Saturday 22 March 2014

The Circular Economy

In the context of recent pronouncement in the Budget on 'resilience'
Futures Forum: Budgeting for resilience?
and the ideas coming out of the Transition Town movement
Futures Forum: Building resilience in local communities and economies: the Transition Town movement today
there is the notion of the 'circular economy' - promoted by solo long-distance yachtswoman Dame Ellen Patricia MacArthur :
Ellen MacArthur - Wikipedia, the free encyclopedia

In 2010, she launched the Ellen MacArthur Foun

The Ellen MacArthur Foundation works in educationbusiness innovation and analysis to accelerate the transition to a Circular Economy.

The circular economy is a generic term for an economy that is regenerative by design. Materials flows are of two types, biological materials, designed to re-enter the biosphere, and technical materials, designed to circulate with minimal loss of quality, in turn entraining the shift towards an economy ultimately powered by renewable energy. 

What is the Circular Economy 100? - YouTube
Home - Ellen MacArthur Foundation

Resilience vs Efficiency

The circular economy, like all economies, is about flow. The flow of energy and materials which produce what we use or consume and the flows of money which enable exchange. What is different about the flows in a circular economy is that unlike the linear economy all of these flows matter. To see why this is important it is easiest to look at an example from living systems. Take an example of a piece of land which has a forest on it (see below). Over time the forest will have evolved through several stages in an adaptive way to be the fine mature forest we are assuming exists now.

In the forest stage to the right of the diagram, soils have built up, there is a lot of diversity and energy and material flows are tapped by plants and animals with theresult that energy flows effectively, waste is food and the forest is resilient. This means that if a part of it is destroyed, say by an avalanche or a forest fire it will usually repair itself.

“Resilience is the capacity of a system to absorb disturbance and reorganise while undergoing change so as to still retain essentially the same function, structure, identity, and feedbacks.”

To do this there has to be a number of features. There has to be redundancy, meaning that there are many ways that the damage can be repaired. For example repair can come from combinations of plants and animals or from bacteri, fungi, etc, and within each category there are many different sub-species which can do the job (diversity) and that these are spread out so that it is unlikely that damage in one area eliminates all of a particular population.

A comparison in engineering is the resilience around the ability to lower the wheels on some commercial airplanes. They can be lowered electronically, hydraulically, or manually (redundancy and diversity), and the control systems for each one are all located in different parts of the plane (distributed). The expense of the resilient systems seems ‘worth it’.

In a system designed for efficiency the expense of having a resilient system is seen as wasting resources. In the forest example, the land might be cleared to grow just a single crop, since every other plant and animal competes for the available energy and material flows. The system is simplified. Perhaps artificial fertilisers keep up the nutrients lost from harvesting, perhaps machines are used to cut down the need for human labour or pesticides to guard against pests. The capital which was built up in the soil, for example the carbon or the mycelial structure of the soil is degraded in search of more throughput. Wastes are not always captured as food and run off from pesticides and fertilisers are externalised (sent elsewhere where they may cause damage). Most significantly, the more efficient the system the more brittle it is. This means it is like glass or a person who is under stress: a shock or disturbance causes a shattering or a major breakdown.

Apparently all systems with flow, whether energy, materials or digits in the banking system, experience a similar trade off between efficiency (and brittleness) and resilience (adaptive to shock but slow to change more fundamentally). Here is a graphic that shows this relationship.

To optimise the system means finding that place between too much efficiency, risking large scale breakdown from time to time, and too much resilience, which risks stagnation and struggles to accept change. Imagine a traditional village in a remote location which is well adapted to its circumstances. It may be an enduring village, but it may resist change. Its young people will then, in turn, find the community’s inability to change offers them little motivation, and so lacking efficiency, life for the villagers is very hard. In a circular economy, all the flows matter because it is whole systems approach and what is sought is a healthy system in a positive relationship to the part which we are especially interested in. 

circulareconomy - Resilience vs Efficiency

Money and Stuff

A great deal of discussion about the economy focuses on taking, making and consuming; on the using and inputs of energy and the flow of materials. There are other essentials and one of them is money.

In short, money need not be created as debt by private banks and the amount of money would be kept in balance with the output of the economy. It would be supplied by the government as a public utility. Banks would lend only what money has been saved (a shift towards 100 percent reserve banking). In terms of the balloon metaphor the balloon should balance the basket so that it floats and neither falls nor rises very much.

Interest is also interesting. Why should just holding money be rewarded? Unless the money is invested productively in say buying a bakery or something which produced more real wealth, holding money means it is not acting as a medium of exchange and not doing its main job. To make sure that the flow is kept going, the idea of interest for merely holding money would be replaced by a maintenance charge. Impossible? These seemingly strange ideas all have a very long intellectual history (1).

“The money system is the most powerful, and most overlooked, leverage point for large scale change in our global society. Any realistic approach to sustainability will require us to consider monetary issues,” says Bernard Lietaer.

The choice about how money is created and whether interest can be charged is one which, in a history stretching back 5,000 years, has been the cause of war, has exercised the minds of no less than five US presidents, has driven an influential social movement in the 20th century (2), and reaches way back to the great religions who, with rare unanimity, prohibited usury (lending money at interest).

Money and how it is created could be a lynchpin for a circular economy, one where money facilitates the exchange of resources but reinforces longer rather than shorter term planning and investment, for example, in rebuilding and servicing capital used to provide stocks of materials for use in technical cycles. It is also important because how money is created is a system condition in any economy.

(1) Debt: The First 5,000 Years by David Graeber
Debt: The First 500 Pages | Jacobin
(2) CH Douglas and Social Credit Party of Canada in the mid 1930s.
See also Silvio Gesell, Irving Fisher, Frank Soddy and others on stamp scrip (also 1930s)

See also:

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