The current linear economy measures success in terms of growth. This definition of success fails to include many environmental and social factors that are important for the wellbeing of society and the natural environment.
This one-minded economic system is increasingly being challenged. For long, thinkers and entrepreneurs have tried to come up with alterations to the current system to reduce its negative impacts. Others have even gone as far as proposing alternatives. Two such alternatives to the linear economy aim to step away from the wasteful take–make–dispose flow and redefine the values of the economic system.
The circular economy, as its name states, aims to transform the linear economy into a circular one. Meaning, that, as defined by the Ellen Macarthur Foundation (EMF) [pdf], it is “restorative and regenerative by design and aims to keep products, components, and materials at their highest utility and value at all times.” In practice this translates to shifting ever increasing intensity of production to product quality and towards reuse and upcycling. Making it “restorative and regenerative by design.” Here a distinction between a technological and biological cycle is made. This distinction is made to maximize the use of the product by diversifying its application and ensuring its safe return to a natural state (e.g. decomposition). The circular economy is further said to be economically beneficial and a source for employment creation. As estimated by the EMF, the European Union could increase its net benefits by €0.9 trillion by embracing the circular economy by 2030.
The steady state economy goes one step further and calls for downsizing and degrowth of the current economy to a size that can be sustained by the planet. Firmly decoupling the economy from growth and focusing it on limiting environmental degradation and improving the quality of human capital and consumer goods. In other words, there is an upper threshold or limit to the steady state economy. This threshold calls for a sustainable and consistent population size (births+immigrants = deaths+emigrants) and capital stock production. Fair distribution of wealth and the efficient allocation of goods and services are said to be easier to achieve in a steady state economy with a stable population.
To achieve either model, behavioural patterns and institutions supporting “growth and accumulation” as measures for success would have to be challenged and altered. This poses a significant challenge to society and will surely not be accomplished overnight. However, first efforts to implement the circular economy are on their way. Other trends within the business sector are evolving, implementing more sustainable practices and slowly reshaping ‘business as usual.’
Bottom Line: Current definitions of success being equal to constant growth must be altered to include environmental and social factors that contribute to wellbeing. This can be done by altering the current linear economic model and moving away from the throwaway society to one that is more restorative by nature. This shift is already in process but still has a long way to go.
* Please help my Growth & Development Economics students by commenting on unclear analysis, alternative perspectives, better data sources, etc. (Or you can just say something nice 🙂