circular economy

How can we make the circular economy fair?

In the last couple of years Tearfund have been working on the circular economy, and they have pioneered a couple of approaches that are neglected in most conversations about it. The first is how the circular economy works in developed countries. The second is how to make sure that the circular economy is fair.

The circular economy is a better approach to resources. The environmental benefits are clear, and it makes good business sense too. There’s a good chance that it might be good for equality too. One of the main reasons is that it’s “resource efficient but labour intensive”. It creates a variety of new jobs in recovery, recycling, repair and remanufacturing, and that makes it a technological step forward that is economically inclusive.

That’s in contrast to other technological advances such as robots or computerization, which replace people and thus mainly serve the owners of the machines.

Tearfund’s latest report, Going Full Circle, also points out that many poorer people in developing countries may already be involved in informal circular activities. Where people don’t have the money to buy new things, possessions are valued and repaired, and local businesses build up considerable skill in repair. Others may be involved in what the circular economy would recognise as materials recovery, but may currently be described as scavenging – bringing in plastic bottles or fabric scraps for recycling. These sorts of practices are easily lost as countries develop, and rightly so when they are dangerous or dirty. But if they can be formalised and retained as part of a deliberate circular economy strategy, then many more people will have a stake in that strategy from the start. The best of both worlds may emerge – people involved in repair and recovery, but doing so out of choice, and with decent pay and working conditions.

Tearfund’s work is focused on developing countries, but studies suggest that the circular economy could have similar effects in Britain too. In 2015 WRAP found that the circular economy could create half a million jobs by 2030, and most of them would be in places where there is higher unemployment, such as the North-East.

It’s hard to know at this stage whether the circular economy inevitably benefits more people, but it certainly could. After all, the circular economy aims to treat waste as a resource. And we could arguably see unemployment and poverty as a form of waste –  a waste of human energy and potential. Rather than seeing labour as a cost to be minimalised in pursuit of profit, maybe the circular economy could open up a more holistic view of the economy, where people and materials are both valued better.

13 comments

  1. I fear you are falling into the economic fallacy that jobs for the sake of jobs is good.

    Unless you are adding value in the work being done you are wasting resources with opportunity costs. You are wasting the resource of that person’s labour that could be put better use doing something else and the money used to pay for their work could quite probably be put to better use. See Bastiat’s broken window fallacy.

    The key to the circular economy being a success would be doing so efficiently, using the lowest costs and least amount of labour. That means using automation (the robots or computers you decry above). Decent pay and working conditions don’t come cheap. They are afforded by improved productivity.

    Your article appears to call for a large unproductive workforce paid high wages and conditions. That would be a huge cost on firms in the circular economy putting them at a massive disadvantage to competitors who didn’t engage in it, and if you insisted all firms participate, raising prices and lowering welfare across the whole economy.

    1. Hmm, pretty sure I’m nowhere near that fallacy, if you look at the examples I give in the fourth paragraph. We’re talking about jobs in repair, recycling, remanufacturing, all of which are adding value and productive.

      I think you’ll also find that I call for ‘decent pay and conditions’, not high wages for doing nothing.

      1. “Resource efficient but labour intensive” That’s how you describe it. Given that efficiently using labour is the productivity goal that raises wages, looking to use more labour isn’t a recipe for wages you would call decent.

        Taking away a JCB and giving lots of people shovels is resource efficient but labour intensive but they aren’t each going to earn anything close to what the JCB driver earned.

        Jobs are a benefit to those in them but are a cost to the employer and consumer. I fear you are focusing on the ‘seen’ and missing the ‘unseen’ costs and things forgone.

        1. But you’re also missing the ‘unseen’: the environmental cost of mining new resources and throwing things away. The circular economy prices those things in.

          The circular economy agenda is being driven by business, by the way, not NGOs or environmentalists.

          1. My point is that businesses are not saying this is going to be a huge source of jobs, since those jobs are a cost. Businesses will seek to use robots and computers to do the repairs, recovery and remanufacturing wherever possible to hold the costs down. Added to that the gains in employment in the recovery end of the cycle are going to be offset by losses in the manufacturing side. If a washing machine lasts 4 times as long then you will only make a quarter of the number and only need a quarter of the present staff to make them. These are the unseen costs.

            You and Tearfund are arguing for a welfare destroying path of low productivity, low value add. Resource efficient but labour intensive is a terrible path to take. Resource and labour efficient is where you want to be.

          2. Those McKinsey gains are predicated upon the kind of technological advancements that you denounce here: “That’s in contrast to other technological advances such as robots or computerization, which replace people and thus mainly serve the owners of the machines.”

            Firstly it is nonsense, efficiency gains via automation principally help consumers, that is everyone in he wider economy through lower prices, not owners. Secondly, they are essential for the circular economy to succeed. Why are you complaining about computers and robots?

          3. I take your point, that’s an oversimplified comparison with robots, which have positives and negatives. But this is mainly a post about the circular economy, as is the McKinsey research. No mention of robots there, but it does highlight the labour intensity of recycling and remanufacturing.

  2. Back in the 50s and 60s when I was a lad (yes, I’m an old git!), I’m pretty sure we had something that was often close to a circular economy. You got paid for taking bottles back to the shop, you got parts for the car from the scrap yard, shoes got mended, my old cloths were worn by my younger brother. So this is not a new idea in Britain, just one that has been lost. Why lost? It isn’t in the interests of big business. It also has less appeal to people who are getting wealthier and are sold the idea of buying new every time. Also, new stuff enables you to better demonstrate your improving wealth and standing in the world; repaired staff doesn’t (unless there is an inconceivably large culture shift). So yes, I fully support the idea, but no, I don’t thing it will become mainstream in our current culture and level of wealth.

    1. Indeed, and many developing countries still operate a low-tech circular economy. Where resources aren’t as plentiful, people will reuse and recycle. What Tearfund are pointing out is how that can be preserved and harnessed to help lift people out of poverty.

      For us in Britain and other rich countries, the challenge is to develop better attitudes to materials, like the ones we had when we weren’t quite as wealthy.

  3. The combination of VAT, Income Tax and National Insurance is the perfect way to promote the throwaway economy and discourage repair and re-use.

    If we want to encourage the circular economy, these taxes need to be discarded and replaced by non-labour taxation. But why is this tax dimension of the problem never talked about?

    1. I agree, and there have been limited attempts to put two and two together on that – Sweden dropping VAT from repairs, for example. I’d love to see Britain take a similar approach. Why are new build houses exempt from VAT, but renovation isn’t? That’s just daft in a country with a depressingly inefficient housing stock.

      However, I think advocates of the circular economy are aware that the idea is gaining traction at the moment, and if it gets too radical too quickly, it risks the whole project. If the government gets the vision, they’ll figure out the tax thing eventually. If campaigners start calling for too much too soon, the government will dismiss it as politically impossible and it’ll never get off the ground.

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