The Understandable Madness of Economic Growth

March 26, 2012 by
Filed under: Social Brain 

Questioning growth is deemed to be the act of lunatics, idealists and revolutionaries. But question it we must. - Tim Jackson

Speaking at the RSA President’s Lecture last year, David Attenborough made a profoundly subversive comment disguised as an innocent joke: “Anyone who believes in indefinite growth on a physically finite planet is either mad, or an economist.”

The trouble is that political and policy arguments are largely driven by the methods and metrics of economists. So while the means to the end of achieving economic growth are constantly debated, the legitimacy of the end itself is barely questioned. In this sense most of our political class are indeed ‘mad’. The problem with Attenborough’s joke is that after the laughter has subsided here we all are, believing in indefinite growth on a physically finite planet.

The problem with Attenborough’s joke is that after the laughter has subsided here we all are, believing in indefinite growth on a physically finite planet.

I write as a relatively privileged thirty-something with a full-time job, so perhaps it is too easy for me to make this case. Perhaps if I was a recent unemployed graduate with a young family, desperate for work in a depressed region, who just received his thirtieth rejection letter I would feel differently. Perhaps if I wanted to start a new business but couldn’t get a bank loan, or if I had to lay-off good staff in a small company because my main customers were withdrawing their business…perhaps.

But for what it’s worth I think the prevailing focus on ‘jobs and growth‘ is painfully shallow. The debate about ‘jobs’ obscures a much more productive discussion about employment, particularly finding ways to support flexible, temporary, and part-time work. NEF lead the way on this issue, with their examination of the feasibility of a 21 hour working week. It appears obvious to me that if most people who have full-time jobs feel overworked and stressed while others are not working at all the solution is not necessarily to create more ‘jobs’ through economic growth, but rather to redistribute the available work more evenly.

It just looks obvious to me that if most people who have full-time jobs feel overworked and stressed while others are not working at all the solution is not necessarily to create more ‘jobs’ through economic growth, but rather to redistribute the available work more evenly.

The reason this idea is viewed as subversive rather than obvious is due to the assumption that we need economic growth at all costs, what Clive Hamilton calls ‘growth fetishism’.

Prosperity without Growth?

Prosperity without Growth by Tim Jackson is an indispensable guide for anybody hoping to challenge this idea. It is a remarkably sane, balanced and human book by an economist who has the capacity to authoritatively present conventional economic arguments at their strongest, and the insight to show their limitations, sometimes even on their own terms. There are many reviews online, so what follows are the traces of the argument left in my mind a week or so after I finished reading it:

Prosperity is a legitimate goal, but it is best viewed as a social and psychological concept rather than an economic one. Linking prosperity exclusively to income is unhelpful, because even if they are related(and some dispute that) prosperity is a much bigger concept, relying only on minimal conditions from income.

Moreover, a fuller analysis suggests we are suffering not just from an economic recession, but also a social recession(poorer relationships, less trust, more lonliness) and, more urgently, we are rapidly approaching our planetary limits. These are clearly related concerns, and it is completely wrong-headed to think that growth will solve the other problems, when it often causes them. As Jackson puts it:

“The truth is that there is as yet no credible, socially just, ecologically sustainable scenario of continually growing incomes for a world of nine billion people.”

Our Dependence on Growth

Alas, the need for growth is deep. We have constructed our economies in such a way that they have a structural dependence on growth and are therefore inherently unstable. Economies are full of positive and negative feedback cycles(e.g. low/high growth, high/low unemployment, less/more spending power to support growth). If the economy stops growing, it starts shrinking towards collapse…there is no steady state. Accepting this means we have a stark choice: to make growth sustainable or ‘de-growth’ stable.

The challenge with the latter is that economic growth is driven by what Jackson calls the ‘social logic of consumption’ underpinned by a deep human need to convey identity and signal status. This is the engine of capitalism, fuelling aspiration, innovation, higher living standards i.e. it’s not all bad and we are used to it. It appears so much easier to find ways to make growth sustainable, but what Jackson’s analysis makes clear is that these approaches don’t add up, quite literally.

We have constructed our economies in such a way that they have a structural dependence on growth and are therefore inherently unstable. 

The Myth of ‘Decoupling’

The Ehrlich equation outlines the arithmetics of growth with respect to sustainability, and it doesn’t look good. The impact (I) of human activity is the product of three main factors: 1) P: the size of the population(going up to 9-11 billion by 2050), 2) A: its level of affluence (income per person) and a technology/efficiency factor which measures impact per unit of economic output. I=PxAxT.

