What are the Basic Principles of a Restorative Economy?

Question for Discussion: According to Hawken,
How Can We Create a Restorative Economy
based on the Principles of Natural Capitalism?

Readings: Hawken, "The Ecology of Commerce:
Restorative Economy," Hawken, "A Declaration of
Sustainability," Hawken, Basic Principles of a
Restorative Economy

Paul Hawken: Natural Capitalism

Paul Hawken: A Declaration of Sustainability

Paul Hawken: Taking the Natural Step

Hawken: Towards a Restorative Economy

Hawken: Dreams of a Livable Future

Paul Hawken: The WTO Protests in Seattle

Fortune: Paul Hawken's Vision

The Developing Ideas interview with Herman Daly

STEADY-STATE ECONOMICS By Herman Daly

Daly: A Catechism of Growth Fallacies

Daly: An Economists' View of Sustainability

Daly: Five Policy Recommendations for a
Sustainable Economy

Daly: Sustainable Growth: An Impossibility
Theorem

PCDF:PRINCIPLES OF SUSTAINABLE LIVELIHOODS

Beyond Growth The Economics of Sustainable Development

Ecological Economics: Two papers on Economics of Sustainability

ELEVEN INHERENT RULES OF CORPORATE BEHAVIOR

A Roadmap for Natural Capitalism

RMI: Sustainable Development

RMI: An Introduction to Economic Renewal

Small is Profitable.org

Hannover Principles for Sustainable Development

The Hannover Principles: Design for Sustainability

Introduction to the Cradle to Cradle Design
Framework

Calvert-Henderson: Quality of Life Indicators

Seven Steps to doing Good Business

The Next Industrial Revolution

Mimicking Nature by Designing out Waste

The Natural Step: Understanding Sustainability

The Natural Step: Four Simple Principles of
Sustainability

Factor Four: FAQs

The Factor 10 Institute

The Factor 10 Club's Carnoules Statement (1997)

The Natural Capitalism Group: Consulting

Natural Capitalism Explained

Global Reporting Initiative

The Earth Policy Institute

Eco-Economy Indicators

Sustainable Development International

In a recent article by columnist Ben Wattenberg, "Global Growth Points to Dawning of a Golden Age," it is announced that the International Monetary Fund (IMF) had determined that the Global Economic Growth has been growing at four percent a year for the last four years. The IMF predicts even higher growth rates will continue on into the new millennium. Wattenberg and other economic pundits are so excited by this news that they have declared the dawning of a "Golden Age." For Wattenberg and others, this news of higher global economic growth represents great news. Economic growth should create more wealth, opportunities, and abundance for all. But does this global growth really mean the coming of a new Golden Age? Or does it mean the increasing destruction of the global environment in the search for more resources to exploit and create even higher profits?

In The Ecology of Commerce: A Declaration of Sustainability, Paul Hawken argues that increased global economic growth, created by our current global industrial economy, will only further destroy the environment and threaten our society and the human future. Unlike Wattenberg, Hawken would ask how this increased global economic growth was created. If it was created by destroying more non-renewable resources, destroying ecosystems, and polluting the environment, then this growth is counter-productive, and may even indicate the continuing decline of our global industrial society. Below is a report on the destruction of American farmland as a result of urban and industrial sprawl. This is a good example of how economic growth often destroys the environment and resources that our society depends on for future growth.

U.S. losing 50 acres of farmland an hour,
group says
.
The United States loses nearly 50 acres of prime farmland an hour to urban development, a conservation group said Thursday.

"The nation's best and most productive farmland is being needlessly destroyed," said Ralph Grossi, president of the American Farmland Trust. "High quality farmland deserves to be treated as more than just a holding pattern for future development.

"The nation needs to take a more strategic approach to farmland protection by giving communities, states and regions the ability to identify the various agricultural, environmental and economic benefits provided by farmland ... providing them ways to permanently protect the resource."

According to the group, 4.3 million acres of prime and unique farmland were lost to development during the decade ending in 1992, or nearly 50 acres an hour.

