Policies

In a democratic society, the people have a say about the policies enacted. We can all look for opportunities to support policies that will lead to a sustainable economy rather than a growth economy. Ecological economics suggests three foundations to a long-term, healthy economy: (1) sustainable scale, (2) fair distribution, and (3) efficient allocation. CASSE’s top 15 policies for building these three foundations are provided below.  In addition, we also provide summaries of policy recommendations from other leading researchers: Tim Jackson, Herman Daly, Gus Speth, David Korten.

CASSE’s Top 15 Policies for Achieving a Steady State Economy

  1. First and foremost, adopt the right macro-economic policy goal – a steady state economy that features sustainable scale, fair distribution of wealth, and efficient allocation of resources. A prerequisite to adopting this macro-economic policy goal is a cultural shift from the pursuit of lifestyles driven by endless economic expansion and unsustainable consumerism to lifestyles driven by the search for long-term prosperity and sustainable consumption that fulfills people’s needs. (2, 5)
  2. Maintain an exemplary network of conservation areas, sufficient in size and diversity to ensure the long-term provision of vital ecosystem services. (6)
  3. Stabilize population, and aim for a long-term population size that enables a high standard of living for everyone without undermining ecological systems and the life-support services they provide. (4)
  4. Gradually reset existing fiscal, monetary, and trade policy levers from growth toward a steady state. For example, manage the money supply and redevelop the tax code with the new macro-economic policy goal as a guide. (2)
  5. Limit the range of inequality in income and wealth, including both a minimum and maximum allowable income. Implement tax reforms to tax “bads” (e.g., pollution and depletion of natural resources) rather than goods (e.g., income from wages). (4)
  6. Develop a commons sector to accompany the public and private sectors. Within this commons sector, assign property rights for commonly held resources (e.g., the atmosphere, mineral resources, and forests), and establish public trusts to manage those resources for maximum long-term public benefit. (1)
  7. Employ cap-auction-trade systems in the commons sector for allocating basic resources. Set caps based on biophysical limits. Use auctions to distribute rights to extract resources. Equitably redistribute auction payments through public trusts. Implement a trading system for extraction rights to achieve efficient allocation of resources to those uses with the highest demand. (4)
  8. Establish a more flexible working day, week, and year to provide more opportunities for people to decide how to use their own time and to alleviate employment pressures. (4)
  9. Overhaul banking regulations, starting with gradual elimination of fractional reserve banking, such that the monetary system moves away from a debt structure that requires continuous economic growth. (3)
  10. Adjust zoning policies to limit sprawl and promote energy conservation.
  11. Continue to monitor GDP, but interpret it as a measure of the size of the economy. Use other indices to measure economic welfare and social progress, such as the Genuine Progress Indicator. Use the Steady State Economy Index (under development by CASSE) to indicate proximity to a sustainable steady state.
  12. Prevent unconstrained capital mobility so that financial resources are more directly tied to the real assets they represent. (4)
  13. Work toward full internalization of costs in prices (e.g., costs associated with environmental protection and fair labor laws), and adopt compensating tariffs to protect efficient national policies of cost internalization from standards-lowering competition from other countries. (4)
  14. Institute policies that move away from globalization and toward localization to conserve energy resources, provide high-quality local jobs, and maintain local decision-making authority.
  15. Limit the scope of advertising to prevent unnecessary demand stimulation and wasteful consumption.

Sources:

1. Barnes, Peter. 2006. Capitalism 3.0: A Guide to Reclaiming the Commons. Berrett-Koehler Publishers, Inc., San Francisco, California.

2. Czech, Brian. 2000. Shoveling Fuel for a Runaway Train: Errant Economists, Shameful Spenders, and a Plan to Stop Them All. University of California Press, Berkeley, California. 206pp.

3. Daly, Herman and Joshua Farley. 2003. Ecological Economics: Principles and Applications. Island Press, Washington, DC. 450pp.

