An Introduction to

Economics as if the planet mattered

The Global Economy, Uppsala University November 2011

Outline

 Steady State Economy  What is it?

  Why do we need it?

How do we get there?

 How would it be?

 The Future of Work  Why should we work less?

  Why don’t we?

Technology, productivity and work

An Introduction to SSE

 A branch of ecological economics  A vision without case studies  Steady State versus Degrowth  Generally intended for the developed economies

An Introduction to SSE…

“An economy with constant stocks of people and artefacts, maintained at some desired, sufficient levels by low rates of maintenance ‘throughput’, that is, by the lowest feasible flows of matter and energy from the first stage of production to the last stage of consumption.” (Daly)

An introduction to SSE…

 Basic Characteristics:  A sustainable scale; then,  A fair distribution; then,  An efficient use of resources  Focus on the ‘ends’, not the ‘means’  It is about optimising quantity and maximising quality rather than ‘optimising’ quality and maximising quantity.

A Brief History

 Sir Thomas More (Utopia) – 1516  Adam Smith (the Wealth of Nations) – 1776  John Stuart Mill – ‘Of the Stationary State’ (Principles of Political Economy) – 1848  John Maynard Keynes – 1946  Boulding, Schumacher, Georgescu-Roegen, Daly, Jackson…  CASSE, the first conference (2010)

Why do we need a change?

 What is wrong with more growth?

  Ecological arguments:      Planetary boundaries (Rockström et al.) Ecological footprint (GFN) Ecosystem degradation (MEA) Climate change (e.g. Jackson) Peak Oil (e.g. Campbell) Social arguments:    Growing inequality (the “rising tide…”?) Plateau in happiness and wellbeing Poverty and global justice

Ecological Economics and SD

£££ £

products

£££ Wast e Waste

Trophic Theory

Ecology (economy of nature)

Carn ivores Consumers (herbivores) Primary Producers (plants)

Human Economy

Light Manufac.

Heavy Manufacturing Producers (agriculture, extractive industry)

Sustainable Scale

 3 rules for sustainability:  Waste: Produce up to the limit that the biosphere can safely absorb  Renewable Resources: At or below maximum sustainable yield  Non-Renewable Resources: Deplete at a rate that allows time for substitutes to be developed.

 Don’t allow economic activity to be uneconomic – i.e. Uneconomic growth

“If it is argued that economic output is a good thing, it follows by

definition that there is not enough of it” (US gov’t 1971)

A Fair Distribution

 A just distribution comes before efficiency  Everyone has access to a sufficient level of resources  Redistribution in the short term, but better to prevent excessive inequality in the first place (eg workplace democracy, cooperatives, max. pay differentials)

“Growth is a substitute for equality of income. So long as there is growth, there is hope, and that makes large

income differentials tolerable” (Wallich, 1972)

Efficient Use of Resources

 Important but not the top priority  Efficiency does not guarantee:  Long-term sustainability (the right scale)  A fair distribution  Only worth being efficient if the outcome is desirable “a job not worth doing, is not worth doing well”  Jevons paradox (macro-rebound effect)

Formulation of Efficiency

Focus on the ‘End-Goal’

 When we focus on growth, we are focusing on the ‘means’ (to a better life)  Sustainable human wellbeing (or ‘services’) – a higher quality of life in the present and the future – should be the focus  Even a steady state economy is not an ‘end’. But it is more likely to provide the means to the above goal

Summary of the Goals

Goal

1. Scale 2. Allocation 3. Efficiency

Fields of Interest/Influence

Ethics informed by Science Justice followed by Markets Markets improved by Science

How do We get There?

 Herman Daly’s 10-point plan: 1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

Cap-Auction-Trade (i.e. limit throughput) Ecological tax reform Limit inequality Working-time reform Re-regulate international commerce/trade Downgrade IMF-WTO-WB Monetary/banking reform Reform models of ownership Stabilize population New indicators and national accounts

1. Limit Throughput

 Could be done through various mean, but a cap- auction-trade system is preferred by Daly.

 Cap on scarce non-renewable resources gradually declines to promote substitution.

 Tradable quota systems can be implemented for renewable resources at max. sustainable yield.

 Good system of reserves/conservation areas to ensure ecological stability, margin of safety.

