An economical economy

Ideas on how to restructure an ‘economy’ that means what it says: an economical, ecological economy that manages resources sustainably, and allocates them fairly

When David Lange said, let’s stop for a cup of tea, we all agreed; we’d had enough neo-liberalism.

In a world where growth is harder, with debt, energy prices, inflation, unemployment, nervousness — where growth is ultimately unattainable, because we’re hitting the biophysical wall — time for another cuppa? Retiring Treasury secretary John Whitehead agrees.

This is what it is: not speculation any longer, or aspiration (though it suits some narratives better than others), not a short-term blip, but fact.

Growth, using more resources, making more waste, can't physically happen on a small, round planet forever. Not much more of it can happen, certainly not enough growth to raise the global South to the level of the global North, to lift 9+ billion people in 2050 to first world standards, by the same methods as those standards are currently achieved.

We hoped, I suppose, that it would be possible for long enough that we wouldn’t have to think about it.

There's a whiff of turkeys and Christmas — why would anyone vote for a solution likely to drag the global North back down South? — and they won’t, and they shouldn’t.

It’s the failure of growth, and the doing nothing in response, that's causing unhappiness, economic collapse, job loss, unemployment, rising debt. It’s the old definition of insanity: planning more of the same, and expecting different, because we don’t know how to be different.

The first problem is what to call it, this new thing. Delegates to this “steady state economy” conference decided it needed a better name. The Greens, to date, have tried “a sustainable economy for New Zealand”, a “smart green economy”.

We could just talk about an economy, in the literal sense: an economical economy, child of ecological economics, focused on efficiency of outcome, conservation of effort, and managing resources so that they last.

I wish with all my heart that we’d started being different 40 years ago, and some tried. To everything there is a season, though. We have more evidence now. The burden of proof may have shifted a bit.

Here's the case for growth: higher incomes to reduce inequality or at least lift the bottom boats; more spent by rich countries on cleaning up and conserving their environment; some wealth, of a sort, and benefits.

Mostly, you'll find, we spent those cleaning up our own back yards, messing in someone else’s, buying more stuff, exporting the pollution costs and not too much of the wealth. This report found that "For every $100 worth of growth, only $0.60 contributes to reducing poverty for the more than one billion people living on less than a $1 a day."

Locally, it's not noticeable that big earner dairy contributes much to cleaning up and conserving our environment, one context where a lot of us might be happy to say "enough is enough". On inequality, take a look here [p 57]: it's not just about wealth, and as wealth has risen, so has inequality.

One solution is discredited, the other untried.

However, the truth that growth would fail in the end was known by Adam Smith, John Stuart Mill, Keynes. Modelling here [pp 36-37] suggests that you can have either a no growth disaster, skyrocketing poverty and unemployment, or a success, where GDP per capita rises whilst all the negative measures track down, by implementing the right policies in the right way.

You could, as a minimum, try using some of those ideas to better manage the status quo and that’s maybe where the conversation starts. But in the end, the status quo may be so flawed that the ideas can’t work without turning the whole thing upside down and shaking change out of its pockets.

The collected works of some bigger brains than mine — here, here, here and here — have lots of common ideas about which policies are the right ones (some of them are pretty left).

If you breathe, I find, reading this stuff, and suspend political disbelief, and suppress the ever-present urge to scoff, you can get through it. Think of it as recycling: take a bunch of stuff that you don't like or hasn’t worked, but instead of throwing it on the scrapheap, build a new and better thing out of the reassembled parts, because we must.

Here are three parts. None of them is very easy, but you know them already.

  1. Resource limits: Limiting resource use and waste production, to levels that can be produced and absorbed, and regulating to enforce them.
  2. Measuring differently: Some form of green accounting, taking account of social and environmental factors. Measuring impact on the environment, by ecological footprint. Measuring human well being, in "happy life years" (life expectancy, and life satisfaction). Measuring progress in the economy by tracking inequality, [or a GPI (genuine progress indicator)] instead of GDP. Measuring overall progress by [a composite headline indicator, such as] HPI (happy planet index). [corrected: ed]
  3. Redistributing wealth, and power: Since the invisible hand of the market will not help, levelling wealth and assets through the tax system (eg, inheritance tax), or a "citizens endowment" or universal income, or managing pay differential. These are just examples. How much levelling? I don't know. Democratising institutions, including different ownership models (not just state or market).

Here’s a fourth: what won’t we do, without 4% growth year on year to lever us out of the fiscal hole?

I’m thinking, in particular here, of upper class tax cuts and middle class welfare (one for each side of the political spectrum, you understand). John Whitehead, challenged on the weekend to name one non-right policy supported by the Treasury, offered opposition to interest-free student loans as an example, and I imagined I knew what he meant. It’s hardly left-wing, but it is non-right. Treasury’s going a little bit green.

And, he admitted, to a dryly sceptical Guyon Espiner ("Now, I know that you claim that you’ve always thought that, but it’s a bit of a new emphasis for Treasury, I think that would be fair ..."), we at the Treasury have always thought other measures of success were perfectly sensible, and practised them, secretly.

Well, let's not argue over old, newly common ground. Time to celebrate ("This is one of the best news stories in my living memory ..."), then shift the debate on to a new one ...

Shorter work weeks are an example of one kind of redistribution and revaluing, by sharing jobs and giving people time to live well in other ways. 

It could, if not done right, substitute one kind of income inequality for another. Some can afford to, and others can’t, and virtually everyone's locked in, by other parts of the economic system, the need to simultaneously address, well, everything really:

  • capital flight, and global trade;
  • debt in the banking system;
  • “right sizing” business profits;
  • adjusting consumer habits and preferences and material expectations;
  • making everyone, in short, not just do different, but be different.

The existential scale of it is almost beyond comprehension; the unknowns and downright political impossibilities no less daunting than the looming environmental one.

What else can we do, except start with the ideas we have, and the things we know — forums like this one, Bills like this one — and take small steps in the right direction, starting now.

“It’s not just that we have to entrench a different form of economy, different ways of doing things, different ways of relating to each other, different consumption patterns. It’s also vital that we do it quickly. We do not have time to waste. There’s no point cheering that you’ve found the brake if, by the time you use it, you’re headed vertically over the edge of a cliff.”