What is ACT’s economy group for?

Much of the advice ACT offers can best be described as “how to live sustainably”, ie living in a way that does not jeopardise the needs or wellbeing of others, future generations or the environment. It often involves satisfying needs rather than wants and considering “sufficiency” when we consume.

ACT’s Economy group explores how these principles of sustainability impact on the “real” economy (lives, nature, materials & resources) and how they are a direct challenge to the traditional economic thinking that has dominated politics, business, taxation, finance and personal prosperity for nearly 100 years, that the economy is distinct from society and the environment and that it needs to grow indefinitely.

Growth in what?

For individuals, growth means ever increasing wealth and for businesses it means growing sales and/or profits, all within a national economy that our politicians and economists tell us must always grow in terms of GDP (Gross Domestic Product), the total £value of goods & services produced in a period.

Often, when we perceive excesses in personal income and wealth, we ask “when is enough enough?” but it soon passes and we will rarely, if ever, ask the same question of business profits or GDP, although, surely, it is equally as valid?

Ever since its inception, and even by the economist who devised it, GDP has been criticised as being a poor measure of “socio-economic welfare” mainly because it fails to:

differentiate between good and bad GDP, eg the costs of developing a vaccine or solar panel tech (good), the health costs of smoking or cleaning up an oil spill (bad) and so politicians tend not to care which GDP they promote, as long as it goes up;
recognise the value of unpaid work such as care in the family or volunteering or the materials and resources provided by nature in the form of say growing trees, minerals or freshwater;
recognise where the wealth created by growing GDP ends up. In a recent report, it was found that about 2/3rd of global GDP growth, in a two year period, had ended up in the hands of 1% of the population.

In summary, whilst GDP is a number that reflects the monetary measure of the economy over a period, politicians and economists put the cart before the horse and promote it as a driver of the economy; “by increasing GDP we will increase prosperity”.

In 1972, following extensive research and using earth systems modelling, the book “Limits to Growth” was published explaining how the Earth’s finite resources could not be expected to cope with the demands and waste of exponential economic & population growth and how, unless remedies were found, environmental and societal collapse, sometime during the 21st century, was inevitable.

Despite its, and subsequent, predictions looking closer to reality, the need for economic growth remains dominant as does the belief that reducing the size of the economy would spell disaster.

How does acting sustainably impact the economy?

So let’s look at some specifics of how the pursuit of sustainability directly conflicts with the imperative of never ending growth.

ACT, other environmental groups and ecological economists such as Kate Raworth (Doughnut Economics), advocate for circular economies in which materials and resources are kept in service by repair and reuse and, where possible, waste products from one process feed another. This contrasts with our current linear economy in which materials and resources are extracted, used (often only once), then thrown away.

From fast fashion (a piece of UK clothing is said, on average, to be worn only 7 times) through plastics to electronic equipment, in which, through planned obsolescence and huge advertising budgets, we are encouraged to replace equipment with the latest version every couple of years, there are many examples of how circular processes could be used to cut consumption and waste.

But think of the impact of circular economies on profits of industries that produce these items, from extracting the raw materials, through processing and manufacture to transport, sale and disposal, and the knock on impact on GDP. Imagine if everyone was able to keep their smartphone for four, rather than two years, it would halve company revenues and dent global GDP.

We also encourage people to consume and do less, or to find alternative goods or services that have less impact on the environment. So we talk about flying and driving less and finding alternative forms of transport for essential journeys. We encourage “buying local” to reduce the need to import from far flung places and to avoid industrial meat and processed food products in favour of less damaging plant-based sources of nutrition and calories.

Imagine how, for example, with decent public transport, we were able to do away with owning a car, making use of taxis, car hire or car sharing services for unavoidable journeys. How many fewer cars would there be on the road, how many car parks and other car infrastructure would we need, how many times would roads need to be repaired and how many motor and component manufacturers would we need, and what types of vehicle would they make, luxury SUVs or efficient family and city cars that use half the resources? Imagine the impact on revenues, costs and GDP of all these reductions.

Finally, on top of reducing material and resource use, with their waste and damaging impacts on the environment, there is energy and its emissions. Every industry and activity mentioned above consumes energy plus we need energy to heat, cool and light our homes and to cook our food. In addition to the reductions in demand described above, we also promote energy efficiency in our homes and in the products and services we consume but all too often our economic systems fail to take advantage of these efficiencies.

As far back as the steam engine, engineers have striven to increase energy efficiency however, rather than industries using those efficiencies to produce the same volume of products with less energy, they almost always use them to produce higher volumes with the same energy and, with efficient marketing, tell us we need to buy more, and more often, thus increasing profits and GDP.

