André Reichel | Sustainability Research

In the persistent controversy over the necessity and possibility of ongoing economic growth for ecological sustainability and societal well-being, growth critics gather around Serge Latouche’s décroissance — degrowth. Being sort of a degrowth economist myself, I started to wonder about something you might wish to call “degrowth capitalism”. Having my disciplinary background in management science, it always appeared to me as a strange blind spot in the degrowth debate. The level of the firm is all too easily neglected, with the minor exceptions of social entrepreneurship. All other forms of enterprise are most likely viewed as part of capitalism’s inherent problem: its excessive overuse and neglecting of natural, societal and human resources.

I am not intending to question the necessity of abandoning our fixation and dependence on growth. But as much as it is important to discuss issue like money and interest, regional economic cycles and social innovation, the acceptance of degrowth as a new economic paradigm, in fact as something politics can start to embrace, can only be gained by connecting to central ideas of economic sciences in a positive way. Enterprises as the basic level of economic value creation and entrepreneurship as the basic economic function are such central ideas with which the degrowth debate needs to establish some common ground.

What I question within discussions on degrowth is in what form a predominantly small-scale, locally organized economy with small businesses and low capital, preferably all co-ops, can sustain a high-technology society like ours — and that in an economic and ecological efficient way. Without global networks of distributed production, comparative economic advantages of cost, and all its necessary logistics it will hardly going to work. Most likely we will need much less of those but needing them we will. And we need capital, which implies a capital market, also on the global scale, and this further implies businesses of a certain size that can provide a certain economic return on investment. But much more important is the simple truth that never on this planet and in our history, a top-down approach succeeded implementing a new economic and social paradigm that was viable in the long term — democratic aspects let aside. The real world is way too complex for that and “systemic changes” run very high risks of ruining everything. It was John Stuart Mill, maybe the last broadly educated and interested political economist, who argued in the 19th century that the ability of a society to prosper and adapt in the light of an uncertain future lies within its willingness to allow for diverse and small-scale social experiments bottom-up. Such an approach is much more tolerant to mistake than a systemic one, although the latter might sound more fashionable.

A bottom-up approach to degrowth explicitly takes into account businesses beyond social businesses and, moreover, capitalist entrepreneurs themselves, including them as active participants and agents of economic change. In general there is no company that could not somehow integrate degrowth at the core of its business model — the question always is: at what “price” i.e. the impact on a company’s value creation potential and its employment base.

We have conducted a model-based scenario analysis on the economic and ecological impacts of alternative business models in the automotive industry, comparing ecological footprint and gross value added. One of the most striking results was that a mix between classical car business (selling of cars) and alternative models (carsharing, selling of services) can actually lead to less ecological impact with only minor forms of degrowth in gross value added of about two percent in comparison with the present situation. As much as these findings are preliminary and based on a very simple model, they show that by expanding the classical engineering view on physical products towards product-based services and mobile communication-based access, a new form of degrowth capitalism can emerge. Such a degrowth capitalism would not only entail ecological negative-sum games — reducing energy and resource use as well as installed product base — but also economic zero-sum games i.e. increase competition dramatically. This will foster the best in entrepreneurial spirit and creativity that capitalism so uniquely brings about. It is exactly this kind of increased competition that is needed to spur innovation in technology, social arrangements and consumer behavior for the great transformation towards a sustainable society.

Entrepreneurs thereby are the central element driving change through implementing new ideas in the classical Schumpeterian sense of creative destruction. Entrepreneurs are not driven by rent-seeking desires alone, however economic rent is needed even in a degrowth economy. An entrepreneur is enthusiastic about his or her ideas that might lead to profit. You cannot imagine entrepreneurship and true entrepreneurial spirit without joy and passion about taking risks. Without it the transformation towards a society that gets off its fixation on growth is hardly conceivable. In fact, these entrepreneurs create it with the introduction of new products and technologies, new business models, social innovations and by discovering different ways how we manage and perceive our daily life. If Steve Jobs would have been obsessed with degrowth as source for a business model, how would the world look like today? Maybe it would have saved as some debates about the future of capitalism and the sustainability of society.

After participating in this year’s Academy of Management Annual Meeting in San Antonio, the planet’s largest professional body of management scholars, I gained some puzzling insights to the profound problems of the field. Of course this is mainly due to my distorted worldview I inherit from Heinz von Foerster, Francisco Varela and Niklas Luhmann. However it might be just as valid as any other, and maybe even more so as it stems from a kind of reasoning that embraces paradox rather than run away from it.

Running away from it is what management science (and probably also management practice) is doing. For management practice this is forgiveable and most likely it is completely irrelevant as to how good or bad management problems are dealt with. For management science the case is different. I will try to explain why and what I see as the problem.

Heinz von Foerster distinguishes two kinds of questions: those that can be decided and those that cannot. Decidable questions take the form of “How old was Heinz von Foerster?” You can find the answer by looking in his passport or, more accesible to most of us as he is dead, by searching the internet. (He died shortly before is 91st birthday) Decidable questions are a bit like complete puzzles, everything is already there in order to answer them. It might just take a while but there is definitely one, and only one unambigous answer to them.

Some sciences, and sometimes even management science, deal with these kinds of questions e.g. when does water freeze under what context situtations or what is the most cost optimal production programme under given constraints. In brief, decidable questions are pretty boring, regardless how relevant the answer can be (e.g. if you want to have ice cubes in your Gin and Tonic).

