Center for the Advancement of the Steady State Economy
Regular Contributors:  Herman Daly, Brian Czech, Brent Blackwelder, James Magnus-Johnston, and Eric Zencey. Guest authors by invitation.

Building a Local Movement: Transition Winnipeg Embraces the Steady State Economy

by James Magnus-Johnston

Johnston_photoWhen activists, teachers, and thought-leaders talk about the steady state economy (SSE), we often refer to macroeconomic state-oriented policy. Not always fodder for dinner conversation. If we’re going to mainstream the SSE, efforts have to be reflected in the local community to show what a steady state economy feels like in the real world. To that end, I believe that a strategic partnership between the transition movement and steady state advocates would be mutually beneficial. Transition initiatives are in need of a lexicon that articulates what we’re transitioning to—that is, the degrowth transition to a steady state economy—and the steady state movement would be able to foster greater collaboration with proponents of community economic development and grassroots change. In collaboration with a number of local teachers and practitioners, I tested a strategic partnership over the last two years, with positive early results in a city that isn’t generally known for leading the charge to be green.

Sometimes, steady state advocates simply fall into the trap of preaching to the wrong audience. We want to celebrate the adoption of SSE policy by governments—things like the reduction of the work week, a basic income, and an increase in the fractional reserve requirement. So rather than having conversations with our neighbours, we jet-set to cosmopolitan centres only to argue with neoclassical macroeconomists over the feasibility of embracing a new set of norms. The response is almost inevitably “one day…but not now.” Among audiences where competitive overconsumption and entitlement are accepted as prime motivators, the steady state economy could not possibly be an easy sell. The culture shift is happening elsewhere.

In fact, the culture shift is likely occurring among a sizeable number of citizens in your own community, where steady state policies are an easy sell indeed. Perhaps post-growth thinkers need to embrace a both/and strategy—both policy reform and grassroots change—rather than privileging one over the other or wasting energy on the wrong audience.

Enter the transition movement, a neighbourhood-based movement for low-carbon, climate-resilient action and reform.

When bicycling isn’t enough, and policy reform is too slow, perhaps what we need is a community-based movement. Photo Credit: Daniel Lee

The transition movement has adopted the notion that “If we try and do it on our own it will be too little, if we wait for government to do it it will be too late, but if we can gather together those around us—our street, our neighborhood, our community—it might just be enough, and it might just be in time.” This likely resonates just as well with proponents of degrowth towards a steady state economy: clearly, if we wait for government, it will be too late. If we act as individuals by embracing materially simpler lifestyles, we may just be branded “weird” by friends and family. Too little. But if we foster a community of like-minded partners, our efforts may be just enough, just in time. Community gardens appear, a can-do entrepreneurial culture leaps ahead of nervous or fickle legislators, bottom-up pressure is exerted on bureaucrats, and simpler low-carbon lifestyles become almost cool—perhaps even hip(ster). More than anything else, the transition becomes something that people can feel. It’s achievable, and it’s fun.

Can it happen in your community? I think Transition Winnipeg’s early experience demonstrates that it can happen just about anywhere. Over the past two years, I inflicted my enthusiasm for post-growth economic change upon the organization’s initiating committee. What I found was that grassroots activists and practitioners were craving a word that described an economy that functions within ecological limits. Often the only word we use to describe the present state of affairs is “capitalism,” but popular alternatives (“socialism”) aren’t universally designed to function within ecological limits. Attractively, perhaps, the word “steady state” can be used to describe both.

Transition Winnipeg’s first pass at imagining Winnipeg as a thriving post-growth community and steady state economy is entitled Winnipeg’s Great Transition: Ideas and Actions for a Climate-Resilient, Low-Carbon City. The document is not all that unique among transition initiatives. In fact, there are plenty of vision documents among transition towns, often called “energy descent action plans,” that outline how energy and climate constraints will shape communities in the years to come. What is perhaps unique about Winnipeg’s Great Transition is its explicit use of the post-growth paradigm and steady state economy as organizing principles. After all, energy use and economic growth have historically been extremely closely linked; it is accepted among ecological economists that you can’t have much of one without the other. On many transition websites, including that of the REconomy Project, “growth” was widely used at first. While the term seems to have been phased out, “steady state” has not been embraced as an alternative. Would it not be meaningful for transition groups to state the explicit goal of aggregate degrowth towards a steady state economy?

The release of Winnipeg’s Great Transition was something of a one-day sensation in the local media for a city where ecological resilience and post-growth planning almost never makes the headlines. We timed the release to coincide with the middle of the civic election and invited a number of mayoral candidates to attend. Three candidates joined us for a sincere dialogue and were receptive to the strategy. The authors of the report were invited by some of the candidates to provide a workshop to the new city council to explain why post-growth planning is important, and how it improves resilience. The report may even have made conversation around the dinner table.

Are small, local initiatives like ours going to move us toward a steady state economy overnight? No. Are they going to create the kind of on-the-ground connections and enthusiasm that a full-scale political and economic movement requires? With time, I believe they will.

Winnipeg provides a great site to test a strategic partnership between the transition movement and CASSE, but that’s not because the city is a shining beacon of change! One mayoral candidate recently announced that he would cancel rapid transit and focus on filling potholes instead (full-cost accounting be damned). Rather, Winnipeg provides a great example of change precisely because the city sometimes fails to embrace the leading edge. If a grassroots partnership can work here, it can work just about anywhere.

Giant Mats of Green Slime in Lake Erie Signal a Need for New Economic Approaches to Pollution

by Brent Blackwelder

BlackwelderFor the past 40 years, I have spent family summer vacations in Northern Michigan to enjoy a fresh water paradise of small lakes and rivers, along with the Great Lake Michigan.

Ghanbani, Slimeade

What does this have to do with economic growth? Photo Credit: Haraz N. Ghanbari of AP

This year, not all of the Great Lakes turned out to be great: Lake Erie was covered with massive algal mats at its western end, forcing the closure of Toledo’s water supply that serves 400,000 people. A sample of the intake water for Toledo looked like a glass of thick green slimeade.

So, what is the link between this latest water pollution debacle, economic growth, and a true-cost economy? I will argue that in a steady state, true-cost economy, there would be much less reliance on pollution regulations. The chief tool would be bans, along with significant harm charges, on those products and processes that threatened public health or jeopardized the functioning of life support systems for the earth.

What causes me to advocate such a major change in the U.S. approach to pollution can be seen in three big water pollution events this year. My CASSE blog in March dealt with two significant water pollution events earlier this year–the coal-processing spill that shut down the water supply to Charleston, West Virginia, and the bursting of a coal waste storage pond in North Carolina, sending toxic sludge 70 miles downstream in the Dan River.

In my March blog, I discussed better economic approaches to pollution that would be pursued in a true-cost, steady state economy.  Before going into these approaches, it is important to understand the huge frustration that the American public was experiencing in the 1960s from hundreds of water pollution incidents and the failure of governmental bodies to put a halt to this.

