Is a Steady State Economy Possible?

1. Is a Steady State Economy Possible?

2. The Pursuit of Economic Growth It is widely believed that continuous economic growth is essential to human survival.

3. The Pursuit of Economic Growth The prevailing view is that in the absence of economic growth, life as we know it would come to a crashing end.

4. The Pursuit of Economic Growth This perspective is so deep and pervasive that we rarely question its efficacy or wisdom.

5. What Might Happen in the Absence of Economic Growth? The prevalent view is that without economic growth several ominous processes would quickly unfold. Borrowers (governments, companies, and individuals) would be unable to pay interest on outstanding debts.

6. What Might Happen in the Absence of Economic Growth? Corporate profits would disappear.

7. What Might Happen in the Absence of Economic Growth? Employment would plummet.

8. What Might Happen in the Absence of Economic Growth? Tax revenues would decline and governments would be unable to provide public services (including military programs that uphold national defense).

9. What Might Happen in the Absence of Economic Growth? Scarcity would become a defining feature of everyday life.

10. What Might Happen in the Absence of Economic Growth? At the extreme, the human enterprise—particularly what is currently understood to be the American standard of living—would wither and contemporary civilization would decline into barbarous hostility .

11. What Might Happen in the Absence of Economic Growth? Books that herald a future without economic growth are deemed to be the rantings of delusional eccentrics.

12. But is Any of This Likely to Be True?

13. The Paradox of Doomsday-ism It is instructive to note that people who are disposed to dismissing doomsday scenarios founded on environmental claims are likely to embrace apocalyptic forecasts founded on the end of economic growth. Why might that be?

14. Why Question Conventional Wisdom? Conventional wisdom is a term used to describe ideas or explanations that are generally accepted as true by the public or by experts in a field. The term implies that the ideas or explanations, though widely held, are unexamined and, hence, may be reevaluated upon further examination or as events unfold.

15. Why Question Conventional Wisdom? Modern usage of the term is generally attributed to John Kenneth Galbraith who defined it in his famous book The Affluent Society (1958) as “a name for the ideas which are esteemed at any time for their acceptability, and it should be a term that emphasizes this predictability.”

16. Why Question Conventional Wisdom? The notion that economic growth is an indispensible societal requirement certainly fits this definition.

17. Why Question Conventional Wisdom? It is also useful to recognize that history is full of examples of societies that maintained resolute belief in an idea only to find out in due course that it was wrong.

18. Why Question Conventional Wisdom? There is no shortage of examples of the phenomenon that “things work until they don’t.

19. Why Question Conventional Wisdom? And this process of revelation rarely proceeds cleanly and painlessly.

20. Why Question Conventional Wisdom? At the same time, fierce and unrelenting criticism is generally a telltale sign that something curious rests just below the surface.

21. Why Question Conventional Wisdom? Bad or patently wrong ideas are generally just ignored and in due course disappear.

22. Why Question Conventional Wisdom? The onslaught of viscous recrimination against proposals to limit economic growth suggests that people in positions of power feel obliged to defend one or another perquisite with which they have been endowed.

23. Why Question Conventional Wisdom? Why do challenges to the relentless pursuit of economic growth prompt powerful attacks? From where does the commitment to economic growth derive? Who are the prime beneficiaries of economic growth?

24. Reasons for Economic Growth 1. Economic growth compensates for ineffectual political leadership.

25. Reasons for Economic Growth 2. Economic growth diverts attention from growing chasm of income inequality.

26. Reasons for Economic Growth 3. The promise of economic growth postpones calls for the redistribution of income (both nationally and globally).

27. Reasons for Economic Growth 4. Economic growth provides justification for environmental degradation.

28. Economic Growth vs. Economic Development Economic growth refers to an increase in the value of goods and services produced by an economic unit (generally a nation) over a specific time period (one year) and measured in terms of gross domestic product (GDP).

29. Economic Growth vs. Economic Development Economic growth occurs due to increases in population, increases in per capita consumption, or increases in both of these factors.

30. Economic Growth vs. Economic Development Economic development is a qualitative change generally understood to entail a change in educational achievement, technological innovation, or income distribution.

31. Economic Growth and Recession We are accustomed to thinking of economic growth as the “normal” condition and economic recession as the “abnormal” state of affairs.

32. Toward a Steady State Economy There is a third alternative that rarely gets attention—a stable (or steady state) economy.

33. Toward a Steady State Economy If one accepts the premise that the earth is a closed system with a fixed limit of biophysical resources, then economic growth in the customary quantitative sense becomes impossible...

34. Toward a Steady State Economy …and a steady state economy becomes the feasible alternative.

35. Toward a Steady State Economy In addition, if we understand sustainability in its strong sense as what is biophysically required rather than what is politically practical, the question of whether we can continue to pursue continuous economic growth becomes unavoidable.

36. Toward a Steady State Economy The pace of economic growth over the past century is widely recognized as attributable to our ability to exploit dense energy sources in the form of fossil fuels, first coal and then oil.

37. Toward a Steady State Economy Finally, steady state economy is not a static economy. Growth of nonrenewable resource flows ceases to be viable, but growth of knowledge, creativity, innovativeness, and so forth can readily continue.

38. Toward a Steady State Economy Rising Expectations Under Democratic Governance Human Proclivity to Strive for Status Incessant Advertising + + = Growth Economy

39. Toward a Steady State Economy

40. Toward a Steady State Economy

41. Brief History of the Steady State Economy Adam Smith, the founding father of contemporary economic thought, contended that there were limits to economic growth. He predicted that in the long run, population growth would push wages down, natural resources would become increasingly scarce, and division of labor would approach the limits of its effectiveness. He forecasted that economic growth would persist for 200 years and this would be followed by a steady state economy. Adam Smith (1723-1790 )

42. Brief History of the Steady State Economy Thomas Malthus (1766- 1834)

43. Brief History of the Steady State Economy John Stuart Mill (1806-1873)

44. Brief History of the Steady State Economy “The increase of wealth is not boundless. The end of growth leads to a stationary state. The stationary state of capital and wealth… would be a very considerable improvement on our present condition…A stationary condition of capital and population implies no stationary state of human improvement. There would be as much scope as ever for all kinds of mental culture, and moral and social progress; as much room for improving the art of living, and much more likelihood of it being improved, when minds ceased to be engrossed by the art of getting on.” —John Stuart Mill, Principles of Political Economy, 1848

45. Brief History of the Steady State Economy John Maynard Keynes (1883-1946)

46. Brief History of the Steady State Economy “Avarice is a vice, that the exaction of usury is a misdemeanour, and the love of money is detestable…We shall once more value ends above means and prefer the good to the useful…The day is not far off when the economic problem will take the back seat where it belongs, and the arena of the heart and the head will be occupied or reoccupied, by our real problems—the problems of life and of human relations, of creation and behavior and religion.” —John Maynard Keynes

47. Brief History of the Steady State Economy Nicholas Georgescu Roegen (1906-1994)

48. Brief History of the Steady State Economy Kenneth Boulding (1910-1993)

49. Brief History of the Steady State Economy Limits to Growth (1972)

50. Brief History of the Steady State Economy Steady state economy—an economy with constant stocks of people and artifacts, maintained at some desired, sufficient levels by low rates of maintenance “throughput,” that is, by the lowest feasible flows of matter and energy from the first stage of production to the last stage of consumption.