The New Economy

[important title=Part 1 of 3] In a three-part series, columnist Loys Maingon gives us an oveview of the New Economy and a Sunshine Coast reality check.[/important]When the ad announcing the formation SuCESS came out, new members asked what “The New Economy” is. They had heard the words, but like most political white-noise, no-one had really taken the time to explain them.

As with most political information and slogans, the more unclear but high-sounding a term is, the easier it is to mislead the voter while raising his or her expectations. That’s how terms like “Zero Waste,” when used by regional governments, come to mean “a lot of unethical wasting and polluting out of our sight,” rather than “fully recycled and recovered resources” as it does for environmental scientists and economists.

So, I thought we should begin with a short background to “The New Economy”: why it has become a buzz-word and where our regional governments are misleading us.

Executive Summary

The New Economy is nothing new. It is about 40 years old. The New Economy is a shift from an oil-intensive consumer economy based on the concept of endless growth to a clean-energy steady-state economy based on “cradle to cradle” accounting. As shown at Copenhagen, political and civic institutions have consistently failed to show leadership. We have now reached a sufficiently serious political, economic and environmental impasse that presents “a perfect storm.” Rather than face reality and take necessary substantive action, politicians are now faintly reviving the hollow shell of words, hoping that by magic problems will be solved. Unfortunately this just compounds growing problems.

Backgrounder

In economic circles the year 2008 is known as “The Great Recession”. 2008 marks a special divide in our global history. It was not only the first year in which President Obama heralded his promise of building a “New Economy,” it was also a year in which we came to the full realization of the extent to which the old economy was broken. The break in globalized consumer economy is deeply linked to both a deteriorating state of the environment, and a global destabilization of security and energy structures linked to oil.

[inset side=right]The break in globalized consumer economy is deeply linked to both a deteriorating state of the environment, and a global destabilization of security and energy structures linked to oil[/inset]None of this is new. The state of affairs in which we now find ourselves has been foreseen since about 1972, when it was fairly accurately modelled in a small report of an M.I.T. systems-dynamics project, called Limits to Growth (1). As a 2008 independent review by CSIRO (Commonwealth Scientific and Industrial Research Organization) of the 30-year old modelling compared with hard data to 2000 shows, in spite of the basic soundness of its findings, the Limits to Growth policy and behaviour recommendations for sustainability were largely disregarded by politicians, because of the sustained campaign of falsehoods carried out against it mostly in popular media (2, 3). (That disinformation campaign was similar to the one currently conducted to discredit the scientific community and Climate Change modelling and research, seemingly by the same interested parties.)

Limits to Growth has been updated twice, in 1993 and in 2004.4 These versions are even more interesting because they incorporate environmental drivers such as Climate Change that were not part of scenarios in 1972.

While Limits to Growth broke essential ground in advocating the need to change economic paradigms, it was not the only major source of information. In 1974, a young economist, Lester Brown, founded The Worldwatch Institute in Washington DC. ( Brown also became a major advisor in China`s economic boom and in its becoming a world leader in alternative energy.) The Worldwatch Institute has tracked the impacts of our wasteful, energy-guzzling consumer-centred economy, and proposed alternatives , every year since 1974.

[inset side=left]The Worldwatch Institute has tracked the impacts of our wasteful, energy-guzzling consumer-centred economy, and proposed alternatives[/inset]By 1983 the United Nations recognized these growing problems. The Brundtland Report , Our Common Future (1987) was its response. The Brundtland report was a halfway measure as of 1987. Today it poses at least 2 basic problems. First, it advocates “sustainable development” within the conventional economic paradigms. In that respect it perpetuates consumer aspirations that would require a tripling of the resources of this planet. Second, it was written without taking into consideration the full implications and new limits that Climate Change imposes on us today. It is largely out-of–step with the currently deteriorating situation.

Regrettably, much government policy today has not moved beyond Brundtland, and its understanding of “sustainability.”

The New Economy

The Great Recession of 2008-2009 marks not only the limits of the financial system, but also of our economic structures and of our political leadership’s ability to reckon with problems posed by Copenhagen. As does this year’s 2010 State of the World Report (5), Thomas L. Friedman makes a very good case that the social problems that caused the financial collapse of 2008 are the same that have contributed to Climate Change, and the ongoing collapse of biodiversity6. We have abdicated responsibility we owe to our grandchildren. As Friedman so eloquently puts it: “the destabilization of both Market and Mother Nature had the same root causes...The same recklessness undermined them all. I am talking of a broad breakdown in individual and institutional responsibility by key actors in both the natural and financial world – on top of a broad descent into dishonest accounting, which allowed banks and investment firms to conceal or under price risks, privatize gains and socialize losses, without the general public grasping what was going on.”