Texas lost the most, 489,000 acres, followed by North Carolina with 295,000 acres, Ohio with 281,000 acres, Georgia with 183,000 acres and Louisiana with 177,000 acres. In all, 17 states lost more than 100,000 acres each.

A report issued by the group, "Farming on the Edge," said 70 percent of U.S. fruit, 69 percent of vegetables and 52 percent of dairy goods were produced on land threatened by urban development.

The ten most threatened areas, it said, were:

1. Sacramento and San Joaquin valleys in central California.
2. Northern piedmont in Maryland, New Jersey, Pennsylvania and Virginia.
3. Southern Wisconsin and Northern Illinois "drift plain."
4. Texas blackland prairie in eastern Texas.
5. Willamette and Puget Sound valleys in Oregon and Washington state.
6. Florida Everglades and associated areas.
7 Eastern Ohio till plain.
8 . Lower Rio Grande valley in southern Texas.
9 . Mid-Atlantic coastal plain in Delaware and Maryland.
10 . Southern part of the New England and Eastern New York uplands in Connecticut, Massachusetts, New Hampshire, New Jersey, New York and Rhode Island.

Hawken, "A Declaration of Sustainability,"

In order to approximate a sustainable society, we need to describe a system of commerce and production in which each and every act is inherently sustainable and restorative. Because of the way our system of
commerce is designed, businesses will not be able to fulfill their social contract with the environment or society until the system in which they operate undergoes a fundamental change, a change that brings commerce and governance into alignment with the natural world from which we receive our life. There must be an integration of economic„ biologic, and human systems in order to create a sustainable and interdependent method of commerce that supports and furthers our existence. (Hawken, 2)

Hawken argues that to the extent that our current industrial economy profits by destroying the environment and destroying and wasting scarce resources is the extent to which it is not sustainable and even self-destructive. The larger question of his book is this: How can we design and create a restorative economy, an economy in which businesses profit by preserving and restoring the environment and scarce resources? Instead of global corporations competing to destroy resources and exploit environments, corporations should compete to "increase and preserve resources." Hawken lays out 8 larger objectives or design principles for creating this restorative economy (xiv-xv):

1). Reduce absolute consumption of energy and natural resources in the North by 80 percent within the next century.

2). Provide secure, stable, and meaningful employment for people everywhere.

3). Be self-actuating as opposed to regulated or morally mandated.

4). Honor market principles.

5). Be more rewarding than our present way of life.

6). Exceed sustainability by restoring degraded habitats and ecosystems to their fullest biological capacity.

7). Rely on current income.

8). Be fun and engaging, and strive for an aesthetic outcome.

Hawken, 12 Strategies for Sustainability

1. Take back the Corporate Charter
2. Adjust price to reflect cost
3. Throw out and replace the entire tax system
4. Allow resource companies to be utilities
5. Change linear systems to cyclical ones
6. Transform the making of Things
7. Vote, don't buy
8. Restore the Guardian
9. Shift from electronic literacy to biologic literacy
10. Take Inventory
11. Take care of Human Health.
12. Respect the human spirit.

Throughout his book, he challenges the reader to "imagine yourself a designer, remaking a world where commerce and environmental restoration are synonymous.

In order to create this restorative economy, we must rethink the goals and processes by which our societies and economies use the environment. But Hawken is not a utopian. He believes that with the right incentives, corporations, governments, and consumers can be encouraged to profit by and increase their standard of living while at the same time restoring the environment. The larger challenge he now must address is how can we use the free market system, business competition, the laws of supply and demand, and the search for profits to preserve, protect, and restore the environment. If our present industrial economy profits by destroying resources and environments, how do we transform this economy into a restorative economy?

In the Paul Hawken interview, he argued that our present economy and society is in a slow, gradual process of transforming itself from an industrial to a restorative economy. He believes that just as our industrial economy grew by exploiting cheap, abundant natural resources, a restorative economy will profit by conserving resources and restoring environments by exploiting cheap, abundant human labor. For Hawken, the economic challenge is how to transform our current dependence on cheap natural resources into a dependence on cheap human labor. He argues that we can greatly reduce our consumption and use of natural resources using current and future technology and lots of human labor. Hawken is now writing a book with Amory Lovins describing the "next industrial revolution" which will focus on using much fewer natural resources to support and maintain our high living standards. Hawken and Lovins believe that we currently have the technology to reduce our consumption and use of 90 percent of the natural resources we now use while at the same time maintaining our current standard of living.