In the early 1970s, many of us worked to obtain the 1972 Clean Water Act that featured the promise of making waters of our nation fishable and swimmable by 1986. Two remarkable examples helped drive public awareness and force Congress to enact this law: the Cayahoga River catching on fire and Lake Erie becoming a dead lake.

If someone had told us that 40 years later Lake Erie would experience massive green slime algal mats, we would have said, “No thanks, we need a truly strong law that would bring back Lake Erie from the dead, not a law so permissive that four decades later we would have a monster slime blob in 2011 stretching 120 miles from Cleveland to Toledo, followed by yet another huge slime mass in 2014.”

So now we are confronted with the abysmal failures of the regulatory system at the state and federal level, along with the tepid responses to the latest pollution disaster in Lake Erie. The time has come to demand a change to our economic approaches to pollution and begin the transition to a true-cost, sustainable economy.

To get down to brass tacks on the Lake Erie green slime, we must recognize that the chief cause is agricultural runoff. According to Don Scavia, director of the Graham Sustainability Institute at the University of Michigan, “the primary driver is the amount of phosphorus entering Lake Erie from agriculturally dominated watersheds.” The state of Ohio reports that two thirds of the phosphorus comes from farm lands.

So let’s start calling for a national ban on gigantic animal factory farms with hundreds and hundreds of animals crowded together. Such factory slum operations would not occur in a steady state economy. They are a microcosm of what happens with too much growth in numbers and pollution. When any population of animals or people get into overly crowded conditions, pollution overwhelms the carrying capacity of the land and water, disease increases, and violence breaks out.  Today, industrial agriculture is increasing in size and adverse impacts, although organic farming is making inroads.

While pushing for bans, we should also demand harm charges for the damages bad agricultural practices have on lakes. Look at the cost of losing a city’s water supply, the health costs, and the costs to the recreation economy in the region. Today animal factory operations and industrial agriculture escape monetary responsibility for the many harms they cause.

The Securities and Exchange Commission (SEC) could require businesses to disclose their pollution externalities when they file their annual financial reports. The Dodd-Frank Act requires companies to disclose conflict minerals in their supply chains, thus setting a precedent for the SEC to act. Revelation of these pollution externalities would constitute the first step in forcing the creators to cover their true costs of production.

My argument runs counter to the major thrust taken to deal with air, land, and water pollution since Earth Day 1970, which was primarily a regulatory approach. Some of the pollution laws have worked quite well, providing crucial health benefits and safeguarding ecosystems, but many are not set to deal with the magnitude of the pollution issues of the 21st century. For example, powerful bee-killing pesticides are causing collapses of bee colonies nationwide. Such pesticides should be banned since they threaten human food supply, about two thirds of which depends on the pollinators. Other pesticides and herbicides kill vegetation relied upon by butterflies such as the monarch that needs milkweed to lay its eggs on.  Bans are possible. Several European countries banned the powerful herbicide atrazine in the early 1990s, but this poison is widely used in the United States despite substantial scientific evidence about its health impacts.

The response taken by environmental groups and official state and federal agencies to the grotesque pollution of Lake Erie has been primarily to call for better regulation, which leads to more bureaucratic procrastination and few results. No one has called for a ban on bad practices of industrial agriculture or called for a shutdown of the big, filthy animal feedlots that are a cesspool of pollution and disease. These should be outlawed! It is not impossible. The Michigan legislature did ban phosphorus in lawn fertilizer.

The industrial agriculture system has grown so large in the United States that it is transgressing planetary boundaries, causing algal blooms and dead zones in lakes, bays, and estuaries. Certain parts of the economy, like those associated with industrial animal slums, need to shrink. Bans and harm charges must become frequently used economic tools.

Transformative Common Sense in Vermont

by Eric Zencey

Eric ZenceyChances are that when you hear the phrase “Comprehensive Economic Development Strategy,” you don’t immediately think of dramatic change in the established political-economic order of things. The words don’t seem revolutionary. They certainly don’t call to mind images of furtive guerillas toting rifles or of throngs in public squares using chains and ropes to topple statues. Chances are equally good that unless you hang out with economic development officers or land use planners, you’d have a hard time rounding up a dozen people who’d sit still long enough to hear what a CEDS is, let alone why it might be of interest to them. But despite the dry name, the document recently released by Vermont’s Department of Commerce and Community Development portends a quiet, far-reaching revolution in governance in the Green Mountain State–and perhaps on a larger stage.

The potential for this enormous change is signaled in a short, clear statement from the report’s Executive Summary:

…This CEDS sets out a unique, overarching goal: it proposes to not only grow jobs and wages and increase our Gross Domestic Product, but also to improve the Genuine Progress Indicator (GPI)…by 5% over baseline over the next five years.

With this language, Vermont becomes the first state to make explicit use of an alternative indicator in setting goals for economic development. The commitment to use the GPI in this way places Vermont in the forefront of a growing national movement to integrate the GPI into social and economic policy. Because GDP-based economic development is so wrong-headed, this commitment is a matter of common sense; and yet, because GDP-based economic development is so deeply woven into the substance and texture of our political economy, using basic common sense here is a powerfully transformative act.

The faults and flaws of GDP as a measure of economic progress are well known and don’t need to be repeated in detail here. It was never intended to serve as a measure of economic wellbeing, and one of the largest problems in using it for that purpose is that it doesn’t subtract environmental damage as a cost of economic development. Instead, it simply ignores these losses as externalities–until and unless money is spent to correct them, at which time the remediation of the cost is transformed, as if magically, into an apparent economic benefit. (This is a macroeconomic instance of what is generally called the broken window fallacy.) Negative environmental externalities occur when economic activity exceeds one of the planet’s local, regional, or global source-and-sink limits and thereby imposes harm, damage, cost or loss on innocent third parties–people who neither produce nor consume the goods whose production damages the environment. (Traditional economists don’t talk of “innocent” third parties when they discuss externalities, but the morally charged language is appropriate. Why should it be acceptable for profit-seekers to impose uncompensated loss on the general public?)

Because these externalities have their origin in ecosystem limits, and GDP treats the externalities as if they didn’t exist, it’s fair to call GDP an infinite planet statistic. Brian Czech has argued recently that what GDP measures best is environmental impact. While GDP isn’t a perfect measure of environmental impact—some of the things we consume cause less environmental damage per dollar than others—it seems a decent proxy, since in general it’s true that the larger the economy in GDP terms, the larger its environmental impact.

In contrast, the Genuine Progress Indicator subtracts environmental and other costs from the ledger, giving a more accurate bottom line. In doing so, GPI applies the principles of double-entry bookkeeping to the economy as a whole. The invention of double entry bookkeeping was a crucial to the growth of capitalism; a business can’t stay in business for long if its managers have no idea how its debits stack up against its credits, how its costs compare to revenues. And what’s true at the micro scale is true, in this instance, at the macro scale: because GDP systematically miscounts costs as benefits, we’re about to go environmentally broke–the entire economy may go out of business as climate change and loss of biodiversity bring dramatic, civilization-threatening change.

