What follows is an attempt to capture my presentation to the Schumacher Institute’s ‘Alternatives to Austerity’ conference, 21 November 2013.
It is scheduled to be published as part of an Ebook, a link to which will appear here in due course.
It is forty years since the publication of ‘Small is Beautiful’. I first read it just a few years after that, in 1980, when I was fifteen. I had no idea at the time that it was still relatively new; nor did I have any sense of its position in the firmament of all that has been written about sustainability. And I certainly had no idea that I would one day be an economist spending his time concerned with sustainability.
I say economist. It would perhaps be more accurate to describe me as a ‘recovering economist’. I certainly received a long and formal education in economics; and for some years I was employed in a role that entailed the day-to-day use of orthodox macroeconomics; and I founded Brook Lyndhurst in 1999 in large part to try to bring to bear the disciplines of economics on the manifold challenges presented by sustainability.
It’s true, too, as my teenage children sometimes wearily point out, that I’ve been thinking about some feature of what we call ‘economics’ pretty much every day for more than thirty years.
This in itself might be a good justification for the need to recover. But I’m referring, of course, to the state in which economics as a discipline finds itself: a discipline with exalted status in the world’s financial and governance infrastructure, yet whose basic tenets are increasingly exposed as deeply flawed and whose role in the most severe economic recession of the twentieth century is widely acknowledged.
It is with this in mind that I offer what follows. It seems to me that our current travails – severe and persistent environmental degradation; shocking and enduring injustice and inequality; widespread stress, distress and mental ill-health – have their common root in the way in which our economy functions. And the structure and functioning of our economy, and the character and focus of economics, have co-evolved for more than two centuries (most especially in the late nineteenth century, when economics successfully repositioned itself as the social science analogue of Newtonian physics) to bring us to this deeply uncomfortable pass. Mere tampering is not enough. A truly profound reformulation is required.
Schumacher believed this too, of course. One of the questions raised by the Institute in preparing for this conference was: why has Schumacher’s work not had the impact of, say, a Keynes or a Marx or a Friedman? In passing I suggest that, whilst the human centeredness and ethical passion of his arguments remain powerful and inspiring, he does not – in ‘Small is Beautiful’, at least – present an explanatory account of how an economy works; which in turn makes it difficult to build a proposition for a coherent set of policies or strategies.
I cannot claim that this paper presents an ‘explanatory account’ of course. It is a personal statement, drawing upon a mix of formal work undertaken by others, various research projects I’ve had the opportunity to conduct in recent years, and interwoven reflections I’ve explored through a variety of speeches and articles. It is concerned with the ‘demand side’ of the economy. There has been much attention in recent years upon the supply side – the ‘circular economy’ is the latest manifestation – but I am firmly convinced that unless and until we tackle the demand side – what it is that we want – we are not really engaging with the problem.
I want to touch on four things:
· the process of change – and what this might tell us about where we are and what needs to happen next;
· a design challenge – to suggest that we need to ask: “What is an economy for?” and to design it accordingly;
· the demand side – to give a flavour of what might happen with some initial demand-side design principles;
· preliminary propositions – some suggestions for actions at key leverage points that have the potential to accelerate the process of change.
As this last mentioned implies, I approach the entire phenomenon from a systems perspective: indeed I conceptualise the economy as a complex, open, adaptive, path-dependent system. Space prevents a full exposition of the implications of this approach; but I have included potentially useful references in the bibliographical endnote.
The Process of Change
At any given time a complex socio-economic system has a mix of extant, co-evolved institutions and structures that explain and comprise the system’s behaviour. The ceaseless pressures of change, emanating from the agency that exists at all levels – from individual citizens to global governance – perpetually act upon the system’s structures.
Thomas Kuhn’s notion of a ‘paradigm’ describes that set of interdependent rules and structures that prevails at any given time. He proposes that pressures upon a given paradigm can build for some while before a ‘tipping point’ is reached; whereupon rapid change can ensue.
Examination of the logarithmic curve that typically characterises such processes of change reveals the crucial importance of the ‘tipping point’ or the ‘take off’ zone, the phase of change beyond which self-perpetuating processes do the work. This is where the key leverage points are to be found. Many transformations never occur because, for one reason or another, they stutter in this crucial zone. And many analyses of these processes neglect to attend to the fact that the ‘pre-take off’ zone - in which hopes are perpetually raised and then dashed - can persist for a very long time.
Such persistent non-take off occurs in many cases because a system transition implies profound loss for those that benefit most from the existing paradigm; and prospective losers resist the change. In the case of the western economies in the early twenty first century, the prospective losers hold an interlocking set of positions throughout commerce, government and academe, and have great power. Their ability to resist change is formidable.
But the pressure for change is irresistible; each grain of sand builds upon those that came before. We cannot know precisely when the avalanche will occur. But we can be certain that it will.
