A new economic model

For a long time now i have been talking to people about the crazy focus on growth that pervades modern capitalism, and that it must be replaced by a much better economic system. I am generally thought of therefore as a crank, a lunatic, or, even worse, a socialist (which is all wrong, I am actually an anarchosyndicalist, but that doesn’t work either).

but there are definite limits to the people that this little rock can carry, and limits to the continued growth of economies, as resources are less than infinite, and barely able to provide for the rich we have at the moment let alone all the poor for whom being made rich is touted as the dream outcome of modernisation and progress. we need a new model for a healthy economy that does not require growth and consumption, where the focus is instead on sustainability and minimisation of resource use. build fewer things, but build them better and smarter.

i came across this great article that discusses the point rather nicely, and made me feel a little less alone on this one!

any thoughts on that out there?

A good article, pulling together a lot of opinion from varying sources and unafraid to point out flaws in thinking. I believe that sustainable development is the most important and exciting field of modern economics. It’s no longer a fringe science either, over the last ten years it has really been pushed to the foreground by businesses and charitable organizations alike. The World Bank in particular has a very intense focus in that area.

That having been said, I am also a firm believer in capitalism, and I do not believe that the two concepts are mutually exclusive. There is a perfectly valid form of capitalism that focuses more on shearing sheep than slaughtering them, and identifies the profitability of sustainability.

Still, it’s hard to argue in favor of preventing developing countries from bootstrapping themselves up through the ranks of success with their own pollution creating industrial revolutions. Coming from a well developed country it is difficult for me to relate to the 4 billion people who live below a poverty line I can only vaguely comprehend. In my mind these issues come back to mortality rates and a quality of life index. I have a strongly anthrocentric view of the world, and look at the survival of trees and critters as important only in the context of our own continued survival. I don’t find anything inherently valuable in the pristine expanses of high plains desert I have most recently hailed from.

That having been said, the most consumptive countries aren’t necessarily the most comfortable to live in. Take a look at Costa Rica, a well preserved haven for ecotourism that still manages to rate very high on quality of life. Most of the reasons for their success are tied to political actions rather than the curtailing of industry. For example, they more or less abolished their standing army in favor of more spending on education. Decisions like this circumvent the pull between consumption and quality of life.

Honestly I find the issues here fantasicly complicated and interweved with seemingly unrelated disciplines. It’s certainly too much for me to get my head around now, though it is certainly an interesting study should I decide to spend the next ten years pounding through a doctorate. (::groan::).

I’m always glad to see other people mulling over these concepts as well, and I look forward to seeing what other people have to say.

Yes, we wouldn’t want to end up like our friends the bacteria-
There’s no real reason humans couldn’t end up like that after exhausting resources and destroying our habitable environment. In fact it probably gets more likely as we depend on more and more advanced technology and oil to grow and ship enough food to feed billions of people everyday. We could be ‘outperforming’ ourselves until something cuts into our system bringing it crashing down.
What could do that- imagine a bug that ate oil and made it useless. A new breakdown chemical that destroyed our global ozone in one year…these things could happen, a global methane hyrdate release (oh wait this might actually already be happening ala ‘The Swarm’-
http://www.universetoday.com/2005/09/19/methane-release-raised-earth-temperatures-180-million-years-ago/. Or it could simply be the oil running out suddenly or runaway greenhouse effect, who knows? Could we deal with the worst circumstances, eventually yes, but with about 90% population loss and massive wars and pollution.

I completely agree, the economic paradigm of measuring success by growth is plain wrong. It totally ignores resource waste, pollution and sustainability. The only question is when do we hit the C part of the curve and can we avoid going to D? This is a very simple and obvious concept, it seems we think we can avoid it even though we don’t control our population growth or sustain our resources.

It’s like the way fisherman go to catch fish everyday all around the world with almost no regulation. Ask 99% of people and they just don’t care, even me, I still eat it without knowing hows it’s caught. The ecosystem of the ocean has already been changed I’m sure in many ways and we don’t even know what the effects of that will be.

I wonder if people have the capacity to really change their thinking slowly over time or does it have to be forced on them by cataclysmic events…if so we are not as advanced as we thought we were.

