1.1.3 Degenerative economies
Helpful prior learning and learning objectives
Helpful prior learning:
Section 1.1.1 The economy and you which explains what an economy is and how it is relevant to students’ lives
Section 1.1.2 The embedded economy, which explains the relationship between the economy and society and Earth’s systems.
Section S.1 Systems thinking, which explains what a system is and why systems thinking is useful. (coming soon)
Section S.x Feedback loops and tipping points, which explains the roles of reinforcing and balancing feedback loops in amplifying or dampening change. (coming soon)
Learning objectives:
outline characteristics of degenerative economies: linear, extractive and divisive, endless and aimless growth
Before his death in 2017, Hans Rosling was an unusual superstar. A data analysis expert and health professor at Sweden's Karolinska Institute, Rosling told surprising stories using Lego bricks, Ikea boxes, and dynamic graphs of data.
Rosling argued that our views on the world are too negative. He used data on incomes, life expectancy, and other indicators to show how standards of living have improved over the last 200 years. The video below shows his entertaining approach and insights.
Rosling's analysis has critics. They note that while human living standards have improved, ecosystems suffer. Since the 1950s, a period known as the Great Acceleration, there has been explosive growth in the economy and human populations. Excessive use of energy and materials and waste production now threatens human development.
Critics also note that since the 1970s, economic inequality has increased. The world’s wealthiest people take far more than their fair share of natural resources and put disproportionately large amounts of waste back into nature.
These problems are part of the metacrisis, complex, interconnected social and environmental challenges. These challenges come from degenerative economies, where humans take more from nature and each other than they give back, eroding life-supporting social and ecological connections.
What are degenerative economies?
Degenerative economic systems erode human and ecological relationships by being:
linear
extractive and divisive and
endlessly and aimlessly growing.
Linear economy
The economy is all the human-made systems that we use to transfer and transform energy and matter to meet our needs. Our current linear economies take energy and materials from nature, make products used to meet our needs, and then throw them away as waste back into nature (Figure 1).
Figure 1. Our current linear economy
This linear system is degenerative because it disrupts the ecosystems on which we depend. We use too much energy and matter to produce what we need and also produce many things that do not support human wellbeing. Then we dump our waste, much of it toxic, back into nature, further harming ecosystems (Figure 2).
Figure 2. Plastic waste from linear economies
(Credit: Bo Eide CC BY-NC-ND 2.0)
Extractive and divisive economy
Our economies are also extractive. They take too much from ecosystems and human communities without giving enough in return, weakening social systems. This behaviour contrasts with the mutualism and reciprocity needed for thriving ecosystems and social systems, discussed in Section 1.1.1.
Business leaders are often taught to maximise profits for a small group of owners or shareholders. Profit-maximisation is a core assumption in many economic models. In practice, this means using power to take as much money as possible from others:
from households through high prices
from workers through low wages
from suppliers through paying low prices for resources
from the state through avoiding taxes needed to fund infrastructure and social services we need
from nature by taking as much energy and material resources as possible and dumping waste back into nature.
This extractive economic behaviour, where economic value is taken from the many to enrich the few, worsens economic inequality.
Aside from extractive behaviour, economic inequality also increases from reinforcing feedback loops of wealth and income. Wealth is a stock, the total value of someone’s assets such as money, house, or investments. Income is a flow, the ongoing money earned from work or investments that enters a stock of wealth.
When wealth increases, people can use it to earn more income and further increase wealth (Figure 3). If you own an apartment, you can rent it to earn income, increasing wealth further. On the other hand, people with low incomes and wealth may experience conditions that further reduce incomes and wealth. Low incomes limit access to education, healthcare and other necessities, reducing economic opportunity and worsening health, which negatively affects incomes and wealth. These reinforcing feedback loops worsen economic inequality.
Figure 3. Reinforcing feedback loop showing how changes in wealth lead to changes in income that reinforce the change to wealth
One consequence of this inequality is overconsumption by rich individuals and Global North countries, leading to excessive use of energy and material resources. These individuals and countries also produce most of the waste and historical carbon dioxide (CO2) emissions that remain in the atmosphere causing global warming. Meanwhile, those with lower incomes and Global South countries bear the negative consequences: vulnerable jobs, pollution and climate-related disasters.
