- Part 1: The Challenge
- Part 2: From sustainable development to sustainable transition
- Part 3: Paradigm shift
- Part 4: Empowerment
- Part 5a: Sustainable economics: introduction
- Part 5b: Sustainable economics: growth, steady-state or degrowth?
Sustainable economics: introduction
In the previous 4 parts of this series, I described the bigger picture of ecologism (the ideology of the green movement). These last two post are the final part of this series and will address the question of how this ideology is translated in an economic system. In this introduction, I will briefly describe what an economy is, why it exists and the big lines of our current economic systems. I will finish this post with the bigger picture on what the economic system should look like in the ideal situation (for the green movement that is).
Is there something as “the economy”, can we change it and should we care? Short answer: No, Yes and Yes.
Economics is not an exact science, therefor there’s no such thing as “the economy”. Just like our political system, the economy is strongly influenced by the way we value society. Let me first start with two very important things: economics are changeable systems and you can always choose your preferred scale.
The moment humans stopped wandering around and started settlements, we where confronted with the problem of scarcity. In order to have enough resources, we started storing and trading resources. These interactions are economic interactions. Whether you’re using coins as a medium of exchange or not is not important here. An economic system is basically the sum of the different economical activities in an area. At the moment we strongly value personal development and personification of products, so we trade our labor for products from companies that respond to this.
“The economy depends about as much on economists as the weather does on weather forecasters.”
The fact that an economic system is the sum of our combined economic activities makes it changeable. If a group of people decide they’ll start doing things different, the result of that sum will change. Sometimes these changes are big and fast (stone age, bronze age, industrial revolution, dot com-bubble…), sometimes they take more time (Corporate Social Responsibility, ecological awareness, equality…). The thing is, you cannot change the entire sum, you can only change your part of it. The only way to change the bigger picture is by being that change and convincing others to do so as well.
Then that last question: Should we care? Somewhere the last 100 year a shift started where the economy became the driving factor for society. politicians are subordinate to the economic system and are elected to keep the machine running (whereas not so long ago, politicians used to steer the economy). The reason you should care about economy (maybe even more than politics) is because it defines your life, healthcare, social freedom… .
The green economy – the bigger picture
The most important issue when talking about green or ecological economy is the limits of resources and therefor the limits of growth (growth is defined here as material growth, creating more products and services). It’s important to understand that accepting limits of resources equals accepting limits to economic growth (no system can ever be optimized to work with a 100% efficiency, this law is also known as the second law of thermodynamics). In a green model of the economy, there’s a consensus that there will be a certain point where the economy will have to stabilize. This ideal situation is known as a steady-state economy and was first described by Adam Smith in his Common wealth of nations (!).
“A business that makes nothing but money is a poor business.” – Henry Ford
Although there’s a consensus that an economy cannot grow forever, there’s still a big discussion on what the focus of a green economy should be at the moment. Three big movements can be defined in this debate:
- Green growth:
- Steady state
I will describe these three in the next and last post of this series.