The fifth issue of Renewable Matter includes an interview with economist Mariana Mazzucato that reviews the current engines of innovation. She describes how public and private governance models have progressively shifted, to the point that they can no longer deliver innovation. She then goes on to suggest how to set innovation on the right track again. 

In this issue of RM we called on the Austrian economist and founding president of the Sustainable Europe Research Institute (SERI), Friedrich Hinterberger to give us his perspective. While essentially agreeing with Mazzucato’s analysis, he provides a different view on the current drivers of change: one that takes into account the priorities and trends emerging within the Facebook generation.

Nearly 20 years after issuing (Friedrich H., L. Fred, S. Marcus, Ökologische Wirtschaftspolitik: zwischen Ökodiktatur und Umweltkatastrophe, Birkhäuser Verlag, Auflage, 1996), how much progress has been made in achieving the dematerialisation you were advocating then?

“Indeed, since Friedrich Schmidt-Bleek forged the concept much progress was made. Particularly over the last ten years. Mostly under the impulsion of the EU and the action of Commissioner Janez Potočnik. What is remarkable is that the language associated with dematerialization has become commonplace within the business community, i.e. among those who make the best use of the related concepts. Unfortunately and somewhat paradoxically, the policy-making arena cannot boast a similar success. In this field, the language has mostly remained confined to experts. Furthermore, the ongoing debate over climate change has captured most of the attention. So much so that, more recently, the Commission appears to be hesitant, and it is yet not too clear whether the circular economy package will effectively move things forward. In other words, attention for dematerialisation has died down, or better, it is no longer rising. On the other hand, by deciding to prioritise decarbonisation and curbing the use of coal and oil, the G7 has recently shown that dematerialisation is still on the agenda and that things are moving.”

So your feeling is that, while the policy arena pays little attention, the business community is moving forwards. 

“Today businesses are handling dematerialisation, although the issue is vastly overshadowed by the debate over climate change. If you take GRI indicators and criteria, for instance, there is a single indicator for materials while you have many for greenhouse gases. Another way to look at it in practical terms, is to look at the debate on dematerialisation as lagging behind discussions over climate change by over twenty years. In that sense, there is still very much to do. If you look at the figures, what you see is that the early-industrialised economies of Europe, North America and Japan, have dematerialized by diminishing direct inputs of resources. However, absolute figures in material consumption are still rising at the global level. And this is happening whether you look at it globally, or you consider it on a sectoral basis.”

Which policy instruments have been most successful and which do you feel should be developed?

“Let us take a European perspective. In the EU recycling is still negligible, except in a handful of countries. In fact, over the last 20 years most of the debate has concerned packaging, which, of course, represents a considerable fraction of the materials displaced by EU economies. At the end of the day, few products are recycled and even fewer products are effectively made of recycled materials. For instance, even for PET that enjoys a very considerable recycling rate, most new plastic bottles are made with virgin feedstock. Hence, the use of recycled materials, especially within products of common use, is lagging behind. This is because the process is looked at mostly from the backend, i.e. the output side is considered rather than product inputs. We still must make a complete U-turn in product’s design to improve key factors such as the durability of products, their service intensity and their sharing capacity. Apart from being preferable for the environment, such a trend would have the further positive effect of increasing the usage intensity of products: greater and more thorough product use contributes to the creation of greater overall wealth. However, although there is considerable advocacy to make progress in this direction, in practical terms, little has been done to render it effective. In fact, today the trend is marginal in terms of quantities, but highly promising in terms of perspective developments. It is comparable to the diffusion of the first cars, or to the diffusion of the first mobile phones. It initially appears to serve only a niche market before becoming commonplace. 

“Another point made twenty years ago and that has not changed to this day is that prices are not ‘right,’ i.e. they do not reflect the true costs because they are developed as instruments of environmental policy. What I mean is, for instance, that taxes deal with carbon emissions rather than overtly curbing the use of raw materials. So, they end up affecting car drivers, i.e. consumers, thus affecting industry only indirectly. This is not enough.”

What are the effects of other trends, such as the upsurge of the sharing economy, upon the dematerialisation of the economy?

“Something we really had not envisaged 20 years ago are the far reaching changes in consumption patterns of the younger generations. These changes are partly driven by economic factors. We are going through a fundamental economic crisis, which is by no means limited to the financial markets. All of the classic economic drivers have fallen through pointing at the systemic nature of the present crisis. This means that people have less and less money. Hence an increasing part of the population is adopting solutions such as those provided by AirB&B for lodging as a matter of necessity, since they cannot afford hotels or other classic forms of accommodation. This of course is no impediment for the development of new semi-commercial solutions to emerge through such novel channels. This raises all sorts of new problems, such as the perception of unfair competition with the previously existing solutions and the consequent displacement of jobs. Furthermore, whenever they can, young people are more attentive at picking quality food; many become vegetarian, etc. Overall, they are adopting a more environmentally conscious attitude without necessarily adopting an environmentally militant outlook.”

Between policy instruments targeting material usage and changing consumption trends among the younger generations, which do you feel holds the greatest probability to bring about the transition towards a dematerialised economy? 

