Ideas on how to restructure an ‘economy’ that means what it says: an economical, ecological economy that manages resources sustainably, and allocates them fairly

When David Lange said, let’s stop for a cup of tea, we all agreed; we’d had enough neo-liberalism.

In a world where growth is harder, with debt, energy prices, inflation, unemployment, nervousness — where growth is ultimately unattainable, because we’re hitting the biophysical wall — time for another cuppa? Retiring Treasury secretary John Whitehead agrees.

This is what it is: not speculation any longer, or aspiration (though it suits some narratives better than others), not a short-term blip, but fact.

Growth, using more resources, making more waste, can't physically happen on a small, round planet forever. Not much more of it can happen, certainly not enough growth to raise the global South to the level of the global North, to lift 9+ billion people in 2050 to first world standards, by the same methods as those standards are currently achieved.

We hoped, I suppose, that it would be possible for long enough that we wouldn’t have to think about it.

There's a whiff of turkeys and Christmas — why would anyone vote for a solution likely to drag the global North back down South? — and they won’t, and they shouldn’t.

It’s the failure of growth, and the doing nothing in response, that's causing unhappiness, economic collapse, job loss, unemployment, rising debt. It’s the old definition of insanity: planning more of the same, and expecting different, because we don’t know how to be different.

The first problem is what to call it, this new thing. Delegates to this “steady state economy” conference decided it needed a better name. The Greens, to date, have tried “a sustainable economy for New Zealand”, a “smart green economy”.

We could just talk about an economy, in the literal sense: an economical economy, child of ecological economics, focused on efficiency of outcome, conservation of effort, and managing resources so that they last.

I wish with all my heart that we’d started being different 40 years ago, and some tried. To everything there is a season, though. We have more evidence now. The burden of proof may have shifted a bit.

Here's the case for growth: higher incomes to reduce inequality or at least lift the bottom boats; more spent by rich countries on cleaning up and conserving their environment; some wealth, of a sort, and benefits.

Mostly, you'll find, we spent those cleaning up our own back yards, messing in someone else’s, buying more stuff, exporting the pollution costs and not too much of the wealth. This report found that "For every $100 worth of growth, only $0.60 contributes to reducing poverty for the more than one billion people living on less than a $1 a day."

Locally, it's not noticeable that big earner dairy contributes much to cleaning up and conserving our environment, one context where a lot of us might be happy to say "enough is enough". On inequality, take a look here [p 57]: it's not just about wealth, and as wealth has risen, so has inequality.

One solution is discredited, the other untried.

However, the truth that growth would fail in the end was known by Adam Smith, John Stuart Mill, Keynes. Modelling here [pp 36-37] suggests that you can have either a no growth disaster, skyrocketing poverty and unemployment, or a success, where GDP per capita rises whilst all the negative measures track down, by implementing the right policies in the right way.

You could, as a minimum, try using some of those ideas to better manage the status quo and that’s maybe where the conversation starts. But in the end, the status quo may be so flawed that the ideas can’t work without turning the whole thing upside down and shaking change out of its pockets.

The collected works of some bigger brains than mine — here, here, here and here — have lots of common ideas about which policies are the right ones (some of them are pretty left).

If you breathe, I find, reading this stuff, and suspend political disbelief, and suppress the ever-present urge to scoff, you can get through it. Think of it as recycling: take a bunch of stuff that you don't like or hasn’t worked, but instead of throwing it on the scrapheap, build a new and better thing out of the reassembled parts, because we must.

Here are three parts. None of them is very easy, but you know them already.

  1. Resource limits: Limiting resource use and waste production, to levels that can be produced and absorbed, and regulating to enforce them.
  2. Measuring differently: Some form of green accounting, taking account of social and environmental factors. Measuring impact on the environment, by ecological footprint. Measuring human well being, in "happy life years" (life expectancy, and life satisfaction). Measuring progress in the economy by tracking inequality, [or a GPI (genuine progress indicator)] instead of GDP. Measuring overall progress by [a composite headline indicator, such as] HPI (happy planet index). [corrected: ed]
  3. Redistributing wealth, and power: Since the invisible hand of the market will not help, levelling wealth and assets through the tax system (eg, inheritance tax), or a "citizens endowment" or universal income, or managing pay differential. These are just examples. How much levelling? I don't know. Democratising institutions, including different ownership models (not just state or market).

