Economic Growth and Steady State Economics

Report
What is a Steady State Economy?
Why do we need one?
How do we achieve it?
Dan O’Neill
CENTER for the
ADVANCEMENT of the
STEADY STATE ECONOMY
SUSTAINABILITY
RESEARCH
INSTITUTE
The Problem

Economic growth is a primary policy goal
of most governments

There is a fundamental conflict between
economic growth and environmental
protection

Economic growth is no longer improving
people’s lives in the developed world
2
What is Economic Growth?

Increase in the production and
consumption of goods and services


Typically measured using GDP


Occurs when either population or per capita
consumption increases
Total expenditure on all goods and services
produced within a country
A relatively recent policy goal
3
The History of Economic Growth
The Global Economy, 1–2006 AD
7
7000
Population
6000
Per Capita GDP
5
5000
Can this really continue???
4
4000
3
3000
2
2000
1
Source: Maddison 2008
Per Capita GDP (1990$)
1000
Year
2000
1800
1600
1400
1200
1000
800
600
400
0
200
0
0
Population (Billions)
6
4
The Economy and the Environment
£££
£
Resources
Resources
Waste
Waste
£
products
products
£££
Waste Waste
5
The Limits to Growth
6
The Ecological Footprint

Measures how much land society needs to:


Produce the resources it consumes
Assimilate the wastes it generates
United States
12,000
3,000
Ecological
Footprint
10,000
2,500
8,000
2,000
6,000
1,500
GDP
4,000
2,000
1,000
Sources: Global Footprint Network,
U.S. Bureau of Economic Analysis
0
1961
500
0
1967
1973
1979
1985
Year
1991
1997
2003
7
Global Ecological Overshoot
The World
1.4

Global ecological
footprint is greater
than available
biocapacity!

We are in a state of
overshoot
1.0
0.8
0.6
0.4

0.2
Ecological Footprint
2000
1990
1980
1970
0.0
1960
Number of Earths
1.2
Biocapacity

Resources are being
used faster than they
can be regenerated
Wastes are being
produced faster than
they can be assimilated
Source: Global Footprint Network
8
Planetary Boundaries

Study in Nature in 2009

Nine planetary boundaries that define the “safe operating
space” for humanity on the planet

Relate to earth-system processes:
1.
2.
3.
4.
5.
6.
7.
8.
9.
Climate change
Biodiversity loss
Nitrogen and phosphorous cycles
Stratospheric ozone depletion
Ocean acidification
Global freshwater use
Change in land use
Atmospheric aerosol loading
Chemical pollution
9
Planetary Boundaries
Source: Rockstrom et al. 2009,
Nature 461: 472-475.
“Transgressing one or more of the
planetary boundaries could lead to
catastrophic change at the continental
to global scale.”
10
Can Technology Save Us?

Can we decouple economic growth from resource use?


Technological progress
Switch from goods to services
250
The World
Index (1980=100)
200
GDP
150
Material Use
100
Material Intensity
50
Source: SERI (www.materialflows.net)
0
1980

1985
1990
1995
2000
GDP growth has overwhelmed any decoupling
2005
11
Is It All Worth It?
Imogen Shaw
Happiness and GDP
Percentage very happy
United States
Real income
per person
Percentage
very happy
Source: Layard (2005)
“Americans have been more successful decoupling GDP from happiness
than in decoupling it from material and energy” —Peter Victor
13
Happiness (Index)
Happiness and GDP Across Countries
Source: Inglehart and Klingemann (2000)
Income per Person ($)
14
What Are We Actually Measuring?