Mushroom Ecosystem

Economic growth will eventually cost more in ecosystem damage than it brings in economic gains. Photo Credit: Scott McCracken, Cambridge, VT

There is nothing in the Genuine Progress Indicator that says, explicitly, “there are ecological limits to economic growth.” But because it subtracts environmental costs from economic benefits, the GPI is a finite planet indicator that will, if implemented accurately, lead policy makers to this realization. Consistent, accurate compilation of the GPI will make clear that for any given ecosystem, at some point economic growth that is rooted in that system costs more in ecosystem service losses than it brings in economic gains.

This means that there are limits to the amount of economic production the planet’s ecosystems can support. Obviously, that fact has implications for economic development and the policies that promote it. Foremost among those implications is the necessity of abandoning the traditional “jobs and GDP” focus of development policy. As noble as it may be to aim to assure every aspiring worker the dignity of useful work, and as comforting as it is to think that we can continually add to our national stock of wealth by perpetually growing our national income, neither goal can be accomplished forever (or even, arguably, in the near term) through policies that take GDP growth or job growth as their sole and solitary focus. A commitment to perpetual full employment that is not also connected to an effort to limit population growth is at bottom a commitment to perpetual economic growth, a chimerical ideal. And because GDP so badly miscounts costs and benefits, failing to keep them separate, any policy effort that aims solely at increasing GDP is destined to be fatuous.

In announcing a development goal that is couched in terms of the GPI, Vermont has put itself on a path that will lead away from traditional “jobs and GDP” thinking–though the divergence of the two paths is not yet fully clear to policy makers. (Recall that the CEDS document aims not only at improving the GPI but also to “grow jobs and wages and increase…GDP.”) No doubt many of the legislators and policy makers who supported the state’s adoption of GPI as a better accounting system did not and would not embrace the notion that there are limits to economic growth. But the contrast between new-think and old-think, between finite and infinite planet thinking, between promoting sustainable economic activity and continuing the “growth forever, business-as-usual” mindset can only become clearer with time. As awareness of the GPI and its precepts filters into state decision-making processes, Vermont will find itself increasingly led to develop in ways that are sustainable and that do not damage the delivery of ecosystem services to its citizens. That kind of development will give the state a competitive edge in the region and nation, as it lays a foundation for the sustainable, post-petroleum, post-perpetual-growth economy that must come to the entire planet, in one version or another, sooner or later. (After all, the one thing you can know about an unsustainable system is that it won’t last.) Vermont’s policy use of the GPI is transformative common sense that will make that inevitable transition smoother and less disruptive for all Vermonters.

The Overlooked Anniversary: Forty Years Ago Congress and the President Called for a Steady State Economy

by Brian Czech

BrianCzechYou read that right. Pursuant to an act of the 93rd Congress, President Richard M. Nixon signed into law the establishment of a steady state economy. That law was called the “Endangered Species Act.”

Technically it’s true that we are closer to the ESA’s 41st anniversary (Nixon signed it on December 28, 1973), but to say we are still within the 40th anniversary of ESA is good enough for government work. Plus it seems more befitting when 2014 happens to be the 100th anniversary of the passing of the passenger pigeon. Martha, the last known passenger pigeon, died at the Cincinnati Zoo on September 1, 1914.

Too bad the passenger pigeon didn’t have the “opportunity” to be listed as endangered pursuant to the ESA. It would have been protected and it may have survived, if only on life support. The American economy wouldn’t have left it a lot of room; rather, just enough.

Of course, when the ESA was passed, no one announced it in terms of a steady state economy, for at least three reasons. First, the ESA’s influence on the rate of economic growth would be very gradual as the listing of species prevented a dam here and a power line there. It would have been inaccurate for Nixon to say, for example, “By September 1, 1974, GDP will stabilize.” Establishment of the steady state economy would take decades as dozens, then hundreds, then thousands of species were driven to the brink, then saved in the nick of time through the designation of “critical habitat” and other ESA protections. But make no mistake: With the stroke of Nixon’s pen, the American economy was slated to move toward a balance with the “economy of nature” and all its species, assuming the law was implemented.

The second reason is that few in Congress (if any) actually realized the ESA would lead to a steady state economy. It’s highly unlikely that Nixon did either. If you read the profiles of elected officials in the House, Senate, and President’s Cabinet, you’ll see there was–and still is–virtually no ecological expertise to speak of. Without understanding the economy of nature, and what is required to maintain its natural capital, one cannot grasp the economic relationship between Homo sapiens and the rest of the species. Only in an ecological curriculum, or at least a course in ecological economics, will you learn in no uncertain terms that, “Due to the tremendous breadth of the human niche, the human economy grows at the competitive exclusion of nonhuman species in the aggregate.” Without that knowledge, which is rooted deeply in physics and biology, our politicians are susceptible to whimsical notions of “green growth” and “de-materializing the economy.”

Third, if there were any politicians involved in the passage of the ESA who sensed the implications for economic growth, they wouldn’t have had the courage or integrity to reveal such an inconvenient truth. If we have learned anything from our political leaders–from Nixon to Clinton–it’s the depth to which they’ll drown the truth in order to maintain their positions of power. They also leave the heavy lifting of legislation to be done by future politicians, political appointees, and bureaucrats. Meanwhile the teeth of such legislation are filed down by budget cuts and hostile amendments.

In any event, and whether our politicians knew it or not, the ESA was as sure a prescription for a steady state economy as the American constitution was for a democracy. Think that’s a stretch? Think again. The word “democracy” is nowhere in the constitution. Indeed our founding fathers argued the merits of that newfangled idea. But the principles put forth in the constitution are all about establishing a democratic system of government.

With the ESA, it’s all about establishing a stabilized economy of nature. That doesn’t mean a landscape filled to the brim with bison herds or passenger pigeons, much less snail darters or Wyoming toads. Far from it. What it means, however, is “no species left behind,” even if many of them are perilously perched on flimsy branches of a tree of life top-heavy with human economic activity. What it means, therefore, is a steady state economy with stabilized human population and consumption, at a level pushing the limits of sustainability. That’s what the ESA is ultimately all about, whether or not the phrase “steady state economy” is used therein.

The ESA was too late for many species, and way too late for the passenger pigeon. Now consider a somewhat chilling thought: Does anyone alive today have any idea what we’ve been missing? Let’s get a sense of the magnitude of our ecological debt from the great French-American naturalist John James Audubon:

The multitudes of Wild Pigeons in our woods are astonishing. Indeed, after having viewed them so often, and under so many circumstances, I even now feel inclined to pause, and assure myself that what I am going to relate is fact. Yet I have seen it all, and that too in the company of persons who, like myself, were struck with amazement. In the autumn of 1813… on the banks of the Ohio… I observed the Pigeons flying from north-east to south-west… the birds poured in in countless multitudes… I traveled on, and still met more the farther I proceeded. The air was literally filled with Pigeons; the light of noon-day was obscured as by an eclipse…

In the more evocative style of Aldo Leopold,

The pigeon was a biological storm. He was the lightning that played between two opposing potentials of intolerable intensity: the fat of the land and the oxygen of the air. Yearly the feathered tempest roared up, down and across the continent, sucking up the laden fruits of forest and prairie, burning them in a traveling blast of life.

