Tag Archives: economics

Image from the front cover of Prosperity Without Growth

‘Prosperity Without Growth’ by Tim Jackson

I’ve just finished reading Prosperity Without Growth by Tim Jackson (2009) for the second time. I got it from my university library and I haven’t been able to bring myself to relinquish it – I’ve renewed this little volume three times now. It’s one of the best factual books I’ve ever read, and I thoroughly recommend it to anyone remotely interested in sustainability, the environment, economics or well-being.  Continue reading

image credit: CASSE, steadystate.org

Steady State and Political Frameworks

A steady state is an economy or society where the goal is sustainable and equitable human well-being rather than economic growth. In order to stay within biophysical limits the goal is for the economy to reach an optimal size and then remain steady or mildly fluctuating – thus ensuring economic stability (no boom and bust cycles) ecological sustainability and a high quality of life for all. Continue reading

Business for the Steady State

Evening, lovely readers.

Sorry I haven’t had time to post very often lately, I’m in my second year of university now and it’s hotting up on the workload front. Anyway, here’s my next post in my ‘Transitioning to a Steady State’ mini series. In my last post I wrote about how individuals can help us to transition to a steady state. Now I’m going to write about the role of businessContinue reading

Let’s Demand a Steady State

So, as promised, this post is the second part in my little mini series about transitioning to a steady state economy. Getting Past the Dilemma of Growth was my policy action plan that governments could feasibly use to get round the catch-22 that economic growth is leading us to ecological collapse and yet the fear of recession chains us to it. How do we get governments to take this seriously? In democracies such as my country, having a policy action plan is only half the battle. You need public support. It’s easy to overlook this when you consider how many things our governments do that we’re not happy with. But something like economic growth is so ingrained in the public consciousness that we’ve all spent our whole lives seeing it as the magic solution to our woes. Above all, we’re used to governments treating it like the number one priority. So in terms of transitioning to a steady state, there’s two things to do before governments will even take notice. Two things that normal people like you and me need to do.

First, we need to raise awareness of the problems with growth and more importantly, the steady state solution. We need to maximise media coverage. Talk about it to everyone. We need it to become common knowledge. We need to persuade everyone this is our best hope.

Second, we need to show politicians we want it. If they tried to do this without public support they’d be out of office come the next election surer than oranges are orange. So we need to assure them we won’t vote them out for their risky behaviour, and in fact, will vote them out if they refuse to act. We need to demand it.

Get Informed & Raise Awareness
If you don’t already know what I mean by a steady state, I mean an economic model where the economy doesn’t grow but stays at a steady size, within ecological limits. It is not in recession because it is designed to be in this state. The focus is on equitable human well-being. Although the economy doesn’t carry on growing, culture and science still drive humanitarian progress. Check out the Centre for the Advancement of the Steady State Economy (CASSE) for more information, and sign their position. Read their books, Supply Shock and especially Enough is Enough which is possibly the best book I’ve ever read. Once informed, and if you want to help make this a reality, then shout about it. Talk to your friends about it. Write facebook statuses about it. Recommend people to read those books, and others, or just google the term.  If you are a blogger yourself, then write about it. Mention the steady state concept in responses to news articles and in online forums. Just go on about it to anyone that will listen. But make sure you know what you’re talking about first, as the last thing we need is confusion over what it does and doesn’t mean.

Demand a Steady State
If you really want a steady state economy, then don’t stop by telling your friends you think it’s a good idea. Demand it. Write an email to your MP about it, and if they don’t respond within a month, send another one. Suggest to a like-minded people you know that they do the same. Write letters to newspapers about it. Maybe we could organise a petition asking for the dilemma of growth to be discussed in parliament. If it did get discussed, I’m sure they wouldn’t agree to do anything about it, not the first time anyway. But that would be just be the start, and politicians would at least be forced to learn what the concept means. Then we could organise protest marches, which would also generate media coverage of the issue. (More on media later). Come on guys, get your citizen muscles pumping. We are the 99% and all that.

