A Radical Thought: Implement the Steady-State Economy

Jun 26, 2020

The post-Covid recovery period may be a suitable time to consider how to transition to a steady-state economy with almost full employment.

The Covid-19 pandemic has thrown billions of people totally or partially out of work. However, it also offers those of us who are not struggling to survive, the opportunity to reflect on the weaknesses of the previous socio-economic system and how we could improve its capacity for meeting other threats to people and the planet.

In a previous article  I observed that the response to Covid-19 could not be made by the unguided market and that preparation for future pandemics and other major crises – such as climate change, global financial collapse and mass unemployment – need strategic planning by governments, business and industry, and the community at large.

The present Irritation starts with the observation that we are facing a climate crisis and, as a result of the pandemic, global greenhouse gas emissions have declined for the first time in many years. Can we maintain the environmental benefits while regaining employment?

Back in 1977, economist Herman Daly, pointed out that economic growth is causing environmental destruction and will cause a food crisis. He argued that, ‘within the context of overall growth, these problems are fundamentally insoluble, although technological stopgaps and palliatives are possible’. His solution was the steady-state economy (SSE), ‘an economy with constant stocks of people and artefacts [sic], maintained at some desired, sufficient levels by low rates of maintenance “throughput”’. Since then, the concept has been further developed by Daly and others (see e.g. Dietz and O’Neill 2013) and has led to the interdisciplinary and trans-disciplinary field of Ecological Economics.

It should be emphasised that the concept of SSE is defined in terms of limits to biophysical growth, that is, growth in use of energy, materials and land and in human population. In theory it is possible to have a biophysical SSE while monetary economic growth continues. However, at present the two growths are strongly coupled in most sectors and most countries. As well as arguing for limits to resource use and population, proponents of SSE such as Dietz and O’Neill argue for a fairer distribution of wealth and income, reform to the monetary and financial system, changing the way we measure progress, providing meaningful jobs, and rethinking commerce. Tim Jackson frames the approach as Prosperity without Growth.

Two key issues are how full employment, or at least low unemployment, could be maintained in an SSE, and the impact of an SSE on social equity. Two studies, using different approaches, suggest that an SSE, together with environmental and social improvements, is possible, although difficult to implement politically. Each study explores several different policy scenarios for transitioning to an SSE

Graham Turner has used the Australian Stocks and Flows Framework to model the Australian socio-economy in biophysical terms (see pp.112-128 of A Future beyond Growth). Stocks are quantities of physical items, such as land, livestock, people and buildings at a point in time. Flows are the rates of change over a time period, e.g. net addition of agricultural land, new computers, births, deaths and immigration. Peter Victor, an economist who works on environmental issues, used a macro-economic model of the Canadian economy to generate scenarios (see here and here).

Although they use entirely different methods, both approaches yield similar results. In scenarios where a freeze is imposed on growth either in the monetary economy (Victor) or the biophysical economy (Turner), and no other supportive policies are implemented, a large fraction of the population becomes unemployed, as expected. But, if a range of policies are implemented to foster new jobs and share them around, then an SSE with low unemployment, less poverty and reduced greenhouse gas emissions is possible. A typical portfolio of supportive policies is: shorter working week; stabilised population; investment in ‘green’ infrastructure; expansion of health care, social services and education; and more local manufacturing in place of some imports.

These results appear relevant to the post-Covid recovery as well as to the SSE.

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