Sustainable Economics

Context, Challenges and Opportunities for the 21st-Century Practitioner

Keith Skene, Alan Murray

• Publisher: Routledge
• Year: 2017
• Print ISBN: 9781783531547
• eBook ISBN: 9781351286183
• Topic: Business
• Subtopic: Business General
• Index: Business

This book marks a milestone in Economics publishing. Sustainable Economics is *the* subject of the moment, as businesses across the globe face up to peak oil prices, climate instability, increasingly complex environmental legislation and the challenge of adapting to a new business landscape. Sustainable Economics: Context, Challenges and Opportunities for the 21st Century Practitioner debugs the language of sustainable development. It explores the strengths and weaknesses of the many and diverse schools of thought. The book enables the modern business student and practitioner to disentangle the complex, often convoluted debate relating to sustainability, and it provides the tools necessary to lead their organizations through the murky waters of current times and prepare for the challenges of the future. Eschewing the linear – take, make and waste – approach of current business and manufacturing thinking, this book revisits the ecological models underpinning recent economic sustainability theory, and re-examines the consequences of modern ecological thought upon business  strategies relating to sustainability. A chapter is also dedicated to the "circular economy", already in common parlance at policy levels in the UK, and notably in China and other developing countries.Packed with the most recent research papers, Sustainable Economics is an essential resource for the 21st-century business practitioner and legislator.The book is supported with a large array of teaching and learning material, for both formal and informal use, ranging from role play to data analysis which are available on request with the purchase of this book.

1
Human economic activity: an environmental impact assessment

This chapter provides an historical context for the current economic, societal and environmental climate, examining the concepts of progress, economic growth, and development. The onset of agriculture, urbanization and economics are traced back to the agrarian revolution, some 10,000 years earlier. We explore the implications of change throughout human history in terms of impact on the environment and provide a detailed analysis of the impact of business activity on the environment. The importance of ecosystem services for environmental, societal and economic security are evaluated. Human, social, manufactured and natural capital are compared and contrasted. Cornucopian, cautious optimist and Malthusian positions are examined, Bearing in mind that many MBA and EMBA students may lack a scientific background, we set out the key basic principles underpinning the science of sustainability, allowing the reader to more fully interact with this topic and make clearer judgements when faced with contrasting viewpoints.

Learning aims and objectives

• To chart the economic–social–environmental relationship through human history
• To examine how risks to our existence have changed through time
• To evaluate how current business practice has emerged
• To evaluate the impact of current business practice
• To understand how source and sink issues impact on our planet
• To appreciate how environmental damage impacts on economics and society
• To examine how feedback effects environmental perturbation

Learning outcomes and experiences

• Understanding the link between business, society and the environment
• Understanding the origins and nature of the modern world
• Appreciating the consequences of a destabilized environment
• Appreciating how positive feedback acts to heighten environmental damage
• Defining sustainability in a meaningful way
• Understanding how very different opinions can exist relating to the issues of environmental sustainability

1.1 Progress and the Golden Age

Nature has fixed no limits on our hopes

Marie Jean Antoine Nicolas de Caritat, Marquis of Condorcet (Condorcet, 1955 [originally 1779], p. 173)

Kungliga Djurgården is an island in central Stockholm and was, formerly, a hunting estate of the Swedish royal family. The name literally means “royal game park”. In many ways, the esoteric collection of buildings and structures on this island highlights the journey of the human race.

A large part of the island houses the Skansen Museum, where scores of old buildings from across Sweden have been relocated to the island, allowing you to visualize what life was like hundreds of years ago. Quaint and simple, the impression is one of how far we have progressed. The smell of ruminant manure and the sight of predatory bears and wolves, interspersed among Sami huts of mud and logs, combine to present a disturbing glimpse of where we have come from, the Agrarian Age. Living shoulder to shoulder with such apparent squalor and danger seems far removed from the sophisticated surroundings of Stockholm itself.

Leisure opportunities are embraced throughout the island, from the myriad yachts and motor launches moored along the shore, to the innocently named Green Grove (Gröna Lund), a terrifying amusement park where people pay to be twisted, dropped, spun and contorted beyond the point of screaming. Progress brings increased leisure time, no longer having to work endless hours among the moose manure and the wolves of Skansen.