However, some sciences, and most of the time management science, are dealing with the other kind of questions: undecidable questions. Some forms this type can take are: What is happiness? What is the origin of everything? What is the best market strategy? With whom should I partner (for business, for love)? You figure their general form for yourself.

Undecidable questions are of interest to me, they open up a space that bears new insight all of the time — not for answering the question, but for understanding why we ask them in the first place and how we can cope with their “undecidableness”. The funny thing with management science is that it uses the methods of puzzle solving (that is working for decidable questions) for adressing undecidable questions. The field is increasingly obsessive with quantitative studies and statistical analysis. And, needless to say, it is the way to get published, to get reputation and tenured positions.

Now, there is nothing wrong with statistics and some good old-fashione empirical social research. But if you do it, you are assuming something: you are assuming more or less clear causality and thus decidability. Causality is always given if you shorten your timespan of inquiry and limit contextual factors to the very least. If e.g. you want to find a causal link between internationalization of SMEs and their overall performance (e.g. R&D patents, employees, sales growth), you will definitely find them if you ignore the historic instances accompanying internationalization (e.g. high economic growth rates in the countries they are internationalizing to) and specific regulatory contexts (e.g. the need to patent your patent again under different national laws). The more you include and the longer you look, the less valid your analysis will become. And it is no wonder because such a question, e.g. to internationalize or not, is undecidable. You have to actually do it. There is no try, as Master Yoda said. And I would add: there is also no prospect to it, no method of calculating it ante.

If you want to take undecidable questions serious, and stick to notions of causality e.g., you have to acknowledge the circularity of causality: a influences a, and it could influence it in such a way that it becomes non-a. And back again. Circularity increases the likelihood of paradox. And if you look to the real world, in which managerial problems occur, paradox abounds.

What I was missing from the discussion at the Academy was the full acknowledgment of paradox stemming from undecidable questions. In more blunt words: the guts to look into them, not for answers about them but for answers about us who are asking these questions. The only sessions where this was possible were Yoga and meditation sessions… Seriously.

Does management science have to turn Yoga in order to adress these questions properly? That is not what I am advocating, although some Yoga can do no harm to a scientist nor to a manager. What I am advocating is a language of inquiry that can handle undecidable questions and is able to provide a formal grounding for posing them. There is nothing else under this sun I came across that appears to be able to deliver this than system theory and second-order cybernetics.  I know, the means to apply it to empirical research are hard; I know that the means to connect it to existing management theories is hard; I know that almost none in the management field really know about it. But that is no excuse, it is a spur to start the discussion and get into the heart of the matter. That was what we did with our workshop on system theory and we will continue to do so. Who wants to join? The odds are against us and the outcome  unclear (not to mention the possibility of tenured positions…), but I guess this is just what undecidable questions are all about.

It is the final day of the 17th Annual International Sustainable Development Research Conference in New York City and I am trying to get the mixed soup in my head together. The first day was really a shock, as Nina Fedoroff was seriously advocating genetic modified organisms as the future hope for sustainable agriculture. In a similar, although more balanced vein, Klaus Lackner argued for clean energy. Now that might at first not look like a bad thing, and I would surely love to see heavy investment in it. But his underlying assumptions were interesting, as he assumed that energy consumption would rise from 15 TW/a to up to 100 TW/a by the end of the 21st century. There was no hint of doubt that economic growth and consumption would continue as if there were no ecological limits on our finite Planet. Jeffrey Sachs and Klaus Töpfer on this last day restored my faith in sustainability research, just as Lester Brown did yesterday. However, American sustainability research appears to be stuck between a way of thinking European sustainability research discussed 15 years ago and the present needs for degrowth as discussed in Europe today.

On a more concrete level, at least for my research, I got out an important insight. We still cannot answer a simple question: What is a sustainable product? What is a sustainable supply chain? How can we measure sustainability? 666 and more indicators are surely not an answer, and especially not if we want to adress business and their decision makers. In order to overcome this situation, it seems most feasible to me to concentrate on those measure that are “limit-able” i.e. to look for variables that can be assigned a limit from our best scientific knowledge. CO2 is such a variable for which we can attach a limit e.g. 750 Gt until 2050 if we do not want to exceed the 2-degrees-guardrail. Maybe this is also possible for certain material uses or biodiversity. It may even be possible for some social variables, also I cannot come up with an example right now. If such limits can be applied, then it is quite easy with the method of ecological allowance (see the paper on it on this website) to allocate a budget per product, output or service unit for an individual firm and compare this to the numbers from its lifecycle assessment calculation. This will give a clear answer to the question “are we sustainable”?

Also, we have to order sustainability measures in an hierarchical manner. Otherwise we are alluded to concentrate on the ones that we can most easily achieve. The top of the hierarchy are ecological measures because without operating within ecological limits, all other indicators become meaningless. The ecology is the primary source of production, everything we do is a rearrangement of this source and, at best, an organizing factor, as powerful this may be and as sophisticated the final products might become. Then come social limits and their indicators. Without a healthy social context, there can be no production, no economy of any kind. Both ecology and society are the sufficient and necessary conditions for any economic activity. If we know their limits, we can start to economize on them and understand what we are allowed to do economically, if we want to survive in the long run.