Start Living It
It’s true that we desperately need systemic change. It’s true that our economy and even physical infrastructure is not set up for sustainable living. But there are plenty of ways we can start living the revolution before it’s actually happened. The main things to think about are reducing our consumption and increasing our resilience… Reducing consumption is quite a challenge in a society crazed by materialism, but it can be done. If you’re a bit poor then you’ll have a head start with this because saving money might be enough of an incentive to force yourself away from the glitter of Topshop and the Iphone 5. I’m not pointing any fingers here, because I know first hand how hard it can be to resist the pull of adverts, shopping malls and the endless treadmill of fashion. But if you’re serious about this, then you need to get a handle on your consumption. I’m not saying don’t buy stuff (obviously impossible) but I am saying think before you buy. Try to buy more second hand things. Or at least good quality things so you can keep them for years and repair them. Don’t buy cheap disposable crap. Borrow stuff, share stuff. You get the idea. The resilience thing is about making yourself more secure and less dependent on the fragile global economy and intricate logistics system. If you have a garden or even a balcony, start growing some of your own food. It’s so fun it’s verging on addictive, once you get started. If you have enough money then invest in solar panels and start generating your own power. If you can’t afford this or are renting like me, then at least try to reduce your energy use.

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So in conclusion, if you want a steady state future, there’s three (or four really) main things you can do. Learn about it, tell others about it, show the politicians you want it, and just start living like it’s already here.

Next time I get a chance I’ll write about what the media can do for the transition. Then I’ll be on to NGOs and the business world.

Getting Past the Dilemma of Growth

Indefinite economic growth is not physically possible, and there’s mounting evidence and opinion that it’s not even desirable.

Cartoon by Polyp.org.uk

Cartoon by Polyp.org.uk

I’m convinced that our best hope of sustainable progress is to transition to a steady-state economy, where consumption and population are kept at steady, ecologically safe levels, and equitable human well-being is the overarching focus. In Enough is Enough, Rob Dietz and Dan O’Neill outline a practical blueprint for such an economy. Their engaging and accessible book suggests seven key policy goals, each with examples of specific policies:

  • Limit throughput of natural resources
  • Stabilize population
  • Distribute income and wealth
  • Reform financial institutions
  • Change our progress indicators
  • Secure meaningful jobs
  • Rethink commerce

Although these are all brilliant suggestions, I think the book misses a crucial point. After reading Prosperity Without Growth by Tim Jackson, I’ve realised that I was being quite naïve in my assumption that the only things blocking my vision of a steady-state were political will and corporate influence. Of course those are huge obstacles, but the real underlying obstacle is what Jackson calls ‘’the dilemma of growth’’.

This dilemma, or paradox, is that although continued economic growth risks ecological collapse, we’re locked in to chasing it simply because our economy doesn’t work if it stops growing. When growth stops, or even slows down too much, it causes recession. People lose their jobs, and sometimes their homes. Businesses go bankrupt. The government interferes by borrowing money from banks and hands out stimulus packages, desperate to get the economy growing again. But this creates public debt.

This is why economic growth is always the top priority, why the media’s always cheerleading it and why the political will for a steady-state is non-existent. But it’s vital that we get past this catch-22, and fast. While we’re forced to pursue economic growth, action on climate change, poverty, social justice and biodiversity loss will be marginal. We desperately need to find a way past this systemic problem, because limiting throughput (and Dietz and O’Neill’s other ideas) won’t be possible in a growth-based economy.

If you thought this post was going to just be me moaning about the problem, then think again. I’ve been racking my brains and I’ve come up with an idea, which I think is feasible.

This is a top-down, policy based approach. Later I’ll be writing about what role individuals, businesses, the media and NGOs will play in the transition.

Stage 1:
Introduce substantial taxes on all forms of pollution (atmospheric, water, soil etc). This would have four beneficial effects. Firstly, it would obviously discourage pollution. Secondly, it would help to internalize externalities, forcing companies to pay the full price of their production processes – which would force them to put their prices up, meaning retailers would also have to, meaning people wouldn’t be able to afford as many consumer goods. Thirdly, it would massively reduce economic growth (which is only possible by externalizing costs and not counting things like pollution). Fourthly, it would raise funds for stage two.

