Steady state economy, Break-even

The break-even motive

The profit motive leads to economic growth, whereas a steady-state economy will be built on the foundations of a break-even motive.

The overarching purpose of the economy should be the well-being of all people and the sustainability of the environment. However, the continuing focus on economic growth leads to the degradation of the environment and an overall reduction in social and individual well-being. Economic growth only benefits a few people. In a report1 from January 2018, Oxfam estimated that 82% of all wealth created in the previous year went to the top 1% of wealthiest people, and nothing at all went to the bottom 50%. Yet rates of poverty, unemployment, mental illness, substance abuse, family violence and crime continue to increase.

From an environmental point of view, economic growth can’t continue if we are to live sustainably. Unlimited growth on a limited planet is impossible. The global economy currently uses resources at over one and a half times what the earth can sustainably provide. Whilst there are advances in technology and efficiency, the efficiency gains are continually outstripped by growth, meaning there still continues to be net growth in resource use.

A steady-state economy

For these reasons, Econation advocates a steady-state economy. A steady-state economy is one in which the level of resource use sustains the well-being of people, but resource use doesn’t increase over time. Also, the total amount of resource use must not be more than the earth can sustainably produce.

If this seems unthinkable, consider a mature forest. There is ongoing birth, growth, death, decay and redistribution of resources in a mature forest but there is no overall growth in the ecosystem. It has reached the limit of its growth and is the optimal size for its environment. An economy is not a forest, but it is similar in the respects that it is a very complex, living system and it is limited by environmental constraints.

The definition of economic growth is any growth in the production of goods and services. There are a number of factors that lead to economic growth, one is interest on debt. Another is population growth. However, the biggest is the investment of profits for more productivity and therefore more profits, compounding over time. Throughout history, people considered profiteering to be unjust and repugnant. However, the ideology of capital growth took hold in the 19th Century and became rampant by the end of the 20th.

Not for profit

In order for a steady-state economy to become reality, the profit motive will have to end. It will be replaced by the break-even motive in not-for-profit organisations. There are many types of not-for-profits including co-operatives; community trusts; mutual societies such as customer- or employee-owned societies; credit unions; and so on. There being no financial incentive for people to own businesses their motive will be to provide needed goods and services to their communities and to support the well-being of employees, customers and members.

The benefits of the break-even motive

If businesses are run to break-even the following is likely to happen:

  1. There will much less benefit in economies of scale, so businesses will tend to be smaller. For environmentally sustainable human well-being the ideal business is small, local and circular. Local, regional or national government will tend to own businesses that have to be large e.g. railways, ports, airports, hydroelectric schemes.
  2. Automation of industry will decrease. The purpose of automation is to increase productivity at a lower cost, for profit. Less automation will mean more jobs and less resource use.
  3. Workers in small, local, worker-owned businesses tend to get more meaning and satisfaction from their jobs because their jobs are less abstract and more relevant.
  4. There will be less cutting corners for the sake of profit and therefore there will be a general increase in the quality of goods and services – particularly in terms of usability, durability and longevity. And there will be no planned obsolescence or ‘this season’s colours’, for example.
  5. There will be much less useless junk, it only exists because there is profit in it. The goal of design and production will be to get the most amount of well-being with the least amount of resources and environmental harm.
  6. There will be less advertising, especially of the persuasive type that emotionally blackmails people to buy what they don’t need.
  7. Without a profit imperative, the media will be free to be what it should be – uncompromised, objective, comprehensive and truth-seeking in the public interest.
  8. Politics, and public discourse in general, will be less about the economy and more about people and planet.

Changing to a break-even economy

How do we change from a profit-motive system to a break-even motive system? The only way is through the will of the people. The vast majority of people will be better off in a break-even, steady-state economy and it is those people who must take the initiative. Rich people will have less material wealth but they will still have rich lives like everyone else.

Assuming that we maintain a market economy, the practical way to promote the break-even motive is to support not-for-profit businesses as well as local, small-scale businesses. Examples of these types of businesses are:

  • Producer markets (e.g farmers markets) and co-ops instead of supermarkets
  • Small locally owned shops rather than big-box stores
  • Credit unions and savings-and-loans clubs instead of privately-held banks
  • Mutual insurance societies instead of privately owned insurance companies
  • Mutual healthcare societies instead of private healthcare businesses
  • Locally produced craft foods instead of industrially processed foods
  • Public schools rather than private schools

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(1) https://www.oxfam.org/en/research/reward-work-not-wealth