Hawken argues that governments can't solve the environmental crisis, neither can environmentalists. The only institution powerful enough to solve the environmental crisis is business. If we can't convince businesses that it is in their short- and long-term best interest to protect and conserve natural resources and restore environments, then the global environmental crisis will destroy our global industrial society. Far from seeing business as the major obstacle to ending the environmental crisis, Hawken sees business as the only hope.

But why is Hawken appear to be so optimistic? Doesn't he understand that global corporations are consuming the world's scarce natural resources and exploiting the global environment in the name of continued economic growth? Doesn't he understand that our global industrial economy is destroying the future in the name of present profits? Why doesn't he simply admit that our global industrial civilization is suicidal and self-destructive?

If we refuse to accept Hawken's challenge that business and our global economic institutions can be redesigned to create a restorative economy, then we must accept the eventual collapse and destruction of our modern industrial civilization. Clearly, Hawken believes we have no other choice but to recognize and accept the challenge of transforming and redesigning our economic systems. He understands that this process will take time and will occur in gradual, step-by-step increments. If they are to be successful, these reforms will have to be incremental and popularly supported. The challenge of creating a restorative economy is, therefore, even harder and more formidable. At each step of the reform and the design process, supporters must convince businesses, governments, workers, and citizens that these changes will benefit them and will improve their lives and standards of living.

Hawken believes the reform process has already begun, because many businesses, governments, workers and consumers are even now beginning to change the way they use, consume, and waste natural resources and products. Recycling, protection of old-growth forests, restoring depleted fisheries, reducing dependence on farm chemicals, encouraging mass transit and ride-sharing, and protecting and restoring local rivers and streams. How do we speed up this process of reform and create a series of escalating and self-reinforcing business, society, and environmental successes that will move this process along even further? Hawken may not have all the right answers, but his book begins the process of asking the right questions and posing the tough challenges.

Hawken doesn't sufficiently examine how we can go from our present economic and political system based on profits, lowest costs, environmental destruction, dependence on non-renewable resources, and pollution to one based on sustainability, restoring the environment, preserving scarce resources, and protecting quality of life. He provides a nice set of examples of how we could use green taxes and green fees to create new economic incentives to businesses to protect and restore the environment. But how do we get from where we are to where we want to go? If we can answer this question, we can begin to create a restorative economy and solve the global environmental crisis. But this is a very difficult question to answer. People like Paul Hawken and Amory Lovins are examples of environmental and energy consultants who get paid by cities and businesses throughout the world to help them answer questions like this.

Let's look at what Amory Lovins of the Rocky Mountain Institute would tell a city that came to him for his advice on what they should begin to do to create a sustainable city and protect and restore its environment .( See The Rocky Mountain Institute's Economic Renewal Site):

What is sustainable development, and is it really achievable?

Sustainable development means many things to many people. Indeed, the term has been so widely used that it has lost much of its meaning. Here's a definition from RMI's Economic Renewal Guide. Sustainable development:

1. Weighs community values and the environment alongside conventional business concerns.

2. Uses renewable resources no faster than they can be renewed.

3. Uses non-renewable resources understanding that someday a renewable substitute will be required.

4. Seeks ways to strengthen the economy without increasing "throughput."

5. Focuses more on getting better, less on getting bigger.

6. Seeks development that increases diversity and self-reliance.

7. Puts waste to work.

8. Regards quality of life as an essential asset.

9. Considers the effects of today's decisions on future generations.

10. Considers the off-site effects of decisions.

11. Considers the cumulative effects of a series of decisions.

12. Measures whether actions actually do what they're intended to do.

Each of these concepts is discussed in detail in "Sustainable Development: Prosperity Without Growth," which is posted at this site. That paper is the first chapter of The Economic Renewal Guide, which you can order through our online catalog

Achieving sustainable development is an incremental process, not an overnight transformation. Any local economy is likely to have some unsustainable aspects and some sustainable ones. A realistic goal is to gradually phase out unsustainable activities and, to the extent possible, phase-in sustainable (or at least more sustainable) ones to take their place. How to do this is the subject of the entire Economic Renewal Guide, but you'll find a number of ideas and examples in the book's second chapter, "RMI's Economic Renewal Program: An Introduction," which is also posted to this site.

