Next Wednesday, June 20, councillors and citizens will discuss a report about Steady-State economics, at Mancheser City Council’s “Economy Scrutiny Committee.” (See below for details)

This report was written solely by several council officers, despite a long-standing offer to work collaboratively from a group of academics, business people and activists (an offer the Council initially accepted).

Below we re-post (with permission) a critique of the Council’s report, pointing out its short-comings and offering constructive ways forward. It can also be found here.

The meeting starts 9.15am in Committee Room 11 at the Town Hall. It’s free, there’s no need to book. Some of us are meeting at the Waterhouse pub on Princess Street from 8.30am.

Manchester City Council and Steady State Economics.

Manchester City Council’s Economic Scrutiny Committee has commissioned a report on Steady State Economics. This is potentially a very positive move- few councils and government bodies are taking the need question of ‘limits to growth’ seriously despite the overwhelming evidence of these limits (from the early 1970s onwards) and the clear evidence that the planet has passed and/or is passing several of the planetary ecosystem limits after which irreversible and damaging change is probably inevitable.

Unfortunately, the report which is now available, is disappointing.

1) The report appears to dismiss the concept of steady state economics from the outset and therefore does not review the growing body of work available (see the Appendix 1 for some of these sources).

2) The report fails to address the critical question about mitigating the effects of growth. As the UK government’s Sustainable Development Commission (disbanded by the current government) showed convincingly in its report Prosperity Without Growth, improved efficiency of resource use comes about with growth (because of innovation in technology) but these improvements are only relative. That is to say the proportion of emissions in relation to GDP reduces, but the problem is that while GDP is increasing, the absolute level of emissions (and resource use) also increases, although it is falling relatively. The net effect of growth then is continued increasing ecosystem damage. The report discusses these relative reductions but fails to consider the critical issue of absolute emissions. Nor does it consider the Jevons paradox – that increases in efficiency do not produce reductions in resource use, but further stimulate resource consumption.

3) The report makes reference (in a rather obscurantist way) to endogenous growth theory. This is contrasted to neoclassical economic theory. But all this is really saying is that government intervention can promote growth. The argument is not relevant to the question of a closed loop or steady state economy.

However, the idea of endogenous development is an interesting one since if taken seriously the idea of economic development (rather than growth) from within the region is relevant to the strategy of (relative) de-linking of the local economy from the global economy. There is some discussion of these topics in the GreenDealManchester paper ‘Getting Started on the Economy”. Not surprisingly this is incomplete work – this is difficult stuff, trying to construct alternative approaches in the face of an economic orthodoxy that is the lifeblood of the current system. De-linking is implicitly ruled out by the report

4) The council report is clear that there would be very tricky issues were it to promote a steady state economy (SSE):

“…even it were desirable there are no realistic prospects of developing an SSE in Manchester – as international and national policy is not geared to this goal, making any meaningful impact minimal, and seriously disadvantaging the city’s economic performance, to the detriment of its residents.”

But we need to counter this by asking “Is growth a realistic prospect anyway?” (see Appendix 2). There has been very little growth since 2007 and there seems little prospect of the healthy (sic) 3% growth rate returning. The city therefore needs an alternative strategy which as has been argued elsewhere would emphasise ‘good living rather than continued consumption’, increased equality, and changes in the way we live in Manchester. Of course this cannot be done unilaterally and in isolation, but isn’t Manchester meant to be a leader, an innovator, a tail-blazer, a pathfinder – a place where tomorrow happens today?

Conclusion

The challenges of a Steady State Economy are considerable, but the council report does not provide a basis for a serious consideration of the limits to growth, nor of the strategies that would need to be adopted to manage an economy with closed-loop and steady state features in these very challenging times of zero growth.

Appendix 1

A Steady State Manchester Economy?

United Nations Secretary-General Ban Ki-Moon: “For most of the past century, economic growth was fueled by what seemed to be a certain truth: the abundance of natural resources. We mined our way to growth. We burned our way to prosperity. We believed in consumption without consequences. These days are gone… Over time, that model is a recipe for national disaster. It is a global suicide pact.”

(Spoken at the World Economic Forum in Davos, Switzerland, January 2011).

The Dilemma

Manchester City Council is committed to securing the wellbeing of its citizens. It has a variety of initiatives to its credit. However, to date the Council, like almost every other government, whether local or national, has relied on sustained economic growth to create wealth. Until recently this may have been a defensible strategy; but now, because of the reality of ecological crises, not least the threat of runaway climate change, a rethink is required.

Until recently a compromise solution, “sustainable growth,” had some credibility. The hope was that it would be possible to de-link growth from resource throughput, and hence ecological damage. Economic research by the last government’s Sustainable Development Commission makes it clear that this is not possible. Only a relative reduction is possible, which means that the demand for resources and polluting emissions continue to grow. Technological innovations that improve the efficiency of resource use actually lead to an increase in overall usage since under a growth model the efficiencies are used to increase production. (The Manchester economist William Stanley Jevons noted this in his 1865 book “The Coal Question”).

