CHALLENGES – Economics

Many people consider economic and environmental issues separately. Within Irish society, issues relating to the environment and sustainability are often disconnected from debates about restoring our economy, which is frequently viewed as a more pressing issue deserving immediate political attention. This misses the important point that our economy and environment are in fact intimately connected; the very existence and working of the economy is dependent on the natural world of which it is a part. Without a healthy and sustainable planet, the possibility of a well-functioning economy is impossible in the long-term. This crucial fact should be reflected in the way we organise ourselves socially and economically. The current economic system, based on principles of infinite growth, resource exploitation and continued wealth creation, is failing to recognise the limitations of the finite planet on which it depends for its continued existence. The current dominant economic model can be described as ecologically illiterate.

Transformation in economics is a key part of any Energy Descent Action Plan. The transition process will require reconciling our economic model with environmental and social concerns. This process is not straightforward. In the context of powerful international agencies and big business promoting continued economic globalisation and growth of corporate power, the importance of rebuilding our economies together on a more sustainable, local and human scale has never been more important. This chapter focuses on first outlining some of the key challenges that characterise the present economic system before laying out some key pathways and solutions for transition, identified by Galway’s community and beyond.

The Current Economic System
Over the past couple of centuries the industrialisation of human societies and rise of the globalised economic system has transformed the way we live. This process has been influenced strongly by what is known as the ideology of neoliberal capitalism – a particular perspective on how the economy should work, that emphasises principles of growth, minimal state influence in the market and intensive use of finite resources to produce material goods. Some of the key problems that have been identified with this system are as follows:
• Economic growth and progress is measured narrowly as increases in GDP (gross domestic product), which ignores other important indicators of a healthy, functioning society such as levels of inequality and well-being.
• Neoclassical economics grossly fails to take into consideration the true environmental costs of economic activity.
• The model of growth relies on unsustainable levels of consumption in society leading to resource scarcity, increasing CO2 emissions and environmental degradation.
• There is considerable evidence showing that this system is leading to a widening of inequality, with the gap between rich and poor much greater in societies embracing free market capitalism.
• There is also evidence to suggest that increasing wealth creation does not lead to more happiness or a better quality of life, and, in fact, over a certain threshold, it can diminish these.
• This system (with commodity chains that span all over the globe) relies heavily on inexpensive and abundant fossil fuels. These are finite resources. Global oil production is now peaking and cannot be relied on indefinitely to support this trade system.

This dominant model of economics is blindly taken for granted by governments and many members of society as the only way economics can and should work. When we talk about “recovery” from the financial/economic crisis we continue to focus on more and more growth. Globalised, resource-intensive growth cannot continue indefinitely in a finite world and, sooner or later, as population growth continues and more and more people seek to attain standards of living experienced in the western world, pressures on natural resources will lead to extended periods of economic crises. However as we will see below, other ideas and models exist that move beyond a narrow focus on wealth creation, and that emphasise ways of conducting economics as if both people’s well-being and that of the planet matter. These solutions centre around some key concepts such as: reconciling economic goals with social and environmental justice; localising economic activities where possible; and moving from a focus on short-term gains to a long-term vision of well-being and flourishing for generations to come. Our vision is one in which Galway incorporates these solutions to become a truly sustainable and resilient economy, now and into the future.