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A world obsessed with economic growth

In Business and Environment, Environment, Ethical and Eco Agriculture by Martin OliverLeave a Comment

Ultimately, we have built an accelerating economic vehicle of great complexity whose controls can only be understood by a tiny minority. Do concerned citizens take on the difficult challenge of tackling growth, or do we take the easy option and leave it to the experts?

 

When somebody starts speaking about it, eyes glaze over. A period of silence usually ensues, and the topic is changed.

Economics has never been a favourite topic of conversation. Dubbed ‘the dismal science’ for its over-reliance on theory and a lack of scientific exactness, over the past decades it has nevertheless exerted a growing influence, and now holds the world in a near-religious thrall. Kevin Rudd is as likely to refer to Australia as an ‘economy’ as a ‘country’, and prides himself on sound economic management above all else.

The growth fixation

Viewed historically, until relatively recent times, the economy played only a minor role in the functioning of a society. Now we have reached a position where instead of the economy existing to serve humanity’s needs, the tail is wagging the dog, and humanity’s adopted role is to serve the economy. So how did this come about?

In the human arena, growth is widely associated with such desirable qualities as improvement, development and progress. Likewise, economic growth is nearly always seen in a similar light, despite being a matter of quantity rather than quality.

Although growth occurs throughout the natural world, this is incremental, and ceases once an organism reaches maturity. In contrast, continuous economic growth is exponential! When mapped on a graph it forms a rising curve that eventually forms a near-vertical upward line. With a 3% annual growth, an economy will double in size every 23 years. After 100 years it will be 19 times larger, and 200 years later it will have grown 369-fold.

Tracing it back

For nearly all of recorded history, economies ran on a virtually steady-state basis, with minimal growth from one year to another.

Today’s banking system was designed in England during the 17th century, with a view to fostering competition and encouraging development. It played an important role in triggering the Industrial Revolution of the 18th century, which launched the modern era of economic growth, powered by abundant fossil energy sources.

Early economic thinkers such as David Hume and Adam Smith favoured growth, but did not necessarily see the process continuing indefinitely. Some claim that the philosophy of endless growth emerged out of 20th century America, with its sense of infinite horizons.

National economic growth, measured in Gross Domestic Product (GDP), has now become hardwired into the structure of the global economy, and no country can afford to step out of line. It is used as the benchmark of success in a competitive world, and a nation whose economy ceases to grow is heading for disaster.

Because growth of the economy is treated as a given, debate is usually restricted to the finer points of economic strategy. Growth has the full support of a bevy of orthodox economists, some of whom believe that a non-growth economy will result in humankind going back to living in caves, and wearing animal skins instead of clothes.

Some criticisms

Interestingly, the words ‘economy’ and ‘ecology’ both derive from the Greek for ‘household’, oikos. However these two seem to be increasingly at odds with each other, and this is becoming harder to ignore. Moves towards greening the existing economy are welcome, but arguably they are doing little more than tinkering around with the edges.

The Earth runs on a steady energy budget, but the economy, with its own energy metabolism, works against the grain of this basic reality, leading to such phenomena as climate change. We have a finite quantity of non-renewable resources, but despite a growing service sector and the much-touted ‘information economy’, the only simple resolution to the problem of resource depletion is to join the ranks of the techno-optimists.

These people widely believe that the exponentially growing resource ‘throughput’ linked to growth can be offset by parallel technology-driven efficiency improvements. This raises the question of whether technological innovation can be relied upon to evolve at an exponential rate that mirrors growth trends. Optimists are also confident that technology will also be able to clean up any environmental mess left over. In a more convoluted argument, some believe that we need growth in order to afford the future clean-up.

Much of the world’s manufacturing has relocated to China, creating the illusion in Australia that the industrial era is past history while the Chinese tackle smog, breathing difficulties and asthma. On the brighter side, Western countries have been endeavouring to decouple their economic growth from energy use. This has been successful to a degree, but in Australia the process is still at a very early stage.

Challenges involved in shifting the world onto a sustainable footing are compounded by the growth model. According to the United Nations Environment Program, humanity’s per capita environmental demand is 21.9 hectares, while the Earth’s biological capacity is only 15.7 hectares. As this disparity widens, aided by economic factors, we are outstripping the Earth’s capacity to sustain us.