I like lots of things about capitalism. I like the idea of money being earned for services and production, and I like some of the mechanisms for communal ownership of large entities, such as we see with shares ownership and dividends. But, there are many things i don’t like such as relying on imperfect market mechanisms to fix the price of everything, of a failure to factor in things such as the true costs of air, land, water, marginal life times, dwindling resource base and opportunity cost into the price of goods and services.

i don’t like monopolies, in either a single product (Microsoft comes to mind here… granted, it is not a monopoly, but close to it) or a market (the duopoly of Coles and Woolworths in the vertically integrated retail market in Australia is a great example), or even as a state concern (apart from monopoly providers of essential services such as power, water, etc., and health and education, and internal/external security and law, but even there there are advantages to competition from suppliers of same, rather than a monolithic inefficient single service. perhaps a state power providor can buy from a variety of small individual power companies, and then sell power to small consumers at bulk rates…)

Yeah, I think this kind of infinite growth thinking is pervasive in the world. I have no idea why. Ever since Malthus published, we’ve known that such growth isn’t sustainable for very long. Yet almost everyone who invests makes decisions on how much growth a company makes. I wish I knew more about economics so I could appreciate why something that’s so intuitively short-sighted to me is accepted by so many “smart” people.

The answer, people ain’t so ‘smart’ and the smart ones usually look out for themselves.
Life is what we make of it. The current model ‘monetary based’ open capitalism will have to change too. No doubt about it, because the world is finite, as technology advances with population and living standards our demands on finite resources grow exponentially.
The pollution that we produce cannot escape, in the same way as bacteria grown in a lab we can kill ourselves by using all our resources and making the environment toxic to ourselves. I think if everybody could be an astronaut and look down on the earth for a day that would make a big difference (using environmentally friendly means to get into space of course). We need to give people the ability to see this issue. That can be acheived by positive or negative means. What I hate the most is how anybody who really pushes these ideas openly gets villified for being a bit of a crackpot when they are scientifically and logically have the best basis for their conclusions.

Quotes from Dr. Edgar Mitchell’s writing (Apollo era astronaut)

“Suddenly from behind the rim of the moon, in long, slow-motion moments of immense majesty, there emerges a sparkling blue and white jewel, a light, delicate sky-blue sphere laced with slowly swirling veils of white, rising gradually like a small pearl in a thick sea of black mystery — it takes more than a moment to fully reaise this is Earth – home.”

“On the return trip home, gazing through 240,000 miles of space toward the stars and the planet from which I had come, I suddenly experienced the universe as intelligent, loving, harmonious.”

“My view of our planet was a glimpse of divinity.”

“We went to the Moon as technicians; we returned as humanitarians.”

Are you sure these people are not speaking the communist language of “sustainable growth” we often hear from them?

  • Economic growth is folly because “our economy is killing the planet.”
  • Tim Jackson, a professor of sustainable development at the University of Surrey

now, why do my eyes glaze over when the same old response comes back:

Communist language of “sustainable growth”… blah blah.

for your erudition, communism did not seem to be a very sustainable psotion economically, and it certainly was not about running a zero-growth mature economy, but about “Great Leap Forward”, “Five Year Plan”, we are the greatest, blah blah.

where do you see that in what has been mentioned above. or in what Tim Jackson has to say? whenever the merest threat to the money siphon that a modern financial system has become, sucking huge amounts out of general circulation into the pockets of those greedy speculators and investors responsible for the whole fucking mess we are in now, arises, those same people label it with the most reactionary petty vilificatory tags they can, without ever once allowing any analysis that might show their actions in the poor light of truth.

Gordon Brown has just today proposed that the USA, UK and Europe sit down now and use the opportunity afforded by the latest Wall Streety shipwreck to change the way business operates, for the good of all, not just for the good of their own tennis clubs, Ferrari dealers, Scotch warehouses and bespoke tailors. are you with him or against him? what do you have to contribute apart from snide defenses of a failed old-man’s folly?

[quote=“Taiko”]Are you sure these people are not speaking the communist language of “sustainable growth” we often hear from them?

  • Economic growth is folly because “our economy is killing the planet.”
  • Tim Jackson, a professor of sustainable development at the University of Surrey[/quote]

Communists and sustainable growth… ‘images of East German factories and coal stacks come to mind…’.
Why equate POLITICS with SUSTAINABLE GROWTH. In my experience its 99% Americans who do this when the two things are not linked at all. It’s nothing to do with your American politics, the world is much bigger than that.

Sustainable growth is a scientific principle. It economic growth is linked with unsustainable development by scientific data then why deny it? In fact it’s plain as the nose on your face in whatever country you live in… check the stats on wildlife diversity and air and water pollution levels let alone climate change data…use your recollection of when you were a kid and the difference now, ask your parents what they used to see in their area before it disappeared. Farming and fishing practices are unsustainable in most of the world. Oil reserves are unsustainable.

Keep your views of politics and religion out of it.

