steady state economics

Growth Model vs Steady-State Economy (SSE) Model

The Key Difference

The Growth Model: The environment is a sub-set of the economy

The SSE Model: The economy is a sub-set of the environment

What is the Growth Model?

A politically sanctioned template that defines a desirable objective and specifies the means to achieve it

The Objective: Prosperity for allThe Means: Economic growth

The pursuit of growth is the primary organizing principle of the world economy

Major international institutions and organizations such as the WTO, IMF, World Bank, the OECD, G8 and G20, and the UN

National governments (North/South, East/West)Regional trading blocs in Europe, Asia and the

AmericasAll multinational corporationsCivil societies around the world

How well does the Growth Model perform?

New jobsCorporate profits for reinvestmentStrong tax base for public spendingRewards for individual successThe promise of a better future for all

Two Problems with the Growth Model

1. Growth drives climate change

The bulk of the world’s economic activity is driven by fossil fuels

GHG emissions are increasing by 3% per year, in lockstep with growth

Energy demand is expected to increase by 36% by 2035

Two Problems with the Growth Model

2. The Growth Model is open-ended

No limits to growth are built into the model

The world economy is already bumping up against planetary biophysical constraints

De-coupling is not an option

An Alternative Model

Acknowledges Earth’s finitude

Functions in dynamic equilibrium with Earth’s biosphere

Requires much less energy to maintain

Basic features of the SSE

A stable population

A constant stock of constructed and natural capital

Population and capital stocks maintained by a minimum matter/energy throughput

Structure of the SSE Model:three nested circles

Functions of the SSE components (inner circle)

The Economy

Market capitalismEfficient resource allocationEmployment and optimal productivityInnovation

Functions of the SSE components (middle circle)

The socio-political context

Prevents runaway growthProvides meaning and direction to the forward

motion of human developmentProvides stability and predictabilityMitigates extremes of wealth and poverty

Functions of the SSE components (outer circle)

Earth’s biosphere

Provides natural support for human society and all economic activity

Determines the ultimate size of the world economy, and the ultimate size of the human population

Economic Obstacles to the Transition

Drivers of economic growth:

Population increase

North-South economic disparity

Sovereign indebtedness

Political Obstacles to the Transition

The paradigmatic commitment to growth

Political expedienceShort-term electoral successMedium-term political stability

Moral convenience: Growth offers an economic surrogate for distributive justice

Other Obstacles to the Transition

Institutional inertia

Long lead time for implementation

Peak oil

Initiating the Transition: Political Objectives

Fill the leadership vacuum

Shift the burden of proof

Put the SSE on the international agenda

Mobilize relevant constituencies

The World Polity in 2050

Micro-variability within a context of macro-stability

A world economy transformed from one that is consumptive, fast-moving and unpredictable to ...

An economy that is environmentally sustainable, stable and more profoundly creative

In Sum

The organizing principle of the Growth Model is the pursuit of (quantitative) economic growth

The organizing principle of the SSE Model is the quest for (qualitative) development

We cannot manage Earth’s biosphere, but we can learn to manage ourselves.