Here is the issue: If P goes up, and A goes up, T has to go down to stay within planetary limits. This is why so many economists and politicians need to believe that we can continue to grow, and the only way to believe that is to argue that technological and behavioural change can make us much more efficient such that our impact remains within sustainable limits. This solution is often called ‘decoupling’- in other words separating economic activity from environmental impact.

However, when you look at the numbers more closely that appears at best wildly optimistic and at worst completely delusional. We have no reason, other than recklessly blind faith, to believe that technology can deliver in that way. One reason many remain caught in this delusion is that they don’t distinguish between relative decoupling(less environmental impact per unit of economic output) and absolute decoupling (less environmental impact overall) which is what we desperately need to achieve. It is possible to appear ‘green’ with relative decoupling, but you are only really sustainable if you achieve absolute decoupling.

It is possible to appear ‘green’ with relative decoupling, but you are only really sustainable if you achieve absolute decoupling.

There is a very strong argument that while we can improve relative decoupling and should continue to do so, absolute decoupling is incompatible with the continued pursuit of economic growth, at least in the developed world. (It remains coherent to argue for growth in the developing world where the marginal utility of growth is much greater, and environmental impact can be lessened through appropriate investment).

So I found Jackson’s argument (much more sophisticated than I can present here) persuasive. I am not sure if that makes me a lunatic an idealist or a revolutionary, but I think we have to think about changing the structure of the economy through giving serious thought to what a model of a stable economy without economic growth looks like. Some models have been proposed, but they remain nascent. We urgently need to develop them.

On reflection, such a bold approach does not appear ideological to me, but rather waking up from a prevailing ideology that is manifestly self-destructive. We are running out of planet. A no-growth economy is a curious creature to think about, but as Sherlock Holmes once put it: once you have eliminated the impossible, whatever remains, however improbable, must be the truth.

 

 


Comments

  • curianth

    I think it’s great that you’re writing about this, and I don’t want to sound gloomy, but people have been challenging the growth imperative for decades. David Attenborough’s “joke” was a (mis)quotation. The words: “Anyone who believes exponential growth can go on forever in a finite
    world is either a madman or an economist” have been attributed to the economist Kenneth Boulding, who died in 1993. (The fact that he was an economist makes it funnier, I think.) I can’t find a source for it, but it’s certainly a quotation that’s been around for quite a while. As have ideas about no-growth economies. Herman Daly has been writing about them since the early 1970s, and plenty of others (including Tim Jackson and others associated with the New Economics Foundation) have been giving them plenty of serious thought since then. So if the models are still only nascent, why would that be?

  • curianth

    I think it’s great that you’re writing about this, and I don’t want to sound gloomy, but people have been challenging the growth imperative for decades. David Attenborough’s “joke” was a (mis)quotation. The words: “Anyone who believes exponential growth can go on forever in a finite
    world is either a madman or an economist” have been attributed to the economist Kenneth Boulding, who died in 1993. (The fact that he was an economist makes it funnier, I think.) I can’t find a source for it, but it’s certainly a quotation that’s been around for quite a while. As have ideas about no-growth economies. Herman Daly has been writing about them since the early 1970s, and plenty of others (including Tim Jackson and others associated with the New Economics Foundation) have been giving them plenty of serious thought since then. So if the models are still only nascent, why would that be?

    • Jonathanrowson

      Thanks Curianth- that’s informative, and I hope I didn’t sound like I had just discovered something new- I know this is old turf. I just didn’t really have a position on it before, and for me it was a revelation to learn more about the structure of the economy that makes growth seem like an imperative(emphasis on labour productivity for instance). I remember reading Buddhist Economics by Schumacher about a decade ago and not really ‘getting it’- I think I’ll return to that now.

    • Jonathanrowson

      Just noticed your last question again- it’s a good question- what’s your answer? My guess is that like any economic model, the reality will always be somewhat different….so without practical feedback it is hard for a model to look fully credible/believable…it might also be that nobody believes countries can do it unilaterally, and despair at the chances of doing it multilaterally.

  • Egidijus Gecius
  • Adam Lent

    It’s a good question from Curianth. I suspect rhetorical but my answer would be clear: the issue of a no-growth economy has been rolling around for a while with little progress for the reason that it can’t be achieved at least under present economic arrangements.  Capitalism is inherently about investment which requires a return and return comes from growth.  Until we invent a system based on an entirely different principle, I’m afraid we have to work towards the decoupling that Tim Jackson derides.  If that really is impossible then we have to live with runaway climate change.

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  • Asdfgh

    >>>Alas, the need for growth is deep. We have constructed our economies in such a way that they have a structural dependence on growth and are therefore inherently unstable.<<>>I found Jackson’s argument (much more sophisticated than I can present here) persuasive. I am not sure if that makes me a lunatic an idealist or a revolutionary<<<

    The second of the three.

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