One could get the uneasy feeling that all the wonder of the Internet would pale under a pulsating sky of passenger pigeons. What would you rather do, surf the web or watch the traveling blast of life?  Yet that’s the type of trade we’ve made, or been subjected to: a constant replacement of the biological with the manufactured, including in the age of the “information economy.”

Passenger Pigeon - Seabamirum

What have we given up, and what are we giving up, to pursue continuous economic growth? Photo Credit: Seabamirum

In the 60 years between the last passenger pigeon and passage of the ESA, GDP grew from well under a trillion dollars to well over five trillion (all in 2014 dollars). To put that in simple ecological terms, millions of acres of wildlife habitats were converted to cities, towns, plant, infrastructure, and landfills. In the countryside, agriculture dramatically intensified, losing its habitat value. Much of the remaining, wilder acreage was polluted to one degree or another with the byproducts of economic activity.

For the most part those trends continue and, as if what’s happened on the ground isn’t enough, today in a 90% fossil-fueled economy we also have relentlessly growing greenhouse gas emissions, despite all the talk of technological progress and green growth. To add insult to injury, politicians continue to tell us that “there is no conflict between growing the economy and protecting the environment,” with political appointees parroting such pap and gagging the scientists who would raise awareness of the conflict. It’s easy to understand why Leopold said, “To be an ecologist is to live in a world of wounds.” The wounds are to the environment, to species, and to human dignity.

Yet that’s what we get when the primary policy goal is economic growth and when so many other laws, policies, and programs are tailored to the pursuit of economic growth. While the language of the ESA is still prescriptive of a steady state economy–perennial efforts to gut it notwithstanding–the ESA has as much chance of implementation as Obamacare would have under Ted Cruz. You won’t see a Tellico Dam being stopped by a snail darter any time soon, whether your president is Obama or Cruz.

Congress and presidents have never been more hell-bent on economic growth. The “Washington Consensus” might as well be the “Wall Street Consensus.” The score is kept in terms of GDP, and the only thing that can change that is a widespread paradigm shift away from economic growth–increasing production and consumption of goods and services in the aggregate–toward the steady state economy.

As the days grow shorter on 2014, with the 41st anniversary of the ESA approaching and the extinction of the passenger pigeon surpassing 100 years, let us commemorate things in the way that matters most for species conservation. Let us recognize the ESA as a prescription for a steady state economy, in balance with the economy of nature and its non-human species. The ESA needs this wedding–a wedding with the truth–before its anniversary can be truly worth celebrating.

Cold War Left Overs

by Herman Daly

Herman DalyThose of us old enough to remember the Cold War will also remember that it involved a growth race between Capitalism and Communism. Whichever system could grow faster would presumably win the allegiance of the uncommitted world. The idea of a steady state was therefore anathema to both sides. The communist growth god failed first because of political repression and economic inefficiency. But the capitalist growth god is now failing as growth becomes uneconomic due to environmental and social costs, and is propped up only by fraudulent accounting, monopoly, and financial corruption. Neither system can accept the idea of a steady-state economy, but neither can attain the impossible alternative of growing forever.

Advocates of the steady-state economy are long accustomed to attacks from capitalists, which have by no means disappeared. We are less accustomed to attacks from the left, not from communists who have virtually disappeared, but from remaining Marxists and socialists. Although Marxism is largely discredited (along with other manifestations of 19th century determinism, such as Freudianism and Eugenic Darwinism), one cannot by any means take that as a vindication of capitalism, which has only gotten worse in its quest for unending growth. In spite of my overall negative view of Marxism, there are some “green Marxists” who, in my opinion, are worth reading (e.g. John Bellamy Foster, Brett Clark, Richard York, The Ecological Rift). Recently, another socialist (I am not sure if he considers himself a Marxist) has criticized the steady-state economy for being essentially capitalist. This is economic historian Richard Smith. He sees the steady-state economy as a distraction from “eco-socialism.”

One should be grateful to one’s critics–it is much better to be criticized than ignored. Richard Smith kindly takes me as his exhibit A for a position that he misleadingly labels “steady-state capitalism.” I have never used that term, always speaking of a steady-state economy, which is neither capitalism nor socialism, although it draws features from both. Indeed, in the Cold War context it was thought to offer a Third Way, a possibility for uniting the best features of each system. Change is impossible unless you start from where you are. As noted, I am more accustomed to attacks from capitalists, so it is at least a refreshing change to be attacked, and on balance rather politely, by a socialist who, unlike many neoclassical growthists, has taken the trouble to learn about the steady-state economy. Disagreements will follow, but my appreciation for his critical attention needs to be expressed.

Richard Smith characterizes capitalism as a system that must “grow or die.” It then follows immediately that since capitalism must grow, it cannot be a steady state. OK then, if capitalism cannot be a steady state, then neither can a steady state be capitalism. So let’s not speak of “steady-state capitalism.” I, for one, never have–although Mr. Smith tendentiously attributes that term to me. By the same logic, following Marx, one might define socialism as a classless society based on overwhelming material abundance arrived at through rapid economic growth under the centrally planned dictatorship of the proletariat. Socialism also depends on growth. Therefore steady-state socialism is impossible. It was precisely to avoid such sterile definitional disputes that I always said “steady-state economy,” and never “steady-state capitalism,” or socialism for that matter.

Empty world models will no longer work in our full world. Photo Credit: www.TheEnvironmentalBlog.org

Would it not be more productive to start by defining a steady-state economy, followed by arguments for its necessity and desirability? We could then avoid ideological classifications based on abstract definitions of what capitalism or socialism “essentially must always be.” We now live in a full world. Capitalism and socialism are both from the empty-world era in which growth was the desideratum. Must we insist on pouring new wine into old wineskins, and then watching them burst?

Smith’s unhappiness with me derives most specifically from my preference for the market over centralized planning as a tool for dealing with the single technical problem of allocative efficiency. Steady-state economics deals with three problems: sustainable scale, just distribution, and efficient allocation. It takes the first two issues, scale and distribution, away from the market. It calls for quantitative ecological limits on the throughput of resources so that the market can no longer determine the physical scale of the economy relative to the biosphere. It also advocates social limits to the range of income inequality, so that the market can no longer generate large inequalities of wealth. Subject to these two prior macro-level aggregate constraints, it then relies on the market to efficiently allocate resources. This is not advocacy of the Market with a capital M, the deified master evaluator and controller of life. This is market with a small m, a limited tool for rationing, communicating, and exchanging goods and services.

Reliance on markets for allocation (now within prior ecological and distributional limits) is further constrained, even within traditional microeconomics, by opposition to monopoly, and restriction of market allocation to rival and excludable goods. Non-rival and public goods have long been recognized to require some degree of non-market allocation. Even so, Mr. Smith is still unhappy with any role for markets.