The cultural past is further celebrated nearer the shore in the Nordic Museum, housed in a magnificent Danish Renaissance building which is more cathedralesque than the Storkyrkan itself. Again the impression is of how far we have travelled and how we have progressed in so many aspects of life, from interior decoration to fashion.

Finally, hugging the shoreline, in a building that resembles a Shinto temple from one aspect and a huge modern barn conversion from another, sits one of the great lessons of our imperfect past: the Vasa. On first entering this vast museum, the impression is not one of failure, but of extraordinary achievement. In front of you, there sits a massive wooden ship from a different age. At 69 m long, 11 m wide and some 52 m in height, the Vasa was state-of-the-art naval architecture when it set sail on its maiden voyage in 1628. At this time, the Swedish Empire stretched across the Baltic, and was expanding. The Vasa was to represent the sophistication and power of Sweden, resplendently embellished with ornate carvings designed to set the King in a suitable context. These included the emperors of Rome, ancient Greek gods and rampant lions. This wasn’t just a warship. It was an all singing, all dancing, all sailing advertising machine for King and country.

However, the ship was a warship, and King Gustav II Adolf was determined that it would be the most powerful warship on the planet. Very late in the design process, he insisted that the ship should have a second layer of gun ports on its port and starboard sides, housing a total of 64 bronze cannon. The ship’s designers bowed to his wish. You didn’t argue with the King.

Unfortunately, this was a major design flaw. These huge cannon made the boat top-heavy, with insufficient room for ballast below the water line, and, shortly after setting sail on her maiden voyage on 10 August 1628, in amenable weather conditions, the boat keeled over and sank. And so this magnificent vessel, proclaiming the power and majesty of the Swedish war machine, ultimately represented failure. Ornate and beautiful as it was, it possessed the hydrostatic qualities of the Venus de Milo. The huge museum houses a boat that couldn’t stay afloat, and represents the interference of a king who knew nothing of design.

On emerging from this massive time capsule into the modern, sophisticated capital city with its smoothly running trams, trains and ferries, all is again well with the world. While the past may have had some highlights, the impression left is that we have progressed so far from the agrarian lifestyle of Skansen and the errors and flaws of the Vasa. Interference by the state and a lack of technological skill sank the ship. The path of progress, as encapsulated in the Enlightenment, would have no time for church or state, and would proclaim technology and reason as the engines of change.

It is a widely held view that the history of humankind traces a journey of progress. Each generation improves on the last one, and we are steadily moving forward towards a much more wonderful life. New breakthroughs in engineering, medicine and agriculture continually hit the headlines. We are travelling into a bigger, brighter and better future. The vertical line of improvement also lies at the heart of much of our understanding of biological evolution. The tree of life branches out and reaches further towards the sky, with humankind at the top. The process of scientific thinking itself is also seen as continually testing ideas, weeding out the less good and replacing them with improved versions.

It was the Enlightenment that set out the principles of this journey, and state and church were not its only targets. The Marquis of Condorcet, one of the leading French Enlightenment thinkers, stated that “Nature has fixed no limits on our hopes” (Condorcet, 1955 [originally 1779]; p. 173). Nature, which had dictated to the human race and shaped our sojourn, was no longer to be worshipped, feared and tolerated. Just as the theologians before them, who took aim at the pantheistic worship of nature seen to be present in Celtic Christianity, so the modern humanist tradition levied the same attack at any consideration of nature as a player in the calculations underpinning progress. In the same way as the grip of kings and papal powers would be loosened, nature would no longer limit the Enlightenment dream. Progress highway would not circumnavigate the ancient woodland; it would bore straight through it.

And economics lay at the heart of the Enlightenment. Adam Smith (1723-90), perhaps the most influential of all of the Enlightenment thinkers in terms of shaping the world we know today, set out the economics of the Enlightenment. Smith emphasized a move away from protectionism to free trade (laissez-faire economics), governed by an invisible hand rather than the ruling classes. He saw economics as delivering social cohesion and paving the way to a productive, prosperous and happy existence for all. Virtuous self-interest could lead to invisible co-operation.

Two central pillars of modern economics, growth and development, follow the Enlightenment mantra, that we are on a journey to bigger and better things. In fact, in terms of development, the world is often divided into developing and developed nations, the former still on a journey to the utopia already enjoyed by the latter. Economic growth is defined as the sustained increase in wealth over time measured in the real per capita production of goods and services.

