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Wednesday, October 18, 2017

Economic growth in the sustainable community: can we or can’t we?

Posted by steve on May 10, 2012

In this next foray into capitalism I want to explore the question of growth. Note that I still have not defined what capitalism is. Instead, I have taken the idea of capital and explored how the concept of capital  works together with sustainability and resilience.

This time I want to consider economic growth.We hear different ideas: economic growth can continue indefinitely as it is just a mirror of human genius and innovativeness. On the other hand, some say economic cannot continue on a finite planet.

Let us look first, then at how nature grows and see if we can find some insights into how capital can grow, and what economic growth would look like through the eyes of sustainability.

Growth = ecological maturity increase

Ecologists describe how all eco-systems strive to become mature.  You probably have the idea somewhere in the back of your mind, how smaller animals give way to large predators, small plants become forests, rushing water becomes a swamp, etc.

One well-known description of maturity comes from the ecologist Odum,(ref 2)  (table below)

Let’s take it bit by bit:

Gross production. This means the total amount of biomass that accumulates in the system. Note that as a system matures, the slower biomass increases. For example, young trees grow very fast, older trees grow much slower.

Biomass supported. As the system matures, more biomass is in the system – more trees grow, more animals and plants more in, and they are larger.

Total organic matter. As above, the more mature the system, the more in the eco-system.

Size of organism. In immature systems, the organisms are small. As the system matures, and there is more for predators to eat, for example, the more and larger the organisms become.

Niche specialism. As the system matures so does diversity. More specialized organisms move in.Mineral cycles. Eco systems need minerals to cycle in them in order to function, so to have more biomass they must retain nutrients.

Nutrient exchange rate organisms <> environment . Immature systems “leak” both heat and nutrients to other eco-systems.Role of detritus in nutrient cycling. As the system matures, detritus is more and more important as a source of minerals and energy for the organisms in it.Nutrient conservation. Mature systems conserve minerals and do not leak them to other systems.
Let us now compare this to a sustainable human settlement (Ref.1 ) In the sketch below, an immature system, say a grassy area, gets settled by humans. The humans need wood for building and fuel and fiber, and they build houses, energy capture devices as well as water- purifying systems and set up some kind of animal management and agriculture. The cycle field to plate to toilet to watercourse is handled to ensure no leakage of nutrients. Trees capture sunlight effectively.

To analyse this situation from a capital point of view we need to identify the various types of capital in the system

Man-made capital: the houses, wind turbines, water systems etc.

Natural capital: the biomass in the tress, plants, animalsSocial capital: the relationships between the residents, their organizations.

Human Capital: the knowledge and skills

Financial capital: the money they have invested themselves and the money they borrowed.

Let us look at this settlement from an ecological maturity point of view:

Gross production In the mature settlement, Financial capital has been converted to Man-Made capital.  Production  transitions to repair and upgrade. You can see this by comparing the use of materials like steel and concrete in mature cities, it is much less than in developing cities. You could say that the mature human settlement tends towards build once – use a generation type technology. The immature settlement will have less of a built environment.

Biomass supported. It stands to reason that the mature settlement will have more biomass so natural capital increases, to support food, fibre, fuel and timber production.

Total organic matter. The total organic matter, in the forests, animals and area supporting them is higher, an increase in Natural Capital.Size of organism. In the human settlement this could be reflected in the size of organization and specialism of the organization. An increase in social capital.

Niche specialism. In immature economies, there will be little specialization, either of tools, objects or people. As the accumulation of knowledge and biomass occur, more specialization will take place.

Mineral cycles. In the mature society, the man-made capital will take care that minerals do not leak. This is backed up by the Human capital, knowledge and skills.

Nutrient exchange rate organisms <> environment. Practices, reflecting an increase in Human capital, develop to stop nutrient leakage. So does the technical infrastructure, reflecting and increase in man-made capital.

Role of detritus in nutrient cycling. Again, Practices, reflecting an increase in Human capital, develop to ensure waste handling is effective. So does the technical infrastructure, reflecting an increase in man-made capital.

Nutrient conservation. Human and man-made capital combine to stop leakage.

Now for some conclusions

  • Economic growth is a blunt instrument of measure at best. The amount of money in the world should in theory be reflected by the value of assets in the world. It doesn’t. Even if the total value of services increases, the relative value of things fluctuates. the price increases of goods have not followed inflation. Some types of goods have become  way more expensive than if they dag followed inflation. Some are way under.
  • A  lot of the economic activity that is measured to day comes from the use and application of fossil fuels. If we decrease the energy intensity of the economy the ecomic activity will drop too.
  • Just as Adam Smith wrote, growth cannot continue indefinitely. Humans need to create sustainable settlements, then biomass will be large, but not grow at the previous rate.
  • In fact, we see from the tables above that financial growth is not desirable, we need to convert finacnial capital to the other forms of capital.
  • What can continue to grow is human capital in the form of knowledge and skills.
  • Measuring growth in terms of monetary value of all services is misleading from a sustainable growth point of view. You should not be measuring the gross of all services, but you need some measure of HOW They are delivered and what kind of services they are.
  • What needs to be measured is the growth of the different types of capital against the level of maturity in the nation.

Here are some suggestions:

Man-made capital building services against level of maturity.

Natural capital building services against level of maturity.

Human capital building rate: total value of services rated against index.

Social Capital: total number of institutions and average number of employees /shareholders in them. Ownership patterns.

For my next blog I will venture to do an analysis of the country where I live,  Sweden,  to illustrate the methodology.

REFERENCES

1) Folke Günther Balanced agriculture.

2) Odum, E. P. 1969. The strategy of ecosystem development. Science, 104:262-270.

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