Here’s a fourth: what won’t we do, without 4% growth year on year to lever us out of the fiscal hole?

I’m thinking, in particular here, of upper class tax cuts and middle class welfare (one for each side of the political spectrum, you understand). John Whitehead, challenged on the weekend to name one non-right policy supported by the Treasury, offered opposition to interest-free student loans as an example, and I imagined I knew what he meant. It’s hardly left-wing, but it is non-right. Treasury’s going a little bit green.

And, he admitted, to a dryly sceptical Guyon Espiner ("Now, I know that you claim that you’ve always thought that, but it’s a bit of a new emphasis for Treasury, I think that would be fair ..."), we at the Treasury have always thought other measures of success were perfectly sensible, and practised them, secretly.

Well, let's not argue over old, newly common ground. Time to celebrate ("This is one of the best news stories in my living memory ..."), then shift the debate on to a new one ...

Shorter work weeks are an example of one kind of redistribution and revaluing, by sharing jobs and giving people time to live well in other ways. 

It could, if not done right, substitute one kind of income inequality for another. Some can afford to, and others can’t, and virtually everyone's locked in, by other parts of the economic system, the need to simultaneously address, well, everything really:

  • capital flight, and global trade;
  • debt in the banking system;
  • “right sizing” business profits;
  • adjusting consumer habits and preferences and material expectations;
  • making everyone, in short, not just do different, but be different.

The existential scale of it is almost beyond comprehension; the unknowns and downright political impossibilities no less daunting than the looming environmental one.

What else can we do, except start with the ideas we have, and the things we know — forums like this one, Bills like this one — and take small steps in the right direction, starting now.

“It’s not just that we have to entrench a different form of economy, different ways of doing things, different ways of relating to each other, different consumption patterns. It’s also vital that we do it quickly. We do not have time to waste. There’s no point cheering that you’ve found the brake if, by the time you use it, you’re headed vertically over the edge of a cliff.”

Comments (16)

by Claire Browning on May 31, 2011
Claire Browning

Okay ... starter for ten.

Here's THE big policy question, or two of my favourites, so far:

Let's assume, for the sake of discussion, that we all wanted to do two things: 

  1. live within global limits; and
  2. allocate wealth (a) more fairly, and (b) fairly enough.

Should be uncontroversial! One of them is necessary; the second consistent (in theory) with received economic wisdom (ducking the question of how much equality that means).

So: how do you do this, with a minimum of state intrusion? Can you? And if it requires culture change, which it does, how do you do that?

by Antoine on May 31, 2011
Antoine

My [uneducated] belief is that transforming the economy would require massive culture change, and that culture change will not occur until the existing, unsustainable world economy has failed.

I don't think it's viable to persuade [most] people to conserve resources that are still abundant.

A.

 

by Denis Tegg on May 31, 2011
Denis Tegg

Maybe we will not have to restructure our economy - the end of growth is happening as we speak.  So argues Richard Heinberg in his soon to be published book "The End of Growth"...

Heinberg argues there are three primary factors that stand firmly in the way of further economic growth:

  • The depletion of important resources including fossil fuels and minerals;
  • The proliferation of environmental impacts arising from both the extraction and use of resources (including the burning of fossil fuels); and
  • Financial disruptions due to the inability of our existing monetary, banking, and investment systems to adjust to both resource scarcity and soaring environmental costs—and their inability (in the context of a shrinking economy) to service the enormous piles of government and private debt that have been generated over the past couple of decades.

