Herman Wijffels, professor of sustainability and societal change at Utrecht University and one of the most authoritative economists in the Netherlands, presented his view on the transition towards the circular economy. New principles and a new way of working are the only way to get out economic crisis. Prosumers (consumers as producers), small scale application of new technologies, in-sourcing of economic production are the key in how we could renew the economy. Circular, in the same way as life itself is circular.
Our weakened economy
His analysis of the current crisis is that a reluctant monetary policy has weakened the economy. The monetary institutions have enforced economic expansion, even when there was no longer a healthy basis for expansion. This created bubbles. Their implosion currently has a negative effect on the economic growth. In addition, the rising prices of (agricultural) commodities have caused a price drain on consumers’ purchasing power.
Special case, the Netherlands
In the Netherlands, this picture is even worse. We have a situation where on the one hand most people have a big mortgage on their house, therefore large depths. And on the other hand, there are huge savings in pensions for the elderly. Both of these hamper our spending habits. Sustainable finance lab is an initiative of professor Wijffels to overcome this situation. The aim is to build a robust financial sector that contributes to our economy and the people without depleting natural resources.
There are no signs of economic recovery, yet. A cyclical economic analysis is very much misguided, as it focuses on the status quo and ignores the societal change. A structural and strategic analysis recognises the trend ruptures that our current times represent. We need to focus on these trend ruptures to build a new economy, because most of the present structures in our economy are ecologically obsolete and will work against us.
The circular economy focuses on rebuilding the new from what is already there. We can become much better in harvesting materials and components from products that have reached their end of life. New technologies can help us to make more use of natural resources and tamper our growing demand for these resources, weather it is metals, agricultural nutrients, soy or fish from the seas. A study by McKinsey for the Ellen McArthur foundation showed that new business models that work by the principles of the circular economy could be worth as much as USD 700 billion in consumer goods material savings alone. It also highlights added benefits in terms of land productivity and potential job creation.
Life itself is circular
Wijffels showed us his deep rooted believes that as life is circular, it is wrong to deviate from that track with a linear economy. We are now at a point that this notion of linearity is working against us.
Emerging new economies
This new circular economy is already there in an early stage. We wrote about it at Futurista, called it the gig economy as another phrase for pro-sumers. Consumers who produce their own energy, grow and share food, share cars, guest rooms and do other barter services. This new economy operates from small scale, instead of large scale production sites. The 3D print revolution is a great example of small scale production. Due to new technologies it becomes affordable to relocate production back to for instance Europe. These are important signs of deglobalisation and relevant features of the new economy.
Wijffels emphasised that if you measure value only in financial terms, you are clearly missing something. The value of our economy is also in people’s welfare, and in a healthy ecosystem. The old economy is heading towards depletion and we should abandon this path soon, if we want economic recovery. His advise is that policy makers could support this transition by creating a context that allows the circular economy to blossom and show the beauty of our human resilience and creativity.