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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.
The piece usefully reflects on the “intuitive” sense that money doesn’t buy happiness, an intuition reflected in the findings of well-being research. Even so, it doesn’t get the interpretation of the Index quite right. It says:
“the United States ranks as low as most of sub-Saharan Africa. In other words, consuming more than our share of resources doesn’t make us happier, despite the fact that we live almost twice as long than those in sub-Saharan Africa who consume very little.”
This suggest that life satisfaction scores (how the HPI measures happiness) in the US are as low as in sub-Sarahan Africa. They aren’t. But what the HPI does show is that Americans are producing fewer units of well-being per units of resources consumed than countries like Malawi and Congo. Which is a sobering thought indeed for the champions of consumption who constitute the vast majority of Davos participants.
Although you wouldn’t have known it from the media coverage at the time, President Sarkozy did something far more remarkable in January 2008 than get engaged to the singer and model Carla Bruni. While angry French leftists were burning Bruni’s CDs on public bonfires, her new fiancé announced his intention to challenge our most intractable economic orthodoxy: Gross Domestic Product.
Soon enough, the President had set up an impressive commission of Nobel Prize-winning economists and social scientists to address the question of how to move beyond GDP as a measure of economic performance and social progress. The group was to be led by former chief economist at the World Bank, Joseph Stiglitz, and would include development guru Amartya Sen, psychologist Daniel Kahneman and the economist-turned-climate-change-hero Lord Stern.
A year and a half on and the Commission has published its final report. The vision is bold – it recognises that “new political narratives are necessary to identify where our societies should go” and advocates “a shift of emphasis from a ‘production-oriented’ measurement system to one focused on the well-being of current and future generations”. Specifically, it recommends that governments should measure subjective well-being – people’s experience of their quality of life – and recognises that these should be textured and multi-dimensional.
These calls are admirable, and echo what nef has long been calling for, particularly in our National Accounts of Well-being report from January 2009.
But there’s a problem. The report carries many recommendations, and there’s a risk that politicians will latch onto the easier ones, without really taking home the big message: namely, that we need to radically shake up our understanding of progress and success. For example, the report shies away from suggesting an overall measure of progress, such as nef’s Happy Planet Index, leading to the risk that GDP will remain unchallenged as the de facto indicator of overall success, despite it never being intended that way.
But for now the Commission, and indeed, dare we say it, Sarkozy, deserve plenty of praise for their boldness. Let’s see if he and other politicians put into practice the advice they are given by the world’s best economists: to move beyond GDP and measure well-being.
This article first appeared at Policy Innovations.
Governments around the world are caught between the proverbial rock and a hard place: We are now nearly two years into what is widely heralded as the worst global economic crisis since the Great Depression, and the ecological crisis of global warming threatens the foundations of human civilization. Should countries stimulate their economies at any cost? How should they prioritize the health of global and local ecosystems? The debates about whether government money should be used to shore up struggling car industries neatly encapsulate these sorts of dilemmas.
Many in government may feel that the best overall path is far from clear. Part of the problem is that they lack tools for making these sorts of policy decisions. The common yardstick since the 1940s has been GDP growth. Gross Domestic Product reflected the wartime concern with increasing economic productivity, and since then it has become synonymous with progress. As the United Kingdom’s Sustainable Development Commission notes, “The state has become caught up in a belief that growth should trump all other policy goals.”
Yet intrinsic to growing GDP is the need to produce more stuff. This is exactly what our planet cannot sustain. More stuff requires more of the Earth’s dwindling fossil energy supplies, with waste products that threaten the climate.
The kernel of the solution to resolving these competing demands lies within the structure of the problem itself. The fact that economic growth can be conceived of in opposition to the health of the planet suggests that neither can claim to be regarded as the true overall measure of success in human society. A much more convincing case is made by the concept of well-being. The experience of well-being is about feeling that your life is going well, something which is universally important to people everywhere. The concept of well-being enables us to define the ultimate aim of human endeavor to be healthy, happy, and meaningful lives.
The Earth’s resources are the fundamental input to this system. A well-regulated economy is just one means to produce well-being—along with others including community, technology, values, and governance. Systems thinking also shows us that using planetary resources so that they can be sustained into the future is vital to ensuring that human well-being can also be maintained in the long term.
