September 09, 2015
The UK Steady-State Economy
Steady-state economics as promulgated by the likes of Herman Daly is founded on the belief that the physical size of the economy cannot grow forever, as it will eventually reach the limits of the biosphere. An analysis of UK data shows that for nearly a decade, UK GDP has been growing whilst resource throughput, or material consumption, has remained steady or even decreased. This is the first ever apparent evidence of absolute decoupling between economic growth and materialconsumption in an advanced economy, and as such, undermines the widespread claims that economic growth is inherently unsustainable. But the implications might not be as significant as they appear.
Steady-state economics has a particular concern for the material resource throughput or, in other words, the amount of stuff that we consume. The idea is that the earth has a certain carrying capacity in terms of physical resources, and that as a result, continued growth of material consumption is ultimately impossible. If this sounds familiar, it has a lot in common with the ideas of the apparently immortal Thomas Malthus in the late 18th century, and with the work of the Club of Rome from the 1970s onward. To be sustainable, according to this definition, we must reach a "steady-state" where our total use of resources remains constant or declines.
Ever since the start of the industrial revolution, economies have become gradually more efficient in their use of resources, so that each, say, kilo of input generates more $ in output. This "relative decoupling," often called "dematerialization," has also been evident in the US over the past few decades. However, given the rapid growth in GDP, this increased efficiency hasn't been enough to actually decrease the total amount of resources needed, and material consumption has therefore increased quite substantially over time. Absolute decoupling, that is, continued economic growth that does not lead to increased resource consumption, has long been the holy grail of sustainability, and something that many did not even think was possible.
No wonder, then, that the recently released study by Chris Goodall showing what is undeniably convincing evidence of absolute decoupling in the UK over the last decade or so, caused quite a stir in many environmental circles. The study, based on data from the UK Office of National Statistics, shows that the Total Material Requirement of the UK economy stayed roughly flat in the 1990s and then started declining in the early 2000s, at the same time as GDP increased by over 50%.
The significance of these data is that they highlight the practical possibility of absolute decoupling. Economic growth doesn't have to lead to increased consumption of resources - and reduced material consumption doesn't have to come about through a collapse of human civilization, as speculated by Donella Meadows and her colleagues in 1972. In fact, by the ecological economics definition, the UK has effectively entered a steady-state condition without anyone even noticing.
Big news, it would seem. But what does it really show? The importance that steady-state economics attaches to aggregate measures of resource use may not in fact be justified. Let's look briefly of what makes up the so-called material flow accounts.
The first component is biomass. Here, there is no strict sustainability issue in terms of amounts of biomass. Yes, we need to increase food production and make sure it reaches the "bottom billion," but we have been, and still are, perfectly capable of producing more biomass. We are not talking about any external, inherent limits here - technological progress doubled yields over the past few decades and there is still plenty of catching up to do for some regions, meaning that we have the technology today - albeit not the political institutions - to feed not only 7 billion people but probably many more. And as for forests, if we needed more of them for biomass, we could plant more; this is a matter of market demand, not biophysical limits. Hence, even if economic growth led to increasing throughput of biomass, that would not have to be "unsustainable." We don't necessarily need "decoupling" here to be okay in the long run.
The second material category is minerals, and in a strict sense, in cases where they are non-renewable, "sustainability" is impossible anyway.
Depletion is inevitable in the long run. But in many cases, we can affect the availability of minerals just like we do with crops. Better technology means more stuff to mine; the reason we don't have reserves for many years is often that we simply don't need to discover or dig up more than necessary for the shorter run. This, not the exact rate at which minerals are extracted, is what determines whether our use of minerals is sustainable. Hence, decoupling could be unsustainable, just like the current norm of "coupling" could be sustainable.
The amount of fossil fuels we use, lastly, can easily be hidden in the apparent absolute decoupling. Fossil fuels are a problem to the extent that they cause climate change, which is an independent and qualitatively different matter from consumption of other non-renewable resources.
Hence, even increasing absolute consumption of certain resources can be "sustainable"- for example food or timber. Conversely, reduced material consumption per GDP - depending on what it is that changes - can be taking us down a less "sustainable path," for example if we ate much less and built fewer houses but increased fossil fuel consumption somewhat.
What at first sight appeared to be momentous news was, at closer inspection, mostly an artifact of a mistaken understanding of sustainability. The total amount of stuff we consume simply does not tell us whether we are sustainable or not.