What is a Steady-State Economy?

by Lucia Rua 

The steady-state economy entails a stable population and per capita consumption that do not exceed the carrying capacity of ecosystems [1]. This sustainable economic model was popularized in the 1970s by the ecological economist Herman Daly [2]. Indeed, a fundamental principle of ecological economics is that ‘human economic activity must be limited by the environment’s carrying capacity’ [3].

The steady-state economy is seen as a solution to the negative consequences of economic growth on the environment and society [1]. Herman Daly explained that when the economy expands, it takes more energy and matter from the biosphere, and as we consume more, we throw out more waste back to the biosphere [4].  

Changing the focus from economic growth

One of the main goals of nations is economic growth, due to the common belief that growth can solve the problems of our modern societies (e.g., poverty, overpopulation, environmental degradation) [5,6,7]. Economic growth entails an increase in the production and consumption of goods and services, which is indicated by an increase in the gross domestic product (GDP) [1,6]. 

During the last 200 years, the economy has been growing [7]. But the economy does not exist in a void. Rather, it is a subsystem that exists inside the biosphere [7]. For this reason, and as mentioned by Daly, the economy cannot grow indefinitely due to the ecological limits of the Earth [2,9]. Moreover, research has shown that in some countries with a high GDP, the subjective well-being of the citizens does not increase (e.g. happiness) [2]. Other authors have added that the ageing population and high levels of debt will make economic growth impossible [2]. So, there is an urgent need to change the focus from economic growth towards a more sustainable option.

Degrowth

Degrowth is another concept that has attracted the attention of many scholars during the past years. This term has been defined as decreasing economic production and consumption, which causes a decrease in GDP [2,6]. In consequence, degrowth can increase human well-being and bring material and energy use within ecological limits [2]. 

However, degrowth is not the solution per se for every nation or region. Only in cases where the size of the economy is bigger than the carrying capacity of the ecosystems, degrowth may be needed to achieve a steady-state economy [1,2]. On the other hand, in poor areas where people are not meeting their basic needs (e.g., food, housing, sanitation, education, healthcare), economic growth or redistribution of resources may be necessary [1]. The concept of steady-state economy and degrowth may be seen as complementary, and as alternatives to economic growth [2,6,8].

What might a steady-state economy look like?

The following points describe some of the policy measures that should be taken to implement a steady-state economy worldwide [7,9]:

• Fair distribution of wealth. For example, to solve poverty and promote equity a minimum and maximum income can be set. 
• Extend the useful life of products. Products that can be used for more years can entail a reduction in the use of energy and natural resources. 
• Redirect financial investment towards replacement and qualitative improvement of products and services.
• Tax based on energy and natural resources use, instead of earned income. 
• Regulate international trade to avoid unsustainable practices overseas.
• Create employment in sustainable areas, such as green energies, maintenance and repair, and wildlife conservation.

References

[1] Steady State Economy Definition, Centre for the Advancement of the Steady State Economy, https://steadystate.org/discover/definition/, accessed on the 12th May. 2021.
[2] O’Neill, D. W., (2015), The proximity of nations to a socially sustainable steady-state economy, Journal of Cleaner Production, 108, 1213-1231, https://doi.org/10.1016/j.jclepro.2015.07.116
[3] Harris, J. M., Roach, B., (2006), Environmental and Natural Resource Economics: a contemporary approach, Boston: Houghton Mifflin Company, https://doi.org/10.4324/9781315620190 
[4] “Uneconomic growth” Herman Daly (Right Livelihood Award 1996) WWF, https://www.youtube.com/watch?v=qBXBk4fduW8, accessed on the 8th May. 2021.
[5] Daly, H. E., (2014), From uneconomic growth to a steady-state economy, Edward Elgar Publishing, ISBN: 978 1 78347 995 5
[6] Washington, H., & Twomey, P. (Eds.), (2016), A future beyond growth: towards a steady-state economy, Routledge, ISBN: 978 1 13895 301 7
[7] Daly H. E., A Steady State Economy,The Ecologist,  https://theecologist.org/2008/apr/01/steady-state-economy, accessed on the 12th May. 2021.
[8] Kerschner, C. (2010), Economic de-growth vs. steady-state economy, Journal of cleaner production, 18(6), 544-551, https://doi.org/10.1016/j.jclepro.2009.10.019
[9] Daly, H. E., (2005), Economics in a full world, Scientific American, 293(3), 100-107, https://www.jstor.org/stable/26061149 

---

Tim Jackson: An economic reality check – YouTube

‘It’s a story about us, people, being persuaded to spend money we don’t have on things we don’t need to create impressions that won’t last on people we don’t care about.’
Tim Jackson, ecological economist and professor from University of Surrey