New Economics of True Wealth

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Book: Plenitude: The New Economics of True Wealth. By Juliet B. Schor. Penguin, 2010


Description

From the publisher:

"In Plenitude economist and bestselling author Juliet B. Schor offers a groundbreaking intellectual statement about the economics and sociology of ecological decline, suggesting a radical change in how we think about consumer goods, value, and ways to live.

Humans are degrading the planet far faster than they are regenerating it. As we travel along this shutdown path, food, energy, transport, and consumer goods are becoming increasingly expensive. The economic downturn that has accompanied the ecological crisis has led to another type of scarcity: incomes, jobs, and credit are also in short supply. Our usual way back to growth-a debt-financed consumer boom- is no longer an option our households, or planet, can afford.

Responding to our current moment, Plenitude puts sustainability at its core, but it is not a paradigm of sacrifice. Instead, it's an argument that through a major shift to new sources of wealth, green technologies, and different ways of living, individuals and the country as a whole can actually be better off and more economically secure. And as Schor observes, Plenitude is already emerging. In pockets around the country and the world, people are busy creating lifestyles that offer a way out of the work and spend cycle. These pioneers' lives are scarce in conventional consumer goods and rich in the newly abundant resources of time, information, creativity, and community. Urban farmers, do-it-yourself renovators, Craigslist users-all are spreading their risk and establishing novel sources of income and outlets for procuring consumer goods. Taken together, these trends represent a movement away from the conventional market and offer a way toward an efficient, rewarding life in an era of high prices and traditional resource scarcity.

Based on recent developments in economic theory, social analysis, and ecological design as well as evidence from the cutting-edge people and places putting these ideas into practice, Plenitude is a road map for the next two decades. In encouraging us to value our gifts- nature, community, intelligence, and time-Schor offers the opportunity to participate in creating a world of wealth and well-being."


Interview

Juliet Schor is interviewed by the Capital Institute and focuses on her proposal for shorter working hours. Excerpted from a much longer original interview.

URL = http://www.capitalinstitute.org/forum/braintrust/conversation-juliet-schor


  • Capital Institute: In Plenitude you make the point that policymakers continue to look to the GDP growth model as a cure-all for society’s ills and yet it has failed to deliver higher levels of well-being, solutions to long-term unemployment or a sustainable global economy. You also maintain that developed nations now need to adjust to a lower or zero growth economy because the very survival of the ecosystem requires that they begin to cede their disproportionate use of the earth’s finite resources to developing countries. Can we talk about how a shift to fewer hours worked in the market economy and more hours spent in meaningful, creative nonmarket activities will facilitate this transition?


Juliet Schor: First of all, we need to understand that it is not going to be possible for wealthy countries to downshift into the required lower or zero growth mode unless we start taking productivity growth in the form of fewer hours of work. Let me unpack that. There are two key components of growth in a market economy: one is “extensive” growth where the market takes over areas of activities that were not previously within it. For example, we have had the marketization of domestic services and household production, which has been going on since the 19th century, as women joined the market labor force. The other kind of growth is “intensive,” which involves increases in labor productivity for a given amount of work time--more produced in less time. Since the second half of the 19th century the US and all industrializing countries took a significant amount of productivity growth to shorter hours of work. They transitioned from an average 60-hour work week, down to a 40-hour work week. In Europe work hours have continued to fall with productivity gains. However, since the 1970s the United States has used all of its productivity growth to work more, and to produce more. That means that our ecological impact is expanding and we are putting more pressure on the environment than it can handle. We are seeing the impact on climate, biodiversity, the nitrogen cycle, water scarcity, etc. So if we think about it in the global context where half the world’s population does not have access to ecological resources and we will likely have 2 billion more people on the planet, it is clear that the wealthy who are overconsumers of ecological resources need to reduce the pressure they are putting on those resources. For that segment of the population a shift from work time to leisure is key. Do shorter work hours mean a shorter workweek? Juliet Schor: There are many ways to realize shorter work hours. You can go to a 4-day workweek. A whole extra day is a lot more valuable than a little more time off every day and it cuts off one day of work travel which is a good in terms of carbon impact. But there are other ways to do it. For example in Europe it has been through increases in vacation time with people getting more and more paid vacation--up to 6 to 8 weeks of paid vacations in some European countries. In the US we have no mandatory paid vacation and the average vacation is around two weeks. The other way is to have people work less over their entire working life, retiring earlier, for example, or taking sabbaticals.