Key references for this argument:

1) http://www.slideshare.net/DFID/professor-kevin-anderson-climate-change-going-beyond-dangerous The basic science and its economic implications.

2) http://www.neweconomics.org/press-releases/economic-growth-no-longer-possible-for-rich-countries-says-new-research Includes a link to a graphic illustration of the statistical argument against growth. Full report http://neweconomics.org/publications/growth-isnt-possible.

3) http://www.sd-commission.org.uk/publications/downloads/prosperity_without_growth_report.pdf The Sustainable Development Commission report to UK government sets out clearly the problem with growth.

4) http://steadystate.org/wp-content/uploads/CASSE_Brief_SSE.pdf Briefing sheet on the Steady State Economy.

The Challenge of a Steady State Economic Policy

But a rethink of economic growth itself faces a number of challenges:-

• Mainstream economic theory has been built on the assumption of continued growth but the alternative, steady state economics, is relatively underdeveloped. Therefore knowledge of how to manage a steady state economy is limited.
• A steady state economy and reduction in economic activity is associated with recession, depression and mass suffering. It is therefore difficult to ‘sell’ the idea.
• There are difficulties in ‘going it alone’ since all economies are linked. So the challenge is to find opportunities for relative de-linking from the global economy while increasing local circulation of resources and wealth.
• Steady state and ecological thinking has had more attraction for those who have prioritised alternative lifestyles, or who have the resources to make green choices. Any strategy adopted has to work for Manchester’s population as a whole, people in Newton Health and Gorton North as well as those in Chorlton and Hulme.

We are now in a different place and time.

The growth policies of the last 60 years were a product of their time. But now there is a fundamental difference. As noted above, we are living in an extremely dangerous ecological emergency, and growth is the problem. But there are other reasons why the old model is no longer appropriate.

Growth does not equal well being

Growth did deliver measurable benefits to the population but the ‘dis-economics’ of growth are now greater than the benefits. This has been demonstrated in relation to measures of well-being, where some analyses suggest that the net benefit of growth had already diminished to near zero as early as the mid 1960s.

See http://ije.oxfordjournals.org/content/36/3/484.full (The “Preston curve”)

http://neweconomics.org/publications/chasing-progress

http://neweconomics.org/publications/growth-isn%E2%80%99t-working

Growth might not return anyway

Growth has stalled and is unlikely to recover to the 3% that mainstream economists use as a proxy for a healthy economy. It seems likely that the motor of accumulation is actually broken, hence the recourse to the fiscal policies of the 1930s by the current government.

See http://www.oecd.org/dataoecd/2/55/49112261.pdf OECD assessment of prospects for growth.

http://www.globalresearch.ca/index.php?context=va&aid=26217 another article on the scale of the global recession.

More economic shocks

Manchester’s population deserves an adequate approach to planning for further shocks. Can we be more prepared for the “next 2008”? Fuel and food prices are set to soar and this will ultimately mean large sections of the population are potentially very vulnerable.

See http://www.worldbank.org/foodcrisis/foodpricewatch/april_2011.html World Bank briefing on world food prices and links to energy prices.

http://www.independent.co.uk/news/world/politics/the-coming-hunger-record-food-prices-put-world-in-danger-says-un-2177220.html Detailed but concise article on the same issue.

http://www.ft.com/cms/s/0/02e7583e-1532-11e1-855a-00144feabdc0.html#axzz1gua5iNxM FT article (Nov. 2011) that indicates food price increases are imminent in the UK.

The Alternative: Steady State Economics

While mainstream, growth-assuming economics is dominant, there is a growing body of work on Steady State Economics. Among other things this work emphasizes the following.

• Alternative measures and criteria for economic and social well-being.
• Closed loop cycling of resources and of wealth – the latter also features in the recent CLES report on procurement in Manchester.
• Government support for non-profit enterprises including cooperatives.
• Macroeconomic modeling of the interdependencies among various economic indicators including incomes and employment.
• Local alliances to encourage necessary and relatively local trade, particularly for bulky low value goods whose transportation is fuel intensive.
• Local production for need.
• Accounting frameworks that include ecological impacts in the economic calculations.
• Promotion of the green economy, including selective development of ecologically friendly industries.

Resources on steady state economics

http://steadystate.org/wp-content/uploads/EnoughIsEnough_FullReport.pdf – Comprehensive report and source book from the UK Steady State Economy Conference, Leeds, 2010.

http://www.sd-commission.org.uk/data/files/publications/prosperity_without_growth_report.pdf See Chapter 6 on macroeconomic models.

http://www.pvictor.com/MWG/About_the_Book.html Link to Managing Without Growth by P Victor. http://vimeo.com/16906655 Video summary

http://steadystate.org/wp-content/uploads/CASSE_Brief_GDP.pdf – alternative indicators.

http://www.beyond-gdp.eu/ EU initiative: Beyond GDP as a measure of wealth and progress.

http://greendealmanchester.wordpress.com/getting-started-on-the-economy/ A Bioregional perspective from Manchester.