In the glob­al North, cap­i­tal­ism has become gross­ly dys­func­tion­al. Income and wealth are con­cen­trat­ed not just at the top but at the very, very top; finance runs amok; employ­ment has col­lapsed; and par­tic­u­lar­ly in the Unit­ed States elites are aban­don­ing the nation­al econ­o­my. With­out a major shift in either pol­i­cy or prac­tice, by con­tin­u­ing with busi­ness as usu­al, the Unit­ed States is like­ly fac­ing years of stag­na­tion, high unem­ploy­ment, wors­en­ing inequal­i­ty and ris­ing poverty.

Our abil­i­ty to make polit­i­cal and eco­nom­ic gains through the open­ing cre­at­ed by the Occu­py move­ment, as well as future open­ings, will depend on artic­u­lat­ing an alter­na­tive to the busi­ness-as-usu­al economy.

The his­to­ry of eco­nom­ic dis­course teach­es us how volatile the con­ver­sa­tion can be. The first six months after the eco­nom­ic col­lapse of 2008 pro­vid­ed anoth­er les­son in change­abil­i­ty. Fifty tril­lion dol­lars in wealth had just dis­ap­peared, lit­er­al­ly overnight, and the ortho­dox mod­el of ratio­nal and ​“free” mar­kets was fac­ing its most seri­ous cri­sis of cred­i­bil­i­ty since the 1930s. The sys­tem had failed, and spec­tac­u­lar­ly so. With­in six months of the crash, only 53 per­cent of U.S. adults would agree that ​“cap­i­tal­ism is a bet­ter sys­tem” than social­ism. But as con­di­tions sta­bi­lized, the sta­tus quo re-assert­ed itself quick­ly, and the win­dow of change slammed shut.

The engine of recov­ery for the past three decades, the con­sumer, is no longer capa­ble or will­ing to play her accus­tomed role. Con­sumers are artic­u­lat­ing a shift from sta­tus-ori­ent­ed pur­chas­es to re-engag­ing with the dif­fer­ence between needs and wants. Peo­ple are sav­ing more, spend­ing less, and say­ing that the Amer­i­can way of life is not sus­tain­able, either finan­cial­ly or ecologically.

The stan­dard pro­gres­sive response has been Key­ne­sian. While Key­ne­sian­ism is unpop­u­lar among elites, it is main­ly oppo­si­tion to gov­ern­ment deficits that fuels its adver­saries. The pow­er­ful cri­tique of Key­ne­sian­ism from the left is that it is wrong to advo­cate indis­crim­i­nate out­lays. Yet that’s effec­tive­ly what we’re doing through mil­i­tary spend­ing, which is not only waste­ful but also deeply destructive.

We have mul­ti­ple urgent human and eco­log­i­cal needs and we are wast­ing resources on activ­i­ties that fail to enhance human and plan­e­tary well-being. While Key­ne­sian­ism is cer­tain­ly bet­ter than neo-lib­er­al­ism, it’s a far cry from the new eco­nom­ics, because it fails to address the unequal dis­tri­b­u­tion of prop­er­ty. Con­cen­trat­ed prop­er­ty not only pro­duces unfair dis­tri­b­u­tions of income but also yields cap­tured gov­ern­ment. We need both a demo­c­ra­t­ic polit­i­cal sys­tem and a demo­c­ra­t­ic econ­o­my. The fact that we have nei­ther is at the core of our con­tem­po­rary dysfunction.