  • Capital Institute: Why has this shift been so difficult to accomplish in the United States?


Juliet Schor: When I published The Overworked American: The Unexpected Decline in Leisure in 1992 people were feeling extremely overworked in this country and the reality of rising hours of work hadn’t yet been described. What the book had to say resonated with a lot of people. Before the current downturn many people were reporting that they were working more hours than they wanted to and would prefer to trade some income for more time. So while there may be a mindset now of “let’s just get back to where we were,” we need to be reminded that the status quo prior to the recession was not optimal for most people with full-time jobs.

I have been really surprised since the current downturn how the idea of working less has not been seen as a solution to long-term unemployment. The academic economists who should have been expected to think about this, who should have come to this idea fairly naturally, haven’t. I think it has to do with the hegemony of neoclassical or neoliberal ideas in the economic conversation where growth is seen as the only solution to any economic problem. It is really not so much that people are averse to talking about work-time reduction but that they are averse to questioning growth. Work-hours reduction will be pretty easy to put on the table once we understand that we are not going to be able to grow our way out of unemployment.


At the same time I think it is also important to say work-hour reduction is not completely off the table now. A number of states have moved to authorize what are called shorter work-time policies where rather than lay people off companies can put them on shorter hours and those workers are eligible for unemployment insurance. In the downturn many companies across many different industries used furloughs and shorter hours to avoid layoffs. Some states like Utah and Georgia went to a four-day workweek. They did that in a nice spirit of equity rather than forcing a small number of employees to bear all the pain.

But the four-day workweek didn’t take hold in more than a few states because there was no underlying public policy to reinforce it. Contrast that with European countries such as Germany who used shorter work hours as a primary mechanism of adjustment. They ended up with much less unemployment in the downturn. In the Netherlands the financial sector went to a four-day workweek very successfully in response to high unemployment in the 1980s. It was part of a larger social response to keep their whole population employed. They now have one of the most successful and highly productive economies in Europe, with the shortest hours and high quality of life and personal satisfaction. (http://www.capitalinstitute.org/forum/braintrust/conversation-juliet-schor)

Excerpts

All excerpts below are from chapter 1.


Intro 1

Juliet Schor:

"It is a great pleasure to communicate with colleagues in the P2P world. One of the main points I emphasized in Plenitude is that the transition to sustainability can be seen as a knowledge transition. This is a point that is generally not recognized in the sustainability discourse. Technologists think it’s just about a shift in shifting how we make things, and in the case of climate change as a shift to an alternative/clean energy system. Economists think it’s just dependent on policies such as taxes and subsidies. Social analysts focus on human behaviors such as getting people to eat less meat or drive less or buy less. Another group thinks mainly in terms of sectors.

These are all important perspectives. But they miss a key aspect of the transition—how we transition to a sustainable economy, and the role of open-source knowledge transmission in that shift. If the technologists are right—and I believe they are—that we need a new energy system and new ways of producing in agriculture, transport, manufacturing and so on—then how do those new ways get learned and adopted? Right now, there are two key features of our system that are structuring that process. The first is that we’re relying on for-profit enterprises dealing with proprietary information to lead the transition to clean energy and sustainability. The second is that it’s a mainly large-enterprise process, with either big firms leading the way, or small firms leading and being incorporated into big ones.