Richard Smith deserves credit for recognizing and opposing the real evils of financial-monopoly-crony capitalism as it currently exists. And, unlike both traditional Marxists and neoclassical economists, he realizes that we cannot grow forever, and that we have in many dimensions already far overshot optimal scale. And he takes the trouble to debate critical issues rather than ignore them. However, he thinks only socialism can somehow cure these evils. The operative word here is “somehow.” Somehow we must wipe the slate clean of any institutions associated with markets, such as property, division of labor, exchange, and profit. How? By violent revolution? By rational persuasion? By moral conversion? That is left vague. It is all very well, for example, to point out the real problems with excess reliance on the profit motive. But if we abolish profit as a source of income then we also abolish self-employment. Everyone must then become an employee earning a wage. Who then is the employer? Do we all then work for Ajax United Amalgamated Corporations? Or for the Universal State Monopoly? Is there something about the mere act of exchange, and the category of profit, (not just excessive inequality and monopoly ownership of the means of production) that offends or confuses Marxists?

Nevertheless, if Marxists now advocate limiting growth, that is a big change. Maximizing growth to achieve overwhelming material abundance has been seen as the path to the “new socialist man,” who, according to Marx, can only be freed from his bourgeois greed by objective abundance, by the abolition of scarcity, not by the “utopian” morality of sharing. I have never seen a Marxist proposal to limit the scale of the macro economy to an ecologically sustainable level–nor for a maximum as well as a minimum income to limit the range of distributive inequality to a reasonable and fair degree. Rhetorical calls for absolute equality and abolition of private property abound, but are neither realistic nor fair.

Marxists also go far out of their way not to recognize overpopulation and the need to limit population growth (a critical dimension of both scale and distributive inequality, given class differentials in fertility and access to contraception). A stationary population is part of the definition of a steady-state economy. Furthermore, a limited range of income inequality would restrict the ability of the rich to bid necessities away from the poor in the market. Unjust distribution of income does get reflected in markets, but let us attack the cause, not the symptom. And quotas on basic resource throughput could raise prices enough to eliminate most frivolous and wasteful production, as well as stimulate recycling, and increase efficiency while ruling out the Jevons effect. If we start with depletion quotas on basic resources, then the resulting increase in resource prices and efficiency cannot lead to more use of the resource. Auctioning transferrable quotas rather than giving them away (markets rather direct government allocation, pace Mr. Smith) will raise enough revenue to greatly reduce taxes on the poor.

It is not at all clear why Smith thinks markets must always be bad masters rather than good servants. If we forgo markets, should we then perhaps have another go at central planning and collectivization of agriculture? Would Mr. Smith have preferred War Communism to Lenin’s New Economic Policy because the latter was really just “state capitalism” that re-established significant reliance on markets? To be fair, we do not know what Smith thinks about any historical experience with the abolition of markets because he does not mention any.

If “eco-socialists” reject the steady-state economy as “inherently capitalistic,” then what specific policies do they recommend? How do their policies differ from those of steady-state economics? Are there some policies we agree on?

Critics of the present growth economy, whether steady-state economy or “eco-socialist,” are, however, united in humility before a common dilemma–namely that the bought-and-paid-for government that would have to enact the programs needed for a steady-state economy is the same government that would have to run a socialist economy. A government that cannot even break up too big to fail monopolies, or provide debt-free money as a public utility, or tax carbon, will certainly not be able to administer a centrally planned economy–nor even a steady state. We have deeper problems of moral and spiritual renewal (in addition to recognition of finitude and laws of thermodynamics) that transcend both capitalism and socialism. It is admittedly hard to envision the source for the basic moral renewal required to face the enormous problems that are looming, but Marxist dialectical materialism and collectivism seem to me already to have historically demonstrated their failure in this regard. We need something new. Although things look bleak, we never know enough to justify giving up hope. But we should avoid repeating past mistakes.

Piketty Acknowledges a Limit to Inequality–Will He Acknowledge the Limits to Growth?

by James Magnus-Johnston

Johnston_photoIn Piketty’s celebrated new work, Capital in the 21st Century, we are treated to a robust argument about the mechanics of worsening structural inequality. He narrates why owners of capital assets–stocks, bonds, and real estate–historically realize higher returns than wage workers. Piketty uses econ-speak to describe this as a gap in “the capital-income ratio,” and explains how our present system is engineered to favour capital-owners or “rentiers.” In the 21st century, he predicts slower growth in population and productivity, but a higher rate of return on capital, pushing us into inequality levels not seen since the 19th century.

But the limits we face are far greater than limits to just the capital-income ratio. While many of us share Piketty’s anxiety about worsening inequality (for me, every time I see a headline celebrating the rise of house prices), worsening structural inequality at this stage in history is but one symptom of our obsession with growth. Like Piketty, many post-growth thinkers are calling for a system change so the distribution of wealth will not inevitably concentrate in fewer and fewer hands. But rather than Piketty’s proposed progressive tax on wealth, we are calling for a fundamental adjustment to the financial system to make it more socially equitable and ecologically sustainable.

It might be helpful to interrogate the question of inequality this way:

  • Why is it that rentiers can achieve such high rates of net worth?
    Because overly-inflated asset values make rentiers look great on paper, and those funds can be leveraged for even more consumption.
  • How did asset values become so inflated in the first place?
    Because everyone from hedge fund managers to real estate investors bid up prices.
  • Why can prices be bid up? 
    Because banks lend out historically unprecedented amounts of money in the form of debt.
  • Why do we need so much debt?
    Because if we fail to grow by at least the rate of interest, the entire financial system enters a state of default and collapse! Herman Daly proposes an increase to the fractional reserve requirement so that banks are able to lend out real money instead of just creating more debt.

While Piketty does acknowledge how the “financialization of the economy in no way contributes to the real economy,” he stops short of acknowledging that the volume of debt-money in the economy makes money scarce for some and abundant for others, and that the system is set up to either grow exponentially or fail spectacularly. More dubiously, in Robert Solow’s review of Piketty’s book, Solow suggests that “a society or the individuals in it can decide to save and to invest so much that they (and the law of diminishing returns) drive the rate of return below the long-term growth rate.” Not so in a debt-backed monetary system steeped in stratospheric and unprecedented levels of debt!

Piketty similarly avoids acknowledging peak oil or ‘limits to energy returns.’ At the most fundamental level, economic growth and capital accumulation require huge flows of matter and energy. This important consideration takes the form of but a few small caveats in Piketty’s book. He predicts that “wealthy countries” will grow at a rate of “1.2 percent,” while acknowledging that such a growth rate can only be achieved as “new sources of energy are developed to replace hydrocarbons.” I’m not sure how this prediction can be taken seriously when we are always and everywhere these days confronted by diminishing energy returns. These limits are evident in our reliance on unconventional oil, including fracking, the tar sands, and all of the new hazards that come with shipping it, such as building new pipelines and ports in fragile ecological zones, the release of methane and other undesirables from fracking, and the looming spectre of another Lac Megantic disaster. Add to this the uncounted costs of climate change–from private insured losses to government disaster expenses–and we wind up in the highly questionable position of counting disaster rebuilding efforts as additions to GDP!

