by Rob Dietz
“It’s the economy, stupid!”
In 1992, Bill Clinton’s successful campaign to become the President of the United States hinged on this juvenile catchphrase. Voters believed that Clinton might do a better job managing the U.S. economy than George Bush, Sr. had done over the course of his term. The economy (or more specifically the status of the economy) has the power to change heads of state, alter the fate of nations, and secure the well-being of people. For such an arcane subject, economics holds enormous sway over what citizens do on a daily basis and the quality of their daily lives. Given that sway, we might want to ponder two elementary questions:
- What is the purpose of the economy?
- How do we make the economy better so that it improves quality of life?
These are not easy questions to answer, but answers often can be found in unexpected places. The simple and oh-so-elegant clothesline offers some key insights.
If you ask a person on the street to tell you the purpose of the economy, you might get a response like this: “To make money.” Sure, money is the lifeblood of the economy – without it, transactions would be inefficient and even cumbersome, but money is just a convenient tool to obtain the actual items that we wish to consume. The real economy is less about money and more about provisioning ourselves with goods and services. The purpose of the economy, therefore, is to help people acquire goods and services to satisfy their needs and wants. An economy is useful only in so far as it can deliver (in the words of conservationist Gifford Pinchot) “the greatest good to the greatest number of people for the longest time.”
In assessing the flow of goods and services, economists focus on the ability of supply to satisfy demand. Take the demand for drying clothes as an example. People want to have dry clothing to wear, and they are willing to pay a price to get that service. Suppliers compete with one another to capture that price. Although it’s almost never asked, the real question is which suppliers (selling which technologies) can offer the greatest good to the greatest number of people for the longest time. The clothesline satisfactorily dries clothes (offers the greatest good) at an inconsequential price that any citizen can afford (to the greatest number of people), without using up any non-renewable resources or causing environmental mayhem (for the longest time). The clothesline is clearly a technology fit for the purpose of the economy.
Going back to the person on the street, if you ask how to make the economy better, the answer almost always revolves around growth. Economic growth is constantly prescribed as the panacea for all social ills. Politicians, business people, and even economists rarely ask how big the economy should be – they appear unwilling to consider the possibility that a bigger economy might not be such a good idea. If an economy is to achieve its purpose of supplying the greatest good to the greatest number of people for the longest time, it needs to have 4 basic features:
- Sustainable scale, so that the economy fits within the capacity of the ecosystems that contain it);
- Fair distribution, so that economy provides equal opportunities for all participants to acquire wealth and income;
- Efficient allocation, so that the economy gets the most out of available resources; and
- High quality of life, so that citizens want to participate in the economy.
An economy with these features (called a steady state economy) is about better lives, not more stuff. It’s about development rather than growth. Once again, the humble clothesline offers a fitting example. In a clothesline economy, there’s not a lot of need for growth. Aside from a line and perhaps a few pins, there’s not much to purchase. And clotheslines are unlikely to breach the carrying capacity of the environment anytime soon. The clothesline economy certainly offers fair distribution – anyone can hang a line to dry their clothes (except of course where absurd laws are impinging on people’s rights to do so). It’s hard to imagine resources being allocated more efficiently than they are in a clothesline economy. The desired service can be provided without wasteful use of energy, time or materials. And finally, quality of life is high in the clothesline economy. People can meet their needs almost magically – with no operating manual, complicated technology, or risk of electric shock or explosion, clothes do just what we want them to do when we hang them.
Given the results of the 1992 election, it seems that President Clinton’s team chose the right slogan. But he really should have been saying, “It’s the clothesline, stupid!”
Rob Dietz is the executive director of CASSE, the Center for the Advancement of the Steady State Economy. For more information, visit the CASSE website.