Members of the P2P community are very familiar with the downsides of the first feature. Proprietary information can slow down transmission by being too expensive to access, impeding incremental progress (“shoulders of giants” effects get dampened), or because companies have financial interests in stopping adoption of new technologies. What if major solutions to climate change are bottled up by self-interested corporations? That would be a tragedy of monumental proportions, but one that is quite possible under a highly proprietary regime. In chapter 5 of Plenitude, I discuss these issues within the context of a shift to a sustainable production and consumption system.

On the question of scale I discuss why we should being ratcheting down the scale of enterprise, even to the household level. The economics of scale are changing, with households and small firms now having much more potential for productivity than in the past, thanks to the information revolution. Linked in networks, small scale enterprises can provide autonomy, creativity and wealth. They’re also key agents for spreading a low-footprint way of producing that will help us solve the climate crisis and restore ecosystem health around the globe.

In the excerpts that follow (from chapter 1) I lay out the principles of Plenitude. Chapter 4 goes into more detail on these issues and in chapter 5 I discuss the economics of information transmission, scale, labor market balance and the transition to a truly sustainable system."


Intro 2

"One of the key features of P2P activity, which I discuss in Plenitude, is the need for people to have sufficient time outside of their formal jobs to participate in peer production. In the United States, in much of the global South, and among certain groups in Europe, paid working hours have risen in recent decades. The demands of jobs, especially for white collar workers and professionals have increased markedly. With technology making 24/7 access easy, it is difficult for people to carve out time to do other things. In the US, for example, the average employee added about 200 hours to his or her annual schedule since the 1970s. For white collar workers, and full-time employees, this number is even greater. On a family basis, the increase in hours is in the range of 300-500, depending on demographics.

The downturn that began in 2007-08 is having varied impacts on hours of work. In Europe, a number of countries deliberately used shorter work time policies to share work and avoid layoffs. In the US, there was a little of this, but the bulk of the response was through outright unemployment. One consequence is that anecdotal evidence is spreading that work intensity and demands are rising among those with jobs. In Europe, recent calls for a “new austerity” are demanding longer hours. This is a mistake, not only because it will exacerbate unemployment and worsen inequality, but also because it will choke off the incredible innovation that is possible when people have time off the job in order to be creative and contribute to P2P activity.

This is a key insight of the P2P process: people need time to participate. It’s vitally important that the pace of life and the structure of working hours are compatible with P2P activity. In Plenitude I discuss trends in labor markets, the role of reducing hours in restoring labor market balance, and how P2P activity is a vital part of that new balance. This is true both for online and offline activity. One message of the book is that the downturn, by reducing hours for most people, has led to much more social innovation and both on- and offline peer production. Here I’m referring to social and economic innovations such as time banks, exchange networks, cooperative, permaculture activity and the like. I think we can expect an expansion of these and related activities in coming years. The P2P community has a tremendous amount to teach us as we try and expand this alternative, ecologically sustainable sector."



Plenitude as the way forward out of the meltdown of global capitalism

Juliet Schor:

"There is a way forward, and I call it plenitude. The word calls attention to the inherent bounty of nature that we need to recover. It directs us to the chance to be rich in the things that matter to us most, and the wealth that is available in our relations with one another. Plenitude involves very different ways of living than those encouraged by the maxims that have dominated the discourse for the last twenty-five years. It puts ecological and social functioning at its core, but it is not a paradigm of sacrifice. To the contrary, it involves a way of life that will yield more well-being than sticking to business as usual, which has led both the natural and economic environments into decline.

Like most of the sustainability visions that have been offered in recent years, plenitude requires that we adopt cutting-edge green technologies. Without them we cannot ensure the survival of what humans have constructed, and we risk plunging into a hellish future. But it’s not a techno-fix. Solving our problems in the time we have available is not possible if all we do is change our technology. We will not arrest ecological decline or regain financial health without also introducing a different rhythm of work, consumption, and daily life, as well as alterations in a number of system-wide structures. We need an alternative economy, not just an alternative energy system.