DivideByZeroError

What happens if Picketty assumes a growth rate of zero? ERROR.

Perhaps, interpreted liberally, Piketty’s prediction of 1.2 percent growth is a couched acknowledgement that we have a failed growth economy on our hands. Or perhaps there is an even simpler methodological explanation for Piketty’s prediction, which is that if he were to assume a growth rate of zero, the “law” he applies–“beta equals savings divided by growth”–would yield absolutely no results whatsoever! And who can make newsworthy predictions with a divide-by-zero error message?

Piketty’s research is certainly useful and clearly resonates with a disillusioned public seeking to understand the causes of growing inequality. But without full acknowledgement of the limits to growth, there are also limits to his historical analogies–after all, the extent of ecological overshoot makes this period remarkably different from any period before it. Which means that the laws and formulae used throughout his book must be taken with a healthy dose of skepticism. EF Schumacher wrote

economists themselves, like most specialists, normally suffer from a kind of metaphysical blindness, assuming that theirs is a science of absolute and invariable truths, without any presuppositions. Some go as far as to claim that economic laws are as free from ‘metaphysics’ or ‘values’ as the law of gravitations.

Piketty makes a compelling, historically grounded argument about worsening structural inequality. But perhaps we can call for bolder action to respond to contemporary problems, including serious financial reform that reduces or extinguishes unsustainable debt; nurturing a grassroots movement toward more equitable, democratic work structures (so that more people have access to assets and ownership in the first place); and teaching a new generation of economists that all financial capital is fundamentally a gift from nature.

Iraq and the Military-Industrial Complex versus a True Cost Economy

by Brent Blackwelder

BlackwelderIraq has been in the news again as civil war looms. President Obama has sent several hundred military advisers to Iraq, perhaps in preparation for Iraq War III. George W. Bush proclaimed victory in Iraq War II and told the American Legion “Slowly but surely, we are helping to transform the broader Middle East from an arc of instability into an arc of freedom.” But the grim fact today is that US actions have achieved the very opposite of what was officially described to the American public as the objective.

A true cost or steady state economy can never be reached in a society consumed with perpetual war, especially warfare over oil. A steady state economy must have its energy supply based on renewable sources like solar and wind. To reach a true cost, steady state economy, the resources currently devoted to waging war must be transformed, and the use of natural resources like oil that are causing wars must be shifted.

Recent developments in Iraq highlight the decades of failure to put in place renewable energy that would have minimized the use of oil in the transportation sector. Trillions of dollars have now been spent on the Iraq II war, where more civilians than soldiers have been killed and billions more will need to be spent caring for severely wounded veterans from these ongoing wars.

A look at news coverage of the situation in Iraq shows what has been really driving the situation. In a June 3, 2013 New York Times article “China is Reaping Biggest Benefits of Iraq Oil Boom,” Michael Makovsky, former Defense Department official under the Bush administration, complained that “We lost out. The Chinese had nothing to do with the war, but from an economic standpoint they are benefiting from it, and our Fifth Fleet and air forces are helping to assure their supply.”

One year later, the New York Times featured a story about all this “progress” being put in jeopardy with the intense military offensive by extremist insurgents. The president of the oil service company Mediterranean International told the Times “The collapse of Iraq would bring an international oil crisis.”

Solar Panels

An important step towards escaping perpetual warfare over oil. Photo Credit: Michael Mazengarb

To escape from perpetual warfare over oil, I propose that the biggest category of funding in all the world’s military budgets should be for installing rooftop solar energy and wind turbines. These renewable resources are widely available, they do not require large central generating facilities for electricity or refineries and pipelines for oil and natural gas usage, they are tension reducers rather than enhancers, they are essentially waterless technologies, and they do not produce the serious pollution and climate disruption caused by fossil fuels.

The younger generation does not realize that Iraq War I in 1991 caused the largest oil spills in history: on the land, in the sea, and in the air. Massive clouds of oily pollution carried as far away as India. Did stability come as a result? Rather than stability, resentments worsened over the US behavior. Osama bin Laden cited the actions of the United States and transnational oil companies as the reason for his launching the terrorist bombing on 9/11.

While some strong efforts are being made to transform energy economies into a more environmentally sustainable form, particularly in some European nations, vast sums continue to be provided to support wars in Iraq and Afghanistan. The sums that could have been used for a solar revolution have fundamentally been undermining the movement for renewables.

But there is good news on the solar front. In one month this year, Germany got more than 70% of its electricity from renewable energy. Germany, with 36,000 megawatts (MW) in solar capacity, leads the world. But in 2013, China added at least 11,300 MW, making it second to Germany with 18,300 MW in overall capacity.

Solar power is starting to take off in the United States with about 4,800 MW added in 2013, increasing our total photovoltaic capacity by 65 percent to 12,000 MW–still far behind Germany, which is about the size of Montana.

President Obama supports legislation to deal with global climate disruption and has made some significant gains in transportation fuel economy, but the US is not a leader in bringing electric vehicles run by solar power into widespread use.

The price of rooftop solar has dropped 75 percent in the last five years and flat roofs are available throughout metropolitan areas, so the opportunity for Obama to do a lot more is present, but oil wars in the 20th Century have continued under his administration, even as many top military people worldwide are calling attention to environmentally driven conflicts as being top security threats.

Before launching a war against any country, the United States should take the vegetable test: would we be on the attack if that country’s leading export were carrots or green beans?

The key step to reaching a true cost, steady state economy is to keep the emerging solar revolution going full speed ahead. It is the underpinning of stability–the kind of stability needed for an environmentally sustainable economy.

Gross Domestic Problem: Don’t Shoot the Measurement

by Brian Czech

BrianCzechA battle is brewing on the outskirts of the general public. A rising tide of quixotic activists is trying to overthrow a time-tested American institution. Like the Battle in Seattle, where the IMF was put on public trial, this new struggle will get a lot of attention, but the institution will remain.

The “institution” in this case is a metric: GDP, or Gross Domestic Product. But GDP isn’t any old metric, like widgets assembled or the price of potatoes. GDP is thoroughly institutionalized at the center of our domestic policy arena. When fiscal and monetary policies are crafted, each is judged according to the likely effects on GDP. If something will increase GDP, it must be good and will likely be adopted. GDP growth is the king of policy goals.

The central logic of pursuing GDP growth is “a rising tide lifts all boats.” As long as GDP continues to grow, it is mathematically possible to have more jobs and increase the amount of GDP available per person. In other words, the “standard of living” can increase with GDP.

The rising tide logic made perfect sense during most of the 20th century, when there was a lot of open water and plenty of boat-building material. But such is not the case in the 21st century. Growing the GDP entails population growth or growth in consumption per person; usually both. Trying to grow the GDP these days causes as many problems as it solves. Biodiversity loss, climate change, and pollution are some of the obvious ones. Noise, congestion, and stress are too. It doesn’t look like GDP growth increases the standard of living after all, unless your idea of living standards is particularly anal.