RMI offers hands-on training and consultation on sustainable community development. For more information, see the Economic Renewal Program Guide to Services.

What is Economic Renewal?

Economic Renewal is both a philosophy of sustainable development and a step-by-step process for achieving it. Created by RMI, Economic Renewal has been field-tested in dozens of communities around the country.

Communities too often assume that the solution to economic problems is growth-more industry, more commercial or residential development, more tax revenues, etc. In contrast, the underlying philosophy of Economic Renewal is do better with what you already have. Communities that try to grow (in the sense of expand) their way out of problems often find that the growth only brings more--and bigger--problems. By doing better with what they've got, communities can increase wealth while maintaining their quality of life and values, retaining control over their future, and reducing the risk of unintended consequences.

The following is a summary of "RMI's Economic Renewal Program: An Introduction," which is posted in full elsewhere at this site.

Economic Renewal stresses four principles:

1. Plug the leaks. Like heat from an uninsulated home, dollars leak from an inefficient community. Plugging unnecessary leaks puts money back into the local economy just as surely as if it had been earned through new industry--but it avoids many growth-related problems and costs.

2. Support existing businesses. Too many communities woo outside businesses while overlooking the wealth-creating power of their own entrepreneurs. Locally owned businesses tend to be more responsive to local needs and values, and more likely to stand by the community through thick and thin. Supporting them also keeps more dollars circulating in the local economy.

3. Encourage new local enterprise. As with existing businesses, new businesses will contribute far more to the local economy if they're locally owned. A town that's plugging leaks and supporting existing businesses is an exciting place to start a new one.

4. Recruit compatible new businesses. "Smokestack--chasing"-the indiscriminate courting of outside corporations--is a risky, high-stakes game that has left many a small
town in the lurch. However, having pursued the previous three steps, a community will be in a stronger position to recruit new businesses that are compatible with its values and needs.

Nine Tools

In more than a decade of field-testing Economic Renewal, RMI staff have worked with dozens of successful, resourceful communities. Based on their inspiring experiences, here are nine tools for harnessing the above principles:

1. Ask why. Asking why shifts the focus from particular proposals, which may divide the community by appealing to entrenched positions, to the underlying goals that unite the community. Having asked why, you can then choose the best way to achieve those goals rather than narrowly focusing on one-size-fits-all solutions.

2. Manage demand. "Demand management" starts by asking what job the user wants done, and then determining the most efficient way to do it. It usually turns out that no kind of new supply can compete with the more efficient use of what you've already got.

3. Pursue development, not necessarily growth. Growth, in the sense of expansion, is an increase in quantity; development is an increase in quality. True, expansion creates jobs; but sustainable development puts people to work, too, without the problems often associated with physical expansion.

4. Seek small solutions. The bigger the solution, the harder it is to pull off, the longer it takes, and the greater the risks. Small solutions are usually faster, more flexible, less expensive, and more manageable than large ones.

5. Find problem-solvers who care. Entrusting your community's future to disinterested outsiders is likely to lead to delay, disappointment, and an unacceptable loss of control over the outcome. In contrast, local people--especially local business people--have a vested interest in seeing your community thrive.

6. Increase the "multiplier effect." When a dollar enters a community and is then spent outside the community, its benefit is felt only once. Keeping dollars recirculating multiplies their benefit, adding more value, paying more wages, financing more investments, and ultimately creating more jobs.

7. Find hidden local skills and assets. Virtually every community has some unique asset or skill that can be put to work creating wealth. The trick is to examine your community with a fresh eye. Opportunities may be right there for everyone to see but waiting for someone like you to recognize them and put them to work.

