Economy, ecosystem and human sustainability

Arguing that the current global economy driven by conventional economics is not sustainable, Prugh et al (2000) show that running a sustainable economy requires three house rules – conserve resources, protect ecological services and conserve Earth’s waste-absorption capacity. Turning to ecological economics, they emphasise that, since no subsystem can outgrow its host, the global economy cannot grow larger than the global ecosystem, which is finite in size; hence, economic growth cannot continue indefinitely. They reveal that a sustainable economy will do several things differently, such as measuring and controlling the economy’s scale relative to the ecosystem’s scale, restraining affluence and population, and stressing development not growth. The following write-up by Asitha Jayawardena is mainly based on Prugh et al (2000).

(For enhanced readability, the main reference (i.e. Prugh et al, 2000) is usually mentioned at the beginning of a section only. My position is clearly differentiated, usually by way of using ‘I’ or ‘my’.)

Maximum growth economy and sustainability

That Planet Earth is capable of sustaining ever-growing levels of consumption is, according to Maiteny and Parker (2002), one of the two cultural beliefs that, together with consumer demand, drive the global maximum growth economy. The other belief is that maximisation of consumption and wealth is the best route to human wellbeing.

Is Earth really capable of sustaining any level of consumption?

No, say Prugh et al (2000). And they explain in detail why and also outline a way to run a sustainable economy.

Helping to justify their position to a significant extent, Raven (2002) observes that many (ecological) life-support systems are deteriorating rapidly and visibly. As Maiteny and Parker (2002) emphasise, the ultimate constraint on human activity is ecological processes because, for existence, nature does not depend on humans but humans depend on nature, which is their environment. And if we humans destroy nature, we will be destroying ourselves because, according to the Inevitability Rule, ‘The system that destroys its environment destroys itself’ (Wilden, 1987: 86, in Maiteny and Parker, 2002: 15).

Therefore, it is reasonable to assume that economics cannot totally ignore its effects on the ecosystem.

Minimum technical requirements for sustainability

In this context, Prugh et al (2000) begin their in-depth explanation with the minimum technical requirements for sustainability.

They focus on three things that the global ecosystem does, namely provision of resources (food, fibre, fuel, biological diversity, etc), performance of ecological services (e.g., photosynthesis, atmospheric gas regulation, climate and water regulation, soil formation, pest control), and absorption of wastes.

The human economy cannot do without them and it cannot do them for itself. That is, the human economy is utterly dependent on these three requirements. In fact, without the immense biodiversity of the global ecosystem, there would be no human economy in the first place. For example, the entire food web rests on a foundation of primary producers (plants and sea-dwelling phytoplankton) that use the energy of sunlight to make biomass through photosynthesis. Almost all living beings incapable of photosynthesis depend, directly or indirectly, on this output.

Therefore, Prugh et al (2000) conclude that running a sustainable economy requires three house rules: (1) Don’t use up all the resources; (2) Don’t undermine the delivery of the ecological services; and (3) Don’t overwhelm the waste absorption capacity of the planet.

Giving such an ‘ecological touch’ to (conventional) Economics results in ‘Ecological Economics’.

Conventional economics and ecological economics

Let’s see how Prugh et al (2000) compare the two types of economics – conventional (neo-classical) and ecological – with respect to their relationship with the global ecosystem. They identify three aspects:

• The connection between the economy and the ecosphere
• Substitutability of the factors of production
• The type of matter/energy flow in the economy

Firstly, on the connection between the economy and the ecosphere.

Conventional economics, today’s reigning economic worldview, assumes little connection between the economy and the ecosphere, and it considers land as a relatively unimportant factor of production.

Ecological economics, however, considers that land (the global ecosystem) is the economy’s home and workshop, the very ground of its being. So, nested within the global ecosystem, the economy is utterly dependent on it. Further, the ecosystem is (1) limited in size, (2) not growing, and (3) not receiving any new flow of materials (though it is receiving a continuous flow of energy from the sun).

Ecological economics perceive economic production as the process of converting the natural world (renewable and non-renewable resources and the ecosystems they constitute) to the manufactured world (houses, cars, books, etc, and non-natural ecosystems such as parks and fields). Therefore, the economy can grow only at the expense of the ecosystem.

Secondly, on the substitutability of the factors of production.

Conventional economics treats the factors of production as strongly substitutable. For its ecological counterpart, however, all forms of capital are necessary for economic production. Beyond certain critical limits, substituting one form of capital for another reduces the output.

Thirdly, on the type of matter/energy flow in the economy.

For conventional economics the economy is a closed circular flow. However, when economic production is viewed as the process of turning natural capital into manufactured capital and wastes, it is a rearrangement of matter and energy. It is a constant one-way flow of high quality matter/energy that is turned into low quality matter/energy (wastes).

Take a chair, for example. We turn coal and trees into carbon dioxide, waste heat and landfill mass; they only pause along the way in the ‘chair’ phase. According to the laws of thermodynamics, the total quantity of matter/energy is the same before and after, but the value or usefulness of the stuff has declined sharply. So what consumers consume is the value in stuff – the value of both natural and man-made capital.

Having identified the key differences between the two types, Prugh et al (2000) move to the issue of economic growth.

Why continued economic growth is not sustainable

What does a growing economy mean to the global ecosystem?

Viewing from an ecological economics angle, Prugh et al (2000) argue that continued economic growth, so profusely promoted by conventional economics as the route to human wellbeing, is not sustainable and explain in detail their position.

In the ecological economics view, resources (1) flow into the economy from the enfolding ecosystems, (2) are transformed by labour and capital (using energy, also a resource), and (3) pass out of the economy and back into the ecosystem in the form of wastes. In any economy, growing or not, things tend to wear out, requiring maintenance and eventually replacement, drawing on stocks of resources and energy.

Increasing economic growth for enabling more people to have more stuff requires an increased throughput of resources. This means high rates of conversion of natural capital to manufactured capital and high throughput of resources into the economy and out again as wastes.

Since no subsystem can outgrow its host, the economy cannot grow larger than the global ecosystem. Because the planet is not getting any bigger, the global ecosystem is finite. Therefore, economic growth cannot continue indefinitely.

In fact some scholars (e.g. Komiyama and Takeuchi, 2006) identify Industrial Revolution and the rapid economic growth it subsequently nurtured as the main cause of today’s sustainability crisis.

Elaborating further, Prugh et al (2000) link the idea that continued economic growth is not sustainable to the constraints associated with the three house rules for sustainability.

Firstly, on constraints associated with resources.

With non-renewable resources, the bigger the economy grows and the more throughput there is, the faster they approach depletion. Renewable resources on the other hand can replenish themselves but only if they are used up at a rate that is within their regeneration rate.

With the increase of the amount of manufactured capital and the simultaneous decrease of the amount of natural capital, a point is eventually reached at which the natural capital sacrificed is worth more than the corresponding manufactured capital. Therefore, endless economic growth is not sustainable.

Technological optimists argue that the marketplace’s response to scarcity will evoke new technologies, enabling the economy simply to tap some other resource stocks. Although that could happen, there is no guarantee that it will allow us to escape the resource constraints.

Secondly, on constraints associated with ecological services.

It seems that the economy can draw renewable resources on forever so long as its rate of use does not exceed their regeneration rates.

This is true if renewable resources are stocks of passive assets, but they are not. They are dynamic parts of a vast and complex global ecosystem that provides essential services to the economy. For example, tropical rain forests among other things regulate water cycles and soil temperatures, control flooding, store biodiversity, and sequester carbon through photosynthesis. Economic overexploitation can therefore adversely affect dozens of essential ecological services, undermining the economy in the long run even though it appears to nurture the economy in the short run.

Thirdly, on constraints associated with waste absorption.

The economy inevitably produces wastes and pollution. Even heroic recycling efforts cannot entirely prevent the production of waste. Waste has to go somewhere and this ‘somewhere’ is the ecosystem – the ‘sink’ of last resort.

Remarkable is the ecosystem’s capacity to absorb, transform and render harmless many wastes. But if we ask it to do too much or present it with waste substances that it has no mechanisms to handle, then it could be swamped.

