Wednesday, March 5, 2014

1344. The Circular Economy: The Transnational Elites response to the Limits to Growth?

By Jonathan Rutherford, March 5, 2014

The global market-capitalist economy is a growth machine. Capital accumulation - the endless quest to invest money in order to make more money – is, and always has been, the defining imperative of the system. It cannot stand still. As Marxist Scholar William Robinson puts it capitalism is like a bicycle. If you stop peddling a bicycle you fall over. Likewise if capitalism stops expanding it crashes. Marx, of course, pointed this out long ago more poetically: ‘accumulate accumulate that is Moses and the Prophets’. But, as growing numbers of people are realizing, this ‘growth compulsion’ is obviously a major problem given we face severe limits to growth. The Marxist Geographer David Harvey talks about the ‘contradictions of capital’. This contradiction – between accumulation and ecology – is, I think, the deepest and most fatal for the system.

The contradiction is so severe that members of the transnational elite – who now informally govern the world capitalist economy – as well as the army of ‘sustainability’ experts who, usually with good intentions, serve them, are getting very worried. According to a new report put out by the World Economic Forum the world economy is struggling to cope with a historically unprecedented rise in resource costs. It notes that since the turn of this century ‘commodity prices overall have increased by nearly 150% from 2002 to 2010, erasing the entire last century’s worth of real price declines.’

The report attributes the rising prices to the rapidly growing demand from new consumers, so-called, ‘emerging economies’. But as the eco-socialist Saral Sarkar has argued it is very likely there is a deeper cause rooted in growing geo-physical energy and resource scarcities. As he says, ‘the raw materials in question must increasingly be extracted in geographical and geological regions and layers of the earth which are getting more and more difficult to access.’ After all if the price rises were only the result of rising consumer demand we would expect to see additional supply come alone from resource/energy companies resulting in a drop in price back to previous levels. This has not happened. 

In the future, resource costs could conceivably be brought down if access to abundant cheap energy is found, but this is not likely given the emergence, in the last decade, of expensive oil, and with  forecasts for peak fossil fuels, including coal, as early as 2020. Renewable energy technologies – even if they could be scaled up quickly – will be far more expensive, especially when one factors in the rising cost of increasingly expensive fossil fuels inputs necessary for the infrastructure.  

What then to do? Many of the more enlightened members of the TE are pinning their hopes on the 'Circular Economy’. This is actually a rehash of ideas that were popular during the last systemic crisis of capitalism in the 1970s when it was then called ‘industrial ecology’ or the ‘closed loop economy’. The aim of the circular economy is the familiar ‘green growth’ hope. As the report makes clear:

The concept of the circular economy is rapidly capturing attention as a way of decoupling growth from resource constraints. It opens up ways to reconcile the outlook for growth and economic participation with that of environmental prudence and equity. It is inspiring CEOs, politicians, engineers, designers and the next generation of leaders

So the aim is not the end of capital accumulation. Given capitalism that must, as always, go on. The aim is to 'decouple growth' from resource consumption.

According to the report the circular economy is about more than just recycling. It is involves reducing resource consumption across the entire production process, and also between industries, via reuse and recycling of materials. As one summary puts it ‘it is a model of industrial production which involves designing products so they last longer, so they can be repaired and upgraded, so they can be reused or resold (on eBay, for example), and so their materials can be used in remanufacture.’ The circular economy, in short aims to apply the old ecological principles - reduce, reuse, and recycle - to all resources across the economy.

Great idea. Any future ecological economy worth its salt would be based on these principles. But of course the World Economic Forum is discussing all this within the context of the market-capitalism. And there in lies the fundamental, indeed insurmountable, problem.

For starters, unless they are forced by (unlikely) regulation, capitalist firms concerned, as always, first and foremost with the bottom line, will simply ignore many of these measures. They will end up as so many ‘nice ideas’ in a flashy report. Take ‘making products to last’. That just ignores the reality of capitalism today. Firms back in the 1930s used to make fridges and toasters etc to last. But gradually they learned, under intense competitive pressure, that ‘planned obsolescence’  - i.e. making shoddy cheap products – tended to maximize sales as consumers where forced to return at regular intervals to replace broken or worn out items.