“Already 20 years ago, it was felt that all the measures necessary to advance the issue are mutually reinforcing. Ideally, in order to achieve maximum positive impact, they should be implemented together. Although, in practice, this does not imply they should all be adopted at the same time. In reality, the measures are being adopted progressively. As I mentioned earlier the changing consumption patterns among the younger generation is affecting the market and new businesses are emerging. This in turn may affect the contents of policy programs that are prepared for local and national elections. Moreover, why not, as things evolve some companies may even start lobbying in favour of resource taxation rather than labour taxation. This because many of the activities related to product maintenance and refurbishment are labour intensive. It is clear that these combined measures have far-reaching effects that go well beyond their environmental purpose: more importantly, they have strong positive economic and social effects by providing new labour opportunities.”

In your view, since we are approaching COP21, which are the most urgent measures that need being adopted? 

“Again, it is very hard to indicate any particular route, since dematerialisation comes from a combination of different measures and trends. A better taxation regime is highly desirable, but turns out to be useless if companies are not able to deliver appropriate solutions. Moreover, it may well happen that taxes are collected without any noticeable effect upon products. This unless complimentary actions are conceived, as is the case in Flanders, where consultants help companies devise new solutions. Another very important aspect lays with media and the way they can relate what is happening among young people. In Austria, today, most young people do not even consider the idea of getting a driver’s licence. There is no interest in driving a car. People of my generation hold a very different attitude. In France, the buyer of a new car is, on average, 50 years old.”

In this context, what are the goals and the actions of the Sustainable Europe Research Institute (SERI) you created in Vienna in 1999? 

“Our main objective is to convey a simple message: ‘Useless is worthless.’ In practice, we work with companies to help them apply and communicate this concept. Accordingly, we help identify hotspots and principal effects and then implement corrective actions or create new solutions. Once this work is done, we ensure that the consumers are adequately informed of the efforts made, so that the progress achieved may be rewarded through consumer preferences. Furthermore, we provide companies with material throughput accounting tools that facilitate material flow management in terms of avoided impacts, CO₂ reduction, etc. Furthermore, these are useful when they draw up their sustainability reports. Finally, SERI assists policy makers in developing new policy tools.”

Secession, Vienna. Photo by Tony Hisgett

An economist by training, you often refer to the work of economist Walter Eucken, one of the fathers of the post-WWII German economic recovery. Can you tell us why his work has inspired you? 

“Indeed, Walter Eucken, and the group of economists linked to him, stand behind the German economic miracle. He developed the concept of social-market economy. It comprises very liberal aspects that support the free-market approach, and highly social aspects that, for instance, take into account distributive issues. However, the most distinctive characteristic of his work is that he clearly called for a very rigorous setting of the boundary conditions. In other words, he advocated the establishment of strong frameworks within which markets should evolve freely. Overall, this concept establishes a particular brand of ‘continental’ capitalism that is clearly distinct and perhaps opposed to the anglo-saxon brand of laissez-faire capitalism. This, perhaps, is what also characterised, to a certain extent, Italian and central European western economies. At the end of the 80’s and the beginning of the 90’s, in Austria, the concept extended and muted into eco-social market economy. Although initially it took care of generic environmental concerns, rather than specific resources and climate change, it somehow represented an extension of conservative thinking. It enabled to embrace social and environmental concerns within mainstream economic thinking. Accordingly, the mantra of economic growth now includes the setting of the most appropriate boundary conditions to achieve it. However, over the last 20 years, these concepts were swept away by the neo-liberal approach only to be resumed in 2008 when the ongoing economic crisis set in. Today analysis of the boundary and framework conditions has gained new legitimacy. 

“It is interesting to note that this new legitimacy does not stem from universities nor from major economic think tanks – vastly colonised by neo-liberal economic thinking – but from the younger students that are calling for ‘a plurality of opinions in economics.’ Today, students ask to be given the opportunity to access truly different economic theories and analysis, and to able to compare them through a pragmatic non-ideological approach. Recently, the de-growth movement, born in France and Italy and diffusing across Europe, has been nourishing the debate with fresh ideas and priorities. This has brought the German parliament to start an enquiry into ‘Growth and well-being’ which has brought parliamentarians and experts to discuss the issue for two years. The Dutch, who pursue the concept of transition economics, have launched another very valuable complementary stream of analysis. It is particularly interesting because it is deeply pragmatic and closely linked to militant activities who walk the talk allowing for useful cross-fertilisation between theory and practice.”

How do you feel these issues are going to evolve over the next few years?

“Well, I am not too confident things will evolve very much, at least at the policy level. Mind you, the big institutions, the bureaucracies – such as the EU – will continue doing their job and some progress will be made. However, change and innovation are much more likely to be driven through a bottom-up approach. Companies, particularly SMEs in which there is a generational change, citizens, local territorial initiatives are going to move more effectively and, probably, much faster than governmental institutions. I insist on the younger generation because, while they are less likely to be radical, they are familiar with environmental concerns. In this sense, I may say that I am optimistic. Even the fact that the crisis will go on, may, at the end of the day, have a positive effect, since materials will become more valuable thus incentivising dematerialisation.”

Sustainable Europe Research Institute (SERI), seri.at/en/.