The updated Happy Planet Index (HPI), published last month by nef (the new economics foundation), uses this view of society to formulate an indicator of overall progress. Scores on the HPI represent the amount of human well-being a country produces relative to its resource use. It is measured in terms of long and happy lives. The HPI is thus an efficiency index, measuring how much well-being is achieved per unit of environmental impact:
HPI ≈ (Life expectancy x Life satisfaction) / Ecological footprint
International meetings of statisticians are hardly the most likely place for one to find passion and drama. Yet, in the Palazzo Strozzi in Florence, home to one of the major banking families of the 13th century, Juliet Michaelson and I took part in a debate which could be changing how we measure progress.
When nef started advocating subjective measures of well-being – i.e. asking people how they feel their life is going – as a tool to guide policy, we were entering almost virgin territory. But it seems that the world of government statistics has started to catch up with projects such as our Happy Planet Index. Subjective well-being is part of official statistics in several countries including New Zealand, Canada and even the UK. nef is currently advising Eurostat, the EU’s official statistics body on the feasibility of including well-being indicators in their official sets. And the OECD is the unlikely home of a major Global Project on Measuring the Progress of Societies, championed until now by the organisation’s Chief Statistician, Enrico Giovannini.
It was the OECD that arranged the meeting aimed to encourage chief national statisticians to take subjective well-being measurement seriously. Chief statisticians and presidents from the statistics offices of the USA, Canada, Ireland, Spain and many other countries were present. The meeting was timed to follow on the heels of the ninth annual conference of the International Society for Quality of Life Studies (ISQOLS), ensuring many of the leading academics working on subjective well-being were also present.
The meeting showed that there was still work to be done. Many statisticians recognise that measuring subjective well-being is a central part of informing governments how well they are doing. They also see the benefits that subjective data provide in terms of understanding other areas. For example, well-being data can tell you something about the impacts of high or low social capital in an area. Academics such as Prof. John Heliwell at the University of British Columbia in Canada made a plea for statisticians to include a few subjective well-being questions in as many different surveys as possible. Meanwhile nef, alongside Prof. Felicia Huppert at the University of Cambridge, called for more textured measures of well-being, such as the National Accounts of Well-Being, so as to provide policy makers with a better understanding of the ways in which the nation’s population is doing well or not so well.
Some statisticians, howeever, were still very resistant to the idea of taking up precious ‘real estate’ on their surveys with questions about how people feel. They argue that they measure what they are told to, and that they are not being told to measure well-being. As Dr. Munir Sheikh, Chief Statistician of Statistics Canada put it, “It’s not my job to decide which data is more important. It’s the users.” Other statisticians disagreed, highlighting that statistics offices do have some flexibility to pre-empt data requests. Meanwhile, the academics argued that there is a chicken-and-egg situation: government bodies will not ask for well-being data until statistics offices collect it, and vice versa.
But, perhaps, for the sake of statisticians such as Dr. Sheikh, it is important that we make it clear that well-being is important. A recent UK poll found that 81% of people supported the idea that the Government’s prime objective should be the ‘greatest happiness’ rather than the ‘greatest wealth’. Given that’s the case, and given that statistics offices are public bodies whose duty it is to provide information to citizens on how our Government is faring, perhaps we all need to tell them just how much we’d like to know the state of well-being in our countries.
Today sees the launch of the second global Happy Planet Index, which measures how nations are faring in terms of what matters to people – having long, happy, meaningful lives – and what matters to the planet – our rate of resource consumption. The Happy Planet Index brings these concepts together into a single indicator, a measure of the ecological efficiency with which each nation supports good lives.
Like with the first Happy Planet Index, HPI 2.0 reveals that no country is achieving the triple goals of long life, high well-being, and a sustainable ecological footprint. Indeed Western countries, usually considered to represent the pinnacle of development, are some of the furthest away from that target. Out of 143 countries, the highest ranking Western country is the Netherlands in 43rd place – the USA is as low as 114th.
And the countries that score highest? That are closest to good lives that don’t cost the Earth? Perhaps surprisingly, they are mostly Latin American countries. 9 out of the top 10 countries in terms of HPI are in South and Central America, or the Caribbean. The highest HPI score belongs to Costa Rica – a nation famed for being an island of peace in troubled Central America, and which is now leading the green revolution in the developing world, producing a staggering 99% of its electricity from renewable sources.