4. Daly, Herman. 2008. A Steady-State Economy: A Failed Growth Economy and a Steady-State Economy Are Not the Same Thing; They Are the Very Different Alternatives We Face. UK Sustainable Development Commission, London, United Kingdom.

5. Daly, Herman. 1973. Toward a Steady-State Economy. W. H. Freeman, San Francisco, California. 332pp.

6. Dietz, R., and B. Czech. 2005. “Conservation Deficits for the Continental United States: an Ecosystem Gap Analysis.” Conservation Biology 19(5):1478-1487.


Tim Jackson’s Recommendations for the Transition to a Sustainable Economy

(Adapted from Prosperity Without Growth)

Recommendations for establishing resource limits and integrating them into economic institutions

1. Identify clear resource and emission caps, and establish reduction targets under those caps. Apply the model of “contraction and convergence” in which equal per capita allowances are established under an ecological cap that converges toward a sustainable level.

2. Reform tax codes for sustainability. Internalize the external costs of economic activities by shifting the burden of taxation from economic goods (e.g., incomes) to ecological bads (e.g., pollution).  Offset new taxes on resource use or carbon with reductions in taxes on labor.

3. Support ecological transitions in developing nations. Create robust funding mechanisms (akin to the Global Environment Facility) to make resources available for investment in renewable energy, resource efficiency, low-carbon infrastructures, and the protection of habitats and biodiversity.

Recommendations for developing a new macroeconomics of sustainability

1. Develop the technical capacity to understand the behavior of economies when they are subject to strict emission and resource use limits. Explore how economies might work under different configurations of consumption, investment, employment, and productivity growth. Provide institutional arrangements to value natural capital and ecosystem services appropriately.

2. Shift investment (and expectations of returns on investment) to jobs, assets, and infrastructures that are ecologically sustainable. Such ecological investments include energy-saving retrofits for buildings, renewable energy technologies, updated public utility networks, public transportation, public spaces, and ecosystem maintenance/protection.

3. Increase financial and fiscal prudence. Reform regulations on national and international financial markets, outlaw unscrupulous and destabilizing market practices (such as short-selling), reduce excessive executive pay, provide greater protection against consumer debt, provide greater incentives for domestic saving, institute a Tobin Tax to reduce the potentially destabilizing effects of currency fluctuations, and raise reserve requirements on banks.

4. Revise national accounts to provide a more robust measure of economic performance than what is provided by GDP.

Recommendations for changing the social logic that locks people into materialistic consumerism

1. Reduce working hours and improve the work-life balance. Provide greater flexibility for employees on working time, institute measures to make part-time work favorable, and provide better incentives to employees and flexibility for employers to have family time, parental leave, and sabbatical breaks.

2. Remove systemic income inequality to reduce social costs, improve quality of life, and change the dynamic of status competition. Revise tax structures, set minimum and maximum income levels, improve access to educational opportunities, improve anti-discrimination and anti-crime measures, and improve the local environment in deprived areas.

3. Develop a systematic method for assessing people’s capabilities for flourishing. Measure what matters for people’s well-being and incorporate such measures into national accounting frameworks.

4. Create a raft of policies to strengthen social capital. Create and protect shared public spaces, encourage community-based sustainability initiatives, reduce geographic labor mobility, provide training for green jobs, offer better access to lifelong learning and skills, place more responsibility for planning in the hands of local communities, and protect public service broadcasting.

5. Dismantle the culture of consumerism. Regulate commercial advertising (especially advertising aimed at children), provide systematic support for public media through state funding, adopt and enforce fair trading standards, and adopt product durability standards to eliminate planned obsolescence.


Herman Daly’s Ten-Point Policy Plan

(Reproduced from Daly, Herman. 2008. A Steady-State Economy: A Failed Growth Economy and a Steady-State Economy Are Not the Same Thing; They Are the Very Different Alternatives We Face. UK Sustainable Development Commission, London, United Kingdom.)

