about the wellbeing of humanity, the answer if to place the wellbeing of the environment as our first priority rather that the current view of placing humanity as the first priority - the former enables us to acheve human wellbeing, the latter ensures we fail. I guess this is a bit counter intuitive for many people. Perhaps we need to talk to people about "our life support system" rather than "environment" However it implies that any economy that does not act to ensure the protection of the environment within those limits as its formost consideration is the wrong model.

John

Yes Denis, even if things go as well as they can there will be nothing steady about the future and its economy. Though illusory, the allure of steadiness is one of the attractions of 'steady-state' economics.

John, I don't find that consumption and services are super-useful distinctions. All economies include both and all services consume material value (if only because people eat). We're not running out of stuff (ref. law of conservation of stuff), we're just forgetting to look after its value. We're even rushing these days to borrow money to 'invest' in mega-incinerators designed to destroy material value. How clever is that?

A circular economy would unite with nature to regenerate this value faster than it is used up. The rate at which material value can be regenerated is limited, mostly by the currently modest exercise of human imagination but also a bit by physical factors like the mess we've made of nature to date. However the financial value of our efforts to get these things right need not be not limited, it seems. Planet-saving economics would invite a surge of activity; people doing great stuff benefiting everyone; nature and the macro-economy both expanding together. Just a different bunch of activities. 

The fun thing about using markets this way is that we can recreate abundance with a mentality of abundance,which offers a nice antidote to the scarcity and scarcity mentalities produced by BAU. Big-brother-global-enforcement-type regulation is not needed, just rather simple 'systemic' regulation to fix markets. Also no need to choose between prioritising humanity and nature since the fate of each is entwined, as you explained. 'Priorities' can be misleading.

We can also view the issue of limits as the question of what to do when approaching the ultimate cliff-edge limit of BAU, the point where the whole muddle gets irreversibly out of hand? BAU says proceed and talk more about change and reform. Steady state says go steady and set tough macro and micro limits on what's allowed. The 3rd option is to turn around and go fast the other way. In circular, restorative or positive economics the ultimate limit gets translated differently, into new worldviews and new incentives (both social and financial). If people go for this then the ultimate limit might be avoidable without much of the language of limits - and the stubborn resistance it provokes.

John, I've not mentioned the actual switches of policy that would be needed since you've seen this already. If others want to check it out, the link is in my first comment on this thread - feedback welcome!