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Reconfiguring the Economic System to Enable Sustainable Development, Equity and Prosperity

Reconfiguring the Economic System to Enable Sustainable Development, Equity and Prosperity

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An essay for the 2011 Undergraduate Awards Competition by James Stockdale. Originally submitted for Society and the Environment at University College Cork, with lecturer Helena O'Connor in the category of Social Studies
An essay for the 2011 Undergraduate Awards Competition by James Stockdale. Originally submitted for Society and the Environment at University College Cork, with lecturer Helena O'Connor in the category of Social Studies

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Published by: Undergraduate Awards on Aug 29, 2012
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01/17/2014

 
 Reconfiguring the Economic System to Enable Sustainable Development, Equity and Prosperity
“The bank – the monster has to have profits all the time. It can't wait. It'll die. No,taxes go on. When the monster stops growing, it dies. It can't stay one size.”(Steinbeck 1939)
Introduction
The prevailing economic system is often taken for granted. It is something that we must work
within
to solve our problems. If that very system is the root cause of our problems then no amountof tweaking and tinkering within the confines of mainstream economic thinking will provide longterm solutions. This essay provides a brief discussion of the concept of steady state economics – analternative to the dominant economic paradigm. It is a system that many thinkers believe couldprovide equity and prosperity in a truly sustainable manner.
Some Definitions
Before addressing the main topic of the essay, it is important to clarify the terms of the question.'Sustainable development' is possibly amongst the most widely used and abused phrases in modernpolitical discourse. The World Commission on Environment and Development (WCED) (1987)famously defined the term as “development that meets the needs of the present withoutcompromising the ability of future generations to meet their own needs.” This is a useful startingpoint for the purpose of the following discussion, however, the terms 'development' and 'needs' aresomewhat open to interpretation and will need to be revisited.Equity, can be broadly defined as the fair distribution of resources amongst people. This includesnot only people alive today but also people yet to be born, the people of future generations who arealso entitled to their share of the world's resources. An equitable distribution is one that isapportioned according to the
needs
of the recipients and is not necessarily an
equal
distribution.Prosperity is often associated with financial security. However, in the context of this discussion, awider, more holistic understanding of prosperity should be adopted. It encompasses the quality ofour lives, the health and happiness of ourselves, our friends, families and communities (Jackson2009, p.16).If the above definitions are accepted, then it is perhaps also acceptable to state that the 'needs' of anindividual or a society, as invoked in the WCED definition of sustainable development, aresubstantially met when equity and prosperity are achieved. However, this still leaves the'development' term to be defined.To the mainstream or 'neo-classical' economist, development is largely contingent on economicgrowth – an increase in the production of goods and services. Economic growth is very much theaspiration of modern governments the world over. In the midst of the current global financial crisis,ministers of finance and other politicians can be heard daily asserting and then reasserting theimperative of economic growth to restore prosperity. This clearly illustrates what Hodson (1972)describes as 'the cult of growth'. Even the WCED concluded sustainable development would onlybe achieved following a five- to ten-fold increase in global economic product (Robinson 2004,p.373).Page 1 of 6
 