Less often remarked is the way in which growth necessitates the continuous opening up of new markets. This insatiability has manifested in a variety of ways:

  • In historical times, it created the need for colonialism, and more recently globalisation under unfair terms of trade.
  • When free enjoyments are stripped from people, they often spend money on substitute activities. Time lost through overwork is then marketed back to us in the form of overseas holidays. If the local park is lost to development, we are more likely to pay for recreation.
  • Activities that once used to occur only at a family level, such as the care of the elderly and childcare, are turned into commercial businesses.
  • Marketing targets children of an increasingly young age, raising a range of concerns.
  • Questionable medical conditions are identified, and drugs are developed to treat them.

Relief of poverty is the most common pro-growth argument, and mainstream wisdom holds that economic growth has traditionally led to significantly improved living standards in developing countries.

In affluent societies, this makes less sense. Despite the messages we are fed, research has found that, once our basic needs have been met, further consumption has a negligible effect on our level of happiness.

A growing weight of opinion

Once dismissed as nonsense, arguments against economic growth are making inroads into the mainstream consciousness. Last October, the New Scientist ran a major feature on this subject that unsurprisingly aroused some strong opinions. Australia’s most prominent growth critic is Clive Hamilton of The Australia Institute, who comes at the issue from an anti-consumerism angle. Overseas, similar views on growth are expressed by the New Economics Foundation (UK), Feasta (Ireland), and the Center for the Advancement of the Steady State Economy (US).

Probably the most influential figure in the movement is Herman Daly at the University of Maryland, a prominent ecological economist and advocate for a transition into a steady state economy. A former World Bank employee, he believes that the growth economy is inevitably heading for disaster in the form of a big crash.

In industrialised countries, economies have started to turn in on themselves by producing economic and social costs faster than they are actually growing. To explain this syndrome, Daly coined the term ‘uneconomic growth’. While economic growth has risen, overall quality of life has been falling. Genuine Progress Indicators that subtract costs from GDP figures have been following a downward trend since the 1970s.

What might a non-growth economy look like?

John Stuart Mill, an important 19th century economic thinker, saw a time in the distant future when the growth economy would no longer be needed, and we could shift to a ‘stationary’ one. Having met our material needs, the focus could then switch to human self-development.

However, what may appear at a distance to be a straightforward concept, becomes far more messy at close range, resembling a multidimensional balancing act across several complex, hard-to-quantify variables. There are plenty of difficult and politically unpalatable decisions to be made, one of which involves population. A steady-state economy can only work in conjunction with a steady population, which would require strict limits on immigration, and possibly even a cap on the birth rate.

Last November, the Minister for Immigration, Chris Evans, stated that immigration into Australia is needed to maintain rates of economic growth. This clearly demonstrates how the pursuit of economic priorities is compromising our ability to live sustainably on a dry continent.

Perhaps the best steady-state economic vision to date has been drawn up by Herman Daly. In his estimation, such an economy would involve: an end to the present debt-based money system; money coming under government control (as opposed to that of the banking sector); a movement of the tax base away from income and company tax towards resource and pollution taxes; a greater level of maintenance and repair in place of production; and a shorter working week. Any change to the fundamental global economic structure would require all countries acting in unison.

Daly describes this new economy as “a subtle and complex economics of maintenance, qualitative improvements, sharing, frugality, and adaptation to natural limits. It is an economics of better, not bigger.”

Ultimately, we have built an accelerating economic vehicle of great complexity whose controls can only be understood by a tiny minority. Do concerned citizens take on the difficult challenge of tackling growth, or do we take the easy option and leave it to the experts?

 

Photo by woodleywonderworks

 

Resources

Center for the Advancement of the Steady State Economy www.steadystate.org

The Australia Institute www.tai.org.au

FEASTA (Ireland) www.feasta.org

New Economics Foundation www.neweconomics.org

About the author
Martin Oliver

Martin Oliver

Martin Oliver is based in Lismore, and writes on a range of environmental, health and social issues. He takes the view that sustainability is about personal involvement, whether this involves making our lives greener, lobbying for change at a political level, or setting up local eco-initiatives.

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