Stage 2:
Before the harmful effects of recession kick in, implement an ecological investment package. This would be similar to a stimulus package in that it would aim to prevent unemployment, but of course it wouldn’t be trying to stimulate growth. Instead, the investments would be laying the foundation for our steady-state economy, while creating millions of jobs and opportunities for enterprise and innovation. The package would provide investments and grants for:

  • Public transport
  • A new smart electric grid
  • Renewable energy
  • Retrofitting buildings
  • Recycling plants
  • Parks, urban farms and green spaces
  • Pedestrianized city centres and plazas
  • Organic agriculture
  • Reforestation
  • Habitat conservation
  • Scholarships for environmental degrees
  • Green skills evening classes
  • Research into clean technologies, e.g. hydrogen power

Many of these investment areas would improve health and well-being, all of them would reduce our ecological impact and all of them would create jobs. Note that employees with a huge range of skill levels and types will be required: from scientists to construction labourers and from teachers to engineers. This should address the risk of unemployment. It would also harbour the growth of many new green businesses. But crucially, many of the investments will not be productive in conventional terms, or will only be productive in the long term. This should mean that although employment will be high, growth should be slow.

Stage 3:
However, there’s no telling how people will spend their wages. If people still spend all their disposable income on consumer goods then our sustainability gains will be negligible. There’s two ways of reducing consumption, and I recommend we use both simultaneously:

Limit throughput:
The pollution taxes will already be reducing consumption to an extent, as super-cheap disposable products will be increasingly unavailable. A few more policies could help speed up this trend:

  • A tax on the use of virgin raw materials which can be recycled, such as paper, plastic and aluminium. This would boost recycling, reduce resource-intensity of products and gather funds for future investment.
  • Stricter controls on advertising could help to reduce demand for consumer goods. As a start, advertising to children should be banned.
  • Some kind of limit could be placed on the import of consumer goods, to prevent the risk of being green at home but outsourcing all our dirty industry, pollution and resource use. Maybe a ceiling could be set and then companies could buy import rights in a kind of auction.
  • Tighter product standards, where goods are expected to be durable and repairable. Better quality products without built-in obsolescence would reduce demand, as they would last longer and could be repaired.
  • Encourage labour intensive but low-carbon services to fill needs rather than products. E.g. massages over cosmetics, gigs over video games… Could be done by offering tax breaks to service companies, or start-up grants, possibly.

Improve Equality:
The Spirit Level by Wilkinson and Pickett show that more equal societies perform better across a range of health and social factors: they have better literacy and life expectancy, and they have less crime, less teenage pregnancy and less obesity. In addition, more equal societies are less consumerist. This is because in unequal societies, envy and competition lead to the increased consumption of status goods (such as flashy cars and designer clothes). Poverty and wealth are always relative; people compare themselves to others in their society. If some are excessively rich, everyone aspires to that materialistic bench mark. For these twin reasons, a steady state aims to be more equal. Note: I am not suggesting a totally equal society. All jobs having the same salaries just wouldn’t make sense. What I am suggesting, is that the gap between rich and poor should be narrowed. This could be done by several policies:

  • Phase out fractional reserve banking and the interest function of money. Is it really fair that people be paid just for being rich? The interest function deepens inequality by distributing wealth to those who already have it. Fractional reserve banking allows banks to create money out of thin air and locks us into cycles of debt that can’t be repaid even with economic growth, let alone without it. Dietz and O’Neill suggest we phase out fractional reserve banking until eventually banks can’t loan money unless they literally have the funds to do so.
  • Progressive income taxes, used to fund extensive public services such as healthcare, education, libraries and museums, incapacity benefits, child and elder care. These would help to ‘’level the playing field’’. I think eventually we should have free university education for those who have the right A Levels and pass an interview.
  • As outlined in Enough is Enough, pay ratios could be used to reduce inequality. If a company had a pay ratio of 1:80 this would mean the CEO couldn’t be paid more than 80 times the salary of the lowest-paid employee, probably a cleaner. More transparency in business would pressure companies to publish their pay ratios, as well as their bonuses.

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With these three stages, I think it would be possible to get past the dilemma of growth.

There’s undoubtedly going to be a large element of creative destruction with this transition. Some companies won’t adjust quickly enough and will go bankrupt. But that’s okay, as long as there are other innovative companies rising from the ashes. The steady-state economy is people centred. It’s not the companies that are important, but the people behind them – what we’re trying to avoid is unemployment. If people lose their jobs because their employer has gone under, that’s okay as long as there are other new job opportunities open to them. It’s only a problem if there aren’t enough jobs to go round or if companies can’t afford to employ the workers they need.