8. Build social capital. A community's most important strength is the capacity of its people to work together for the common good. Like more conventional forms of capital, this "social capital" is essential to successful development.

9. Organize regionally. The human scale of a community--which is its strength on a social level--can make for limited economic options and few opportunities to make business connections. A smart development effort looks for ways to tie in more fully to the regional economy.

The Economic Renewal Process

Think of the principles and tools discussed above as the backdrop for Economic Renewal. The main event is an eight-step process of collaborative decision-making that's designed to bring together residents from all walks of life to develop projects to strengthen their community and its economy.

With the exception of the first preparatory step, the process consists of a series of town meetings, each building on the results of the previous one. The process is conducted by and for community residents, who, after all, understand their community's needs and assets better than any outside "expert."

This process is described in detail in RMI's Economic Renewal Guide, which you can order through our online catalog. Other Economic Renewal books on food and agriculture, energy, and business opportunities can also be found there.

RMI also conducts training seminars and consultations in communities interested in using Economic Renewal to develop sustainably. For more information, see the Economic Renewal Program Guide to Services.

Our town is growing too fast. What can we do?
.
A community that's growing too fast will probably experience some or all of the following symptoms:

1. rising cost of living
2. higher taxes
3. traffic congestion and pollution
4. housing shortages
5. increasing crime
6. cutthroat business competition
7. increasing intolerance of differences
8. disrespect for traditional leadership

If you think your town is growing too fast, this list will probably sound familiar.

Before discussing what to do about growth, let's first look at why it so often happens even when it's not in a community's best interests. The following section is excerpted from "Sustainable Development: Prosperity Without Growth," which is posted in full at this site. For a more detailed analysis of community growth and what to do about it, order "Paying for
Growth, Prospering from Development."

Clearly Amory Lovins and the Rocky Mountain Institute team approach creating sustainable cities as a complex, involved process of education, technology and design, and development of institutional reform. I want to give a clear example of how this process of creating a sustainable city can go wrong. Let's use the city of Boulder, Colorado, as a example of the real problems that can beset a city that doesn't properly think through the process of economic reform and renewal.

Since the late 1970s, the city of Boulder has had a growth management plan. This plan focuses on limiting the growth of old businesses and restricting the introduction of new businesses; limiting the construction of new housing and remodeling existing housing units; and purchasing "open space" around the city to prevent further business and housing growth. The goal of this plan is to limit the growth of urban sprawl, crowding congestion, and pollution. But does it work?

Last year, the city of Boulder estimated that 50,000 people drive to Boulder every day to work. These people are creating a massive traffic, congestion, and pollution problem. Boulder is in a valley and the smog and pollution collects and is trapped on the valley floor. In response to these growing problems, the city of Boulder has become even more committed to limiting new business growth in Boulder. But with Boulder's refusal to allow new manufacturing companies and their high-paying jobs to locate in Boulder, this makes it even more difficult for the people who work in Boulder to be able for afford to live here. As a result, Boulder has seen a growth in low-paying service sector jobs and increased commuting into Boulder, because Boulder will not allow any more industrial businesses to locate in Boulder. All this makes it even more necessary for the people who work in Boulder to drive long distances to work. As the few remaining building sites are developed around the edges of Boulder, the costs of housing keeps going up, because there is a limited new supply of housing. As the cost of housing in Boulder and in Boulder county continues to go up because of our commitment to open space and limiting development, more and more people find that they have to commute even longer distances to work in Boulder. As a result, Boulder feels more crowded, more polluted, more congested, and more populated than it really is. Boulder's growth control measures are not solving the problems created by growth and congestion but in some ways making them worse.

It is precisely complex, difficult problems like this that Amory Lovins and Paul Hawken and other environmental and economic consultants get paid thousands and thousands of dollars to try to solve. They are not easy problems. Often the very efforts you take to solve the problem, make it much worse. Given the difficulty and the political conflict that can result from such efforts to control growth and promote sustainable cities, many cities throw up their hands in despair and say it is out of their control. But this simply isn't true as Lovins and Hawken's consulting work demonstrates.