A body of research, writing, and practice on economic alternatives has been developing. It is part of the larger movement for sustainability that began in earnest in the 1980s. At first, these perspectives had a hard time piercing the bubble surrounding the growth economy. Today, there’s newfound receptivity as people recognize that a true recovery will require more than lifelines and bailouts.

The logic driving plenitude is largely economic, focusing on efficiency and well-being. I’m betting that the intelligent way to act, for both individuals and society, is the one that will make humans, nonhuman species, and the planet better off. Plenitude promises smarter economic arrangements, not just technological improvements. It’s a and careful attention to multiple sources of wealth. In this way, it departs from messages of voluntary simplicity and critiques of consumer culture that contend that less is more, that income and consumption are overrated. Research has shown that outside of poverty they are, but that realization doesn’t take us far enough. The bigger prize, true affluence, comes through changes that yield new efficiencies: getting more from less.

The version of plenitude that I describe here is addressed in large part to inhabitants of wealthy countries and wealthy inhabitants of poor ones. But most, although not all, of the principles of plenitude and the economics underlying it are also relevant for lower-income households in poor countries. In its general outlines, if not specifics, it’s a widely applicable vision of economic life.

Plenitude is also about transition. Change doesn’t happen overnight. Creating a sustainable economy will take decades, and this is a strategy for prospering during that shift. The beauty of the approach is that it is available right now. It does not require waiting for the clean-tech paradigm to triumph. It doesn’t require getting government on board immediately. Anyone can get started, and many are. It was the right way to go before the economic collapse, in part because it predicted a worsening landscape. It makes even more sense in a period of slow growth or stagnation. As individuals take up the principles of plenitude, they are not merely adopting a private response to what is perforce a collective problem. Rather, they are pioneers of the micro (individual-level) activity that is necessary to create the macro (system-wide) equilibrium, to correct an economy that is badly out of balance.

That balance won’t develop automatically. All large-scale transformation requires collective arrangements to succeed. We need environmental accounting, a mechanism to reduce carbon emissions, and an end to fossil fuel subsidies. We need new labor-market policies. We need to reform our health care, education, and retirement security systems. But while we work for those changes, here’s a vision for a way to live that respects the awesome place we call earth and all who live upon it."


The Four Fundamentals of Plenitude

"From the perspective of the individual, there are four principles of plenitude. The first is a new allocation of time. For decades, Americans have devoted an increasing fraction of their time and money to the market—working longer hours, filling leisure time with activities that require more income per unit of time, and buying, rather than making, more of what they consume. It’s time to reverse this trend and diversify out of the market. This doesn’t just mean the stock market, although its recent volatility suggests that’s one market to which this point applies in spades. Today’s smart strategy for many, if not most, households will be to begin a shift away from the formal and centralized sets of institutions and arrangements that are called the market. By “the market” I mean business-as-usual (BAU) economic activity. BAU is a term that came out of the climate discourse to indicate what would happen if we didn’t address rising emissions. Here I use it to indicate the continuation of the current economic rules, practices, growth trajectory, and ecological consequences of production and consumption. It especially refers to the large corporate entities that dominate the market and are heavily invested in it. For individuals, relying less on the market spreads risk and creates multiple sources of income and support, as well as new ways of procuring consumption goods.

Concretely, what this means is a moderation in hours of work. For time-stressed households with adequate incomes, it likely means making trade-offs of income for time. Reclaiming time frees up resources to invest in ecologically restorative activities and creates the opportunity to replenish the human connections that were depleted in the boom years. Of course, millions have had an altered equation of time and money painfully thrust upon them through unemployment or other losses of income. For that group, which already has a surfeit of time and not enough money, the advice involves moving forward with plans that are less centered on full-time employment in the BAU economy and more oriented to the emergent sustainability sector, which includes both businesses and the parallel economy developing amid the wreckage of the collapse. This encompasses areas such as household food cultivation, home construction and renovation, and community initiatives such as barter and bulk buying.

