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Sustainable Community Action

Economics and sustainability

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Introduction Edit

This article, which so far is a stub, is mainly about sustainability and traditional economics. It was sparked by a question on the localsustuk discussion list, which went something like: "Why is it taken for granted that countries need economic growth? And can standards of living be maintained in an economy which doesn't grow?"

Sustainability and traditional economics arguments for growth Edit

From the point of view of sustainability it perhaps useful to consider the political implications of what traditional economics has to say rather than just what might appear in dry economic text books.

For example the predicted consequences of a lack of economic growth may strike politicians as extremely frightening. As countries generally tend to experience at least some population growth, if the economy does not also grow this inevitably leads to a decline in standards of living per head of the population. Of course in Western countries, some of which are now experiencing zero or even negative population growth, this is less of a concern at present.

However, there is no doubt that within the present economic system, both in Western countries and elsewhere, employment levels tend to be linked to growth levels. In the past at least the political consequences of unemployment either nationally or even just locally, have not been trivial.

The link between growth and employment is connected to the fact that the world's financial system is dependent on continual economic growth - without growth it could not function. This is because most money is created on the basis of debt by commercial banks. New debts must be constantly taken on in order for a sufficient amount of money to remain in circulation in the economy. In order for people and firms to have the confidence to take on these debts (which are, of course, to be paid back with interest), the economy must constantly expand. Within the present system, the alternative to an expanding economy would not be a "steady-state", stable economy, but rather would be economic depression and even collapse.

In a world economy which grows, any country without growth will "fall behind", even if only in comparative terms, and politicians are perhaps not unaware of economic power being equated with political power. World capital is notoriously volatile. If currency market traders sense a "weakness" in a country's economy, eg slightly lower growth rates than some other country, they will quickly bet against that country's currency. The country may also experience capital flight, with foreign investors pulling their funds out. Hence there is a real price to be paid for being seen to fall behind in terms of competitiveness.

The current financial system has evolved gradually over several centuries, and its rules are not written in stone. With sufficient popular and political pressure, it could be changed in such a way as to promote sustainability and social justice. There are many useful historical examples of alternatives which we can learn from. More information about these ideas, and suggestions for changes to the financial system, can be found on the Feasta website at http://www.feasta.org.

Sustainability and 'new' economics Edit

Of course there are alternative views, but arguably these have not as yet made huge inroads. So, for example, in the UK Sustainability indicators may be produced alongside more traditional measures of success such as GDP (Gross domestic product), but arguably national and more local decisions are still made with a view to at least not threatening economic growth rather a broader picture of quality of life.

It's interesting that in the run up to May 2006 local elections politicians of the main UK political parties are wishing to present themselves as 'greener than thou', see for example BBC news story: Chancellor Gordon Brown saying protecting the environment can boost rather than hinder economic growth.

Sustainability and economics in the future Edit

Even the views of traditional economists may alter in the future with developments such as changes in the price of oil. A recurrent question seems to be can those promoting sustainability find any common cause with those seeking economic wellbeing? Rather than a fixation on the amount of economic change, is it possible to ask what kinds of (e.g., less energy and resource intensive) economic growth or wellbeing are more compatible with sustainability?

Related topics Edit

Related Wikipedia content Edit

  • There's an article on Economic growth and its advantages on Wikipedia, which approaches this from a general perspective. One of the reasons for setting up the Sustainable Community Action wiki was to provide a space also for articles which look at topics more from a sustainability perspective.
  • There's also a section, Sustainability and Competitiveness in Wikipedia's article on Sustainability. Some might say sustainability is ultimately more about cooperation than competitiveness, but this does not necessarily negate what the article implies with regard to sustainability and economic well-being.

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