The End of Linear Economy

Copyright and all rights reserved Tomi Nyman

I have often considered about the current linear economy and demand for continuous growth. We have recently been hit with a strong fear for a long and deep recession. 

Last summer I started to think about an option: What if central banks induced a 'recession' on purpose by gradually but firmly increasing interest rates until people and enterprises are driven to favor a circular economy to save in virgin raw material costs? 

'Change' is a word that makes people worried as it often implies changing routines - and this is exactly what should be done with linear economy.

The definition of recession relates to the linear growth, but what if we stop fighting to try and preserve it by keeping interest rates low - a very topical question again today. Central banks intend to keep linear economy growing in danger of a recession and interest rates remain low. If everyone knew that the interest rates will grow by e.g. 0,1% per month during next 5 + years until a sustainable balanced circular economy is obtained, people and companies can plan and adapt to the changes. 

Investments in favor of circular economy will ensure a growth - but of circular economy where products are made strong, designed to be repaired and recycled. People will find new jobs, not in virgin production but in services, repairs, refurnishing, restructuring, recycling. Individual companies have calculated that they can achieve massive growth in revenue thanks to developing fully circular business models and taking those into practice.

A huge amount of savings are available from circular economy when no new raw materials need to be purchased again and again. This value can be shared amongst the society, being the producers, industries, recyclers and consumers. In this model, what is notable is that since such a large amount of capital is saved from raw material costs, purchase power is still maintained, it may even grow, and people can keep their jobs.

Companies will always go bankrupt and disappear, but those that are most agile in adopting new circular models and taking them into action will be the winners. There is no room for a linear economy which is based on a growth of consumption, when we have less to consume every day.

Moving into such a plan would require strong faith, education, marketing, long-term commitment, global agreements. Initially, though, this may be implemented by national banks only. Eventually only one central bank, be it the FED, ECB, PBC, needs to initiate this, make the first snow ball and make it roll - big time - and others will need to follow to maintain global economic balance.

The central bank which first implements this, will create a strong domestic market with high competitivity and challenging imports. This will drive others to follow to recreate trade balances.