Keystone Protest

GDP measures environmental impact and the size of our economy, not its health. Photo Credit: Stephen Melkisethian

A more nuanced problem is that GDP growth is addictive, kind of like NFL football or World Cup soccer. It has societies and governments all over the world scrambling like hamsters to keep “the score” from shrinking. Crazy things are done in the name of GDP growth: huge rivers are dammed, Keystone pipelines are built, Supreme Courts kick people out of their homes. (Remember Kelo vs. New London?) A society hell-bent on GDP growth is like a junkie doing whatever nasty thing it takes for the next high, rather than doing the right thing for himself and his family.

Yet the realization is gradually spreading that GDP growth can’t continue forever. This reality is causing societal angst and discomfort. For many, especially in the economics profession and business world, the response is denial. “The world can, in effect, get along without resources” is how Robert Solow, the Nobel prize-winning economist, put it.

But among those with their feet firmly on the ground, seeing the limits to growth materialize, the responses aren’t always prudent either. One such response has been to shoot the measurer, or to be more metaphorically accurate, to shoot the measurement of GDP. The politics of this makes for some exceptionally strange bedfellows. From tree-hugging Earth Firsters to staid Austrian-school economists to think tanks funded by the Rockefeller Brothers fund, performing an exorcism of GDP from the spirit of our political economy is all the rage.

The motives of the GDP antagonists differ wildly, reminiscent of the NRA joining the ACLU to fend off the NSA. Pro-growth, free-market economists don’t like government getting any credit for anything, and GDP calculations include government spending, so GDP must be an evil spirit. On the other end of the spectrum, no-growth proponents who see the government as a force to defeat the pro-growth capitalists (and economists) think… something quite odd. They think that, if we refuse to even acknowledge GDP, we’re less likely to be obsessed with its growth, and we can focus more on healthier goals such as better education and healthcare.

It’s shoddy logic at best. It’s akin to an alcoholic thinking, “If I don’t count those beers I drink, I’m not as likely to drink so many. Then I can focus more on my book-learning and health.”

Shall we have a toast? Let’s drink to not counting those beers!

No, the fact is that the alcoholic needs to count those beers more than ever. The diabetic needs to monitor that blood sugar. The obese patient needs to monitor that scale. You get the picture: As our economy exceeds the capacity of the planet to sustain us and future generations, we need to monitor the size of our economy more closely than ever. And there is no better measurement of the size of our economy than GDP.

Due to the fundamental structure of the economy, the size of the economy – as measured by GDP – is a perfectly valid indicator of environmental impact. Agricultural and extractive sectors form the base, which must expand to support the growth of manufacturing and service sectors – yes even the “information economy.” This structure, which is the closest thing in economics to an inescapable law of physics, gives us the “trophic theory of money,” which says that the level of expenditure (GDP, in other words) is proportionate to environmental impact including such tangibles as biodiversity loss, climate change, and pollution in the aggregate.

Those who think technological progress can somehow decouple GDP growth from environmental impact haven’t thought hard enough about the relationship between technological progress and the GDP growth that was based on pre-existing levels of technology. The two go hand in hand, which again in the 20th century was a fine thing. The two going hand in hand in the 21st century tells us nothing except that technological progress cannot reconcile the conflict between economic growth and environmental protection.

So let’s not shoot the measurer or the measurement. Let our friends in the Bureau of Economic Analysis calculate GDP as consistently as they’ve done for over 80 years. They perform a valuable service, and GDP is an invaluable metric. Instead of shooting it, let’s help to ensure the appropriate attitude toward ever-growing GDP: that is, a growing sense of alarm and a concomitant determination to stabilize the size of this economic ship before it sinks as surely as the Titanic.

News on Blue Planet Prize

Editor’s Note: the below is cross-posted from The Asahi Glass Foundation website. We are very excited Daniel Janzen, INBio, and (especially) Herman Daly’s achievements are being celebrated with this prestigious award. Congratulations! 

Announcing the winners for 2014 Blue Planet Prize

Today, we issued a press release announcing the winners of the 23rd Blue Planet Prize.

The winners are

Prof. Herman Daly (USA) Professor Emeritus, School of Public Policy, University of Maryland

Prof. Daniel H. Janzen (USA) Professor, Department of biology, University of Pennsylvania
Instituto Nacional de Biodiversidad (INBio) (Founded in Costa Rica)

The commemorative lectures by the winners will be held at the United Nations University (Shibuya Ward, Tokyo) on November 13 (Thursday). Details will be posted on our website at a later date.

2014 (23rd) Blue Planet Prize Winners

Herman DalyProf. Herman Daly (USA)
Professor Emeritus, School of Public Policy, University of Maryland

Prof. Daly redefined “steady state economics” through the concept of sustainability by incorporating such factors as the environment, local communities, quality of life, and ethics into economic theory, which lead to building a foundation of environmental economics. He has been questioning whether economic growth brings happiness to humans and has been issuing warnings to society, which tends to overemphasize economic growth. As a consequence, he has had a significant international influence.

23-Janzen_INBioProf. Daniel H. Janzen (USA)
Professor, Department of biology, University of Pennsylvania

Instituto Nacional de Biodiversidad (INBio) (Costa Rica)

Prof. Janzen and the Instituto Nacional de Biodiversidad of Costa Rica (INBio) propose measures and policies on sustainable development in harmony with local environmental conservation and local inhabitants and works on environmental education and the conservation of biodiversity. INBio’s activities serve as a valuable role model, from which people both in developed and developing countries around the world should learn.

Remarks from the Award Recipients upon Notification of their Selection

Prof. Daly
I am both honored and humbled to accept the magnanimous Blue Planet Prize from the Asahi Glass Foundation. The making of such important products as glass and chemicals is already a great benefit to the world. Encouraging and supporting others in their efforts to protect and improve our Earth home, as the Asahi Glass Foundation does, is truly an example of generosity and service. When one is treated generously, then one is inspired to treat others the same way. Thank you for that inspiration, and for including me among a list of recipients whom I have long admired.

This recognition is not only an encouragement to me, but also to many friends and colleagues who have worked hard to protect and preserve our Earth from the destruction caused by excessive growth and careless waste. Among these I especially include my colleagues in the International Society for Ecological Economics. If I have done anything to deserve this Prize it is to have provided a generational connecting link between my best teachers and my best students. May this award strengthen that continuing chain into the future!