Words of wisdom from the elder.

ca.youtube.com/watch?v=9piIziXU9 … re=related

Nice clip. It’s a moral question. When did CEOs and shareholders become non-humans and non-parents, it doesn’t make sense. We regulate societies to prevent violence and cruelty and bring medical advances to people, we can also regulate resource use and commercial entities in the same manner.

I’ve recently become a fan of the Work Less Party:


More on the issue, this time from New Scientist, discussing the predictions of the Club of Rome from 30 years ago.

[quote] Prophesy of economic collapse ‘coming true’

17 November 2008 by Jeff Hecht

Things may seem bad now - with fears of a world recession looming - but they could be set to get much worse.

A real-world analysis of a controversial prediction made 30 years ago concludes that economic growth cannot be sustained and we are on track for serious economic collapse this century.

In 1972, the seminal book Limits to Growth by a group called the Club of Rome claimed that exponential growth would eventually lead to economic and environmental collapse.

The group used computer models that assessed the interaction of rising populations, pollution, industrial production, resource consumption and food production.

Most economists rubbished the book and its recommendations have been ignored by governments, although a growing band of experts today continues to argue that we need to reshape our economy to become more sustainable.

Now Graham Turner at theCommonwealth Scientific and Industrial Research Organisation (CSIRO) in Australia has compared the book’s predictions with data from the intervening years.
‘Steady state economy’

Changes in industrial production, food production and pollution are all in line with the book’s predictions of collapse in the 21st century, says Turner. According to the book, the path we have taken will cause decreasing resource availability and an escalating cost of extraction that triggers a slowdown of industry, which eventually results in economic collapse some time after 2020.

“For the first 30 years of the model, the world has been tracking along an unsustainable trajectory,” he says.

According to Herman Daly of the University of Maryland, Turner’s results show that we “must get off the growth path of business as usual, and move to a steady state economy,” stopping population growth, resource depletion, and pollution.

Yet Turner reckons his report [pdf format] shows that a sustainable economy is attainable. “We wouldn’t have to go back to the caves,” he says.

Journal reference: Global Environmental Change (vol 18, p397)[/quote]

Aren’t you missing a few key points here?

Very simply and skipping over concepts such as inflation.

As an investor I want to put my money somewhere safe, and ideally where it will grow into more money. I am therefore going to look for companies that are likely to grow.

Not every company can grow and industries tend to grow in cycles. These cycles are dictated by demand.

E.g. people used to want big impressive cars, and now they want small economical (green) ones. Thus Toyota is #1 car manufacturer and GM/Ford are almost broke. In the future people may demand flying cars and Toyota will either build them or it too will go to the wall.

Looking for growth in business does not have to be at the expense of individuals or the planet. If we as consumers demand the right behaviours of industry then that is where the growth will occur.

Now in a global context this starts to fall over because of the “industrial revolution” mindset discussed before. Typically 3rd world countries have less educated populaces who are less likely to demand, or even know whether companies behave appropriately. We in the west still have a part to play, by espousing the correct values through media which does reach those far off shores - movies, CNN/BBC broadcasts etc. This won’t stop inappropriate behaviours, nor should it. We had our industrial revolutions why should others not have theirs?

If we as importers are demanding the right kinds of goods and services then surely our 3rd world brethren will rush to supply it?

We had ours, why shouldn’t they have theirs? While that sounds fair and square, can the world handle that?

I acknowledge that the Western developed nations had their day in the sun, and I acknowledge that the US, especially has way overstepped its bounds, but many aspects of this report (just issued by the US govt) seem a little unsettling.

[quote] U.S. power, influence will decline in future, report says

A government report released Thursday paints an alarming picture of an unstable future for international relations defined by [color=#FF0000]waning American influence, a fragmentation of political power and intensifying struggles for increasingly scarce natural resources[/color].

The report, “Global Trends 2025: A Transformed World,” was drafted by the National Intelligence Council to better inform U.S. policymakers – starting with the incoming administration of President-elect Barack Obama – about the factors most likely to shape major international trends and conflicts through the year 2025.

“Although the United States is likely to remain the single most powerful actor, the United States’ relative strength – even in the military realm – will decline and U.S. leverage will become more constrained,” says the report, which is the fourth in a series from the Intelligence Council.

The report argues that the “international system – as constructed following the second World War – will be almost unrecognizable by 2025 owing to the rise of emerging powers, a globalizing economy, an historic transfer of relative wealth and economic power from West to East, and the growing influence of nonstate actors.”

. . . America’s biggest rival by 2025, the reports says, will be China.