But outside of the dogmatic realms of mainstream politics and economics, 'development' can beviewed in a different light. Daly (1996) makes a clear distinction between growth and development.The former, is merely a
quantitative
increase in the production and consumption of goods andservices. The latter is the
qualitative
improvement in the factors that contribute to individuals' well-being – in other words, that which we previously defined as prosperity. This separation of conceptsis vital as it allows for the idea that development – enhancement of the quality of life – has thepotential to proceed independently from economic growth.It is undeniable that economic growth has yielded increases in prosperity. However, it is abundantlyclear that such gains have been grossly inequitable. During the
 period of modern economic growth
all of the world's regions have experienced some level of economic progress from what was arelatively level playing field around the turn of the nineteenth century. However, the disparitybetween rich and poor nations has grown enormously during the same period as progress was notexperienced equally by all nations (Sachs 2005, p.29).
Limits to Growth
Aside from concerns over equity, there is another major problem with the belief that continuedeconomic growth will deliver universal prosperity. Namely, the biophysical limits to growth. It isneither a new, nor difficult concept, but somehow it has failed to command the attention it deservesin mainstream economics.The prevailing economic paradigm is based firmly on the premise of economic growth – theincreased production and consumption of goods and services. If we experience economic growth, itmeans we are making more things or providing more services. The things we make and the serviceswe provide require inputs of materials and energy. As we consume the goods and services, weproduce waste. Simply put, our economic process consumes energy and materials and creates waste.Daly (1996) contends that neo-classical economists see this process taking place in a vacuum withthe inputs appearing on demand as they enter the system and vanishing without trace as they leave.In reality, the materials and energy that fuel the economy are provided by our planet just as thewastes that the economy creates are returned to the earth. Meadows et al. (1972), drew popularattention to the proposition that there must be biological and physical limits to what resources wecan extract from the natural environment and what pollution and waste we can return. Economiststend to dismiss these factors by invoking 'externalities' – that is, benefits and costs that do not havea monetary value.For Daly (1996), the bottom line is that the economy is a
sub-system
of the environment. Therefore,the economic system must work within the restrictions imposed by the biophysical limits of theenvironment. This is in stark contrast to the neo-classical economist's view that the economicsystem is at the centre of the world and the environment must be overcome and adapted – throughthe use of technology – to fit the economic model.Page 2 of 6
 
An Alternative Economic Model
Like the practitioners of any branch of knowledge, economists have particular ways of doing things.For example, taxes, interest rates, social welfare can all be manipulated to steer a path towards aparticular economic goal. But the goal has always been growth. As we have seen, however,continued economic growth has delivered neither equity nor universal prosperity. If anything, it hasachieved quite the opposite. Furthermore, continued economic growth causes irreversible depletionof natural resources and environmental damage. As Albert Einstein is widely reputed to have said,we can't solve our problems with the same kind of thinking we used when we created them. Perhapsit's time to move the goalposts?For many people, abandoning the pursuit of economic growth is akin to abandoning the breathingof air. So deeply ingrained in our culture and every day experience is the imperative of growth thatalternatives seem quite unthinkable. But many thinkers have pondered on alternatives for someconsiderable time. Quite simply, the alternative to growth is... no growth!
The Steady-State Economy
A steady-state economy (SSE) is one that neither grows nor contracts, but remains at a (relatively)constant size. Overall production and consumption remain at a relatively constant level and,therefore, the
throughput 
of energy and materials is correspondingly stable. The trick, of course, isto achieve the steady-state at a sustainable scale. That is to say that the extraction of resources mustnot exceed the rate at which they are naturally replenished and that waste must not be produced at agreater rate than it can be absorbed by the planet. Naturally, some resources are non-renewable andare not replenished at all. A sustainable SSE would substitute the use of these resources withrenewable alternatives at such a rate that the use of non-renewables is continually reduced.It follows that the economy will grow if per capita production and consumption increase or if thepopulation itself increases. If capping the former is unpalatable to the traditional mind, controllingthe latter is taboo of an even higher order. Kerschner (2010, p.545) contends that the important issueof population is “mostly ignored... in the general sustainability discourse”. But the uncomfortabletruth remains; if the world has a limited carrying capacity, then at some point, population must levelout. Humanity will be bound by the biophysical limits to growth whether by a controlled descent ora Malthusian catastrophe.Steady-state economics has many critics. Naturally, neo-classical economists find it hard toentertain a notion that chips away at the very foundations of everything they have learned.However, some critics of the steady-state believe that it doesn't go far enough. The so-called
de-growth
movement argues not only for an end to economic growth but for a decline in economicthroughput. Kerschner (2010) attempts to unify de-growth with SSE by asserting that the former isa necessary step on the road to the latter. In particular, while developing countries are expected togrow their economies by a certain amount, de-growth is considered a prerequisite to a SSE in thewealthier nations.Page 3 of 6

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