Is steady‐state capitalism viable?

Abstract

Most ecological economists believe that the transition to a steady-state economy is necessary to ensure ecological sustainability and to maximize a nation's economic welfare. While some observers agree with the necessity of the steady-state economy, they are nonetheless critical of the suggestion made by ecological economists-in particular, Herman Daly-that a steady-state economy is compatible with a capitalist system. First, they believe that steady-state capitalism is based on the untenable assumption that growth is an optional rather than in-built element of capitalism. Second, they argue that capitalist notions of efficient resource allocation are too restrictive to facilitate the transition to an "ecological" or steady-state economy. I believe these observers are outright wrong with their first criticism and, because they misunderstand Daly's vision of a steady-state economy, are misplaced with their second criticism. The nature of a capitalist system depends upon the institutional framework that supports and shapes it. Hence, a capitalist system can exist in a wide variety of forms. Unfortunately, many observers fail to recognize that the current "growth imperative" is the result of capitalist systems everywhere being institutionally designed to grow. They need not be designed this way to survive and thrive. Indeed, because continued growth is both existentially undesirable and ecologically unsustainable, redesigning capitalist systems through the introduction of Daly-like institutions would prove to be capitalism's savior. What's more, it would constitute humankind's best hope of achieving sustainable development.