How would a steady-state economy work?

The steady state economy is an idea that I became interested in a few years ago. What some might describe as a fringe economic movement, others might term an environmentally-responsible solution to the current unsustainable, runaway-growth mentality.

The steady-state economy proposes an alternative to an economy that seeks to expand and grow each quarter.

The idea is that – in developed, usually western, economies – many of us already have everything that we need. And if we already have everything we need, does it make sense to constantly extract more, produce more, spend more and strain the planet with more people and more things? Can the economy really grow every year, forever? At some point, should we not consider a transition to a stationary, or steady-state economy?

We live on a planet with limited resources.

Why is it a bad thing when consumer spending goes down? Why are people encouraged to go out and spend money to ‘stimulate the economy’? Encouraging the mindless consumption of cheap ‘Made in China’ goods is not good for the planet. Consider the energy that it took and pollution that it caused to create these goods, to ship them, to put them in stores… For what? So that we can buy more things that we don’t need, let them pile up in our houses and closets… and eventually donate them or send them to landfill?

What about the idea of minimalism? Of not expanding the economy, but redistributing the immense wealth that already exists? What about the billionaires who have so much wealth that they wouldn’t even notice if half of it disappeared? What about the plastic piling up in the oceans? Are we really better served by increased consumer spending?

A steady state economy is an economy of stable or mildly fluctuating size (1). An economy can reach a steady state after a period of growth, or after downsizing. A sustainable, steady state economy entails a stabilised population and stable per capita consumption. That’s not to mean that there’s no change – fluctuations may occur in the short term – but that long-term a stable equilibrium will emerge. Birth rates will approximately equal death rates, and production rates will equal depreciation rates.

With a stable population and a high quality of life for most or all citizens, a steady state economy is a more logical ambition, versus the constant expansion sought by the neoclassical macroeconomic policies. The steady state economy is also the predominant policy goal of ecological economics.

Contrary to popular belief, the steady state economy is not even actually a new idea. Various economists have long considered the transition from a growing to a stable economy, famously including John Stuart Mill, and Adam Smith in his work, The Wealth of Nations (see more on the history of the idea here).

Our economic system isn’t going to change over night, if at all, but critical reflection is an important component of it. There is benefit in initiating the conversation to consider new systems, rather than accepting the current one as a given. Capitalist economic expansion has certainly provided us with numerous benefits thus far, but consideration is warranted, as to whether this system ought to persist indefinitely into the future.

What do you think? Leave a comment and let me know.

What is the circular economy?

The concept of the circular economy (CE) has rapidly gained popularity over the past few years, and is currently being promoted by the EU, several national governments and many businesses around the world. There are numerous definitions of the circular economy, but perhaps the simplest is that it’s a cradle-to-cradle approach – one that aims to close the loop and bring consciousness and ownership to the entire lifecycle of a product.

It’s about manufacturers taking responsibility for their product from production through to disposal, recycling or reuse. It’s the same kind of system that many countries use for bottle recycling, for example. Bottles are sold with a small deposit fee to incentivise consumers to to bring them back, they are then collected by a retailer, shipped back to the manufacturer, cleaned and reused.

Now imagine this idea being implemented everywhere, for all kinds of products. No longer would you be left wondering what to do with old electronics that don’t work anymore, debating if you should just throw them out or spend time and effort to look up where you can recycle them, and then making a special trip to a special electronics recycling location that’s probably out of your way.

Or with clothes – H&M is one retailer that is now collecting old textiles, whether they can be reused as clothes or not. In exchange, they offer customers a discount coupon for their next purchase. Similarly, some sustainable razor companies now have programs where you can safely send back your old blades instead of throwing them away.

In this way, the circular economy aims to minimise waste, make the most of resources and reduce externalities. It’s in contrast to the traditional linear economy, which operates along a one-way chain of resource extraction, production, and disposal – which the manufacturer isn’t responsible for.

Moving away from the linear model will help promote a more sustainable society, allow us to design waste out of the system, and slowly separate productive economic activity from the consumption of finite resources.