Another consequence of economic inequality is weaker democracy. Rich individuals and businesses may use their power to influence political decisions for their own economic benefit, called political capture. This causes public discontent and protest (Figure 4) and strengthens support for radical politicians. Our current economic systems promote social division, instead of the social cohesion needed to address local and global challenges.
Figure 4. Social protests in Chile, 2019.
(Credit: Carlos Figueroa CC BY-SA 4.0)
Endlessly, aimlessly growing economy
Degenerative economic systems also strive for endless economic growth, measured by gross domestic product (GDP). Gross domestic product is the total value of all final goods and services produced in an economy.
Many governments aim to increase GDP, believing that growing economies lead to the ‘the good life’. However, any economic activity involving an exchange of money can be counted in GDP, no matter whether it has a positive or negative social or ecological impact. Spending on the military (Figure 5) raises GDP, but is unlikely to support human and ecological wellbeing. Meanwhile, unpaid economic activity, like household care and domestic work, is not usually recorded in GDP, but is essential for human thriving. WHAT our economies produce is more important than HOW MUCH we produce.
Figure 5. Military spending increases GDP, but is unlikely to support human and ecological wellbeing
(Credit: Somchai Kongkamsri CC0)
Instead of economic growth, our economies should focus on human and ecological wellbeing. As scientist Donella Meadows put it:
“If you define the goal of a society as GDP growth, that society will produce GDP. It will not produce welfare, equity, justice, or efficiency unless you [aim for those goals].”
“Growth is one of the stupidest purposes ever invented by any culture…. We should always ask ‘growth of what, and why, and for whom, and who pays the cost, and how long can it last, and what’s the cost to the planet, and how much is enough?’”
Fortunately, we can do better. One option is a regenerative economy that is circular, distributive and caring, needs-based and sufficient.
Activity 1.1.3
Concept: Systems
Skills: Thinking skills (transfer)
Time: 30 minutes
Type: Individual, pairs and/or group
Option 1: Describing degenerative characteristics of industries
Use what you learned in this section about degenerative economies to consider the characteristics of one or more of the following industries might be considered degenerative.
If you are stuck, you may wish to look up criticisms of these industries. Brainstorm ideas and discuss with a partner or as a class group.
Social media technologies
Fast fashion
Oil industry
Food delivery using workers in the gig economy
What would have to change in these industries to make them less degenerative?
This question will help prepare you to consider what regenerative economies could look like.
Option 2: Exploring global economic inequality data
Access the World Inequality Database
Individually, or with a partner, explore the database and select some interesting data to practise interpreting using a strategy that your teacher recommends. Aside from basic understanding of what the data show, make sure you can also explain the significance or importance of the data - what is the point, why is it interesting?
Share what you learned from the data with another pair, or with the whole class.
Data interpretation strategy (if you do not have one)
What is the title of the data? Clarify any questions you have about it
If a graph, what are the axis labels? Clarify any questions you have about them.
If a table, what are the row and column labels? Clarify any questions you have about them.
If a choropleth (coloured) map, what do the colours represent? Clarify any questions you have about them.
If some other form, make sure you understand the labels, colors, or other descriptive information provided.
Identify one fact from the data. Identify a second fact from the data.
Is there a pattern in the data? What story does that pattern tell?
If the data has dates, is there a trend over time? What story does that trend tell?
Are there any anomalies in the data? What might explain the anomaly?
Ideas for longer activities, deeper engagement, and projects are listed in Subtopic 1.5 Taking action
Checking for understanding
Further exploration
Take the Gapminder Quiz to see how well your perceptions of the world match up with data. Difficulty level: easy
The Story of Solutions - A video that explores how to achieve a more sustainable economy, starting with choosing better goals. Difficulty level: easy
Kate Raworth on Growth - A video explaining the problem with economies that focus on growth and how we need to shift our goals to meet the needs of all within planetary boundaries. Difficulty level: medium
How has income inequality within countries evolved over the past century - An article from Our World in Data about how inequality has changed over the past 100 years and what that tells us about how we can change our economies to support economic equality. Difficulty level: medium
The Lorenz Curve and the Gini Coefficient - Two videos explaining a way of calculating economic inequality used in some secondary economics courses. The two videos can be combined with Our World in Data’s choropleth map to explore country differences over time in the Gini coefficient. Difficulty level: high
Sources
The Donella Meadows Project. The Academy for Systems Change. (2021). https://donellameadows.org/
Ellen MacArthur Foundation. How to Build a Circular Economy. https://www.ellenmacarthurfoundation.org/
Gapminder. (n.d.). The Worldview Upgrader. https://upgrader.gapminder.org/.