GDP

Total expenditure on all goods and services
produced within a country

Adds to GDP:

Also adds to GDP:
15
Genuine Progress Indicator (GPI)
Same accounting framework as GDP, but
United States
$40,000
GPI per capita
GDP per capita
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
Source: Redefining Progress
Year
2000
1995
1990
1985
1980
1975
1970
1965
1960
$0
1955

Adds value of household and volunteer work
Subtracts cost of crime, pollution, and family breakdown
1950

2000 US$

16
The Degrowth Transition to a SSE
Growth
Degrowth
SSE
Carrying
Capacity
Time
17
What is a Steady State Economy (SSE) ?

Stable population

Stable per capita consumption

Energy and material flows are reduced
and kept within ecological limits

Constant stocks of natural and humanbuilt capital
18
Characteristics of a SSE

Sustainable Scale

Fair Distribution

Efficient Allocation

High Quality of Life
Energy
and
Energy
and
Use
markets
material
flows
material
flows
Limits
to
Health,
time,
only
where
within
ecological
within
ecological
inequality
prosperity,
appropriate
limits
and limits
community
19
Can We Really Do This?

Model for the Canadian Economy

Possible to have






Full employment
More leisure time
Fiscal responsibility
Virtually no poverty
Reduced GHG emissions
All without the need for economic growth!
Source: Peter Victor, York University
20
How Do We Achieve a SSE?

Adopt the right macro-economic goal: the
Steady State Economy

Gradually change existing policies from
growth towards a steady state
21
The CASSE Position

Position statement on economic growth



Purpose



Recognises the conflict between growth and
environmental protection
Calls for the transition to a SSE
Demonstrate the level of support for a SSE
Advance the SSE in policy discussions
Endorsements

>170 organisations, 7000 individuals
www.steadystate.org
22
How Do We Achieve a SSE?

Adopt the right macro-economic goal: the
Steady State Economy

Gradually change existing policies from
growth towards a steady state
23
1. Limit Resource Use
Currently:

Few controls on use of resources and emission of
pollutants


Montreal Protocol: limits ozone-depleting substances
EU Emissions Trading Scheme: limits CO2 emissions
In a SSE:


Impose strict resource and emission caps
Employ a cap–auction–trade system



Caps set based on ecological criteria
Permits auctioned by government
Trade between industries to allow efficient allocation
24
2. Stabilise Population
Currently:


Natural increase is low in many wealthy countries
But many rich countries are trying to encourage
population growth
In a SSE:

Births plus immigration must equal deaths plus
emigration

In wealthy countries:


Balance immigration with emigration
In poorer countries:

Provide education, access to birth control, and equal rights
for women
25
3. Reduce Inequality
Currently:

Economic growth is used as an excuse to avoid
dealing with poverty

“A rising tide lifts all boats”
In a SSE:



No growth, so no excuses!
Finite resource use = Finite amount of wealth
Must deal with distribution explicitly

Need a minimum and maximum income
26
4. Reduce Working Hours
Currently:

Technological progress is used to increase
production of goods and services

A better widget machine = more widgets!
In a SSE:


We cannot increase production if it results in
higher resource use
Instead, shorten the working day, week, & year

Same salaries but more leisure time!
27
5. Reform the Monetary System
Currently:

Fractional reserve banking


Most money is created by private banks in the form of
debt
Increasing debt drives economic growth
In a SSE:


All money would be created and spent into
existence by a public institution
Banks would be prohibited from creating money,
but would instead have to borrow existing
money to lend it
28
6. Change How We Measure Progress
Currently:

Rely on GDP, which doesn’t distinguish between:


Benefits and costs
Quality and quantity
In a SSE:


What happens to GDP is not important
Replace GDP with two sets of accounts:

Well-being


To be maximised
Resource use

To be reduced and kept within ecological limits
29
Conclusion

There is a conflict between economic growth and
environmental protection

Economic growth is no longer improving people’s
lives in the developed world

We need to make the transition to a SSE

Adopt the right macroeconomic goal

Restrict resource use, stabilise population, limit
inequality, reduce working hours, eliminate fractional
reserve banking, and change the way we measure
progress
30
Enough is Enough
www.steadystate.org/enough-is-enough
31
Thank you!
Dan O’Neill
[email protected]
CENTER for the
ADVANCEMENT of the
STEADY STATE ECONOMY
www.steadystate.org
SUSTAINABILITY
RESEARCH
INSTITUTE

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