Development vs Growth

In a steady-state economy the focus is on development versus growth. As Herman Daly puts it, growth refers to “physical scale of the matter/energy throughput that sustains the economic activities of production and consumption of commodities.”  In other words, growth is the increasing of production and consumption of goods and services. This is a quantitative increase in scale. Development is a qualitative improvement of the same scale. A contained system (the Earth, for example) can develop inside but does not significantly grow. (Daly, Beyond Growth)

econecosystemWe live in a contained system, of which our economy is a large part of and, currently, the largest driving factor in changes within that system. In our system, we can choose to develop or “grow,” but our growth is limited by the constraints of that same system (e.g. Earth’s natural capital). If we change our focus to development, we will increase the quality of our lives (qualitative development) instead of the amount of production and consumption (quantitative growth).

As our system is right now, we are increasing the production and consumption, but decreasing the quality of our lives.

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Natural vs Man-Made Capital

As we continue to fuel our all-important economic growth we begin to realize more and more that it has done all the good it can for us. In fact, it has started to become uneconomic growth; a growth that actually costs us natural capital (resources) and man-made capital (products). The costs of growth now outweigh the benefits.

Today’s neoclassical economists will have you believe that reduction of natural capital (resources) can be replaced with man-made capital. However, this is not true because in order to create man-made capital you require natural capital. Therefore, natural capital should be maintained as it is the limiting factor for man-made capital.

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Steady State Economy: An Overview

The Steady State Economy requires a shift in our focus as a culture, but what policies are actually developed and what are the fundamentals of this new paradigm? There are three main parts to a steady state economy: sustainable scale, fair distribution, and efficient allocation. The following are the definitions given by the Center for the Advancement of the Steady State Economy (CASSE):

Sustainable Scale

“The most important characteristic of a steady state economy, sustainable scale is achieved when the economy fits within the capacity of the Earth’s ecosystems.  Economic activity degrades ecosystems, interfering with natural processes that are critical to various life support services.  The unprecedented growth of economic activity has significantly shifted the balance with potentially disastrous consequences.  This is why getting the scale of the economy right (technically the point at which the marginal costs of growth equal the marginal benefits) is the highest priority for a steady state economy.”

Fair Distribution

“Since continuous growth and sustainable scale are incompatible, growth cannot be relied upon to alleviate poverty, as has been done (ineffectively) in the past.  If the pie isn’t getting any bigger, we need to cut and distribute the pieces in a fair way.  In addition, poor people who have trouble meeting basic needs tend not to care about sustainability, and excessively rich people tend to consume unsustainable quantities of resources.  Fair distribution of wealth, therefore, is a critical part of sustainability and the steady state economy.” (sometimes referred to as “Just Distribution”)

Efficient Allocation

“The conventional neoclassical school of economic thought focuses almost exclusively on efficient allocation of scarce resources.  The dominant thinking is that free and competitive markets, along with prices driven by supply and demand, result in efficient allocation of goods and services (in the absence of pesky, omnipresent externalities).  Efficient allocation is also important in a steady state economy – ecological economists support many market strategies to accomplish efficient allocation of resources – but only after achieving sustainable scale and fair distribution.  Efficient allocation, although a valid criterion for managing and using resources, means very little in an unsustainable or unjust economic system. ”

Steady State Economy Discussion

I will be going into more detail about the basics of the steady state economy as well as discussing the many other aspects of a steady state (i.e. what does this mean to our monetary system? how do we move from a growth economy to a steady state economy? what policies must we institute to provide a sustainable economy to our children?).

Please feel free to interject with opinions, ideas, and feedback as we take a look into the details of steady state economy!

Get the Word Out!

While trying to transition this blog onto a new platform, I will also be starting a new phase in my posts. Over the next few months I intend to move from the generalities of steady-state economics to the specifics; that is, we know that it’s good, but how do we get there and what does it actual entail? Well, we’ll start delving into the transition and the beautiful life on the other side of the transition.

To start that transition we need to talk policy and public opinion. I’ve posted before about pushing for political change, now it’s time we start taking actual action in that arena. One SSR-follower, Allen, has been writing to magazines and newspapers. With his permission, I’m posting a copy of his letter as an example of the types of pro-active work everyone of us could (and should) be doing. Please take this as an example and alter this type of letter to fit your recipient.

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Why the Stimulus Packages Will NOT Work

Recently congress passed the nearly $800 billion “stimulus” package (passed with strong republican opposition). For more information on the package itself, you can even go to the website devoted to it to learn more. There are many mixed views on it’s ability to help, harm, or do nothing to our economy. I confidently believe that it will likely be one of the latter two – harm or do nothing.

We may see a short upswing, perhaps even a temporary rebound, but it is likely to be years from now. We have yet to really see the impact of 3.6 million lost jobs until each one of those people run out of unemployment benefits – that’s when the proverbial shit will hit the fan.

However, this stimulus package is no better than using a bucket on a barn fire – any relief will be an illusion and not a fix to the real problem. The system doesn’t work, so the stimulus will not work. Consider the following…

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The Corporatism that is America

“By the people, for the people” not by and for corporations.

In Thom Hartman’s book What Would Jefferson Do? the author quotes Mussolini’s description of fascism as it “should more appropriately be called corporatism because it is a merger of state and corporate power.” This has long since happened in American politics – and has been deepening since a misrepresented court ruling in 1886 gave corporations rights equal to the rights of people. We allow them to lie, steal and kill to make a profit.

The original intend of our Founders and Framers was to limit the privileges of corporations as to protect the rights of the people. Not only did these corporations have definite life-spans and limits to there abilities, but the businessman running them could be held accountable for the actions of their group. Today, corporations can be “above laws” in the sense that they are fined for wrong-doing. So long as this fine works into the cost-benefit calculations, the law will be violated – even if it means death and destruction.

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The Political Push for a Steady State

These few first days of the president’s term in office have many people thinking. I am wondering what is being done for a moral economy, one that focuses on more than just “bailing-out” a broken system? The economy is so much more than our jobs and our money. The affects of our economy are felt on everything…

People are starving in countries where you cannot grown corn (or wheat, or rice, et cetera) to compete with the world market. Why? Because our government (and other industrialized governments) subsidizes corn so much that it can be sold at below it’s actual cost of production. On top of that, aid to countries in need of food is often too little too late because of our highly inept aid policies, which are corrupted with profits for agribusiness and shipping companies and little actual aid.

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The New New Deal

When Franklin Roosevelt initiated the first “New Deal” he pushed through reforms in the banking laws. Today we are faced with one of the most dire financial crises since the depression. Why? Because our system is broken. Most of us know this, but many feel as though it is still the only or best option we have for an socioeconomic model.

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