Implications of a steady state economy

What are the implications of a steady state economy?  As part of a occasional series of alternative economics I want to look at some what in my view are pressing economic questions based around peak oil. In Third Way magazine Nick Spencer wrote an article about “Welfare” and the church, or I as I would prefer to call it “Social Security”.  I’m not sure I agree with his ultimate conclusion- but that is not the point of this blog post.

The point is can we afford health and social security in a post oil world with a steady state economy?  Our whole economic system is built around the idea of constant economic growth.  This is course impossible to maintain forever as we looked at in our book.  What happens when we run out of growth?  The problem is that health inflation generally outpaces the general rate of economic growth in the economy.  The reasons for this are pretty obvious.  In the West most people are living longer and new treatments are being developed, so our expectations rise.  If you like we are victims of our own technological prowess.

Its conceivable that when the ecological crisis hits, as has happened when the 2008 crash hit this demand for increased health and social security will carry on going up.  By the way the type of system we have providing this is immaterial.  It all still has to paid for as part of GDP somehow.  Personally I like the “socialist” system we have in the UK.  Its health outcomes are better than the US and its despite its large bureaucracy probably more efficient.  For example we get very large purchasing economies of scale on drugs and other products.  However, that’s by and by.  The problem will be common to all systems in both the US and UK.  Health and social security has to be paid for somehow. The question is how?

One possibility is to tax people more.  This is something I support, especially the rich.  In the UK its hard to think of a tax that has risen over the last thirty years apart from sales tax (VAT) which is regressive anyway.  This can be only a medium term solution.  However high you raise taxes there are ultimate limits.  It delays the crunch point.  Another partial solution is that the fact that many of our health problems in the West have lifestyle causes.  Type II diabetes and obesity would be helped by more expensive food and more exercise.   Both of these seem more likely in a post oil world so much of the pressure on our current health systems would be slowly eased.  On social security we need to maintain very high levels of employment.  Its clearly difficult to totally calculate the job gains and losses of peak oil.  Many jobs will disappear (such as airline jobs) but off-shoring will come to an end and agriculture may become de-mechanised.  Its not impossible to imagine high employment levels, although in the UK most of this bill goes on pensions.

One country that is given as an example in transition circles is Japan.  Over two decades it purportedly  underwent very little economic growth.  Japanese society seemed remarkedly unaffected.  Its health outcomes improved.  However, some people question whether its economic situation was as dire as was made out.  The lesson if true was one of choices, how the Japanese government planned to spend what money it had.

This is probably another aspect of peak oil to which there is no ultimate solution.  We will have to learn to live within our new means and lower our expectations.   If you have any other ideas please fell free to suggest them…

On this happy thought -happy new year!


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2 Responses to Implications of a steady state economy

  1. I think it may be worse than that because currently the system has a lot of throwaway material, based on oil. How are we going to make disposable gloves and syringes win a steady state economy and fewer resources? how will we sterilise materials? how will people with asthma and diabetes get the medicines they need?

    On the other hand with less machines and cars the need for emergency surgery due to road traffic incidents and power saws will be reduced.

    I think you may be correct: healthcare will be more along the lines of simpler medicine and patching people up, and we will possibly have lower life expectancy than we currently do.

    On the other hand, many people I know are dreading old age because they see it as a slow decline into an undignified death on a damp bed in a nursing home. Others have deliberately chosen a more simple lifestyle in a poorer region of the world even though they know it will lead to an earlier death than they would expect in our western medical system.

    I guess we will have to change our focus from how long we can live to how well se can live.

    • admin says:

      Andy thanks for your comment. There is another issue that I will cover in a future post about what is the minimum energy return on energy invested an industrialised society needs to exist.

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