Engaging with established economics

Scottish Environment LINK, the umbrella body for environmental NGOs in Scotland, has become increasingly aware we need to understand economics and economic policy. In this article, I reflect on some of the recent work undertaken by its Economics Taskforce on GDP and the national performance framework, the circular economy and ways of accounting for the value of nature.

Although the concept of sustainable development clearly situates economics as a means to human wellbeing albeit constrained by environmental limits, this is not generally reflected in the positioning or framing of policy areas. In Scotland, ‘Scotland’s Economic Strategy’ sits above other strategies and policies and alongside the National Performance Framework (NPF). LINK is arguing for significant changes to its structure and content.

The NPF is a matrix that links the Scottish Government’s aspirations to targets and indicators, being centred upon the government’s desire to create ‘a more successful country, with opportunities for all of Scotland to flourish, through increasing sustainable economic growth’. We believe GDP needs to be a less prominent indicator of success and important environmental and social indicators (like carbon footprint, air quality, biodiversity; quality of people’s local environment, jobs and relationships) as well as additional economic indicators (like median household income, income and wealth inequality) should be elevated to play an increased role in assessing what is important in our society.

Despite seemingly widespread agreement of the need to move ‘beyond GDP’, mainstream media regularly presents GDP figures without qualification or questioning and ‘success’ remains largely synonymous with data which only measure the busy-ness of the economy, saying nothing about how the benefits and costs are distributed, nor the impact on the environment. LINK is beginning to get some media coverage, highlighting important indicators other than GDP and reminding people that the economy is a means to wellbeing, not an end in itself, and that our society, economy and entire life support system are integral to a healthy environment.

From a different angle, the concept of the circular economy could also change the shape and environmental impact of our economy. A circular economy is an alternative to a traditional linear economy (make, use, dispose) in which we keep resources in use for as long as possible, extract maximum value from them whilst in use, then recover and regenerate products and materials at the end of each service life. This concept is popular with the Scottish Government which has set up the Scottish Institute of Remanufacture and has commissioned studies to examine how suitable various sectors might be to circular economy models and the carbon impact of the circular economy. Currently, the Scottish Government has a public consultation open and LINK is commissioning a study to look at the strengths and weaknesses of the concept and what opportunities it might offer to the environmental movement.

Another area of interest to LINK and environmental NGOs is developing concepts, mechanisms and methods that seek to bring environmental criteria into the economic decision-making. There is a tension here because while market economics is seen by many environmentalists as one of the main causes of environmental degradation, suggesting it should be abolished, there are attempts to ‘fix’ this model by recognising the importance of the services that the environment provides and enabling these to be taken into account in cost/benefit type decisions and business strategies.

Two related concepts, ecosystem services and natural capital, have been the subject of debate within the environmental movement. Discussion within LINK highlights both useful applications offered by these concepts and a range of concerns. Natural capital accounting enables organisations to take account of environmental impact and reliance on natural assets. An assessment of the status of it could guide investment decisions and be built into credit ratings. Quantification of both concepts might provide a barometer for a nation’s natural wealth and generate information to set the rates for taxes and subsidies.

However, they are also utilitarian concepts and economics as the main criterion in decision making is further elevated. Additionally they cannot capture the full value of nature, and there is danger that conservation related policy is driven by optimising them so that existing regulations and non-market mechanisms, such as protected areas and planning policy, will be deemed less important. Last is the concern that the pathway to commodification of nature and a market in nature is opened.

Increasingly studies and reports are presenting economic rationale for resource management decisions that include the use of these concepts coupled with environmental economics methodologies. We need to be able to assess the robustness of such work and make informed decisions about whether and how to use it.

LINK has also been thinking about how these and other environmental issues interact with working towards a more socially just society. We can discern different approaches to economic questions from different types of environmental organisation. Some are primarily concerned with conservation but understand that breaching climate change and other natural limits threatens those objectives. Others are focused on campaigning issues. Both recognise that integration of an environmental narrative into dominant social and political discourse is needed to achieve their objectives.

Phoebe Cochrane is Sustainable Economics Policy Officer at Scottish Environment LINK http://www.scotlink.org/). She works with the Economics Taskforce on developing the Flourishing Scotland report.