Sunday, December 21, 2008

Are we wrong about our economic principles?

Adbusters has a recent article constrasting two different views of the economy, growth vs. steady-state. Having not ever taken an economics class, I found the article pretty interesting. Most of the time I figure that the way things are running now must be the best, if not the only way to do things. As usual, Adbusters helps me take a look outside my 21st Century Western bias:
"The most important change in recent times has been the enormous growth of one subsystem of the Earth, namely the economy, relative to the total system, the ecosphere. This huge shift from an 'empty' to a 'full' world is truly 'something new under the sun,' as historian J. R. McNeil calls it in his book of that title. The closer the economy approaches the scale of the whole Earth, the more it will have to conform to the physical behavior mode of the Earth. That behavior mode is a steady state – a system that permits qualitative development but not aggregate quantitative growth. Growth is more of the same stuff; development is the same amount of better stuff (or at least different stuff). The remaining natural world is no longer able to provide the sources and sinks for the metabolic throughput necessary to sustain the existing oversized economy – much less a growing one. Economists have focused too much on the economy’s circulatory system and have neglected to study its digestive tract. Throughput growth means pushing more of the same food through an ever larger digestive tract; development means eating better food and digesting it more thoroughly. Clearly the economy must conform to the rules of a steady state – seek qualitative development, but stop aggregate quantitative growth. GDP increase conflates these two very different things.

We have lived for 200 years in a growth economy. That makes it hard to imagine what a steady-state economy (SSE) would be like, even though for most of our history mankind has lived in an economy in which annual growth has been negligible. Some think an SSE would mean freezing in the dark under communist tyranny. Some say that huge improvements in technology (energy efficiency, recycling) are so easy that it will make the adjustment both profitable and fun."
The steady-state economy also seems to be the answer to better helper poorer countries:
"For poor countries GDP growth still increases welfare, at least if reasonably distributed. The question is, what is the best thing for rich countries to do to help poor countries? The World Bank’s answer is that the rich should continue to grow as rapidly as possible to provide markets for the poor and to accumulate capital to invest in poor countries. The steady state answer is that the rich should reduce their throughput growth to free up resources and ecological space for use by the poor, while focusing their domestic efforts on development, technical and social improvements, that can be freely shared with poor countries."
Read the whole thing

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