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The notion that growth cannot continue indefinitely is still a young idea. Yes, it’s been around since the 70s, with the book The Limits to Growth. But it’s had little resources to really develop answers to the challenge of how to achieve a successful economy that does not depend on growth. Duncan Green, Head of Research at Oxfam GB, has written a blog criticising a recent event on Rethinking economic growth (also see my blog on it) which nef supported last month. He obviously agrees with the alarm call (that growth is not sustainable) – you can see that in his presentation of his to the Quakers Zero Growth Economy conference last year. But Duncan seems to expect solutions to these problems already and was disappointed at the scarcity of them at this event.
I shan’t attempt to stand up for all the speakers, but I would suggest that two of their publications at least (Tim Jackson’s Prosperity without Growth and nef’s Great Transition) do start to touch on some of the solutions to what is very admittedly a difficult problem. André Reichel’s suggestions for companies that do not require constant throughput of material production were also real practical solutions. Here are three parts of the solution. Just three:
- Steadily reducing working hours. Increases in labour productivity have typically meant that economic growth is required to keep steady employment. If productivity gains were taken as more free time, this would resolve this challenge. Take a look at our new report, 21 hours.
- Re-structured ownership. An economy dominated by shareholders who only take a stake in firms so as to make a quick profit is driven relentlessly to growth (see the work of Mathias Binswanger on this). It doesn’t have to be like this. Many forms of ownership, including small family businesses, co-operatives, communities, and the state, are not predicated on ever increasing returns on investment.
- Re-focussing measurement. Of course I mention that partly because at the centre for well-being we’ve been working on alternative measures of progress such as the Happy Planet Index and how they might help shift us away from the folly of the constant pursuit of growth. But also, Duncan himself has highlighted this as a key part of the shift away from a growth focussed economy.
Of course, these three solutions alone won’t solve all the world’s problems, and of course there are many interests who would oppose such changes, but they’re a start. More research is needed to better understand how a no-growth economy would work. And more advocacy is needed to promote the ideas around a stable economy. But until recently, this is not been something that big money was likely to get behind. However, things are beginning to change and there are signs of some forward thinking governments starting to invest in exploring alternatives to growth. Maybe then we’ll be able to have a few more answers for the man from Oxfam.
Like a patient waiting for hospital scan results, this week the government nervously anticipates new growth figures for the economy. Any sign of an increase and relief could quickly lead to self-satisfaction about its handling of the recession. Approving nods may be seen later this week in Davos at the World Economic Forum. Why? Because among political and business classes, growth, measured by rising GDP, is considered always a “good thing”. But is it?
The banking crisis taught us that when things look good on paper, if the underlying accounting system is faulty, it can conceal high risk and imminent disaster – as Jared Diamond put it in Collapse, his book about societies throughout history that fell by wrongly estimating the resilience of their environmental life-support systems. What looks like wealth might just be a one-off fire sale of irreplaceable natural capital. Ecologically speaking, he writes, “an impressive-looking bank account may conceal a negative cashflow”.
To avoid collapse the economy has to operate within thresholds that do not critically undermine the things that we depend on on a daily basis. They’re often interconnected, like a sufficiently stable climate, productive farmland, fresh water and a healthy diversity of plants and animals.
On climate change, a new piece of research by the New Economics Foundation thinktank looks at which rates of global economic growth are compatible with prevention of a dangerous level of warming.
It shows that, even with the most optimistic likely uptake of low-carbon energy, it is seemingly impossible to reconcile a growing global economy with a good likelihood of limiting global temperature rise to 2C, the agreed political objective of the European Union, and widely considered the maximum rise to which humanity can adapt without serious difficulty.
In this context, Adair Turner, chair of the Financial Services Authority and the Committee on Climate Change, refers to the pursuit of growth for its own sake as a “false god“. Other work by Professor Kevin Anderson of the Tyndall Centre for Climate Change Research at Manchester University concludes that: “Economic growth in the OECD cannot be reconciled with a 2C, 3C or even 4C characterisation of dangerous climate change.”
The problem is that growth drowns out the gains from increased efficiency and technological innovation. The New Economics Foundation study looks at by how much growth would need to be delinked from fossil fuels – the so-called carbon intensity of the economy – to reach the mark of climate safety suggested by Nasa climate scientist James Hansen.
Having improved steadily in the late last century, “carbon intensity” changes flatlined over the last decade and even worsened in some years. Against this trend, to avoid dangerous climate change the fall in carbon intensity would need to improve by more than two hundredfold. The economic doctrine of growth collides headlong with the laws of physics and thermodynamics. Only so much energy efficiency can be squeezed from a system. The other problem is the counter-intuitive rebound effect spotted by William Stanley Jevons in 1865 when he wrote, “It is a confusion of ideas to suppose that the economical use of fuel is equivalent to diminished consumption. The very contrary is the truth.” Increased efficiency tends to lower costs and perversely drives up overall resource use.
Writing in the science journal Nature last year, a multidisciplinary group of scientists identified nine key safe-use planetary resource boundaries, three of which had already been transgressed (climate change, biodiversity and the nitrogen cycle to do with farming). We are on the cusp of several others.
So, this week, if you find yourself cheering a return to growth, you may be inadvertently celebrating our acceleration toward an ecological cliff edge and an opportunity missed to find a new, better direction. For example, the economist Herman Daly points out that full employment could be easier to achieve in an economy not addicted to growth because it would reverse “the historical trend of replacing labour with machines and inanimate energy”.
Both the desirability and possibility of never ending growth goes unquestioned in mainstream economics. It’s odd, because the world would be a very strange place if the same was applied in nature. For example, from birth until around six weeks old, a hamster doubles its weight each week. If, it didn’t stop and continued doubling each week, on its first birthday, you would be looking after a very hungry nine billion-tonne pet hamster. There is of course one thing in nature that grows uncontrollably. It’s called cancer and tends to kill its host. So when those growth figures come out, let’s hope the government scans the results for what they really mean.
nef‘s new report Growth isn’t Possible was published today.