We can­not afford indis­crim­i­nate growth, for humans now face enor­mous costs of eco­log­i­cal restora­tion. We must reverse the dan­ger­ous, indeed ter­ri­fy­ing path of cli­mate desta­bi­liza­tion, ecosys­tem degra­da­tion, and bio­di­ver­si­ty col­lapse on which we now find our­selves. Revers­ing our present course is made hard­er by the rise of pop­u­la­tion from 7 to 9 bil­lion, with most of that increase in the glob­al South. One hopes these addi­tion­al 2 bil­lion peo­ple will con­sume ener­gy, food, and man­u­fac­tured goods at high­er rates than their nation­al coun­ter­parts. With more than half the glob­al pop­u­la­tion liv­ing on $2.50 a day or less, the solu­tions put for­ward by new eco­nom­ics must be com­pat­i­ble with con­sid­er­able increas­es in the eco­log­i­cal space afford­ed to low-income pop­u­la­tions of the glob­al South. Yet, on a plan­e­tary lev­el we are already overus­ing eco­log­i­cal resources.

The eco­nom­ic down­turn makes it more dif­fi­cult to enact envi­ron­men­tal leg­is­la­tion or adopt new tech­nolo­gies. Progress on a cli­mate agree­ment has been omi­nous­ly stalled; how­ev­er, we can­not afford to wait for peo­ple to feel rich again. That is unlike­ly to hap­pen in either the Unit­ed States or West­ern Europe. We require a tri­fec­ta that simul­ta­ne­ous­ly address­es three chal­lenges: a dra­mat­ic reduc­tion in plan­e­tary eco- and car­bon foot­prints, a solu­tion to the eco­nom­ic prob­lems of the glob­al North, and an increase in the stan­dards of liv­ing in the glob­al South.

The most impor­tant con­nec­tion between these three prob­lems is that the con­ven­tion­al solu­tion to the lat­ter two exac­er­bates the first, name­ly the eco­log­i­cal over­shoot that has led to cli­mate desta­bi­liza­tion. Unem­ploy­ment and pover­ty are typ­i­cal­ly addressed by rais­ing the rate of growth of the econ­o­my, but growth is at the core of eco­log­i­cal degradation.

When faced with a mul­ti­tude of prob­lems that are typ­i­cal­ly solved in con­tra­dic­to­ry ways, stay­ing with­in the cur­rent sys­tem will fail because this sys­tem is struc­tured so that each of these is a trade-off of the oth­er. There­fore, it is essen­tial to con­struct new eco­nom­ic rela­tion­ships, new poli­cies, and new cul­tures. What would those new ways be?

There is an alter­na­tive path for the glob­al North that will reduce unem­ploy­ment and eco­log­i­cal foot­prints with­out rais­ing the rate of out­put growth. This path will also enhance well-being and the qual­i­ty of dai­ly life. It is not pri­mar­i­ly a tech­no­log­i­cal solu­tion, although green and clean tech­nolo­gies are indis­pen­si­ble components.

We need to shift the con­ver­sa­tion about tech­nol­o­gy to one that takes into account labor mar­kets, con­sumer pat­terns, and growth. Achiev­ing sus­tain­abil­i­ty requires new pat­terns of time use, which in turn alters the macro­eco­nom­ic path of the econ­o­my. A tra­jec­to­ry of reduc­tions in work­ing hours both slows the unten­able expan­sion of the econ­o­my and facil­i­tates a tran­si­tion from activ­i­ties that destroy plan­e­tary and per­son­al well-being to those that enhance it. I reject the main­stream assump­tion of a trade-off between pro­tect­ing the envi­ron­ment and gen­er­at­ing well-being for peo­ple. By con­trast, I argue for a new way of liv­ing that is rich in those ele­ments that will yield true well-being: time afflu­ence, high­er lev­els of self-pro­vid­ing, and social capital.





What is the ​“new economics”?

Main­stream econ­o­mists are opti­mists who deny the sever­i­ty of both eco­log­i­cal degra­da­tion and our cur­rent eco­nom­ic dys­func­tion. Their view is that mar­kets and tech­nol­o­gy will be suf­fi­cient to solve the eco­log­i­cal prob­lem, address unem­ploy­ment in the glob­al North and address pover­ty in the glob­al South. They believe that nat­ur­al-resource pro­duc­tiv­i­ty will grow, per­haps dra­mat­i­cal­ly, there­by lead­ing to dema­te­ri­al­iza­tion (a reduc­tion in the amount of mate­ri­als flow for every dol­lar of GNP), decar­boniza­tion (a reduc­tion in the amount of ener­gy use asso­ci­at­ed with every dol­lar of eco­nom­ic out­put), and increased wealth.

