Nominated essay for our essay contest

As part of the Future Markets Consultation, students and young scholars were invited to participate in an essay contest. This essay was nominated in the category of master students. It was written by Luka L. Blankevoort, student at Wageningen University. She can be reached at luka_b@live.nl or luka.blankevoort@wur.nl.

During the span of my life, the world has seen growth in wealth, health, and innovation like never before. At the same time, the world has become aware that human actions are affecting climate change, environmental pollution, biodiversity loss and more, with potential catastrophic consequences. In quest for solutions, Future Markets Consultation initiated the essay question: How can the freedom and innovation that free markets provide be squared with environmental sustainability and social justice?

A simple answer to the question how free market economic systems can go hand in hand with sustainability is: free markets, where producers are largely rewarded for the amount of kilograms or liters they produce, do not go hand in hand with social justice or nature conservation. But that is an answer too simple for an all too complex question so we should try harder. In this essay, a circular economy lens is deployed to see how ‘true’ environmental and social sustainability could be obtained in a free market economic system. I argue how circular economy is conditioned to economic degrowth to truly lead to sustainability. Although at first these insights were intuitive to me, now I have had to ability to support them based on a course on Economic Perspectives on Circular Food Systems at the Wageningen University and Research and on varying symposia at the University of Utrecht, for which I am thankful. To me, inevitably finite global resources and planetary boundaries require another question to be considered too; one that allows for the space to question free market economy itself. Therefore, I add to Future Markets Consultation’s question: What fundamental economic and social change is needed for an effective response to the worlds’ environmental sustainability problems?

How can the Circular Economy Square Free Markets with Sustainability?

Circular economy is a promising paradigm for addressing sustainability problems (Aurez et al., 2019). It aims to overcome unsustainable development of the global economic model, characterized by an overuse of resources and generation of waste and greenhouse gas emissions through a linear take-make-dispose pattern of production and consumption. Rather, circular economy proposes an economic system in which the value of products, materials and resources is maintained as long as possible, through a circular pattern of repair, reuse, remanufacture, refurbish, recycle (Korhonen et al., 2018; Merli et al., 2018). This circular approach would lower global resource use and hence reduce anthropogenic pressure on the environment.  Also, it would stimulate solar, wind, biomass, and waste-derived energy utilization. Added to those it would create new business opportunities valued at USD 600 billion by 2025 according to Ellen MacArthur Foundation (2013). So far the concept has been hailed as a solution that would enable the decoupling of economic growth from environmental degradation.

However much these reasons are promising a good step forward, there is debate on if equity and environmental sustainability transformation can be achieved in conditions of continuous economic growth. Importantly, the expectation of circular economy’s decoupling of economic growth – inherent to free markets – from environmental degradation is not backed by any evidence (Korhonen et al., 2018).

Challenges of Circular Economy as Vehicle to Environmental Sustainability

As observed by Cullen (2017, p. 483): “A Circular Economy […] is one in which waste no longer exists, one where material loops are closed, and where products are recycled indefinitely— an economy that perpetually gyrates without any input of depletable resources.” If we assess the potential of the circular economic system for environmental sustainability, certain challenges of the paradigm become apparent. First, there is unclarity about the entropy and natural thermodynamic laws applied to circular economy. That is, in practice materials degrade in quality and quantity each time they are used or ‘cycled’ (Friant et al., 2020; Korhonen et al., 2018; Reuter et al., 2019). This means that even if recycling processes would innovate to become near-perfect in terms of material cycling, still materials cannot be circulated indefinitely (Giampietro, 2019).  New materials and energy must be injected into any circular material loop, to overcome those losses. Every loop around the circle creates dissipation and entropy, attributed to losses in quantitative (physical material losses, creation of by-products) and qualitative (mixing, downgrading) losses.

Furthermore, recycling processes require large amounts of energy. Increased recycling will increase the demand for energy, and even if we would use energy from renewables only, this will still increase demand for finite natural resources. For example, wind and solar energy are generated for human consumption with the use of finite natural resources like lithium, cobalt, and nickel, all of which currently have very low recycling rates and are expected to be inaccessible in less than eighty years (Aurez et al., 2016). So, innovation in optimizing recycling processes is important, but moreover it is required to cap global resource utilization at a certain sustainable level (Friant et al., 2020). In short, the unclarity about entropy and thermodynamic laws within circular economy and the knowledge that materials decay when cycled, mean that even in a ‘real’ circular economy, where all materials are derived from recovered or renewable materials, an overall reduction in material demand and economic throughput is necessary (Friant et al., 2020, p.4). Furthermore, circular economic approach has the capacity to obscure the problematic character of productivist growth. It risks that people will believe that ‘circular’ products are safe to mass-produce and consume (Vonk, 2018).