Persuading politicians to undertake this strategy is the subject of future posts, because that’s where the role of individuals, the media, NGOS and businesses come in.

Until next time!

 

Recommended reading:

Dietz, R and O’Neill, D. (2013) Enough is Enough. London and New York: Routledge.

Jackson, T. (2009). Prosperity Without Growth. London: Earthscan.

Wilkinson, R. and Pickett, K. (2010). The Spirit Level. London: Penguin Books.

USA: Shut Down & Cough Up

Sorry, we're closed. Not my image.

Sorry, we’re closed. Not my image.

On Tuesday 1st October, the USA went into partial shut-down mode. Only federal services considered ‘mandatory’ are now running. These essential services include the air traffic control, social security, some medicare benefits and the postal service. However, 800,000 public employees have been sent home without pay, with no guarantee of returning to their jobs. All the National Parks and the National Zoo are shut. The Environmental Protection Agency’s funding has instantly dried up. Students will have their student loans and grants delayed. Disaster care programs have their funds drastically cut, along with the Women, Infants and Children program that supplies poor families with food and milk tokens. Food inspectors aren’t in operation. NASA have sent most of their employees home. Small businesses cannot receive loans. The dollar has dropped in value.

What’s going on?

Apparently, this has happened because the two warring factions of American politics – the Democrats and the Republicans, simply can’t agree on the budget for the coming financial year. The centrepiece of the argument seems to be ‘Obamacare’ – i.e. Obama’s idea that everyone should be entitled to free healthcare, much like in Britain. For some reason the Republicans are very fiercely against this. So against it, that they simply won’t accept a budget that includes it. But Obama isn’t budging, because he pretty much won the last election by promising to deliver this one service.

Congress have been in negotiation, but they failed to agree on a new budget by the 12am deadline last Monday so now the government has basically ground to a halt.

What’s even more worrying, however, is the problematic fact that the USA is about to reach it’s debt ceiling (that’s how much the government can borrow for public spending) of a staggering $16.4 trillion. Actually, it was reached last year, and the US Treasury have been holding the debt ceiling raise on suspension ever since. The rules surrounding this issue are confusing as hell, but suffice to say that this kind of suspension can only go on for so long. It seems raising this mysterious ceiling is long overdue, and it’s estimated to be reached (again?) on 17th October 2013. After this date, the US government will not be able to borrow any money, and will have just $30,000 billion in ‘cash’ to run the country, This might sound like a lot, but it’s really not at all when you consider that the public spending and debt payments accrue to several billion per day.

You would have thought the Democrats and Republicans would throw their differences to the wayside (temporarily) in a heroic bid to save their country from the threat of bankruptcy and chaos.
I thought Americans were meant to be patriotic?

Well, apparently not enough. Economists are saying the US is on track to shoot through it’s debt ceiling, which means it could possibly default on all or some of its debts. As far as I can tell, this would disrupt international financial markets, causing  economic chaos . The US government might try to revoke the debts of the many nations that have borrowed from them since WWII. This includes the UK, Germany, many other European countries, Japan and countless developing nations. This knock-on effect could cause an international recession at least as serious as the 2008 sub-prime meltdown.

To be honest with you, I have no idea why Congress can’t just get on and raise the debt ceiling. They’re the ones that have the power to set it; it’s just that they’re so divided they can’t even agree on that one fundamental thing.

Seriously, Congress, stop quarreling and sort it out!

Protesters show their outrage outside the White House. Not my image.

Protesters show their outrage outside the White House. Not my image.

Resources:
http://www.theguardian.com/world/2013/sep/29/us-government-shutdown-services-affected
http://www.reuters.com/article/2013/09/25/us-usa-fiscal-debt-idUSBRE98O0LU20130925
http://www.independent.co.uk/news/world/americas/everything-you-need-to-know-about-how-the-partial-shutdown-will-work-in-us-8850937.html
http://en.wikipedia.org/wiki/United_States_debt-ceiling_crisis_of_2013
http://www.bbc.co.uk/news/world-us-canada-24343698