This idea has also been pop­u­lar in the design and engi­neer­ing sec­tors of the sus­tain­abil­i­ty com­mu­ni­ty, with approach­es such as Fac­tor 4, Fac­tor 10, zero waste, etc. Soci­ol­o­gists who take this view call them­selves eco­log­i­cal mod­ern­iz­ers, giv­en their belief in a busi­ness-led, prof­it-dri­ven green­ing that they see as the foun­da­tion for the next major growth phase of cap­i­tal­ism. They all argue that if we do it right, the growth process is what will lead us to an eco­log­i­cal solu­tion. Along the way, more jobs will be cre­at­ed because as we grow, jobs trick­le down.

Dema­te­ri­al­iza­tion, decar­boniza­tion, and the delink­ing of eco­log­i­cal degra­da­tion from out­put growth in GDP have not been achieved except on a small scale. The most suc­cess­ful region to date has been West­ern Europe. How­ev­er, once we account for trade flows and the out­sourc­ing of car­bon use through import­ing car­bon-inten­sive goods from Chi­na, the record is mod­est. Dema­te­ri­al­iza­tion has not been achieved.

In North Amer­i­ca, between 1980 and the mid 2000s total mate­r­i­al flows increased by 70 per­cent, as a result of expand­ing fos­sil-fuel con­sump­tion and con­struc­tion mate­ri­als asso­ci­at­ed with the hous­ing boom. Giv­en the enor­mous wealth of our region and our abil­i­ty to install new tech­nolo­gies, this is unac­cept­able. Glob­al­ly, emis­sions are still accel­er­at­ing and mate­ri­als use con­tin­ues to rise. That’s a dis­ap­point­ing devel­op­ment for peo­ple who believe that dema­te­ri­al­iza­tion is the answer.

By con­trast, Marx­ists have been too pes­simistic. They believe that the imper­a­tive of growth and the abil­i­ty of cor­po­ra­tions to cap­ture the state to pre­vent sig­nif­i­cant envi­ron­men­tal reg­u­la­tion make envi­ron­men­tal pro­tec­tion almost impos­si­ble.. How­ev­er, the suc­cess­es of some small Euro­pean coun­tries, indus­tries and com­pa­nies in mov­ing to clean ener­gy show that exten­sive, increased growth in mate­ri­als and nat­ur­al resources is not a nec­es­sary con­di­tion for suc­cess­ful busi­ness activity.

Accord­ing to a sec­ond pes­simistic par­a­digm based on neu­ropsy­chol­o­gy, humans are hard-wired to avoid respond­ing to risks such as cli­mate change: we can’t cope with abstract for­mu­la­tions; we brack­et out risk; we can focus on only one prob­lem at a time. This is an unfor­tu­nate dis­trac­tion that is at odds with the great vari­a­tion in respons­es to eco­log­i­cal threats across coun­tries, times and cul­tures. The British, Ger­man, Aus­tralian and Cal­i­forn­ian land­mark cli­mate-change leg­is­la­tion all sug­gest that humans’s abil­i­ty to respond to cli­mate change is affect­ed more by polit­i­cal econ­o­my than inher­ent lim­i­ta­tions in our think­ing. One hard­ly need invoke brain sci­ence to explain oppo­si­tion to cli­mate leg­is­la­tion in the Unit­ed States being dri­ven by the polit­i­cal influ­ence of the fos­sil-fuel ener­gy sector.

In con­trast to both the opti­mists and the pes­simists, the new-econ­o­my posi­tion is that moti­vat­ed humans can take on these challenges.