Hasell, J. (2023) - “How has income inequality within countries evolved over the past century?” OurWorldInData. https://ourworldindata.org/how-has-income-inequality-within-countries-evolved-over-the-past-century'
Oxfam International. (2024). Inequality Inc. Executive Summary. https://oi-files-d8-prod.s3.eu-west-2.amazonaws.com/s3fs-public/2024-01/Davos%202024%20Executive%20Summary%20English.pdf.
Raworth, K. (2017). Doughnut economics: seven ways to think like a 21st century economist. London: Penguin Random House.
Reardon, J., Caporale, M. M. A., & Cato, M. S. (2018). Introducing a new economics: Pluralist, sustainable and Progressive. London: Pluto Press.
Terminology (in order of appearance)
life expectancy: the average age that people in a particular population group will be when they die
indicator: a variable that measures a characteristic of a group of people or an ecosystem
ecosystem: the interaction of groups of organisms with each other and their physical environment
Great Acceleration: a period of dramatic increase in human economic activity and impact on the Earth's systems since the mid-20th century
economy: all the human-made systems that transfer and transform energy and matter to meet human needs
economic inequality: unequal distribution of income and opportunity between different groups in society
metacrisis: complex, interconnected social and environmental challenges
degenerative economy: an economic system that meets human needs in a way that degrades and destroys social and ecological systems
regenerative economy: an economic systems that meets human needs in a way that strengthens social and ecological systems
extractive: taking something from other humans or from nature without trying to replace it or avoid harm
transfer: to move something from one place to another
transform: a change in the state, energy or chemical nature of something
energy: the ability to do work or cause change
matter: anything that takes up space and has mass
linear economy: an economic system where resources are extracted to make products that eventually end up as waste
mutualism: a relationship between two species in which both species benefit
reciprocity: exchanging things and favours with others for mutual benefit
profits: total revenue from selling a product minus the total costs of producing that product (revenue-costs)
shareholder: a person or organisation that ownes a share, or portion, of a business
profit-maximisation: a business goal that seeks to maximise the difference between revenues earned from selling a product and the costs of production
power: the ability to influence events or the behaviour of other people
household: a system where people living together care for each other and do domestic work, often termed the 'core economy'
wage: payment for work
tax: payment from individuals or organisations to the government, used to provide public infrastructure and services
infrastructure: large scale physical systems that a society needs to function (roads, railways, electricity networks, etc)
reinforcing feedback: a situation where change in a system causes further changes that amplify the original change which can lead to tipping points in a system
wealth: the total value (stock) of someone’s assets such as money, house, or investments
income: the ongoing money earned (flow) from work or investments
stock: an accumulation of something, such as energy, matter, information, or money
asset: something that is useful and valuable
flow: movement of something such as energy, matter, information or money between stocks
Global North: a group of countries with high incomes and more industrialisation and service-based economies; these countries bear most responsibility for exceeding planetary boundaries
carbon dioxide (CO2): gas produced by burning carbon or organic compounds and through respiration, naturally present in the atmosphere and absorbed by plants in photosynthesis
global warming: the rise in the average temperature of Earth's air and oceans (due to human activities)
Global South: a group of countries with low-middle incomes and less industrialisation; most of the global population lives in these countries, but these countries bear little responsibility for exceeding planetary boundaries
political capture: when the government prioritises the interests of economically powerful groups over the general interests of the public
social cohesion: the extent to which people in society feel connected to one another and share common values
econmic growth: an increase in the total value of goods and services produced in a period of time
gross domestic product (GDP): the total value of all goods and services produced in an economy in a time period
the good life (buen vivir): a life that brings wellbeing, with all its possible meanings, to self and others
circular: having the form of a circle; in this course, closing the loop on linear economic systems
distributive: when something is shared widely or evenly among individuals
sufficient: when there is enough of something
gig economy: working conditions where there are short-term contracts or freelance work as opposed to permanent jobs