The circular economy concept obviously relies on extensive recycling of materials, whether end-use recycling or intra-firm recycling. But there are real limits to recycling. Industrial commodities are most often made up of a complex mix of materials. Think of a typical mobile phone with its plastic cover, circuit board made up of gold and silver and other precious metals, batteries using nickel, cobalt and cadmium, and the glass display. Separating and collecting those materials, ‘requires the expenditure of energy, labor and materials’ (Sarkar, 1999, 117). And that means it is costly. It is very costly – often prohibitively so – for affluent nations with high labor costs. That is why, for long, companies have found it cheaper to use the global south as a dumpsite for waste. But even more fundamentally, recycling, being an energy-intensive process, will become increasingly expensive in the near future, as energy costs increase.

No doubt, in many cases, as the report points out, the above measures may well be to an individual firms competitive advantage. After all, firms stand to benefit from reducing their expenditure on increasingly expensive resource inputs. But, as Sarkar has noted, what is good for individual firms may not be good for the macro-economy as a whole. For example, the report provides the example of car manufactures selling ‘hours behind the wheel’ rather than new cars to every consumer, thereby reducing overall car production. This may well make handsome profits for the car manufacture despite reduced ‘capacity utilization of their plants and machines’ (Sarkar, 167). But any reduction in car production would inevitably cripple the suppliers of tire, steel and other parts. These firms would experience cutbacks, closures and lay-offs.

The biggest, and most obvious, problem is that any resource reduction is usually outweighed by the sheer growth in output. This applies at both the level of the firm and the global economy as whole. For most capitalist firms, except maybe small niche companies and those shielded from direct competition, growth is an imperative, which must be obeyed on threat of extinction. All must re-invest capital in building up the forces of production and increase market share in order to stay viable. Growth at the level of the firm increases resource use across the economy. A study by Peter Victor on material throughput in Germany, the Netherlands, United States, and Japan found that, from 1980 to 2002, despite a 25 % reduction in material use per unit of GDP, there was an overall 36 per cent increase in resource extraction (Victor, 2008). In Australia, according to the ABS, despite half of all waste now being recycled, landfill continues to grow.

One of the reasons for this macro growth in resource consumption is the ‘rebound effect’ or ‘Jevons Paradox’. This occurs when cost reductions resulting from improved efficiencies increase the disposable income of consumers, triggering increased consumption and overwhelming the original resource/energy savings. The report itself is aware of this problem, but does not discuss or reflect on it at any length. At one point it promises reduced prices for resource efficient mobile phones and washing machines. Apparently they are oblivious to the fact that this will only free up income to be spent on more products, services and industries across the economy, triggering….you guessed it, further resource growth!

The rebound effect is a perpetual reality in capitalism. It renders the noble aims of the circular economy useless. The report believes the circular economy could achieve a ‘materials cost savings of…US$ 1 trillion p.a. by 2025, net of materials costs incurred during reverse-cycle activities.’ But how long will these ‘savings’ last in a 72 Trillion dollar global economy, which requires, at least, 2 to 3% per annum compound growth to stave of economic and political problems?  Not more than six months!

Many more problems and flaws could be pointed out. And this despite the huge resources, and academic research, put into such reports. How can this be explained? Is this just deliberate ‘green’ propaganda, designed to give the impression that something is being done, so the show can roll on and the corporates can continue to rake in the profits? Such an interpretation is tempting. But the reality, sadly, is that ideas like the ‘circular economy’ are sincerely believed, especially by the army of green sustainability academics and lay people, despite the obvious elite agenda it serves. It is the result of decades of neo-liberal economic training, and the deep penetration of market assumptions into the fabric of our culture. This, in turn, reveals the power of capitalist ideology, and the inability of both academics and lay people to imagine ‘another world’.

All that said, the elite will, very likely, make large reductions in resource use through these efforts. They will have too as the resource crunches intensify. But - and this is the major point - it won't be enough. They will not achieve the vast reductions in resource use required in the affluent ‘global north’ to stave of ecological crises, let alone the numerous other problem this system is generating from global poverty and inequality, endless wars, social and community breakdown and the errosion of democracy and civic participation. According to the best evidence of ecological scientists industrialized countries need to make factor ten reduction in resource/energy throughput. This cannot be achieved via technology, efficiency gains, and waste reductions alone. And neither can it be achieve in or through transnational industrial capitalism, whether of the green variety or not. In affluent societies it will require a radically new simpler, co-operative, and democratic social model that can only be built slowly, over many decades by ordinary people at the grassroots!


Sarkar, S., 1999. Eco-Socialism or Eco-Capitalism: A critical Analysis of Humanity’s Fundamental Choices. London, Zed books

Victor, P. 2008. Managing without growth: Slower by design, not disaster. Cheltenham: Edward Elgar Publishing

No comments: