With
the Federal Budget being brought down next week, it's time to
reflect on how things could be. When I arrived in Australia, Frank
Crean wasTreasurer - and things haven't improved since. Treasurers
take the same advice from incumbent bureaucrats and make the same
mistakes as their predecessors
Steady
State Economics presents a different view of how we could run the
world, instead of chasing the illusiuon of perpetual growth. It
offers the concept of an economy that is completely sustainable. A
community with a size and structure that doesn't grow, but remains
stable to match the limits of the natural environment and its
resources.
Greed
and self-interest led to the last global financial meltdown. It was
an inevitable result of Government policies, big business demands and
mass gullibility.It will happen again (and again)unless Governments,
industrialists, commercial interests and individuals choose a
different path from the God 'growth'. The same greed resulted in a
pathetic and useless outcome from the climate change talks in
Copenhagen.
Traditionally,
economics taught in our universities has been based on an
assumption that continuous growth is the only way to generate a
better life for everyone on the planet. It argues that growth will
raise living standards, lift people out of povertywhilst the cycleof
supply and demand will solve environmental problems and the depletion
of world resources. The classic view is that exponential growth is
good and fast growth is even better.
Advocates
of steady-state economics dispute this view. One of the first was
John Stuart Mill in the 19th century and he has been followed by
people like Herman Daly who maintains that the economy is a subset of
our ecosystem. The global ecosystem is finite, a closed system which
cannot grow. Matter neither enters nor leaves it. The ecosystem also
provides the economy’s resources and a sink for its wastes.
Continuous growth forces a collapse in the ecosystem which then
becomes unable to support the economy and the community.
Some
who question the current economic system, note that the ecology of
the planet is increasingly under pressure, with natural resources
such as forests, fish stocks, minerals and soil being depleted at
alarming rates. Land for food production is increasingly scarceand
pollution levels are making water and air unusable or unsafe.
The
idea of a steady state economy is a way of addressing the problems of
an unsustainable human society. Because the resources of the economy
are all derived from the natural environment, the ecological
dependence and the availability of natural capital means there are
strict limits to any growth. Instead of continuous growth and
'development', a steady state economy would have zero growth, at
sustainable levels of production and resource use. Renewable
resources would only be used at a natural replacement rate and
non-renewable resources would be used no faster than renewable
alternatives could be found. Limits would be needed for population
size, consumption, and the gathering of personal wealth. The steady
state would maintain the entire population at a comfortable level
which neither threatens the natural eco-systems and resources of our
world, nor forces people to live uncomfortable lifestyles.
One
definition of sustainability is to have a population and an economy
in equilibrium. The birth rate matches the death rate and commercial
activity is maintained at a constant level. If we reach this state,
the peaks and troughs of a demand-driven society expecting to make
more money this year than in the previous year will be a matter
of ancient folk lore
There
have been many arguments against the steady state theory. Oneis that
zero growth would result in a serious economic depression, high
unemployment and huge shortages. However, Daly counters this by
pointing out that such a depression is part of the design of the
current economic system. It's an inevitable consequence of chasing
growth. A steady state economy has an entirely different basis that
requires a smaller economy which better matches the availability of
resources. Under a steady state system there can be no shortage. Our
current economy has become far too large relative to the
ecosystems and it cannot be sustained at this level. Just as
economists and accountants teach that a business has an optimal scale
of operations, where the marginal revenue equals the marginal cost,
the optimal scale of the economy is where the marginal gain from
growth equals the marginal cost of growth – costs such as pollution
and resource depletion. It's clear that,over time, growth
generates more costs than benefits.
Implementing
the theory of steady state economics is inherently difficult. It
requires a total change of ideology for economists, consumers and
governments of developed and developing countries, and meets
strong opposition to what is seen as its extreme requirements. Their
whole thinking revolves around growth. It's hard to imagine the
mandarins in organisations like the World Bank, the International
Monetary Fund or any of the Government leaders in the G20 looking
kindly on any suggestion that they should stop worshipping growth.
But
Daly, along with many others has identified the most urgent step in
fixing the world's economic problems as cutting unfettered
growth. This demands limits on family size and allocating fixed
stocks of manmade capital.
The
world's population has outstripped the carrying capacity of the
earth. Steady state economics requires that the population be
stabilised at well below the natural carrying capacity, rather than
at that level. This means that resources will be better utilised and
lifestyles maintained at comfortable levels, rather than at low
standards of living. The gathering of personal wealth needs to be
limited to avoid over-consumption and waste that reduces the
food and other goods and services available to the wider
community.
In
order to achieve the steady state, the following steps have been
suggested to limit growth, stabilise populations and wind production
back to a sustainable level:
-
Apply
substantial taxes on fossil fuels, especially petrol – fossil
fuels are finite and reliance on them can therefore only be
temporary. There needs to be deterrents to using fossil fuels and
incentives for finding alternative sources of energy.
-
Abolish
subsidies encouraging fossil fuel use – fuel prices in many
countries are subsidized, so that the price reflects neither the
value, nor the finite nature of fossil fuels.
-
Price
water to reflect scarcity and encourage conservation –
over-consumption and wasteful use has resulted in scarcities of
drinkable water in many countries, both developed and undeveloped,
and the pollution of waterways.
-
Halt
immigration – in developed countries the natural population is
below the replacement rate and population growth comes largely from
immigration. Halting immigration will mean that local populations
will gradually decline naturally. It is also claimed that such a
move would have global benefits as immigrants from poor nations
living at even low standards of living in developed countries would
consume more than they would in their own countries.
-
Eliminate
subsidies to industrial agriculture – mass production of food,
through crowding or excessive use of fertilisers are already
revealing massive repercussions such as ‘mad cow’ disease,
declining soil fertility, and pesticide contamination of soil, water
and animals.
-
Abandon
globalization – this concept completely challenges economic
notions of free trade, as Daly argues that ‘by encouraging
consumption of cheap imports and pressuring domestic producers to
cut costs, makes it harder to set prices so as to reflect ecological
costs’ and domestic markets need to be protected from cheaper
imports to maintain sustainability.
Steady
State economics challenges the view that a traditional ever-growing
economy will lead to wide-spread global prosperity, including the
preservation of the environment through the mechanisms of supply and
demand.
Daly
concluded that increasing global wealth will never raise the living
standards of the poor, because the benefits of growth go to the
owners of surplus, who are not poor. Furthermore the need for surplus
will deplete all the natural resources and result in widespread
economic destruction. With a steady state economic system the
resources of the world can be maintained. The population would be
stabilised, growth would be brought to an end and the economy would
continue to draw on renewable resources but at completely sustainable
levels.
Is
superannuation just a con?
Any
investment that relies on tax concessions to make it effective should
be treated with great caution. And that's the main problem with
superannuation. It's a great way of generating a huge financial pool
with Governments, fund managers, investment advisers and merchant
bankers skimming off the top – but Joe Blow citizen at the bottom
of the pile has no guarantee that much will be left when he (or she)
needs it. The industry spruiks about it's financial performanceas
though it is something wonderful. However if you look at the figures
it really only works if there is continual growth which is not going
to happen.
In
the end its an elaborate sham, a lottery in which there are many
winners (such AS the fund mansgers) along the way. Some individuals
enjoy the benefits when they finally retire but there will be
many who don't receive anything like they expected. For them the
gamble won't pay off!
For
more on a "Steady State Economy" go to
http://learningforsustainability.net/susdev/steadystate.php
