Markets have always delivered what ‘circular economy’ advocates want

A recent advertisement from academics at the University of Exeter argues that the “circular economy is the missing link in the race to net zero.” This is because the transition away from fossil fuels to renewables can only account for 55 per cent of greenhouse gas emissions, whereas the remaining 45 per cent is “embodied in everyday products” from food and buildings to clothes and cars. Similar arguments have been promoted by numerous organizations, businesses and governments including the World Economic Forum, the United Nations Environment Programme and the Chinese Communist Party.

So what exactly is the circular economy?

According to the Trudeau government, it’s a new way of doing things where nothing is wasted. It’s about retaining and recovering “as much value as possible from resources by reusing, repairing, refurbishing, remanufacturing, repurposing, or recycling products and materials.” This is in sharp contrast to the traditional “linear” way market economies “extract, use, then dispose of resources.” As the World Resources Institute sums it up, “linearity in the global economy” has resulted in “significant societal challenges including resource depletion, climate change, waste, pollution and health hazards.”

How should we reorganize our economy along circular lines? By and large, most policy prescriptions involve top-down green taxes, subsidies, regulations and mandates that will discourage the use of virgin materials and promote the (re)design and extended stewardship of consumer goods.

Interestingly though, as academics and activists began to preach the gospel of circularity, a few of them, including researchers affiliated with the University of Ottawa’s Smart Prosperity Institute, came to realize that “globally, businesses are already implementing a wide range of practices that incorporate circular economy principles, whether or not these practices are explicitly identified as circular, or part of a larger, company-wide greening strategy.” Could it be that most manufacturers never needed outsiders to tell them there was money to be made in eliminating waste?

As it turns out, from the beginnings of industrialization several writers observed that what’s now known as the circular economy was really business as usual. In 1863, famed British chemist William Crookes wrote that “the progress of our great chemical manufactures during the last ten years… appears chiefly to have been directed towards the utilization of waste substances.” In 1904, American industrial chemist Leebert Lloyd Lamborn observed that “If there is one aspect more than any other that characterizes modern commercial and industrial development… it is the utilization of substances which in a primitive stage of development of any industry were looked upon as worthless.” Even Karl Marx observed a few years earlier that advances in chemistry taught manufacturers “how to throw the excrements of the processes of production and consumption back again into the circle of the process of reproduction.” As a result, the “so-called waste plays an important role in almost every industry.”

Most writers attributed this “green” behaviour to the search for increased profits. For instance, in 1927 the Canadian-born economist Rudolf Clemen credited the “ever-increasing force of competition” for ever greater circularity. Because modern conditions made it “almost impossible materially to cut production and distribution of expense for the majority of commodities,” one of the “most important opportunities for gaining competitive advantage, or even for enabling an industry or individual business to maintain its position in this new competition” was to reduce manufacturing expenses “by creating new credits for products previously unmarketable.” Marx similarly commented that newly created by-products “reduce the cost of the raw material to the extent that they are saleable” and suggested that industrial waste recovery was “the second big source of economy in the conditions of production.”

Past commentators on circularity differed from present-day ones in a few ways. Most believed that manufacturers would do good things on their own and that the best way to stimulate this behaviour was to publicize success stories. Some even created a significant exhibit on the topic in London in the late-19th century. They also emphasized the valuable role of dealers and other intermediaries in gathering, sorting and finding new markets for waste substances. Modern theorists, on the other hand, are typically more enamoured of technocratic government planning and interventions. They typically put much effort in (re)designing products so they can be disassembled more easily, think of new ways of holding firms responsible for the products they have sold, and ignore the fact that intermediaries might find new and better uses for the materials they recover.

It’s rather ironic that greater government intervention in our economies is now often justified in the name of a promise, the circular economy, that markets have always delivered.