Circular realities: Shaping strategies for the circular economy (pt. 1)
A circular economy strategy starts by acknowledging that every natural resource is scarce (yet regenerative).
The Norwegian government has announced it’s plans for launching a circular economy strategy for a long while. Now that the strategy is right around the corner, it is useful to review some of the central tenets of the circular economy. In this and following pieces, I will provide some reflections on what are key to succeed with any circular strategy.
When the government says that Norway will become a pioneer in a circular economy, it is fundamentally about re-describing the economy. An economy based on ‘circular principles’ is nothing new. After all, the Stone Age didn’t end because you ran out of stone. Many of nature’s systems are also based on cyclical processes, where the waste from one process becomes raw material in another. Unfortunately, this perspective is away from the common socioeconomic models.
The forthcoming circular economy report must therefore look to new explanatory models for how the economy operates, within earth’s endurance capabilities, on nature’s terms. The Government’s strategy for circular economy must be measured on whether it encompasses concepts such as resource scarcity, nature’s reproductive capacity and absolute limitations.
It took a British sailor to ‘reclaim’ the circular economy concept from our collective memory.
In 2004, Ellen MacArthur embarked on a solo voyage to round the earth as the world’s first woman. She spent 71 days on endless, stormy seas alone in a thin trimaran of microfiber. Besides a knighthood, the tour gave her a couple of lessons in a phenomenon we hardly know anymore in our part of the world: resource scarcity. Every gram of material and desijoul energy she brought with her was the very foundation of life for the next ten weeks. Everything she threw became with her for the rest of the journey, in the already crowded cabin she called the kitchen, bedroom, bathroom — and home.
MacArthur quickly realized that her experiences of these days in a sail dinghy on the open sea represented a deeper insight into how our economy works. In 2010, she established a foundation that transferred these lessons to the world economy and established the now prevailing description of a circular resource management, known as the butterfly model.
The very phrase ‘circular economy’ first appeared in a 1966 essay written by Kenneth Boulding titled ’The Economics of the Coming Spaceship Earth’ in which he suggests that we see the economy as a spacecraft passing through the universe. And on this journey, the supplies “from the galley” are all we have got. A couple of years later, in 1772, the landmark report titled “Limits to Growth” launched, which largely argued that human exploitation of natural resources exceeded the Earth’s reproductive rate — doubting the opportunities for further material growth.
Hardly every economist agreed with this dim view and presented a range of counter-theories, based on the assumption of ‘substitutability of capital inputs’.
Throughout the 60s and 70s, economists dedicated less and less space to the ‘limiting’ factors, such as land area and natural resources, in their models. Only labour, capital and technological developments are relevant to assessing economic developments in the long term, it was claimed. The models thus started to disregard countries as a factor at all and have not looked back since.
To understand how modern economists lost resource constraints from their models, we need to go back 200 years, to the British economist Thomas Malthus.
At the time Malthus published his best-known work ’on the principles of population’ in 1798, there was acute food shortages and a lack of arable land in England. Malthus delivered what he himself believed was a necessary corrective to the prevailing optimism among several of the intellectuals of the time, especially radical philosophers in England and France (much of the text actually stems from a letter exchange with his father, who described himself as a ‘radical optimist’). Malthus, on his part, predicted a tragic end for humanity as the population would eventually, and unequivocally, outgrow the food production.
Historians today refer to this as the ‘Malthusian trap’, which biologists again refer to as a population ceiling. For economics, Malthus’s contribution was actually to mathematically confirm that economic production is characterized by the law of deminishing returns.
Malthus nevertheless marks the beginning of the end for the idea of resource scarcity within the mainstream of economics. In retrospect, Malthus has become a target for economists who argue that the 20th century’s growth history disproves any concern about ‘natural cielings’. From the 1970s onwards, the economist will instead highlight the unique human ability to masterfully exploit natural resources in more efficient ways.
In theory, according to the father of the Neoclassical Growth Model, Robert Solow, there is no reason not to assume unlimited resource supply in the future.
The economist William Nordhaus stated in a 1972-article that so-called man-made backstop technologies would step in to save the day once scarcity strikes. In practice, the economy can make use of endless resources, without further consequences, Nordhaus claimed. (Solow, in his own 1973-article, mentioned nuclear power as a promising backstop technology for our growing energy needs during the 1970s).
By replacing the emphasis on the limited resources of countries with boundless technological advancement in the private sector in the models, generations of economists became blind to both resource waste and overconsumption. The field of environmental economics has since built on welfare economics to internalize the economy’s environmental impact, but without fully acknowledging absolute resource constraints and material throughput.
The Dasgupta Review, appointed by the UK government, recently presented its report on the place of biodiversity in the field of economics. From the outset, the report assumes that the economy is a subsystem of nature and suggests that rather than trying to force-fit nature into existing models, economics ought to restore nature’s position in (macro)economic calculations. This means that the models of the (national) economy are re-built on nature’s terms where concepts such as absolute energy exchanges and material flows, limited inventories, as well as nature’s reproductive capacity, are included.
In practice and as a policy objective, the circular economy is an attempt to correct these outdated macroeconomic models.
Thus a realistic circular economy strategy must always starts with the recognition that nature is not an inexhaustible resource, nor a boundless wilderness at the whims of economic needs. All research suggests that today’s fossil-driven, linear economies far exceed nature’s planetary boundaries. Despite our technical ingenuity, we now seem to encounter Malthus’ infamous cieling.