Similarly, on a personal basis, as cars became more fuel efficient motorists just end up driving more miles for the same quantity of fuel and, as homes become more energy efficient, whilst there might be an initial period of keeping thermostats at lower settings, the temptation is to return to 21C, or higher, for the same cost, but with more energy.

If we champion energy efficiency it must be to reduce energy consumption.

It should go without saying that the immediate benefit of reducing energy consumption is to reduce our dependence on fossil fuels but globally, because total energy demand continues to rise, increases in renewable energy sources can’t keep pace and so, despite predictions that 2023 will be the turnaround year, we are still adding renewable energy to fossil fuel energy, not replacing it.

The objective must be the end of fossil fuel use but there is huge resistance from the industry and its vested interests. It will happen and the loss of global GDP from the demise of this activity will be huge. This prospect however should not diminish our need to act sustainably and only use the energy we need.

Many believe the antidote to fossil fuelled growth is “green” growth and yes the renewables industry must grow but to replace not enhance fossil fuels and, with renewable energy and its infrastructure requiring earth’s minerals and resources, often extracted from the poorest regions, the environmental and societal impact must continue to be our prime concern.

The dichotomy

Even if the public has a grasp and acceptance of sustainability and the need to do less, many are unaware of the conflict with economic growth. This lack of awareness (or deliberate ignorance) has been played out many times over the past four decades in government policies. In 1988/89 Margaret Thatcher became a global leader in the understanding of Climate Change but policies to tackle it soon hit her Chancellor’s economic brick wall and today we have a government promoting Net-Zero emissions whilst granting licences for new sources of fossil fuels.

It is time therefore to help resolve this conflict, to continue to support people and organisations in going for sustainability but showing them that, whilst economic growth might happen, it’s just a number on a spreadsheet not an objective. This is best summed up by Kate Raworth:

“Today, we have economies that need to grow, whether or not they make us thrive, and what we need, especially in the richest countries, are economies that make us thrive, whether or not they grow”

In other words, our objective should be the wellbeing of humans, nature and the environment, using multiple measures available to judge our success and, although important for national accounting, a single £ value for GDP is not one of them.

So what next?

In the UK there have been whispered doubts over economic growth for years including the creation of an APPG “On Limits to Growth” and recently the media have started interviewing and running pieces from “post-growth” thinkers.

Outside the UK there is far more awareness, with the UN starting to explore ways to adjust GDP to account for factors such as sustainability and the natural environment and, in the EU parliament, a three day “Beyond Growth” conference was held in May 2023 with around 7,000 attendees and 150 speakers talking about what a “post-growth” world would look like and what we’d need to do to get there.

So we will continue to provide advice and resources on these issues to our members in the hope that they will feel enabled to pass the information on to others, to sow seeds of doubt every time a politician or BBC economics editor mentions the need for economic growth, to suggest that, in the 6th richest country on the planet, Enough is Enough.

A word on Degrowth

At the same time as “Limits to Growth” was being written a French philosopher came up with the word Décroissance, translated as “Degrowth”. The word and its concepts are widely misunderstood, often deliberately, but it was coined to be both provocative and to make it difficult to hijack by vested interests, as has happened with “growth” (green, sustainable, inclusive, smart….).

As described above, an economy like ours, is dependent on, and structured towards, endless growth. If we and other rich nations decide to aim instead for a “post-growth” economy that is not dependent on growth but instead runs in balance, providing us with what we need whilst not adversely impacting the environment or society, what is often called a “steady-state economy“, we will need a phase of transition, a period of managed degrowth, changing the infrastructure of our economy and the activities that go on within it.

For examples of what this transition might mean refer again to; How does acting sustainably impact the economy? above. Each of the reductions in material, resource and energy use described represent what we need to do to go from where we are today to where we want to be, a sustainable economy.

In the words of Timothée Parrique, in his speech to the Beyond Growth conference:

“Think of Degrowth as a macroeconomic diet for biophysically obese economies”.

Because of the urgency in tackling all aspects of the climate and nature crisis, whilst enabling poorer countries to grow their economies and improve living standards, supporters of Degrowth propose a complete transition away from, not only fossil fuels, but also other damaging and unnecessary industries and activities, such as private jets & yachts, commercial aviation, SUVs, fast fashion and industrialised meat.

The above is a limited summary of how an economy fit for the 21st century might be imagined. Issues such as equity, how a decent standard of living could be provided for all, shorter working weeks and Universal Basic Services are also relevant and will be discussed in other posts.

So that we can provide appropriate and understandable information and opinions please do feedback thoughts, and pose questions, in the comments below or by emailing Paul.