But just think if it is so difficult to create sustainable cities, how can we expect states, nations, and the global community to even begin to take the steps they need to to create sustainable human communities? In addition to the difficulties of design and overcoming divisive political conflicts, states and nations are faced with the increasing economic and political power of national and global corporations who are using their considerable power and influence to block these efforts to create restorative economies and societies. Currently, large corporations control and limit the power of governments to make these reforms by threatening to cut off the vast amount of money they give state and national politicians and political parties. Hawken argues that businesses should stop trying to corrupt the political process and allow government to function as "the guardian" of business and the larger society. Business should allow government to set the standards and limits that will make it profitable for business and citizens to protect and restore the environment. But how can government convince these powerful corporate interests it is in their interest to allow government to reform our economy and society so that the market and free enterprise will encourage everyone to protect and restore the environment? This is a very difficult question to answer.

Let's look at a specific federal government effort to change the economic incentives in order to encourage business and consumers to reduce their consumption of fossil fuels. In 1993, President Clinton suggested that the United State put a carbon tax on all businesses and consumers who used fossil fuels. By increasing the costs of oil, gasoline, coal, and natural gas, the federal government would be encouraging business and consumers to reduce their consumption of fossil fuels and develop and purchase new, more energy-efficient technology. But the major energy companies and the automobile companies spent millions of dollars to kill this carbon tax arguing that it would reduce their profits and costs thousands of jobs; they were focused on the short-term costs to business, not the long-term costs to business and society of continuing to use increasing amounts of fossil fuel. As a result of pressure from business and consumers, President Clinton quickly backed off his carbon tax proposal. He discovered that American business and consumers were unwilling to pay "green taxes" in order to protect the environment and their society.

The failure of the carbon tax proposal raises an interesting series of questions: What could the government have done to convince American business and consumers that such a tax would benefit them both in the long- and short-term, that conserving energy and reducing pollution are real economic benefits that would make up for the burden of new taxes? Here Hawken begins to develop an answer. He argues that the government should gradually "phase-in" these green and environmental taxes over a period of twenty years. The taxes on energy consumption, use of material resources, pollution, environmental destruction, and consumption of products that aren't durable or recyclable should be slowly and gradually increased to allow business and consumers time to change their behavior and develop and buy new technology. In addition to phasing-in these new taxes, governments should slowly phase-out taxes on income and corporate profits. By convincing business and consumers that these new taxes are revenue-neutral, that is don't involve new, additional taxes but simply shift the tax burden from income and profits to environment and consumption, the government would be much more likely to convince them to accept these new green taxes. In addition, the government could give individuals and businesses tax breaks for buying new technology that would reduce their energy consumption. Finally, the government could give the energy companies tax incentives and financial support to move them from being in the fossil fuel business to being in the energy conservation and renewable energy business. These gradual, incremental changes, and the economic and environmental education about the true costs of our present system, would go a long way toward winning over business and consumer to accepting these new green taxes.

The larger immediate problem is that our political system is so corrupt and so overburdened with campaign contributions and financial support to politicians and parties that national and global corporations can use their economic power to prevent even small, initial steps to reform our economic and social institutions to create a restorative economy and society. ( See the Center for Public Integrity site for a number of studies of political and financial corruption in the United States.) It is at this point that many Americans throw up their hands and say: "The system is so corrupt nothing can be done about it." But if we don't accept the challenge of reforming our political, economic, and social institutions we must accept the horrifying conclusion that our global industrial civilization is doomed to destroy itself by undermining the environment that supports it. The large challenge that Hawken raises in The Ecology of Commerce is how we can collectively reform our institutions, recognizing the immense challenge and difficulty in trying to do so. Instead of giving up, people like Paul Hawken and Amory Lovins see this challenge as an interesting, exciting, and profitable venture for them. Those people who can provide real solutions and reforms that help us gradually move toward a sustainable, restorative economy and society will not only profit in doing do they will be helping to guarantee a future for their children and grandchildren. This is a real challenge, but it is not an impossible one.