Productivist free market economies are addicted to economic growth and so are the people in that system. Economic throughput converts energy and material into goods, services, and waste. Therefore, beyond its expression in percentage of GDP, “economic growth is essentially a biophysical process; ever more energy and material resources are extracted, transformed, and ever more waste is generated,” says J. Smessaert in an essay in The Economist (2019, p.1). Also, climate change is an expression of waste accumulation inherent to the dynamics of economic growth. Other devastating direct and indirect effects of ever-growing economic throughput include massive deforestation, alarming biodiversity loss and ocean acidification. In a way, years and years of economic growth have created a world which is already burning, where forced displacement is already happening.

Yet, our policy and education tend to regard the only pathway to sustainable futures as through technological innovation and through economic growth. This mindset is reflected in for example statements like ‘as people get richer, they want cleaner environments – and they acquire the means to pay for it’ (The Economist, 1999, p.17), ‘too poor to be green’ (Martinez-Alier, 1995), ‘most people think about the end of the month, rather than the end of the world’ (Smit, 2019).

The notion of growth is perhaps the biggest elephant in the room. “Anyone who believes that exponential growth can go on forever in a finite world is either a madman or an economist,” is a famous quote by K.E. Boulding (Douthwaite, 1993). The concept of circular economy coupled with productivist growth cannot lead to environmental sustainability. So, if environmental sustainability is the goal and the free market economic system is embedded in growth, maybe we are asking the wrong question. For all reasons above, which outline why free market economies’ excessive resource and energy use require a capping of global resource use at a certain sustainable level for environmental sustainability, I ask the second question:

What Fundamental Social and Economic Change Is Needed for Environmental Sustainability?

We need regenerative ways of production, in which materials are cycled as local as possible, through renewable energy only. Low-energy intensive production is still preferred over energy intensive production, because currently even generation of renewable energy demands resources which have a low recycling rate and are finite. So, there is a need to discuss practical solutions and perspectives in order to develop tools towards a true sustainable circular economy, as for example the doughnut model (Raworth, 2017). There is also a need to building discussion on how to obtain sustainable circular cities, where both natural and human ecosystems can thrive. Other contributions to solutions are small steps towards less material and energy intensive lifestyles, for example cooperative housing models and repair cafés. Symposia could allow for cross-pollination of innovative ideas. E.g. University of Utrecht organized a symposium last year. Their key discussion topics included the current challenges of circular economy, including the need to go beyond market-based circular solutions, and the concept of degrowth. Indeed, planetary boundaries and inevitable global resource scarcity force us to reconsider the current economic system’s addiction to growth and requires us to imagine a degrowing circular society. As we have already reached some of our planetary limits, degrowth is not only socially desirable but also necessary for the very survival of humans and other beings.”

Hence, what is needed to address the current environmental challenges in a transformation towards a more sustainable economic system, is primarily a shift in people’s minds. We need to overcome our addiction to economic growth, which is dominating the realms of business, policy making and education. Here, in fact, lies a crucial role for businesses, policy makers and educators. Certainly, then the question is not how free markets allow for sustainability, but rather which changes in that system can make economies more just and sustainable.

Degrowth economics aims to re-embed economy into society and the planet’s biophysical limits. Degrowth is simultaneously a social movement, a political program and an academic field aiming to downscale the size and impact of our economies. Its actors include activists, artists, scholars, practitioners, organised and less organised individuals, who work together to decentralise political decision-making and experiment with collective deliberation and direct democracy (Smesseart, 2019).” “In doing so, they put citizens in the middle of the political stage, demonstrating that sustained changes do not occur through price signals, technological innovation, or top-down interventions, but through concrete actions of actual humans,” (Smessaert, 2019). This demonstrates the necessity to think of fair and regenerative circular society rather than simply an eco-efficient circular economy.

It is key to be very critical about degrowth, as it would have a huge impact on us. We are used to growth, addicted to growth. From my small student room, I hope to move to a bigger apartment, with many rooms to fill with furniture, with kids, with a car, with bikes. For this, I will need more income, and even more after that. So how to change that? What does degrowth all imply?

In short, circular economy is in my view one of the most promising economic paradigms to reconcile free market systems to environmental sustainability. However, if not decoupled from productivism the circular economy approach risks to actually foster productivism and consumerism Therefore, a fundamental economic change that is needed is to move toward a circular economic system that uses renewable energy only. Furthermore, it should use only the amount of energy and material needed to stay within safe-operating boundaries of Earth. The most crucial aspect of this circular system is that the world’s addiction to economic growth is to be denounced. We need a circular economic system, in which growth and prosperity are broader defined than economic growth.  In that, we do not have to fear that innovation is an aspect of free markets economic systems only. Innovation, however, must be directed more to circular regenerative systems, that let nature and people, including my generation and future generations, flourish.

References

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