An example of the first type is adding large amounts of carbon dioxide by human activity (mainly fossil fuel combustion and deforestation). Although the ecosystem absorbs much of this gas added to the atmosphere, the steadily rising concentrations suggest that we are overtaxing nature’s capabilities.

Secondly, on alien substances. The sophisticated waste-absorption mechanisms of the ecosystem have evolved over millions or billions of years to handle essentially any category of waste it could generate, ensuring that every organism’s waste is some other organism’s fuel. However, in the last few decades, humans produced substances (and even elements) not found in nature. The ecosystem does not necessarily have any mechanisms to render these new substances harmless due to lack of adequate time for evolution of such mechanisms.

A system’s wastes are by definition what it rejects as useless or harmful to it. Therefore, allowing piling up of wastes could be dangerous or lethal to human wellbeing or economic activity (which is supposed to serve human wellbeing). Earth is essentially a closed system, so at the global scale, there is no ‘somewhere else’ or ‘away’ and the abuse of its services undermines their delivery. Therefore, endless economic growth that could eventually exhaust Earth’s waste absorption capacities is not sustainable.

Thus, using the three house rules, Prugh et al (2000) clearly demonstrate that the maximum growth economy is not sustainable. This I think is an important point to bear in mind. Although the economic growth is usually portrayed as a sure-fire medicine for all human illnesses in all terms – from short to long – what it seems to be doing in the long run is undermining the global ecosystem’s capacity to sustain life on Earth.

How to run a sustainable global economy

Now the question Prugh et al (2000) ask is: Can a globalising economy be run in a way that prevents it from destroying the ecosphere that makes it possible? Replying in the affirmative, they explain in detail how it can be done.

The three house rules for a sustainable economy – namely conserve resources, protect ecological services and conserve waste-absorption capacity – are difficult to follow today mainly because the economy (driven by conventional economics) itself offers many immediate payoffs for ignoring these rules and few for observing them. However, the economy could be restructured in order to give incentives to people to act in sustainable ways. Taxing consumption and resource use rather than income, for example, would accurately reflect the value of resources and encourage their careful use.

An economic system refashioned for sustainability would:

• Measure and control the scale of the economy relative to that of the global ecosystem
• Restrain affluence and population
• Acknowledge the inherent uncertainty of the economy and the ecosystem
• Stress development not growth, making economy better not bigger
• Be vary of risks and costs of increasing complexity

Firstly, a sustainable economic system would both measure and control the scale of the economy relative to that of the global ecosystem. In order to control the economy’s size to prevent it from consuming its host ecosystem, it is useful to devise measures applicable to both so they could be readily compared. For example, net primary productivity (NPP) is a more useful measure than the gross national product (GNP), the present measure of the economy.

Here, thought provoking is the idea on the economy’s scale presented by Leopold Kohr: ‘… instead of centralisation or unification, let us have economic cantonisation. Let us replace the oceanic dimension of integrated big powers and common markets by a dike system of inter-connected but highly self-sufficient local markets and small states in which economic fluctuations can be controlled …. because the ripples of a pond, however animated, can never assume the scale of the huge swells passing through the united water masses of the open seas’ (Esteva and Prakash, 1994: 163).

Secondly, a sustainable economic system would restrain affluence and population. The scale of the global economy is mainly a function of the total number of people and their standard of living. Both greater populations and higher per capita wealth mean more conversion of natural capital to manufactured capital. Therefore, to control the economy’s scale, both the total population and the average affluence should be controlled. Although technology can mediate this effect, it cannot eliminate it altogether due to the limits imposed by the global ecosystem’s finite size.

Several other authors resonate Prugh et al’s (2000) stance here. For example, Maiteny and Parker (2002) argue that, for reducing pressures on the ecological processes while ensuring equity between the rich and poor parts of the world, what requires is that the rich parts lowering their consumption levels rather than the poor parts increasing their consumption levels to those of the rich. Moreover, according to Wackernagel and Rees (1996) in Maiteny and Parker (2002), if everybody in the world lived like an average North American, two more planets will be required to produce the resources, absorb the wastes and maintain life support. This illustrates the ultimate influence of the global ecosystem’s finite size on all human activities if we are concerned about a sustainable future.