Prof. Janzen
We – all of us, including 2.6% of the world’s biodiversity – are delighted and honored to learn of the Blue Planet Prize for us and Costa Rica’s INBio. This honor really is for a cast of thousands of Homo sapiens – Costa Ricans and internationals – dancing with billions of other beasts, each doing their part to keep alive some portion of the nature that produced all of us. It is wonderful and wise that years ago the Asahi Glass Foundation had the foresight to offer this support to attempts to move away from the very human tendency to consume and alter our nest. Yes, we can restore some of what we have destroyed, and yes, we can help the world to become biologically literate. Without bioliteracy, nature is just a green threatening mass and there is little hope of its peaceful coexistence with all of us. We, INBio, and Area de Conservacion Guanacaste, are happy recipients of this recognition of decades of trying to open the doors of conserved wildlands to non-damaging partnerships with humanity. Only through direct understanding of the wild world can society welcome it into the family, village and nation.

INBio
To receive the prestigious Blue Planet Prize, given in recognition of our voluntary efforts to conserve Costa Rica’s rich biodiversity is a great honor, which we appreciate in all of its significance. We are humbled to be among many of the most outstanding authorities and leaders in the quest for solutions to the global environmental problems who have been previously recognized with this award, as well as to share it with Dr. D.H. Janzen, a world authority in tropical ecology and conservation with whom INBio has worked in a mutually beneficial association.

What our National Biodiversity Institute has been able to achieve through its institutional efforts has been largely determined by an enabling national environment; the endorsement of the Government of Costa Rica; the support of bilateral and multilateral development agencies; the collaboration of the scientific community and the profound commitment of INBio’s community with the cause of promoting a greater awareness of the value of biodiversity in our society.

The Blue Planet Prize becomes a new source of inspiration and motivation to continue our search for a harmonious relationship between humanity and our living world.

Fresh Water, Growth, Degrowth, and the Steady State Economy

by Geoffrey Matthews

Geoffrey MatthewsIn Our Common Future, the 1987 report of the United Nations World Commission on Environment and Development, sustainable development is described as a process of change which meets the needs of the present generation without compromising the ability of future generations to meet their own needs and aspirations. To achieve this objective, the report suggests a series of goals that should underlie national and international action on development. In the authors’ opinion, the most important of these is “a production system that respects the obligation to preserve the ecological base for development.”

The only way to do this is to manage economic growth or degrowth by the adoption of an economic policy where development may not exceed ecological limits–precisely the definition of the steady state economy proposed by CASSE.

However, in spite of initiatives by extraordinarily committed individuals, developments in ecological economics, and publications by Herman Daly and other members of CASSE, the traditional development process continues almost unchanged. This process fails to appropriately prioritize the social, economic, and environmental sectors to ensure that the growth of each does not occur at the expense of the others. Consequently, the conflicts between economic growth and the environment continue unabated, improvements to quality-of-life are slow and unsustainable, and poverty continues to erode the advances that have been made.

I believe one of the major reasons the concept of a steady state economy is not gaining traction is the omission of the role of fresh water in the production and maintenance of all its ecosystem and economic goods and services. The value of fresh water is that it sustains the life support system via the hydrological cycle. This cycle is the natural phenomenon whereby solar energy evaporates water from the surface of the planet to form clouds, and returns the water back to the planet’s surface in the form of rain, mist, and snow.

Matthews, Fig 1This diagram represents the availability of water in the economy and the environment. The quantity (Q) will vary over time (T) due to changes in the hydrological cycle, climate variations, and pollution. These variations in availability will always affect the scale of the economy and the ecosystem, because fresh water is required for every environmental and economic activity on this planet. To ensure a steady state economy, the supply of fresh water required to satisfy the ecosystem demand must be maintained at the expense of the economy’s demand for fresh water. Therefore, the scale of an economy and the services it produces are subservient to the availability of fresh water and the maintenance of the ecosystem services in its region. This means an economy can only grow within the dynamic hydrological envelope, and under the red supply line. As soon as its demand reaches the available supply, growth must stop, as in the below figure.

Matthews, Fig 2Indeed, some planning committees have made explicit the understanding that economic scale is subservient to fresh water availability–for example, the Town of Okotoks, Alberta, Canada. In 2002, Okotoks designed a Water Management Plan based on the limits of the environmental carrying capacity of the Sheep River and its watershed, gross water consumption of about 300 liters per capita per day, and an urban development policy that provided no allowance for extending utility services outside the town’s municipal boundary. However, in 2013, after consulting the citizens of Okotoks, the town decided to pursue urban growth by annexing adjacent land, but not at the expense of the water required to satisfy the Sheep River ecosystem demand. The present population of Okotoks is about 27,000, and the actual water supply will permit this population to grow until it reaches 35,000. Beyond this limit, additional water will be drawn from a regional water supply system via Calgary.

Conversely, in the case of a drought, when the hydrological envelope shrinks naturally, the economy must downsize or degrow, as in the below figure. No continent is immune to this natural phenomenon, and issues of food security often become the main concern. The degree of intensity and duration of droughts vary, so the amount of downsizing or degrowing will depend on the ability of the citizens and local/regional authorities to cope. Holistic water resources management and drought preparedness are key to the coping capacity of communities. There are no easy solutions because humanity cannot, and will never, control the behaviour of the hydrological cycle.

Matthews, Fig 3So what does this mean in terms of a “full world”? To date, we are accustomed to talking about a finite planet and ecological footprints in terms of the number of planets needed to support us. Although correct, many people cannot easily sense the impact of the deterioration of the life support systems, the loss of biodiversity, and the depletion of renewable and non-renewable natural resources on his or her quality of life because the process is relatively slow. Compare this to the change in the supply of fresh water due to the behaviour of the climate or pollution. This is a daily topic of conversation because fresh water is vital, and people’s reactions in terms of quality of life, finance, effects on aquatic and terrestrial biodiversity, farming, industry, population carrying capacity, etc. are always immediate. In other words, they already know that “their world” is defined by the finite amount of water and quality of water in their region.

As fresh water is an important “full world” parameter, I propose fresh water management be incorporated more fully into steady state policies and discussions with, for example, Integrated Water Resources Management (IWRM). IWRM, as defined by the Global Water Partnership, is a process that promotes the coordinated development and management of water, land, and related resources, in order to maximize the resultant economic and social welfare in an equitable manner without compromising the sustainability of vital ecosystems.

Like the example of Okotoks above, Ecuador is aware that its water demand is reaching the limit of its resources, particularly due to increases in population from 2.8 million in 1950, to 14.7 million in 2013. To address this situation, the government began implementing IWRM and population management simultaneously. IWRM began on February 19, 2008, when the National Constitutional Assembly declared

The State should guarantee the preservation, conservation, protection, restoration, sustainable use and integrated management of watersheds, including necessary quality and quantity of ecological flows to sustain the integrity of all ecosystems associated with the hydrologic cycle, in order to safeguard the satisfaction of individual and collective human needs in function with societal health, including respecting the rights of nature and preserving biological diversity.

Population growth is being managed via free contraception, family planning, and education. As IWRM is designed to replace traditional top-down fragmented sector management with a bottom up cross-sector approach relying on cooperation, coordination, and population decrease, tangible results are not apparent at present. This will take time, perhaps a generation. While the dual policies of IWRM and population management have not been incorporated into a stated steady state economy objective, this is a very promising beginning.

Geoffrey Matthews is a water engineer, now living in France.