1. Cap-auction-trade systems for basic resources. Cap limits biophysical scale according to source or sink constraint, whichever is more stringent. Auction captures scarcity rents for equitable redistribution. Trade allows efficient allocation to highest uses.

2. Ecological tax reform—shift tax base from value added (labor and capital) and on to “that to which value is added”, namely the entropic throughput of resources extracted from nature (depletion), through the economy, and back to nature (pollution). Internalizes external costs as well as raises revenue more equitably. Prices the scarce but previously unpriced contribution of nature.

3. Limit the range of inequality in income distribution—a minimum income and a maximum income. Without aggregate growth poverty reduction requires redistribution. Complete equality is unfair; unlimited inequality is unfair. Seek fair limits to inequality.

4. Free up the length of the working day, week, and year—allow greater option for leisure or personal work. Full-time external employment for all is hard to provide without growth.

5. Re-regulate international commerce—move away from free trade, free capital mobility and globalization, adopt compensating tariffs to protect efficient national policies of cost internalization from standards-lowering competition from other countries.

6. Downgrade the IMF-WB-WTO to something like Keynes’ plan for a multilateral payments clearing union, charging penalty rates on surplus as well as deficit balances—seek balance on current account, avoid large capital transfers and foreign debts.

7. Move to 100% reserve requirements instead of fractional reserve banking. Put control of money supply and seigniorage in hands of the government rather than private banks.

8. Enclose the remaining commons of rival natural capital in public trusts, and price it, while freeing from private enclosure and prices the non-rival commonwealth of knowledge and information. Stop treating the scarce as if it were non scarce, and the non-scarce as if it were scarce.

9. Stabalize population. Work toward a balance in which births plus inmigrants equals deaths plus out-migrants.

10. Reform national accounts—separate GDP into a cost account and a benefits account. Compare them at the margin, stop growing when marginal costs equal marginal benefits. Never add the two accounts.


Gus Speth’s Policy Recommendations

(Adapted from The Bridge at the Edge of the World)

Suggested priorities for setting policies to increase well-being:

  1. Strengthen families and communities.
  2. Address the breakdown of social connectivity.
  3. Favor rootedness over mobility.
  4. Provide jobs with high satisfaction and security.
  5. Support leisure and flex time.
  6. Provide access to health care and education.
  7. Address prejudice, exclusion, and ostracism.
  8. Eliminate/reduce poverty.
  9. Reduce advertising.
  10. Address income distribution and over-consumption.

Suggested policies for managing corporations to achieve environmental and social responsibility:

  1. Use the power of revoking corporate charters–require periodic public reviews and rechartering.
  2. Exclude or expel unwanted corporations.
  3. Roll back limited liability to make corporate officers and shareholders more responsible for misdeeds.
  4. Eliminate corporate personhood–overturn judicial rulings that extend Constitutional rights to corporations.
  5. Get corporations out of politics with publicly financed elections.
  6. Increase oversight on corporate lobbying (and its effects on broad public policy issues).


David Korten’s Policy Agenda for a New Economy

(Adapted from the article, “Beyond the Bailout: Agenda for a New Economy,” in the Winter 2009 edition of Yes! Magazine)

  1. Clean up Wall Street by limiting speculation, prohibiting the merger of commercial and investment banks, and forcing the breakup of oversized financial conglomerates.
  2. Regulate competitive practices to ensure that:
    1. market prices internalize social and environmental costs;
    2. trade between nations is balanced;
    3. no single economic player is big enough to influence prices directly;
    4. economic power is equitably distributed; and
    5. intellectual property rights are limited.
  3. Transfer power from bloated Wall Street banks to a network of independent community banks. Community banks can fulfill the classic role of acting as intermediaries between local people looking for a secure place for their savings and other locals seeking home or business loans.
  4. Evaluate economic performance against indicators of what we really want—healthy children, families, communities, and natural systems. The current practice of assessing economic performance solely against financial indicators, such as GDP and stock prices, disregards social and environmental consequences.
  5. Transfer the power of money creation from private banks to government.