Thirdly, a sustainable economic system would acknowledge the inherent uncertainty of the economy and the ecosystem. The world is an economically, politically, culturally and ecologically complex, even chaotic, place with many players and forces that are interacting with each other and changing over time. Such a complex, co-evolving system produces surprises, creating an element of inherent unpredictability that cannot be eliminated. Humanity is in for some serious adapting over the next few decades and institutionalisation of adaptability is therefore needed. A key to this process is adaptive management.

Fourthly, an economic system refashioned for sustainability would stress development, not growth, making the economy better, not bigger. Economic activity should aim to improve human wellbeing, not to grow for its own sake. Growth has considerable, but limited, capacity to improve wellbeing. Beyond a certain point, growth is both uneconomic in ecological terms (more value is lost than gained in converting natural capital to manufactured capital) and cannot significantly improve wellbeing because much accumulation of personal wealth is driven by considerations of relative status in society. If too much growth threatens to crack the ecological foundations of the economy, development (without growth) is the only viable option. However, mere technological improvement is not an adequate solution because it will not free humanity from the growth constraints imposed by population and scale.

Sharing Prugh et al’s (2000) view on the unsustainable nature of maximum growth economy, Maiteny and Parker (2002: 19) see an inherent contradiction in the belief that infinite growth can contribute to long-term wellbeing; they quite correctly question, ‘How can a species that undermines its means for its long-term survival considers itself to be developing…..?’

Finally, a sustainable economy would be vary of the risks and costs of increasing complexity. Powerful forces in society and the economy prefer globalisation at whatever cost. However, as cultures and civilisations become evermore complex, they become increasingly difficult to sustain. This explains the collapse the world’s great civilisations.

Thus Prugh et al (2000) identify five main ways a sustainable economy would do things differently.

Downturns and upturns

I agree with Prugh et al (2000) on the maximum growth economy’s contribution to an unsustainable future. Perhaps economic downturns of global scale surfacing from time to time are nature’s way of reminding us this fact. As (conventional) economists predict, we will certainly overcome the current economic downturn and will eventually turn it into an upturn. It will only be a matter of time.

But what happens if we encounter an ecological downturn – most probably in the form of runaway global warming? Are we capable of converting such a downturn into an upturn? Only time can tell. And when it eventually does, it could be too late!

References

ESTEVA, G. and PRAKASH, M. (1994) From global to local thinking. The Ecologist, 24(5), pp. 162-3 In: CLARKE-PATEL, A. and PARKER, J. (eds.) (2001) Unit 4 Reader: Local and global. London: Distance Learning Centre, South Bank University.

KOMIYAMA, H., and TAKEUCHI, K. (2006) Sustainability science: building a new discipline. [Online] Available from: http://www.environmental-expert.com/Files%5C6063%5Carticles%5C15092%5Cart13.pdf [Accessed 16 December 2008].

MAITENY, P. and PARKER, J. (2002) Unit 6 Study guide: Science and culture in education for sustainability. London: Distance Learning Centre, South Bank University.

PRUGH, T., CONSTANZA, R., and DALY, H. (2000) Minimum technical requirements for sustainable development. Chapter 2 in: The local politics in global sustainability. Washington: Island Press In: CLARKE-PATEL, A. and PARKER, J. (eds.) (2001) Unit 4 Reader: Local and global. London: Distance Learning Centre, South Bank University.

RAVEN, P.H. (2002) Presidential address: Science, sustainability and the human prospect. Science, 297(55-83), pp. 954-958. [Online] Available from: http://www.sciencemag.org/cgi/content/full/297/5583/954 [Accessed 6 November 2008].

WACKERNAGEL, M., REES, W., and TESTEMALE, P. (1996) Our ecological footprint: reducing human impact on the Earth. Gabriola Island: New Society. (In Maiteny and Parker, 2002).

WILDEN, A. (1987) The rules are no game: the strategy of communication. London: Routledge and Kegan Paul. (In Maiteny and Parker, 2002).