The Real Circular Economy
Post Growth Institute & AUDAcities
New Economy Network Australia Conference
Brisbane, September 2017
…humanity has reached its
‘Wile E Coyote’ moment
Planned obsolescence is not
a bug of capitalism…
…it’s a feature.
what if businesses that
place purpose ahead of
welcome to the
Not for Profit World
ADOPTS NEW TOOLS
Presentation given at the Building a New Economy for Australia Conference in Brisbane, 2 September 2017
Linear thinking has been part of Western tradition, especially since the industrial revolution – time flows in a linear direction from past to present to future; life conditions and opportunities will always improve for subsequent generations; our use of resources occurs in a take-make-waste fashion. Linear thinking has permeated our culture such that we anticipate 'progress', defined in a certain way, is on a constant upward trajectory, so its hard for us to notice when we have arrived at a place like this…
A plethora of research shows we are in an era of climate instability, biodiversity loss, increasing extremes of inequality, all of which are both causing and driven by being in ecological overshoot – consuming nature's regenerative capacity faster than nature can regenerate it. Some call this time in history the Anthropocene, the geological era in which human activity has become the dominant influence on climate and the environment. I like to call it humanity's 'Wile E Coyote moment’.
If we’re concerned with resource consumption and associated carbon emissions, then materials and how we use them should be a focus. The intent of the circular economy is to bend the linear 'take make waste' trajectory of the materials economy into a circular shape. The circular economy is necessary, but insufficient - it's been enthusiastically adopted by governments and business because it allows them to focus mostly on the politically safe stuff of green technology and business models that work with the existing economic modus operandi, and less on potentially messy things like people, culture, values and the transition to a new economic operating system. The circular economy does not address the wider milieu of values and systems in which it operates, such as an economic system that depends on perpetual growth [image: Sustainable Brands]
The way the dominant economic system works requires constant growth, and it needs things to wear out, break down or become unfashionable in order to perpetuate itself. How can a company that must continually provide returns to shareholders not grow? How can it continue to have that economic growth if its market is satisfied with things that last a long time? Extraction is in the very DNA of this system. As peer to peer researcher and theorist Michel Bauwens likes to say, planned obsolescence is not a bug of capitalism – it’s a feature [image: www.chrisjordan.com]
Planned or perceived obsolescence is not the only driver of extractive growth. A well known global furniture company has made significant achievements in more efficient and environmentally responsible use of materials, and they deserve accolades because these efforts are critical. However the company is due to double in size by 2020. This company sells 100 million pieces of furniture every year, and is estimated to be the third largest user of wood in the world. The company has a target that by this year, half of all the the wood it uses (an increase from 17% to 50%) will either be recycled, or come from forests that are responsibly managed. The question is, what will be the impact of the other 50% of uncertified wood, especially as the company doubles in size?
Can we have ‘green growth’ or somehow decouple material consumption from growth? In 2011, a study commissioned by the CEO of Veolia assessed business opportunities of the circular economy and recycling. It found that the ability to ‘decouple’ is only possible if the total annual raw material consumption growth rate is under one percent, and that ‘the influence of recycling on resource preservation is negligible for any raw material with a greater than 2% per annum increase in world production’. Even then, growth in material consumption kept below that rate is still insufficient to decouple, and requires a high rate of recycling (60% - 80%).
It's one thing to work towards a circular economy, but is it enough if the circle has to keep growing to feed our extractive economic systems, when our planet is not growing? It’s hard to see how we can we make an extractive, linear materials economy into a circle without addressing the extractive, linear financial economy.