This brings us to the second principle of plenitude, which is to diversify from the BAU market and “self-provision,” or make, grow, or do things for oneself. Indeed, the rationale for working fewer hours in the market is not only, or even primarily, about reducing stress in daily life (although that is certainly important). Recovering one’s time also makes self-provisioning possible and reveals a liberating truth: The less one has to buy, the less one is required to earn. The downturn has accelerated what was already a robust rediscovery of doing for oneself among sustainability pioneers. Plenitude aspires to transform self-provisioning from a marginal craft movement into something economically significant. That requires raising the productivity of the hours spent in these activities. As I argue later in the book, new agricultural knowledge and the invention of small-scale smart machines make it possible to turn household provisioning into a high-productivity—and economically viable—use of time.

These ideas reverse the direction most households have taken in recent decades and contradict what modern economics preaches, which is that specialization, in one skill or one job, is efficient. Specialization may have made sense when the market was offering better returns. Even as wages stagnated, ultra-cheap consumer goods were hard to turn down. Today, in a world of ecological and economic uncertainty and distress, putting all one’s eggs in the basket of the capitalist market looks like a more dubious proposition.

The third principle of plenitude is “true materialism,” an environmentally aware approach to consumption. In the United States, the speed of acquiring and discarding products accelerated dramatically before the crash. Consumers knew relatively little about where purchases came from and the ecological impacts of their production, use, and disposal. But many people do care, and want to lighten the footprint of their spending.

Perhaps surprisingly, the route to lower impact does not require putting on a hair shirt. Nor does it entail making consumption less important. Indeed, the plenitude consumer is likely passionate about consuming, and deliberate in the creation of a rich, materially bountiful life. We don’t need to be less materialist, as the standard formulation would have it, but more so. For it is only when we take the materiality of the world seriously that we can appreciate and preserve the resources on which spending depends. Living sustainably does mean we can’t reproduce a lifestyle of gas-guzzlers, expansive square footage per person, bottled water, and outsize paper consumption. But it doesn’t mean we can’t have fabulous clothes, low-impact electronic gadgetry, great local food, and a more leisurely mode of travel. Plenitude means that you will actually have time to take the slow boat to China if that appeals.

The final principle is the need to restore investments in one another and our communities. While social bonds are not typically thought of in economic terms, these connections, which scholars call social capital, are a form of wealth that is every bit as important as money or material goods. Especially in times of distress, people survive and thrive by doing for one another. Interpersonal flows of money, goods, and labor are a parallel system of exchange and savings. One casualty of an intense market orientation is that community has gotten thinner and human ties weaker. People haven’t had enough time to invest in social connection outside their primary families. By recovering hours, individuals are freed up to fortify their social networks.

These, then, are the individual principles of plenitude: work and spend less, create and connect more. In turn they yield ecological benefits—emit and degrade less—and human ones—enjoy and thrive more."


Two Types of Growth

"We need to unpack the idea of growth. This overused term lumps together two very different dynamics, only one of which is really expansion. Intensive growth means using a fixed set of resources with greater efficiency. This productivity growth is rightly understood as the cornerstone of economic progress. As we begin to produce more sustainably, it’ll be because we make technological and other changes that yield efficiencies in the use of natural capital. A shift to organic and local agriculture, passive solar homes, wind power, and other forms of renewable energy will result in genuine productivity increases. Other true efficiencies can be had through information technology and enhanced human capital. To the extent that this kind of growth occurs, it will indeed provide opportunity and real wealth.