As chapters are written they are published here

well worth a read

 

by Claire Browning on May 31, 2011
Claire Browning
Yeah, I certainly hope there's more coming, because that's not a solution, it's the reason.
by Antoine on May 31, 2011
Antoine

I suppose I don't think the solution will be implemented until the problem has already happened. So I'm not sure I believe in your "small steps in the right direction, starting now".

On the other hand it may be possible to develop some theory or ideas now which can be put into practice later on (when enough people want to).

You said

"There’s no point cheering that you’ve found the brake if, by the time you use it, you’re headed vertically over the edge of a cliff."

I don't think there's time to find the brake before we hit the cliff, but there may be time to write an instruction manual for getting out of a smashed up car and stick it in the glove box.

Anyway I should shut up and let people who actually know something about this answer your question.

A.

by stuart munro on June 01, 2011
stuart munro

If growth were to end before banks and financial markets were regulated to prepare for it, they would swiftly end up 'owning' most of the resources. Arguably this is happening already.

We would of course need to restructure our economies, unless it is acceptable to you that economies instead, Malthusian style, restructure us.

Even once such a revolution were achieved, growth would be necessary in many areas - lower on the food chain farming methods such as aquaculture for instance, or alternative energy and transportation.

Frankly, a no growth economy looks like a desperate intellectual folly. After all, it aligns perfectly with contemporary Treasury and government policy.

Simply delivering the 170 000 jobs that Key has fiated would produce growth in the 4-5% range. Perfectly possible, but we know he will do nothing to that end. And he has plenty of company.

by Claire Browning on June 01, 2011
Claire Browning

Antoine:

  1. I wish I had said that! It was a guy called Andrew Simms, one of the keynote speakers here [p 117].
  2. Knowledge is not a pre-requisite, and its absence no obstacle to running a whole country, apparently. Or writing blog posts. Or whatever.
  3. Therefore, please don't shut up.
  4. Realism's fine, fatalism maybe not so much. If you take a look at this, you might be surprised at what "[most] people" will come around to, incrementally - then they bank it, as perfectly sensible and of course what we always thought, and forget where it came from.
  5. Dear Treasury. The bank metaphor was for you.

 

Stuart:

"Frankly, a no growth economy looks like a desperate intellectual folly."

And yet, I persist, in preference to gloomy cogitation on Malthus.

by Antoine on June 01, 2011
Antoine

Fatalism aside, is it reasonable to think that local or national problems are likely to be more tractable than global ones?

A.

by Claire Browning on June 01, 2011
Claire Browning

Um. I think it would be foolish to assume you could solve one without the other. 

by Antoine on June 01, 2011
Antoine
by Claire Browning on June 02, 2011
Claire Browning

John Whitehead, challenged on the weekend to name one non-right policy supported by the Treasury, offered opposition to interest-free student loans as an example, and I imagined I knew what he meant. It’s hardly left-wing, but it is non-right. Treasury’s going a little bit green.

I thought of a better way to explain this. I meant, there's nothing inherently ideological (in the old left-right sense) about opposing interest-free student loans; it's just a plea for smart sustainable fiscal policy.

Antoine - I read that blog of Catherine's. What's your point?

by Antoine on June 02, 2011
Antoine

That it might be possible to remediate contaminated land in New Zealand without dealing with similar problems in other countries?

by Claire Browning on June 03, 2011
Claire Browning

I've no interest in remediating contaminated land in other countries. They can look after their own back yards. I am, however, quite keen on doing something about this.

by Antoine on June 03, 2011
Antoine

The risk you run is creating the following chain of logic in the minds of the impressionable:

1. if we can't solve greenhouse then nothing else we do for the environment will be worthwhile

2. we can't solve greenhouse

3. so let's just give up on the environment and play Playstation.

Which brings us back to fatalism.

A.

by Gary Cranston on June 03, 2011
Gary Cranston

thought you might be keen on reading this...
12 lines of flight for just degrowth

 

by John Hurley on August 29, 2014
John Hurley

How come no ones talking about our own Michael Reddell, Senior economist at the Reserve Bank?

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