Pre­vail­ing eco­nom­ic con­di­tions are aid­ing this tran­si­tion. Peo­ple are rel­a­tive­ly cash poor in com­par­i­son to the boom years, and also rel­a­tive­ly time rich because unem­ploy­ment and under­em­ploy­ment are so high. This leads to the growth of all the prac­tices I men­tioned, which tend to be more time con­sum­ing than the buy-every­thing-new-at-the-mall mod­el of goods pro­cure­ment. This move­ment shares a com­mit­ment to local, small-scale, low-impact pro­duc­tion and con­sump­tion, to expand­ed moti­va­tion for eco­nom­ic activ­i­ty beyond mak­ing mon­ey, to enhanc­ing social cap­i­tal and com­mu­ni­ty and to a rejec­tion of the dom­i­nant con­sumer culture.





An eco­nom­ic mod­el for a post-growth society

Here are two key com­po­nents of how the new econ­o­my could func­tion. The first involves a with­draw­al of labor from the for­mal econ­o­my and a result­ing decline in aver­age annu­al hours of work per employ­ee. The sec­ond is an expan­sion of the local econ­o­my, includ­ing both a Do-It-Your­self pro­duc­tion sec­tor and growth in small-scale entre­pre­neur­ial activity.

Before the eco­nom­ic down­turn, the Unit­ed States had been on a tra­jec­to­ry of ris­ing work hours, with aver­age annu­al work time per employ­ee increas­ing 204 hours between 1973 and 2006. Longer work sched­ules pro­pelled growth in GDP but also in car­bon emis­sions and eco­log­i­cal degra­da­tion. Over­work cre­at­ed stress, impaired fam­i­ly life, under­mined com­mu­ni­ty, and reduced polit­i­cal as well as civic engagement.

Work time is rel­e­vant to the new econ­o­my because many peo­ple have only mar­gin­al attach­ment to the for­mal labor mar­ket: down­shifters, home­stead­ers, small-busi­ness peo­ple, ear­ly retirees or late entrants into the labor force. They are alter­ing pat­terns of time use to reduce their depen­dence on for­mal jobs. The mag­ni­tude of the unem­ploy­ment chal­lenge is such that labor mar­ket equi­lib­ri­um can­not be restored sole­ly by growth in GDP. Growth has become a far less effi­cient gen­er­a­tor of domes­tic jobs because of out­sourc­ing, because of a strong propen­si­ty to import and because of labor-dis­plac­ing tech­ni­cal change.

There’s a good deal of such rebal­anc­ing going on in the econ­o­my. The poten­tial is enor­mous, and it cre­ates a tremen­dous chal­lenge from the point of view of employ­ment. If pro­duc­tiv­i­ty growth is increas­ing rapid­ly, how can full employ­ment be main­tained? It can’t be done by growth alone.

The cur­rent jobs cri­sis is more struc­tur­al than one might imag­ine, and it’s why only reg­u­lat­ing banks or fix­ing the finan­cial sec­tor will not re-estab­lish the unem­ploy­ment lev­els of the ear­ly 2000s. The Unit­ed States needs to cre­ate rough­ly 8.3 mil­lion jobs in order to return to the pre-down­turn labor sit­u­a­tion, a chal­lenge that even an opti­mistic 4 per­cent growth rate will not meet. By con­trast, re-struc­tur­ing of the labor mar­ket through work shar­ing, hir­ing on four-day work weeks, insti­tut­ing vol­un­tary pro­grams to trade income for time, job shar­ing and ear­ly retire­ment can re-bal­ance the labor mar­ket, yield­ing short­er aver­age hours per employ­ee. The alter­na­tive is to keep peo­ple in the labor mar­ket for more years, a coun­ter­pro­duc­tive idea in a time of mass unemployment.

