It’s Time for a New Economics of Sustainability by Dan O’Neill

Ecological economists have long argued that the pursuit of never-ending economic growth is a dead-end strategy.  One of the most basic insights of the discipline is that the economy is a subsystem of the environment.  All of the inputs to the economy come from the environment, and all of the wastes produced by it return to the environment.  Since we live on a finite planet, the economy cannot grow forever.

In our book and film, Enough Is Enough: Building a Sustainable Economy in a World of Finite Resources, Rob Dietz and I argue that it’s time to abandon the pursuit of growth in wealthy nations like Canada and consider a new strategy—an economy of enough.  The blueprint that we describe is based on the contributions of over 250 economists, scientists, NGO members, business leaders, politicians, and members of the public.  Some call this blueprint the “new economics”, some call it “degrowth”, and some call it a “steady-state economy”.  No matter what you call it, the key idea is to develop economic policies that improve quality of life without expanding consumption.  These policies include methods to reduce resource use, limit inequality, fix the financial system, create meaningful jobs, reorganize business, and change the way we measure progress.

In a recent article, published in the Journal of Cleaner Production, I analyzed how close modern-day economies are to the concept of a steady-state economy, and whether there is any relationship between a country’s proximity to such an economy and its social performance.  I carried out my analysis using the Degrowth Accounts, a set of 16 biophysical and social indicators that are derived from Herman Daly’s definition of a steady-state economy and the social goals of the degrowth movement.  I applied these indicators to 180 countries over a 10-year period.  I found that countries with higher levels of material and energy use tend to be better places to live than countries with lower levels.   No surprise there.  But I also found that there are diminishing returns to this relationship.  Once people’s basic needs are met, additional resource use contributes less and less to human well-being.

More surprisingly, I found that countries with stable levels of resource use are better places to live than those experiencing growth.  Stable economies are more democratic and more equal, and their citizens are happier and healthier than those in growing economies.  These findings hold up even after taking into account the level of resource use.  Moreover, there is no difference in the unemployment rates between countries achieving high rates of growth, and those achieving no growth.  Japan serves as a good example.  It is a country that has had virtually no economic growth for 20 years.  By conventional measures it should be an economic basket case.  And yet unemployment is less than 4%, and the Japanese live longer than anyone else in the world.

Our main economic indicator, the GDP, is a good measure of economic activity—of money changing hands—but a poor measure of social welfare.  It lumps together desirable expenditures (food, entertainment, and investment in education) with expenditures that we’d really rather avoid (war, pollution, and family breakdown).  In the language of economics, GDP does not distinguish between costs and benefits, but counts all economic activity as “progress”.

Instead of GDP, we need indicators that measure the things that really matter to people, such as health, happiness, and meaningful employment.  We also need indicators that measure what matters to the planet, such as material use and CO2 emissions.  In fact, we already have these indicators—the problem is that we largely ignore them, because we are so fixated on GDP.  If the goal of economic policy were to change from increasing GDP to improving human well-being and preventing long-term environmental damage, then many proposals currently seen as “impossible” would suddenly become possible.

There is an increasing feeling, even in the mainstream, that the era of economic growth is coming to an end.   Stock markets are tumbling, oil prices are falling, and economic forecasts are systematically being downgraded.  There is space and opportunity for a new macroeconomics to emerge, but it’s up to ecological economists to ensure that it’s an economics of sustainability.

 

ONeill_Photo_WebDan O’Neill is a Lecturer in Ecological Economics at the University of Leeds and the Chief Economist at the Center for the Advancement of the Steady State Economy (CASSE).  He grew up in Victoria, BC, but currently lives in England.

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