But even Costa Rica is not quite achieving one-planet living – it’s ecological footprint of 2.3 global hectares per capita is marginally above the 2.1 global hectares per capita that one calculates if everyone on the planet was to have a fair share of the Earth’s resources. It looks like something quite profound needs to change to achieve good lives that don’t cost the Earth for all. The first step to doing so is the new HPI Charter which sets clear targets for where we need to get to by 2050.
On the new HPI website you can download the report, sign the charter, and explore some of the data online. Over the next few weeks, I will be highlighting some of the stories of the HPI in this blog – countries that do particularly well, changes over time, steps we need to take to change the way things are going, and some of the things that are happening already.
Oscar Wilde said ‘a map of the world that does not include Utopia is not even worth glancing at’. The HPI may not tell us exactly where utopia is, but it at least tells us in which direction we need to travel.
“A man who falls from a 100-storey building will survive the first 99 storeys unscathed,” wrote the economist EJ Mishan in response to critics of his attack on the costs of economic growth. It was the 1960s and then, as now, it was heresy to question growth. The cry went up: “But natural resources haven’t actually run out yet, and what about the costs of not growing?” Mishan returned to his falling man: “Were he as sanguine as our technocrats, his confidence would grow with the number of storeys he passed on his downward flight and would be at a maximum just before his free-fall abruptly halted.”
The environmental movement was labelled alarmist and wrong in reaction to the subsequent Limits to Growth report, written by scientists at MIT, which projected the natural resource constraints of trying to grow indefinitely in a finite space. When, last year, a detailed study compared the original report with 30 years of data and trends, it found a solid correlation between projections and reality. Among environmentalists there was less a sense of final triumph than sadness at a critical opportunity lost.
Now, with the UK’s ecological debt still rising, and perhaps about 90 months to go before the world enters a more perilous phase of warming, we cannot afford another lost month. We must look for new models of economy that can operate in dynamic equilibrium with the biosphere on which we depend. In getting out of this mess, our creativity needs more help than anything. How can we begin to imagine what it looks like to live within our environmental means?
Britain is an island nation, and we could start by looking at the experience of other islands, especially small ones. Try to grow indefinitely on a small island, and you’ll come a cropper. It’s not so different on a small island planet. When societies get it wrong on small islands the consequences are clear, think of the Pacific island of Nauru, mined to virtual destruction for its rich phosphate. But when islands get it right, they show how it is possible to lead good lives at much lower environmental cost.
The Happy Planet Index is a measure that assesses the relative efficiency with which natural resources are converted into meaningful human outcomes. It compares peoples’ ecological footprints with life expectancy and life satisfaction. On average, island nations score better than other states on all three indicators. Within different global regions, islands come top. Malta was ranked highest in the western world, the top five nations in Africa are all islands, and two of the top four are in Asia. Sitting on top of the index was the island of Vanuatu.
Several reasons might explain why. Isolation and relative vulnerability have probably encouraged more adaptive and supportive ways of organising island societies and economies. Traditional Pacific agriculture is, for example, highly resilient to extreme climatic conditions. Island economies like that of Tuvalu developed around sharing and gift giving, helping to create highly co-operative and mutually supportive communities.
In Karl Polanyi‘s classic work The Great Transformation, he presents various types of social and economic organisation on islands as evidence against some of Adam Smith’s more sweeping assumptions on the central role of markets. Complex forms of “gift exchange”, in which people partly meet their needs not through markets mediated with cash, but through the giving and receiving of gifts, operated over vast areas, revealing a system that met people’s needs in a challenging environment, and bonded society together.
In their book The Spirit Level – on the comprehensive importance of equality – Richard Wilkinson and Kate Pickett point out that economies more based on sharing and reciprocity equalise access to resources and create more equal, resilient communities. Conversely, unlimited growth, fed by individualistic, beggar-thy-neighbour competition, is no recipe for survival on an ecologically stressed and finite planet.
The next lesson is deceptively simple: on islands you have to respect environmental limits. Close contact with nature may also help develop deeper cultural respect for ecosystems and ingrain notions of environmental stewardship. But we are challenged at the global level to learn – in a few short years – lessons that such small communities often took millennia to arrive at. We can bail out the banks, but if we bankrupt the biosphere there is nowhere else to go.
This article was first published in The Guardian, Monday 13th April 2009.