A Design Challenge
The economy is widely treated as a disembodied phenomenon. It is described using metaphors from the natural world: there are earthquakes and storms, whirlwinds and tides. An economy is ‘returning to health’ when we espy ‘green shoots’.
Such language helps us to conceptualise the economy as some sort of inevitable force in the world and to forget that it is, in fact, an entirely human construct. It is us. We make it. Yes, of course, it is a complex system so it has ‘emergent properties’ that are distinct from the individual choices we in our billions make. But it is, unavoidably, a human construct and, as such, is subject to human agency.
Most human constructs are designed; and there seems no reason not to ask something similar of an economy. Rather than restrict ourselves to the questions “What is it?” and “How does it work?” let us ask: “What would we like it to do?”
In surveys, when asked what they consider most important, citizens most frequently cite “health” and “spending time with friends and family”. If we were to take the latter as a design principle for an economy, what would it look like? And how could we make it do that?
The focus here is on the economy, not economics. Deciding upon the design criteria is a socio-political project; the engineering is the domain of economics. At the moment it’s the other way around.
The Demand Side
In ‘Small is Beautiful’ Schumacher discusses education, land, industry, nuclear power and intermediate technology – and all from the supply side! His demand side remarks, though deep, are confined to the requirement that humanity needs a spiritual transformation, a revolution in consciousness, if the economy he envisages is to come about.
Whether or not this is the case, there would seem to be insufficient time available: the environmental limits to continuing along our present path are already becoming manifest and we may have less than a century before the problems become acute and irreversible. Three centuries on from the Enlightenment, it is hard to imagine the kind of transformation Schumacher implies taking place so swiftly.
In the quest for a more practical and optimistic position, we might usefully consider Maslow’s hierarchy of needs, and start with some basics.
Thinking about food, for example, we have to acknowledge the enormous complexity of the world’s food systems, and the ways in which the diets and preferences of the majority of consumers have been and continue to be manipulated by profit-oriented corporations. We should acknowledge too, however, the potential power of insights such as that from Michael Pollan, who managed to condense into just seven words an entire ethos of health and sustainable living: “Eat food. Not too much. Mostly plants.” What might achieved by the indefatigable promulgation of this simple entreaty?
And, thinking about housing, consider the following:
Here we have a graphical image of the various functions performed with respect to Maslow’s notion of ‘shelter’. It is immediately clear that a ‘home’ is a great deal more than just ‘shelter’. But how many of these functions – these needs, these wants, these demands – can only be met by a ‘house’? If, wearing our design hats, we think about how we might best meet these (perfectly legitimate) wishes, we might well come up with not just a different but a better solution than the bubble-dependent system that we have at present.
This is only a sketch, of course, but it points to the underlying argument: if we adopt a design perspective to the demand side, we may find very different solutions to the answers by which we are presently surrounded. And if we don’t even try, then we shall have to endure the spinning froth of ‘resource efficiency’ until it’s simply too late.
By way of illustration, and without by any means having the space properly to link the preceding case to the subsequent propositions, here are four suggestions for action at key leverage points in four different levels of the ‘take off’ zone, all of them feasible in the short and medium term:
· Individual – Cook food, and eat in company. We can re-connect farm to fork and re-build conviviality.
· Civic – De-monetise elder care. What we want when we’re elderly is not the freedom to choose between different annuities; we want to know that someone will look after us. Let’s start trading in units of care: it’ll siphon money from the financial system and will give us what we really want.
· Societal – Change the frame. Speak of collaboration not competition; argue for enough instead of more; challenge conspicuous consumption; express sympathy for those whose self-esteem is so low they need to buy preposterous yachts and sports cars.
· Governmental – Smart taxation. Use modern technology to re-calibrate consumption taxes on a continuous basis, with high and higher VAT on unsustainable goods and services, and low – even negative – VAT on sustainable goods and services.
In the longer term, as I have suggested, we need – I believe – a comprehensive re-think of what we want from an economy; and to do that requires something far more sophisticated than the medium of a general election. For such a purpose, I propose nothing less than a Royal Commission on the Economy. We could of course wait for the avalanche; but it would seem prudent to move more quickly if we possibly can.
Selected sources of particular relevance are:
“The structure of scientific revolutions”, T Kuhn (1962)
“Metaphors we live by”, Lakoff and Johnson (1980)
“Choosing the right pond”, R Frank (1987)
“On kissing, tickling and being bored”, A Phillips (1994)
“The diffusion of innovations”, E Rogers (1996)
“Strategies of commitment”, T Schelling (2007)
“The diffusion of environmental behaviours: The role of influential individuals in social networks”, D Fell et al (2008)
“In defence of food”, M Pollan (2009)
“On being a good grain of sand”, D Fell (online, 2013)
“New Paradigm Economics versus Old Paradigm Economics”, E Fullbrook (online, 2013)
“Food and Sustainability: Consumer psychology - a tool for policy making?” C Moschaki (unpublished)