2. Ecological Tax Reform

 Currently, most tax revenue comes from ‘value-added’ eg income, corporate, Moms/VAT/GST.

 Need to shift taxes onto ‘that to which value is added’ i.e. the physical resources used in production.

 Cap-Auction-Trade system would generate large revenues. Land rates could also be raised. Large reduction in income tax to compensate price rises.

3. Limit Inequality

 Steps 1 and 2 will help. Further steps can prevent an increase (or reduce) poverty.

 Maximum income as well as minimum incomes, or a maximum ratio within businesses (say 20-1).

 High income taxes on high incomes another option.

 Redistribution is less preferable to a fairer distribution in the first place.

 Low-unemployment, more democratic ownership can also play a large role.

4. Working-time Reduction

 Essential for maintaining employment without growing consumption.

 Employment is a human right (Article 23 UNDHR)  Unemployment should be considered as a market failure  The labour market is not a ‘free market’  More flexibility, fewer hours

5. Re-regulate International Commerce and Trade

 Free trade is not feasible under an SSE, at least until the whole world prices externalities equally .

 Comparative Advantage theory only works when capital resources are not mobile.

 Compensating tariffs on imports should be implemented.

 To minimise capital mobility, use minimum residence times for investment and institute a Tobin Tax.

6. Downgrade IMF/WTO/WB

 If free trade is not feasible, the institutions that strongly promote it at present would need reform  Downgrade and democratise them.

 WB – provide development support  IMF – Facilitating international payments and penalising countries that create instability through high trade or budget deficits  WTO – Regulating trade and capital mobility, as discussed above, and settle trade disputes.

7. Monetary/Banking Reform

 Gradually raise reserve ratio while government simultaneously spends money into the system.  Move to 100% reserve requirement. Money supply controlled by tax/spending policy – to be balanced. Inflation could be kept near zero!

 Use variety of currencies – from global to local – leading to greater resilience.

8. Reform Ownership

 Bring knowledge into public domain. Shorten patent/copyright periods.

 Use public trusts for common resources – i.e. The rights to log, mine, fish etc.  Encourage community ownership to minimise duplication – eg car-share, laundry/game/TV rooms  More democratic, employee ownership of businesses, with profits being more widely distributed

9. Stabilize Population

 Population growth roughly equal to unplanned pregnancies each year (about 80 million)  Focus on non-coercive means to eradicate population growth. Such measures could include...

  Women’s rights – alternative opportunities Availability of family planning and contraception ‘democratising contraception’   Tax laws/incentives Tolerate homosexuality  Improved welfare systems and old age pensions  Transferable Birth Licences??

10. Measurement

  The problems with GDP:      Doesn’t measure distribution/inequality Nor unpaid work (volunteer, housework) Cost’s are added – pollution, crime are ‘good’ Mixes income with capital expenses No measure of quality – can be a bad thing.

Alternatives – use a ‘dashboard’ approach     GPI & ISEW – makes corrections to GDP Ecological Accounts – stocks , flows, (+ assets, depreciation) HPI – Happiness (benefit)/Ecological Footprint (cost) GNH – Bhutan – a focus on the end-goal!

What would society be like?

 Additional topics to consider...

 Energy (more precious)  Agriculture (more local)  Businesses (more local)  Advertising (more restricted)  Technology (more resource efficient)  Investment (more public)  Governance (subsidiarity)  Travel (slower)

Discussion

“Man has probably always worried about his environment because he was once totally dependent on it”



Economics is about ethics, justice and morality. It is far from the ‘Dismal Science’ of Thomas Carlyle.



‘Science’ progresses in Paradigms. We are in one linked to neo-classical economics. This will not last forever (or perhaps much longer at all).

Choose a steady state lifestyle!

 Work as little as you can afford (but still hand in your GEK assignments)  Avoid the banking system – JAK bank  Choose a small family (when the time comes)  Eat less meat and dairy (they are resource heavy!)  Don’t be wasteful – RRRR (efficient – more from less)  Keep learning, develop the vision and spread the word – plenty of reading suggestions at CASSE 

Read and sign the CASSE position!

More information

CASSE: www.steadystate.org

Email or find me at CEMUS; [email protected]