The Steady State Blog

Economic growth is simply an increase in the consumption and production of goods and services, and thus, is an increase in the flow of natural resources through the economy and back to the environment as waste.  It is driven by increasing population and increasing per capita consumption, and typically indicated by increasing gross domestic product (GDP).  Theory and evidence suggest that continued growth is actually uneconomic or costly to society.  If the growth paradigm is unsustainable and harmful to biodiversity, the environment, and future generations, why is society still pursuing it?

First, economic growth has been a blessing for much of history, and it is difficult to change from something that worked in the past.  Second, powerful interests from corporations to government agencies to universities have a stake in the growth economy and promote it doggedly.  Third, the idea of more goods and services for everybody is a powerful political promise that allows governments and businesses to postpone work on just distribution of resources.  Finally, and perhaps most importantly, society lacks knowledge of the alternative to economic growth.

The alternative to economic growth is the steady state economy.  The idea of the steady state economy is not new.  It has been considered since the days of classical economist John Stuart Mill in the 19th century, yet society is almost completely unaware of the concept.  The steady state economy represents a positive alternative to unsustainable growth.  It is an economy with relatively stable population and per capita consumption, and it is fully capable of meeting needs and providing a high standard of living for all citizens.

Conservation biologists have front row seats to the assault of economic growth on biodiversity.  Habitat loss, extinctions, damage from invasive species, and loss of functioning freshwater systems are a few of the symptoms of economic growth as it pushes beyond ecological limits.  But conservation biologists (not to mention other scientists, politicians, and the general public), sometimes raise common objections to the idea of curtailing economic growth and transitioning to a steady state economy.  Here are some common objections:

Technology

Objection:  “Humans are clever.  Our technology will allow us to manage any problems with resource use, energy, and ecological health.”

Reality:  Some economists think that, because a particular production process can become more efficient (more output per unit of natural capital), there is no limit to economic growth.  These economists and “technological optimists” are disregarding the second law of thermodynamics, the entropy law, which tells us that we cannot achieve 100% efficiency in the economic production process.  When the entropy law is applied across all economic sectors, or in other words when the limits to efficiency have been reached, the only remaining way to grow the economy is by using more natural capital (including energy).

Case Study:  Besides the limits to efficiency, there is another issue with technology.  Societies have wielded it in many ways, some useful for long-term sustainability, and some harmful.  When gasoline prices rose in the 1970s, automobile companies developed new technology to increase the efficiency of engines.  Marked improvements in vehicle mileage occurred with a resultant drop in pollution from transportation.  When gas prices dropped in the 1980s and 1990s, fuel efficiency in the United States stagnated.  The technological improvements were used to provide increased horsepower to smaller cars and sufficient horsepower to big cars, trucks, and SUVs.

Technology that could have continued to improve the fuel efficiency of the U.S. auto fleet was used instead to power bigger and faster vehicles, resulting in a less sustainable transportation systems and more pollution (e.g., smog and greenhouse gases).  In addition, technology has widely been used to increase the liquidation of natural capital.  Readily recognizable examples include technologies for logging and fishing.

Substitution

Objection:  “As we use up resources, we will find substitutes or alternatives.”

Reality:  This argument is akin to the technology argument – it rests on the notion of humans using their cleverness to solve the problems of over-consumption of resources.  Although people have demonstrated some successes in finding alternatives to meet needs when resources become scarce (e.g., fiber optic instead of copper wire or particle board instead of timber), some materials and services are not so readily substitutable.  What are the substitutes for clean supplies of fresh water, pollination, intact species habitat, or climate stability?

Several characteristics of resource scarcity events are negative for long-term sustainability.  Oftentimes substitutes are simply extracted from other areas of the planet to avoid local scarcity (e.g., oil from the Mideast nations to feed U.S. demand).  Scarcity and price increases often provide an increasing incentive to liquidate natural capital (e.g., oil corporation profits when demand outstrips supply) even as alternatives are being developed.  Substitutes are often not developed or manufactured sustainably.  For example, in the search for a substitute for fossil fuels, renewable energy from biomass is spurring transformation of tropical forests into palm oil or sugarcane fields.