In the thirty years from 1980 – 2010, our global material extraction went up 94%, to 70 billion tonnes annually: www.mdpi.com/2079-9276/3/1/319 - Global Patterns of Material Flows and their Socio-Economic and Environmental Implications: A MFA Study on All Countries World-Wide from 1980 to 2009 (Multidisciplinary Digital Publishing Initiative)
The miles associated with moving stuff is on track to double by 2010 – and neither aviation or shipping are part of the Paris Agreement due to a lack of agreement on how to allocate emissions (diagram to scale – the circle on the right is double the size of the one on the left): www.businessinsider.com.au/global-transport-use-will-double-by-2040-as-china-and-india-gdp-balloon-2016-4
Global solid waste is set to increase threefold by the end of the century (diagram to scale – the circle on the right is 3 x the size of the one on the left): www.nature.com/news/environment-waste-production-must-peak-this-century-1.14032
Why do we need growth? Because we have an extractive economy. Wealth is increasingly captured, sucked out of the ‘real’ or ‘common’ economy of goods and services, into the ‘elite’ economy of business equity, shares, securities, money markets and hedge funds – not to mention an estimated at $32 trillion stashed in offshore tax havens. Only 15% of all the money flowing through financial institutions today ends up in businesses; the rest is staying within the closed circle of the financialised economy (http://evonomics.com/the-rise-of-finance-and-the-fall-of-american-business). For many reasons, including corporate tax avoidance, tax havens and this wealth siphon, tax and redistribute is simply not enough; to counter extraction, we need models that keep wealth in the real economy and keep it circulating; and we can't talk about this if we are not talking about ownership. More: http://wiki.commonstransition.org/wiki/The_Real_Circular_Economy
On the 21 December 2012, the New York Stock Exchange – the largest in the world by far, in terms of market capitalisation – was purchased by a derivative of itself: http://www.theguardian.com/business/2012/dec/20/nyse-sold-8bn-intercontinentalexchange
Douglas Rushkoff: ‘The amazing thing here is that the derivatives market is now so much bigger than the “real” market, that it has gone ahead and purchased it. The transactions abstracted from the reality of the marketplace are now more important than the marketplace itself.’ https://thenewinquiry.com/blog/2-consumed-by-abstraction/
In its forthcoming book, How On Earth (http://www.howonearth.us), the Post Growth Institute will set out a model for how the global economy could be based on not-for-profit business. The not-for-profit model is about preventing value extraction and keeping it invested and circulating in the real economy. It promises value creation, rather than value appropriation, and is a system that runs on shared interest, not self-interest.
A not-for-profit business is one where profit cannot be privately distributed to anyone, including workers or stakeholders as well as shareholders. It is different to a traditional non-profit, which is often dependent on government funding, philanthropy or corporate charity. Not-for-profit business is legally different to other models such as B Corporations (a certification scheme), corporate social responsibility and for-purpose business, where the surplus is still allowed to be privatised. A not-for-profit business works the same as any other business: it must be financially sustainable, everyone gets paid, and it can make as much profit as it likes – but it cannot distribute profit privately. Any surplus is required to be reinvested back into the mission or purpose of the business. These businesses see profit as a means to achieving deeper goals, rather than as a goal in itself. ‘Profit is neither inherently good nor bad. But, as the surplus of economic activity, it is important. And what happens to the surplus in our economy is at the root of whether we have a healthy economy or a destructive economy. An economy based on not-for-profit enterprise would take us beyond the current debate about whether the market should be more heavily regulated or if it should be allowed to operate more freely, because the functioning of a not-for-profit market economy would be so different from the for-profit market economy.’ Donnie Maclurcan and Jennifer Hinton, Post Growth Institute
In the Kubler-Ross Grief Cycle, denial is followed by bargaining. Like ‘green growth’, the circular economy is an expression of the 'bargaining' stage of the end of growth grief cycle. It seems we will do anything to not have to face that we cannot sustain nine billion plus people on a western industrial model of development when the earth is already in overshoot. Our technology and our volume and rate of use of materials reflects our values, and our economic system is one of the most significant expressions of our values. We need an economic system that serves people and nature, not one which uses them as fuel. Any approach which is aligned with or dependent on an economic system based on perpetual growth and the pursuit of more, or one where value is created by many but captured by a few, does not offer the structure that can deliver the changes we need to address our environmental and social challenges.
If we are truly seeking to create a circular world, let's start by adopting a wider vision of a circular economy, and ways of manifesting that vision - otherwise we may find our circle has, in fact, become a cul-de-sac.
cul-de-sac, from French: literally ‘bottom of a sack’; dead end street
AUDAcities is a catalyst to relocalise production and revitalise local economies in cities, initiated in Australia: http://www.audacities.co