[inset side=right]The New Economy is first and foremost an economy that understands that everything has a cost...[/inset]The current economic system shows little concern for either environmental or economic consequences. As this year’s State of the World Report makes clear, it is incompatible with talk of sustainability.

The New Economy is first and foremost an economy that understands that everything has a cost, that all transactions have consequences, because all resources are finite and their depletion will impact upon us. Accounting in the New Economy, means factoring true environmental costs, so that future costs to the public are not socialized, while gains are privatized. This means that the New Economy has an ethical focus on outcomes that must be weighed on a par with profits. Long term profits must be considered before short term gains, and consequences incorporated.

One of the misconceptions regarding the New Economy is the role of natural resources. As I will discuss in the next parts of this column, addressing Climate Change does not call for a “freezing” of natural resources, but rather, it requires their very intensive management. This means that there is an urgent necessity to repair the largely destructive and venomous conversation between natural resource workers and environmental concerns.

[inset side=left]Real environmental conservation begins with our “garbage”[/inset] Within that debate, the main driver of both Climate Change and market destabilization has been our dependency on oil. The post-1945 economy has been built around the relative cheapness of oil. The various economic crises, and wars we have had in the last two decades have been struggles to maintain that commodity. The geo-political and environmental costs now outweigh the benefits. There is therefore a necessity to reduce oil consumption and move to alternative sources of energy. To reduce energy consumption is also to reduce demands on natural resources.

Recycling is central to the energy/resource component of The New Economy if we are serious about minimizing impacts on the environment. In the consumer-economics of the Brundtland Report, recycling is partial, and recycled products are at best used to make lower quality products. This is known as “down-cycling” on a “cradle to grave” model. The New Economy proposes a “cradle to cradle” approach, thereby “eliminating the concept of waste” – nothing needs go into the landfill, everything can be re-covered. (6)

Sunshine Coast Reality Check

As the title of this year’s State of the World report indicates, the consensus is that The New Economy is a cultural transformational moment which is currently driven by “bottom-up” politics, simply because it makes good sense to average working people around the world. The Sunshine Coast is missing the boat.

To understand the huge disconnect that SCRD’s policies represent we just need to consider two things: the approach and the intention.

The approach has been a top-down series of attempts to impose binding restrictive policies. As Michael Mandelbaum, Johns Hopkins foreign policy expert, rightly noted this approach is doomed to fail because: “People don’t change when we tell them they should. They change when they tell themselves they must.” (7)

[inset side=right]The approach has been a top-down series of attempts to impose binding restrictive policies.[/inset]This failure to convince is compounded by a complete failure in leadership and vision, exemplified by the Chair of SCRD in her January 15th response to Marilyn Richmond’s letter about recycling costs to seniors on a limited income. Donna Shugar’s response is worth quoting: “reduce the costs we all have to pay for the landfill.” The focus is really not on “zero waste,” but on paying for, not eliminating, the landfill and on avoiding to deal with the problem. SCRD sustainability management policies are not “sustainable recycling.” They are “downcycling” waste, contrary to any aspiration to building The New Economy.

Failure to address the problem and the general abdication of responsibilities are clear in further , often self-contradictory, statements that run counter to the progressive consensus on how to implement The New Economy: As in Shugar's statement, “These are huge whole society changes that are very difficult to achieve...these.are the responsibility of other governments.” After 40 years of political foot-dragging, one could hope for better. Where does one start managing transportation costs, if not at home? Taxpayers do not need to wait for a punitive tax, if the right infrastructure design enables them to conserve, reduce, reuse and recycle at home.

Here is the simple logic for all to consider. SCRD seeks to impose costly top-down solutions to simple bottom-up problems. It often repeats empty mantras such as “zero waste” and “sustainability” because it is living the unsustainable self-contradictions of the old economy, and is progressively oblivious to “The New Economy.”

FOOTNOTES

1. Donella H. Meadows, Dennis L Meadows, Jorgen Randers, and William H. Behrens III (1972). The Limits to Growth. Universe, 205 pages.
2. Graham Turner (2008). A Comparison of The Limits to Growth with Thirty Years of Reality.
3. Donella H. Meadows, Dennis L Meadows, Jorgen Randers Beyond the Limits (1993) Chelsea Green. 320 pages; (2004) Limits to Growth: The 30-year Update. Chelsea Green, 365pages.
4. The Worldwatch Institute (2009). State of the World: Transforming Cultures, From Consumerism to Sustainability. W.W. Norton, 244 pages.
5. Thomas L. Friedman (2009). Hot, Flat and Crowded: Why We Need a Green Revolution and How it Can Renew America. (release 2.0). Douglas and McIntyre,516 pages.
6. William McDonough and Michael Braungart (2002) Cradle to Cradle: Remaking the Way We Make Things. North Point Press, 208page.
7. Friedman (2009), 141.

• Prev