Case Study:  What resources will be used as substitutes for Haiti’s forests and the ecological services they once provided?  Economic growth on Haiti generated widespread deforestation, first through sugarcane planting, then through timber sales, and finally through subsistence farming and provision of fuel wood.  Already impoverished, with only 1.4% of their land in forest, the citizens of Haiti face ongoing soil erosion, serious floods, and loss of biodiversity.

Leave it to the Economists

Objection:  “Let the economists decide what’s best for the economy.  They’re the ones who spent all those years in universities learning about economics.”

Reality:  Economists cannot work in isolation – the nature of their work is interdisciplinary, notwithstanding an unsuccessful attempt to remake economics into a pure science through mathematical expression.  Economists have been prescribing policies using a theoretical construct that is largely devoid of physical and ecological realities.  Without an understanding of the true value of ecological systems, a solid grounding in basic physical principles, and a rich understanding of human welfare and happiness, economists have made underlying assumptions that do not stand up to scrutiny.  Examples of such assumptions include:

• infinite growth is possible on a finite planet;
• evermore consumption of goods and services (as well as ever expanding choices of goods and services) leads to individual and societal well being; and
• economic output is a function of only labor and capital (capital taken to mean factors of production built by humans, such as factories and computers), and natural capital (e.g., land and ecosystems) is ignored.

Case Study:  The Post-Autistic Economics movement illustrates how narrowly focused economists have become.  The movement critiques neoclassical economics (also called mainstream economics after sidelining other approaches) for suppressing competing and complementary theories.  The movement began modestly in June of 2000, when students in Paris circulated a petition calling for the reform of their economics curriculum.  The first part of the petition was titled “We wish to escape from imaginary worlds.”

The students’ desire to connect their curriculum to complex economic realities struck a chord with the media and the public.  Following the lead of the French students, 27 Ph. D. candidates at Cambridge University launched their own petition a year later, titled “Opening Up Economics”.  That same year, students at an international conference wrote an open letter to all economics departments calling for a broader, more inclusive approach to economics education and research.

Students at Harvard University soon followed suit, launching a petition in 2003 calling for a broader spectrum of views in the economic classroom.  These student initiatives, coupled with the initiatives of numerous other economists committed to empiricism and reality-based models, spurred the development of the Post-Autistic Economics movement (journal Real World Economics – website www.paecon.net).

Information Economy

Objection:  “As we transition to an information economy, we use fewer and fewer resources.”

Reality:  The “economy of nature” operates in trophic levels, and so does the human economy.  In nature, the producers are plants.  Herbivores consume plants, and carnivores consume herbivores.  Some species function as “service providers,” such as scavengers and decomposers.  The human economy follows the same natural laws.  The producers are the agricultural and extractive sectors, such as logging, mining, and fishing.  As Adam Smith wrote in The Wealth of Nations, it is the agricultural surplus that allows for the division of labor, the origin of money, and economic growth.

Analogous to herbivores, economies have sectors that consume the raw materials of the producers.  These are manufacturers, and the higher level manufacturers are analogous to the carnivores.  The economy also features service providers, such as chefs, janitors, bankers, and purveyors of information.  The key point is that the economy tends to grow as an integrated whole.  More manufacturing and more services requires more agricultural and extractive surplus.  In other words, economic growth, requires the use of more natural capital and results in more pollution.  In addition, a society can only afford to spend time and resources on information if its material needs are met first.

Case Study:  Clearly the U.S. economy has transitioned from an industrial base to a service-provider base, but this transition has not resulted in a net decrease in a material and energy throughput.  Why is this the case?  First agricultural surplus, which is a baseline condition necessary for an information economy, is being achieved by increasing capital inputs (e.g., tractors, oil, and fertilizer).  Fewer people and more machines (less labor, more capital) are able to produce our agricultural surplus.

The agricultural sector has actually become more throughput-intensive.  Second, the people who work in information sectors of the economy may not be using many material and energy resources in their productive capacity, but their consumptive capacity has not changed in the transition.  Information employees spend their wages back into the economy to purchase material goods – the difference is that they are simply made in another economic sector or elsewhere in another economy.