If you think we’ve been standing still – even going backwards – on reconciling the economy with the natural environment, that’s not wholly true. While our refusal to get real on climate change drags on, we’ve started our journey to the nirvana of a “circular economy”.
Never heard the term? Heard of it, but not sure what it means? Really? It’s the great intellectual fashion statement of 2018.
And, since it has more merit than I suspect many of its advocates realise, we must hope it doesn’t fall out of fashion long before it’s done any good.
Governments around the world are doing things about it. Mainly, saying what a nice idea it is, writing reports and designing “road maps”.
The Organisation for Economic Co-operation and Development has taken up the cause in its RE-CIRCLE project. And no lesser bunch of worthies than the World Economic Forum (the Davos brigade) is enthusiastic.
Here in Oz, last year saw a favourable report from a Senate committee. The Victorian, South Australian and NSW governments have recently signalled their support, with the latter issuing a “circular economy policy statement” in October.
Some of my information comes from an explainer by the Victorian Parliamentary Library, written as recently as October. Circularity is hot, hot, hot.
The explainer explains that, as presently organised, market economies are linear. You take natural resources, process them into many and varied goods – from food to fancy electronic gizmos – which you and I consume before eventually disposing of them. Then we take more natural resources and start the process again.
In contrast, the goal of a circular economy is to keep natural resources in use for as long as possible, extract the maximum value from them while in use, then recover and regenerate products and materials at the end of their serviceable life.
Get it? The ultimate goal is to “decouple” economic growth from the consumption of natural resources.
The OECD points out that, over the last century, global use of raw materials grew at almost twice the rate that the population grew.
To minimise the – to some extent irreparable - damage that economic activity does to the natural environment, we need to ensure it involves less net use of natural resources.
The idea that natural resources should be recycled is one Australians – and people throughout the rich world – happily embraced ages ago. Almost all of us divide our garbage between recycling and the rest before we put it out.
But the concept of a truly circular economy requires us to go a lot further than that. We need to repair the durable products we use rather than throwing them out and buying another.
But that means changing the design of those products from disposable to repairable – and upgradeable. It means making much greater use of recycled materials in the manufacture of “new” products, as well as doing something sensible about all that packaging.
In my limited reading of all the circular economy bumf, I haven’t seen it explained that the basic problem arises from the first law of thermodynamics, which says that matter can be transformed from one form to another, but can be neither created nor destroyed.
In other words, something has to happen to all the natural resources we use to produce and consume. They don’t cease to exist, they just change form. They turn into multiple forms of waste, which we dispose of down the sewer and in landfill.
One important form of waste created by the economic process – particularly if it involves burning fossil fuels – is the emission of greenhouse gases. For more than 200 years we couldn’t see this happening, so we didn’t think it was a problem.
Now we know the gases hang around in the upper atmosphere, trap the earth’s heat from the sun like the roof of a greenhouse, and raise the earth’s temperature.
When you consider how much trouble we’re having agreeing on a solution to that small part of our waste problem, don’t kid yourself dealing with the rest of the waste will be a simple matter of everyone seeing the light and doing the right thing with a bit of encouragement from the government.
What worries me about the circular-economy push is not the objective – it’s dead right - it’s the naivety of those doing the pushing. They want to radically transform the economy, but haven’t seen the need to consult any economists about how you might go about it.
All the governments know better, of course, but they seem to have decided that, as long as it stays on the level of appealing to people to Do The Right Thing, it could keep the greenies diverted without doing much harm.
No one seems to have asked the obvious question: just why is the economy presently linear not circular? Answer: because all the powerful economic incentives push us in that direction.
Because the resources the environmentally aware care about – natural resources – are relatively cheap, whereas the resource they don’t think about, but everyone else does, labour, is relatively dear.
Why do you think the nation’s local councils have been taking most of our recycling and shipping it off to China? Because processing that stuff in a rich country like ours is uneconomic.
Why have the Chinese been taking it? Because their wages were low enough to make processing profitable (that is, economic).
Why have the Chinese now stopped taking it? Because their economic success has raised wage rates and made it no longer profitable.
So, how on earth could we make our economy circular?
Ask economists to figure out a plausible way of reversing our incentive structure. That's the kind of job they do when asked.