“[color=#FF0000]China is poised to have more impact on the world over the next 20 years than any other country[/color],” it notes.

The report projects that China will have the world’s second largest economy by 2025 and will be a leading military power.

Equally problematic for U.S. policymakers is the fact that [color=#FF0000]China is expected to become the world’s biggest polluter and largest importer of natural resources.[/color]

China will not be alone, however, in terms of its desire to provide a consumption-oriented American lifestyle to a rapidly growing population. [color=#FF0000]Countries such as India and, to a lesser extent, Indonesia, Iran and Turkey, will also likely see their power – and desire for natural resources – increase[/color].

The report predicts that, the recent economic downturn aside, “unprecedented global economic growth” will mean that the [color=#FF0000]demand for basic resources such as food, water and oil “will outstrip easily available supplies” [/color]over the next decade.

As an estimated 1.2 billion people are added to the world population over the next 20 years, the demand for food will rise by 50 percent, the report projects.

The [color=#FF0000]lack of access to stable water supplies will also worsen[/color] due to rapid global urbanization, it says. . .

While conflicts are still most likely to “revolve around trade, investments, and technological innovation and acquisition,” the report states that “we cannot rule out a 19th century-like scenario of arms races, territorial expansion, and military rivalries.”

[color=#FF0000]Terrorism is also expected to remain a major issue through 2025[/color], though its appeal could be significantly reduced if economic and political liberalization accelerates in the Middle East.

“In the absence of employment opportunities and legal means for political expression, conditions will be ripe for disaffection, growing radicalism and possible recruitment of youths into terrorist groups,” the report argues. . .

Iran’s possible acquisition of nuclear weapons, which could trigger a regional nuclear arms race, the report says. Continuing tensions between India and Pakistan also add to concerns regarding nuclear proliferation. . .[/quote]
cnn.com/2008/POLITICS/11/20/ … pstoryview

True, the US has overstepped its bounds particularly in terms of consumption of resources, creation of pollution, contributing to global warming and, of course, military agression. BUT, will China, India, Indonesia, etc., behave more responsibly? Will people finally learn that we are all linked together and need to treat our planet and each other with respect, for our mutual survival. . . or are we all doomed?

I must admit, though, I read urodacus’ article in the OP and I don’t get it. I don’t see how one can change the world so that everyone everywhere doesn’t want to consume more and more, while polluting more and more, and using up the last precious remnants of all our natural resources. Sure, one can do it one person at a time, in a groovy, hippy, peace love, back to nature way (and maybe that’s all one can and should work on). But how can one convince 9 billion people to behave more responsibly?

There is no issue for anyone outside of the US if their “perceived” influence wanes. I say this a little tongue in cheek as a Brit but it is the way of the world. Superpowers lose their influence and new powers take over. Clearly we all see China playing a major role in future and maybe the Oil states will too.

If you look at the press in China it is clear that the community is far more aware of the issues than say the US was as recently as 30-40 years ago. I don’t think they will continue to develop without any consideration for the environment.

IMHO: Indonesia seems to be WAYYYY overrated in that article, they are a corrupt basket case of a country and headed back to the dark ages as far as I am aware.

Hoorah for the old guard.

In summary, the issue is not about removing economic growth as a target at all; it is about discouraging environmentally inefficient allocation of resources by capturing the true cost / value of a product in its price, and about making sure everyone signs up. This is where all govts should and MUST take decisive, swift action. Sadly, this is unlikely.[quote=“alteris”]Ever since Malthus published, we’ve known that such growth isn’t sustainable for very long.[/quote]
It’s a bit odd to be using Malthus as “evidence” considering his work has long since been discredited on a number of fronts, not least being the fact that his main postulation is false. Populations do NOT increase geometrically over time as wealth grows. In fact, most western countries (ie high income countries which have experienced powerful growth in the not-too-distant past) now have barely replacement populations; birth rates drop as incomes rise. Indeed, if changes in developed countries set the pattern, the best way to stop the global population reaching 9 billion as the UN predicts by 2075 is through rapid economic growth in the third world. Plot income per capita and fertility rates on a graph and see what you get.

At the same time, technological advances, particularly in food production, but covering almost every conceivable industry, mean we are now able to produce far more than ever before on the same (or even fewer) inputs. In fact, the article introduced by the OP gives several examples of this as it points out the flaws in Daly’s reasoning.

Malthus’ (and others’) “zero-sum-game” has proven to be, well, nonsense. A gain by one party does NOT need to equate to a loss by another. We can ALL improve our buying power (which is effectively what economic growth means - improved productivity means we get more outputs from the same inputs) at the same time, pretty much indefinitely.