Short­er work­ing hours reduce the eco­log­i­cal impact of the econ­o­my because time-rich house­holds shift to low­er impact forms of trans­port and con­sump­tion. My research with the late Gene Rosa and Kyle Knight shows that coun­tries with longer work­ing hours have larg­er eco­log­i­cal and car­bon foot­prints. Coun­tries with short­er aver­age hours of work have small­er eco­log­i­cal footprints.

With these poli­cies, there is no invol­un­tary reduc­tion in incomes. Con­sid­er the pro­pos­al to hire on a four-day work­week, start­ing at low­er salaries than on a five-day work­week. If we build in the prin­ci­ple of using pro­duc­tiv­i­ty growth to fund reduc­tions in work time, work­ers will expe­ri­ence sta­ble incomes with ris­ing leisure time. Peo­ple are far less attached to income they haven’t yet got­ten than to income they already have, so poli­cies that give time off rather than more income will be more popular.

With short­er hours, peo­ple can use the time freed up from for­mal jobs to meet needs through self-pro­vid­ing, which allows them to become more self-reliant, build skills and exer­cise cre­ativ­i­ty. Fol­low­ing the philoso­pher Frithjof Bergmann, this is ​“high tech self-providing.”

In the Unit­ed States high tech self-pro­vid­ing (which used to be how many peo­ple lived) has recent­ly become pop­u­lar: grow­ing food, rais­ing live­stock and poul­try, bee­keep­ing, small-scale ener­gy gen­er­a­tion, eco-friend­ly home con­struc­tion, and the man­u­fac­ture of cloth­ing, arts, crafts, etc. What are the eco­nom­ics of this type of small-scale house­hold activity?

We have reached the point at which fur­ther spe­cial­iza­tion does not make sense and that diver­si­fi­ca­tion of activ­i­ties and income streams is the wis­er way to go for many house­holds.. The labor mar­ket has become a more uncer­tain place. That’s why diver­si­fi­ca­tion makes sense in a time such as the one we are liv­ing through. There’s also a high like­li­hood of cat­a­stroph­ic events that can wreak hav­oc on high­ly cen­tral­ized, sin­gle-pur­pose sys­tems or lifestyles. Cli­mate and eco­nom­ic insta­bil­i­ty make full reliance on the mar­ket increas­ing­ly risky. Being able to meet one’s needs, even in the event of mar­ket col­lapse and cli­mate cat­a­stro­phes, is a smart strat­e­gy, and even smarter on a com­mu­ni­ty level.

If self-pro­vid­ing meant going back to the tech­nolo­gies and ways of doing things from the nine­teenth cen­tu­ry, main­stream econ­o­mists would be right. But self-pro­vid­ing now avails itself of new labor-and-resource-sav­ing tech­nolo­gies. Frithjof Bergman, who,moved into a cab­in and lived as self-reliant­ly as he could endured a hor­ri­ble, cold win­ter. He left before the two years were over, and the les­son he learned is that self-pro­vid­ing is great but only in ways that min­i­mize the human labor of drudgery.

This is where tech­nol­o­gy fits in. New­ly avail­able tech­nol­o­gy, knowl­edge, and web-based inno­va­tions are enhanc­ing the pro­duc­tiv­i­ty of labor at a house­hold and com­mu­ni­ty lev­el. These inno­va­tions include liv­ing wall gar­dens, micro-gen­er­a­tors, and per­ma­cul­ture. This is the sec­ond stage of a rev­o­lu­tion that began in the realms of infor­ma­tion, soft­ware, and cul­ture. A vibrant peer-pro­duc­tion mod­el has devel­oped high-val­ue prod­ucts such as Wikipedia, Lin­ux, Fire­fox, through this infor­mal, extra-mar­ket process. None of these were devel­oped in the mar­ket for prof­it. Self-pro­duc­tion in music, video, adver­tis­ing, and writ­ing has explod­ed. Peo­ple are learn­ing new skills, they’re enjoy­ing the oppor­tu­ni­ty to be cre­ative, and they’re pro­duc­ing real val­ue to be used and shared by others.

