A demand for fundamental change in economic theory and practice

Professor Ove Jakobsen
Centre for Ecological Economics and Ethics, Nord University.

If we wish to develop an economy of long-term sustainability, it is necessary to delve beneath the surface and examine the fundamental motives behind economic activities. Environmentally and socially responsible business practices is often founded on a wish to improve a company’s market position. Measures positively influencing the attitudes among consumers, politicians and authorities improve the reputation of a company. Environmentally and socially responsible business practices also stimulate creative solutions within both production and organisation, and improved resource efficiency lowers costs. However, even though many of these arguments are sensible, measures motivated by growth and profitability have marginal effect. Instead, they contribute to upholding existing practices, as they are founded on the belief that profitability is paramount. Additionally, “green” efficiency measures may liberate funds that in a worst-case scenario can increase overall consumption of natural resources. The focus on symptom-reducing measures facilitate the concealment of the actual cause of the problems by environmentally correct terms and concepts. Expressions like “green growth”, “sustainable competition” and “green marketing” are good examples.

If the over-consumption of resources and increased waste-production is the problem, any increase in consumption will be detrimental. Imagine an overloaded cargo ship. It will sink in a storm, regardless of whether the cargo stems from conventional or “green” production lines.

Today’s problems relating to both the environment and to poverty are largely a result of established economical systems founded on principles incompatible with ecological and social frameworks. Well-documented research repudiates the existence of a singularly positive relation between an unlimited increase in production and consumption and the continued improvement of welfare. When economic growth exceeds a certain limit, the level of satisfaction decreases. The explanation is that the domination of materialism and consumption displaces nature, stability, safe neighbourhoods, social justice, social affiliation and numerous other qualities. This insight is not included in established economic theories and models, and is therefore largely overlooked.

In order to manage environmental and societal challenges it is necessary to be aware of the underlying premises for established economic theory and practice. We are not direct observers of reality, but see the world through a culturally determined filter that define our perceptions and observational interpretations. Our understanding of reality thus determines what we see, which contexts we apply and which methods we consider valid.

There is increasing recognition for a view of the ecosphere as a complex self-organising system of integrated interaction of innumerable lifeforms. Humanity does not exist separately, but rather as just another integrated part of the ecosphere. Based on an ecological interpretation of reality, economic practice must adhere to the limits and principles of nature. Instead of reducing nature to a resource base for economic activity, the challenge will be to develop an economy that promotes the intrinsic life force of nature for the benefit of all living organisms, including humans. A new approach to science must replace the idea that research should generate knowledge ensuring humankind’s power over nature. The purpose of scientific research must be to find the best ways in which to cooperate with nature while safeguarding fundamental humanistic values such as freedom, equality and righteousness.

Economics anchored in an ecological interpretation is dynamic, and postulates continued development without increased consumption of natural resources. This development will amongst other things result in the replacement of existing companies and business sectors by new ones founded on ecological principles and humanistic values. This requires a change in focus, from competition between autonomic economic actors to the development of cooperative decentralised networks. Even though local production for local markets is central, it is obviously necessary to promote cooperation through international networks. Instead of viewing economic processes as linear, one must see all production, distribution, consumption and recycling in a cyclical perspective where economic practice is placed in an ecological and cultural context.

In other words, it is not naïve to believe that reputation management, green-washing and green economy will give way to an economy built on ecological insight and humanistic values in time. We must not be fooled into believing that a greener economy within the established system will yield significant results. The development of recent years shows that green economy has done little to reduce the threat to oceanic life, the spread of drought, the frequency and severity of economic crises, worldwide military spending, the accumulation of wealth on a decreasing number of hands, or the gap between rich and poor.

Even though ecological economics may seem impossible to implement, there are indications that rapid change will occur once we realise that individual self-interest coincides with the long-term collective interests of humankind. Success demands change on several levels. Individual awareness is important, but systemic transformation is vital in order to achieve real change.

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