None of which denies the fact that we are doing a royal job of destroying the planet. There is certainly a failure by the market, as has been pointed out already, to take the true cost / value of different products / industries into account. There’s a relatively simple way (from a theoretical perspective) to change this though, and that is through incorporating “social externalities” into the cost / value of products. Efforts at doing this are currently underway through, for example, the Kyoto protocol and various emissions trading schemes / carbon tax initiatives. The principle here is to capture the “true cost or benefit” of a product / service. So for instance, the true cost of a litre of petrol is currently understated, as its price does not include the social harm (environmental damage) it does. By the same token, the value of planting trees is underrated, as it does not take into account the social benefits.

The two (major) problems with incorporating social externalities into prices are:

  1. accurately measuring the true social cost / value of a product
  2. getting all countries to sign up to a common approach and then holding them to it

For example, the greenies amongst us who are keen to offset ourcarbon footprint for air travel will have stumbled across a plethora of websites claiming they will cover our emissions by planting trees. Type in your origin and destination, and just about each website will give you a different answer for CO2 emissions. Some sites even try to include the impact of “radiative forcing”, which is additional environmental damage allegedly caused if the plane flies above a certain height (usually around 30,000 feet). Debate rages as to how to measure this radiative damage. With no agreement on how much we’re emitting, how can we price those social costs accurately and make sure that the user pays?

On the second point, it doesn’t help when the world’s biggest polluter does not sign up, and then there is the issue of what to do with developing countries. It isn’t “fair” to make them restrict their pollution given the esay life the West has had in cranking out pollution these last several decades. Yes, it may be terribly unfair, but the reality is that if we don’t ALL make changes now, we’re all going to suffer, Chinese, Indian, American, European… Are the Chinese / Indians going to tell their grandchildren, as unpredictable weather leaves them homeless, and as food crop failures leave them hungry, that it wasn’t fair that the West got to use so many resources, so they refused to agree to limiting their own climate-changing emissions?

one point that is admittedly a bit off topic but addresses the ‘inequity’ of the developed nations’ demands/request/polite hints to China and India that they cannot afford to pollute in the same way as the developed nations did in their rush to industrial might is the fact that WE DIDN’T KNOW THEN HOW BAD IT WAS, AND NOW WE DO.

kind of like slavery. “america became rich from slavery, so let us keep slaves too”. that’s a bankrupt selfish argument that we all know is wrong.

another point is that those polluting industries grew up in a time of far less population, when the old adage of 'the solution to pollution is dilution" worked very well with one-tenth of the people or less. Now, with burgeoning populations in India and China, we (the whole world, not just ‘us’ or ‘them’) simply cannot afford the amount of pollution that a rehash of the old bad ways would bring, if allowed to rampage unchecked through Asia and Africa. now, we do have far superior technology, stuff that was not even dreamed of 50 years ago, to avoid precisely this issue, and it is as obvious as dog’s balls that that should be the way forward, rather than building a new coal fired power station per week, whatever the size of your massive coal reserves.

And not only do we now know what we didn’t once, but there’s also the very un-PC suggestion that the outrageous population sizes (and densities) in many countries particularly in Asia, are in themselves “pollution”. It is unfair to expect China, at almost the same geographic size as the USA, to be “allowed” to consume four times as much of the world’s resources just because it has a population four times as high.

If we’re to say that each person in China is “automatically” entitled to the same level of resource use in, say, the USA, we are exacerbating the problem tremendosuly. If we talk about unsustainability, just imagine a country with a demand for resources the same as the USA, but a population 4 times larger (1.3 billion people in China) or 3.5 times larger (1.1 billion in India). As incomes rise and therefore demand for air conditioning rather than fans, cars rather than bicycles etc grows, if we haven’t priced the cost of environmental damage into these items, we can expect it to go on unabated.

In this view, of course we need the West to cut emissions, but developing countries must also take responsibility for the increasing strain they put on the environment by expecting they can continue to pollute as they like until they reach the same level of resource use as the West (see China especially, and policies toward vehicle use, encouraged at any cost as a sign of “becoming 1st world” even in cities with very good public transport like BJG).

To sum up, the total disregard for the environment achieved in places like China and India despite knowing the effects (in recent years), and with their mind-blowingly high populations and densities sustained by (relatively, not necessarily in absolute terms) small land masses, some would argue, has been their own contribution to “pollution”. To expect to be able to achieve a resource-use per capita level the same as, say, the USA, with far larger populations in a limited space, is a bit rich.