This mod­el is inter­est­ing because it is built on col­lab­o­ra­tion and coop­er­a­tion. Pro­duc­tion does not rely main­ly on self-inter­est: Peo­ple are not moti­vat­ed to con­tribute to Wikipedia sole­ly to make mon­ey, but to feel use­ful, to build their rep­u­ta­tion, to be cre­ative and to be con­nect­ed with oth­ers. This new pro­duc­tion par­a­digm is out­com­pet­ing pri­vate ini­tia­tives in the world of soft­ware and infor­ma­tion. It has rapid­ly spread across the world of infor­ma­tion and soft­ware, and finan­cial self-inter­est as a pri­ma­ry moti­va­tor of pro­duc­tion will ulti­mate­ly be seen as anachro­nis­tic and destructive.

The high tech self-pro­vid­ing path extends the mod­el to the pro­duc­tion side, the. so called ​“open-source hard­ware” move­ment. The new self-pro­vid­ing human labor has high pro­duc­tiv­i­ty because it is knowl­edge inten­sive, employ­ing high lev­els of know-how, main­ly in com­put­ers and under­stand­ing of eco­log­i­cal sys­tems. Back to Bergman’s cri­tique, self-pro­vid­ing does not rely on the low-pro­duc­tiv­i­ty labor of split­ting wood but rather on the high-pro­duc­tiv­i­ty labor of using smart machines to cre­ate hous­es or bicy­cles, using of per­ma­cul­ture prin­ci­ples in food pro­vi­sion­ing and small-scale ener­gy generation.

The mod­el of retriev­ing labor time from the mar­ket and putting it to work at the house­hold and com­mu­ni­ty lev­els to self-pro­vide makes sense because the eco­nom­ics of scale have changed. The rise of infor­ma­tion tech­nol­o­gy has trans­formed micro-enter­prise into a smart twen­ty-first cen­tu­ry insti­tu­tion­al form. Small com­pa­nies are where the dynamism and employ­ment growth are locat­ed. There are new pos­si­bil­i­ties at the house­hold and local lev­els for engag­ing in high-pro­duc­tiv­i­ty eco­nom­ic activ­i­ty — name­ly, a syn­the­sis of the pre-mod­ern house­hold form and mod­ern tech­nol­o­gy. Peas­ants did not work for oth­ers; they had diverse skills, activ­i­ties, and income streams; and they active­ly man­aged risk through that diver­si­ty. Because they were poor, peo­ple don’t like the asso­ci­a­tion, but it’s his­tor­i­cal­ly accu­rate. Today we have a kind of postin­dus­tri­al peas­ant mod­el of a small enter­prise economy.

Self-pro­vid­ing activ­i­ties gen­er­al­ly have low foot­prints and con­tribute to reduc­ing eco­log­i­cal impact. High tech self-pro­vid­ing is a tran­si­tion­al strat­e­gy for an exit from the high­ly destruc­tive cap­i­tal­ist firms that now dom­i­nate the econ­o­my. This is a com­plex process with a dif­fi­cult pol­i­tics but it is a nec­es­sary tran­si­tion that can lead us to the new econ­o­my and put in place the con­di­tions that will allow us to solve the three chal­lenges with which I began: restore the Earth, pro­vide work and liveli­hood, and give eco­log­i­cal space to the nations of the glob­al South.

Far from being main­ly a paper blue­print, this tran­si­tion is a liv­ing, breath­ing, expand­ing, suc­cess­ful move­ment of peo­ple who are forg­ing a new econ­o­my from the ground up, mod­el­ing key fea­tures of what the new econ­o­my can, and I believe will, be.

This arti­cle was edit­ed from a speech deliv­ered by Juli­et Schor in the Thir­ty-First Annu­al E. F. Schu­mach­er Lec­tures, in Novem­ber 2011, NYC.