The Essential Characteristics of Economies -- And How They [Could] Drive Sustainability

Submitted by John Ikerd

The recent global financial crisis has raised widespread concern for the sustainability of the global economy and much has been written concerning the negative impacts of economic development on natural ecosystems and civil societies. Unfortunately, few viable alternatives to the prevailing economic paradigms have been suggested for consideration. Those that have been are typically little more than suggestions for fine tuning capitalist or socialist economies.

 In his new book The Essentials of Economic Sustainability, John Ikerd addresses the basic principles and concepts essential to economic sustainability. Some of these concepts are capitalist, some are socialistic, and others are general principles validated by philosophy or common sense. What results is a synthesis: something that is neither capitalist nor socialist but fundamentally different. In part six, he outlines the basic principles driving economies and what they mean for sustainability.

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Living systems are capable of offsetting the inevitable diminution or degradation of economic productivity of natural and human resources. Only living organisms can capture, organize, concentrate, and store solar energy in the diverse forms necessary to support biological life on earth, including human life.

An economy is a living organization, as explained in some detail in The Essentials of Economic Sustainability. Thus sustainable economies must be designed, organized, and function in accordance with the basic paradigm or model of holistic, diverse, interdependent living organisms.

Balancing Efficiency With Longevity

Healthy living systems must continually balance their natural tendency toward greater efficiency with their quest for longevity or sustainability. The pursuit of efficiency appears to be a natural characteristic of all living systems.

However, in striving for greater efficiency, natural ecosystems may become vulnerable to disruption, impairment, and eventual collapse. Healthy ecosystems, however, remain holistic, diverse, and interdependent, even as they evolve toward greater efficiency. By maintaining mutually beneficial relationships among their diverse elements, sustainable systems are able to move toward greater efficiency without losing their resilience or regenerative capacity.

The Three Rs of Ecological Resourcefulness

Healthy living systems continually reorganize and rearrange their component parts in ways that reduce, reuse, and recycle the energy that flows through their systems and fuel both their productive and regenerative processes. These so-called “3-Rs” of ecological efficiency or resourcefulness, while necessary, are not sufficient to ensure ecological sustainability.

Since the usefulness of all energy is eventually depleted through the process of entropy, sustainable living systems must also be regenerative as well as efficient or resourceful. Since nothing lasts forever, regeneration is the only known means of sustaining productivity.

Living systems must rely on solar energy to continually renew, reproduce, and reorganize. Green leaves and algae are nature’s self-renewing biological solar energy collectors. Living organisms have an innate tendency to reproduce. By their basic nature, plants devote a significant portion of their life’s energy to producing seeds and shoots and other means of reproduction.

The Three Rs of Ecological Regeneration

By nature, most animals devote a large portion of their energy to conceiving, gestating, and raising their offspring. By nature, plants and animals redesign and reorganize their structures as they evolve from generation to generation. Sustainable living systems must balance the 3-Rs of ecological resourcefulness with the 3-Rs of ecological regeneration – renewal, reproduction, and reorganization.

Natural ecosystems tend to evolve toward greater complexity and connectivity in their quest for greater efficiency. They gain greater efficiencies through more narrowly-defined specialization and closer coordination of increasingly-complex interconnections of functional processes. At some point in their quest for greater efficiency, such systems lose their resilience, meaning their ability to withstand or recover from expected adversity.

Even while striving to balance regenerative capacity with greater efficiency, living systems can become vulnerable to disruptions, physical impairments, and potential ecological collapse.

The Three Rs of Ecological Resilience

Increasing complexity leads to loss of authentic diversity and interdependence. Diverse systems are resistant and tough, complex systems are fragile and vulnerable. Interdependent systems are responsive and able to adapt to changing situations; complex systems are inflexible and lack the ability to adapt to changes in their environments. Damage in any part of their system quickly spreads through the system, disrupting and damaging the systems as a whole.

In the quest for efficiency, systems remove redundancies both within and among their various functions. The lack of redundancy diminishes the ability of systems to regroup or recover from major disruption and impairments; they become vulnerable to collapse. Sustainable systems must balance the 3-Rs of ecological resourcefulness, the 3-Rs of ecological regeneration and the 3-Rs of ecological resilience – resistance, responsiveness, and redundancy.

Natural ecosystems, being self-making and self-regulating are capable of balancing the need for efficiency with the need for resilience and regeneration. If natural ecosystems fail to maintain a healthy balance among these three essential characteristics they eventually will collapse.

Economies, on the other hand, are created and regulated by people, who make purposeful choices affecting their efficiency, resilience, and regenerative capacity. In the pursuit of greater economic efficiency, today’s global economy is becoming increasingly vulnerable to collapse, either through depletion of its natural and human resources or through its inability to withstand major ecological or social disruptions, whichever occurs first.

Learning Economic Resilience From Nature’s Example

Sustainable economic organizations and individuals are microcosms of sustainable economies and must possess the same characteristics if they are to function sustainably. Thus, the essential characteristics of sustainable economies are also essential characteristics of all types of sustainable organizations, including for-profit, nonprofit, and public agencies. These same characteristics are also essential for economically sustainable individual lifestyles. 

Most contemporary sustainability initiatives – individual, public, nonprofit and for-profit – focus on the 3-Rs of ecological efficiency. They reduce pollution and energy use, reuse durable materials, and recycle wastes. Since such strategies often lead to increased economic efficiency, they are frequently cost effective or profitable as well as more ecologically sustainable. Most government, private sector, and individual sustainability initiatives focus on areas of overlap or congruence between ecological sustainability and economic efficiency.

Other sustainability initiatives take a first step toward ecological regeneration by substituting renewable for non-renewable energy resources.

In some cases, as with hydroelectric generation, renewable energy may be economically competitive with fossil energy. In other cases, such as photovoltaics, significant government incentives are required to make renewable energy economically competitive with fossil energy. While such initiatives are necessary, they are not sufficient for sustainability. Sustainability requires ecological, social, and economic integrity.

An economy that relies solely on economic incentives, whether from markets or governments, will leave some people without the basic necessities of life.

A national or global society in which some prosper while others live in poverty or starve is inherently unstable and unsustainable. Economic sustainability is no less dependent on social relationships than on ecological relationships. Economic sustainability ultimately will require radical rethinking, redesign, and reorganization of economies to reflect the paradigm of healthy living systems.

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Part 5: The Three Economic Principles of Sustainability

Part 4: From Utilitarianism To Ethics: The Social Principles of Economic Sustainability

Part 3: The Three Ecological Principles of Economic Sustainability

Part 2: The Hierarchy of Economic Sustainability: Getting The Principles Right

Part 1: Ethics & The Challenge of Economic Sustainability