Progress has a unit of measurement: the gross domestic product. Gross domestic product (GDP) is defined as the monetary value of all the finished goods and services produced within a country’s borders in a specific time-period. GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory. The concept was framed in its current form by Simon Kuznets (1901–85).

Since GDP is the unit of progress, it has taken centre stage and has recharacterized our perception of success. Based on GDP, economic growth “has become a national virility symbol” (Hywel Jones, 1975; p. 1). Negative economic growth is looked on as a very bad thing. Two successive quarters of negative growth can be termed a recession, while two years of negative growth can qualify as a depression (note that many definitions exist for recession and depression, but all involve sustained periods of negative economic growth as measured by GDP). Economic growth is also seen as delivering sociological wellbeing. Samuelson and Nordhaus (1995; p. 402) wrote: “The GDP and related data are like beacons that help policy-makers steer the economy towards the key economic objectives”.

Economic growth is viewed as not merely as a good thing, but as essential evidence of progress. “To continue to progress, humanity needs more economic growth, not less” (Atlantic Institute for Market Studies, 2003). Indeed, economic growth is also implicated as a central pillar to global security: “Domestically and internationally, the tolerance of the poor and middle classes for the existence of wealthier classes and countries depends on a belief in economic growth” (Delaney, 2005). Warnings are made relating to any suggestion of reducing growth in order to protect the environment. Lord Stern has commented that:

It is neither economically necessary nor ethically responsible to stop or drastically slow economic growth to manage climate change. Not only would it be analytically unsound, it would also pose severe ethical difficulties and be so politically destructive as to fail as policy (Stern, 2009; p. 3).

He had earlier stated that “stabilisation of greenhouse-gas concentrations in the atmosphere is feasible and consistent with continued growth” (Stern, 2006; p. xi)

1.1.1 Human development

Human development is the second important aspect of progress, viewing humans as not merely a means of production but as an end-point (Streeten, 1994). Incorporating the societal face of the Enlightenment, it describes the ongoing journey towards a better world, where humans, through knowledge, industry, reasoning and technology, maximize their potential, their comfort, their longevity and their contentment.

The United Nations has even developed a unit of measurement for development, the GDP of society, called the Human Development Index (HDI). This index combines measurement of education, earnings (measured by gross national income per capita) and health, and each year the nations of the Earth are assessed. In 2013, Norway ranked as the most developed nation on Earth, while Niger finished in 187th and last place.

A recent phenomenon has been to tie development to sustainability, in the term sustainable development. Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs (Brundtland, 1987).

This very much echoes a much earlier definition of income by Sir John Hicks (1946) who defined income as the amount (natural or financial) one could consume during a period and still be as well off at the end of the period. Thus sustainability is fundamentally framed within human development, which is itself grafted to economic growth. This locates the solution space for our concerns related to our planet within the current growth-based economic model. Thomas Friedman states: “I start from the bedrock principle that we as a global society need more and more growth, because without growth there is no human development and those in poverty will never escape it” (Friedman, 2008; p. 186).

American President Ronald Reagan aligned himself with Enlightenment thinking, rejecting any limitation to growth, and claiming that: “There are no great limits to growth because there are no limits of human intelligence, imagination, and wonder” (Reagan, 1983).

1.1.2 Issues with the growth dogma

The idea that economic growth can continue, unrelenting, bringing with it human development and leading to some form of utopia, unhindered by nature, is not the only cockerel in the hen-house. Many economists and politicians express serious concerns that continued economic growth will not deliver a perfect world. Indeed, many of the benefits ...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• List of figures
• List of tables
• Preface
• 1. Human economic activity: an environmental impact assessment
• 2. The three horsemen of the modern apocalypse: climate, pollution and habitat
• 3. Water, energy and the green paradox
• 4. Business and biology: can we learn from nature?
• 5. Current schools of sustainable thinking: origins, strengths and weaknesses
• 6. The circular economy
• 7. Design to redesign
• 8. Generic barriers to change
• 9. Transition to a sustainable economy
• 10. Appropriate indicators of a sustainability transition
• Appendix: a brief guide to thermodynamics
• Glossary
• About the authors
• Index