But most of the time when people (and economists) use the word growth, they are also referring to the process of pulling in new factors of production, or what’s called extensive growth. It is so named because it extends the scope of the market, or capitalist, sector, as it replaces public, household, or other types of production. Gross national product and other measures of output and income conflate intensive and extensive growth. But the extensive type is not really growth. It’s a shift of resources from one economy to another, or the use of a nonrenewable asset. Drawdowns of capital from the natural world to the market economy (e.g., felling timber, mining, overfishing, and using fossil fuels) are one example. If enough extensive growth occurs, the economies from which those resources are drawn become depleted or, if the process goes far enough, devastated. Eventually, extensive growth starts to become less profitable because the assets being used up get scarcer. It can eventually lead to blowback, which is now happening with the climate system, oceans, and forests.

While the standard account of economic development stresses factors such as human ingenuity, education, and physical capital, that view is beginning to be challenged by environmental historians and social ecologists. Some historians now argue that much of the growth of the industrial period has been of this extensive type, made possible by tapping into fossil fuel sources. We’ve long been aware that the industrial revolution depended on coal. What we haven’t done is work through the implications of that for the post-carbon era. Bill McKibben has put the point powerfully: “Fossil fuels were a one-time gift that underwrote a one-time binge of growth.”

The point is also true for other natural resources. Beginning in the sixteenth century, Europe and Asia deforested in order to grow, and resource depletion has been ongoing since then. Over the last few decades, a significant fraction of market expansion has occurred through running down ecosystems. The first national study to assess the extent of the overstatement of growth was done for the 1970s and ’80s for Indonesia, and found that half its measured gross domestic product growth disappeared once timber, oil, and soil depletion was factored in. The situation is even starker in China, where torrid growth has created environmental and social havoc. Studies of environmental degradation have found that Chinese GDP was overstated by 8 to 13 percent in the 1990s, and suggest the figure may have grown to as much as 25 percent now. U.S. consumption, fueled by Chinese exports, has become reliant on these drawdowns from nature. A recent estimate of the value lost on a worldwide basis to deforestation alone puts it at $2 trillion to $5 trillion a year."

Review

Mentioned by Paul Fernhout:


[From a comment on Amzaon ?:]

"Almost every economist (with the exception of those mentioned here) misread the financial tea leaves of 2008. Imagine the circumstances if that happens again. If you want to learn how economic downturn tracks ecological decline, and how to deal with that congruence, Plentitude is a must read. The wisdom expressed by Professor Schor talks about a different way of living that will allow our children and their children to live a good life.

The alternative to Juliet Schor's future is unknowable, if not unthinkable.

[And from another comment:] Though never having heard of Schor previously, when she was recently interviewed on National Public Radio, her ideas and perspectives immediately piqued my interest. What Schor offers, in a nutshell, is a preview of important changes that have begun to unfold, and will continue to do so over the course of this century. While books on globalization, such as Thomas Friedman's The World is Flat, capture one piece of the emerging puzzle, Schor draws our attention to another critical dimension. Namely, she recognizes that the twenty-first century will not only be characterized by postmodern practices, such as the global marketplace, but also premodern ones. The latter includes things such as a rediscovery of small farms and gardening, a renewed emphasis on local trade, and diminished reliance on mass markets and disposable goods. At first blush, it is easy to be skeptical of such notions, which might seem hopelessly romantic or even naive. Viewed more carefully, however, Schor's treatise actually appears more realistic (at least from my perspective) than those who view globalization as the ultimate panacea. ...

The bottom line:

We have come to a critical point in human history. We can either continue to cling to the dreams of the past, or, we can find the courage to build a new future. The former requires that we continue to place all our trust in massive and often volatile systems, while in the latter, we start turning to our neighbors, innovate new local practices, and work more from the ground up. To thrive and survive, we must harness global wisdom and ingenuity toward the building of an interconnected network of quasi self-sustaining communities. Schor's work is a move toward achieving the right balance between the global and the local."


More Information

  1. http://www.pbs.org/newshour/businessdesk/2010/06/will-the-united-states-experie.html