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|Beyond the Growth Paradigm|
Three notable heterodox thinkers - Tim Jackson, Herman Daly and Joseph Stiglitz - discuss the shortcomings of contemporary economics, consider ways to stand up to the economics establishment, and ask the question: at what point does economic growth become uneconomic growth? By Adbusters.
28th July 2009
16th July 2009 - Tim Jackson, Adbusters magazine
Every society clings to a myth by which it lives. Ours is the myth of economic growth. For the last five decades the pursuit of growth has been the single most important policy goal across the world. The global economy is almost five times the size it was half a century ago. If it continues to grow at the same rate, the economy will be 80 times that size by the year 2100.
This extraordinary ramping up of global economic activity has no historical precedent. It's totally at odds with our scientific knowledge of the finite resource base and the fragile ecology we depend on for survival. And it has already been accompanied by the degradation of an estimated 60% of the world's ecosystems.
For the most part, we avoid the stark reality of these numbers. The default assumption is that - financial crises aside – growth will continue indefinitely. Not just for the poorest countries where a better quality of life is undeniably needed, but even for the richest nations where the cornucopia of material wealth adds little to happiness and is beginning to threaten the foundations of our well-being.
The reasons for this collective blindness are easy enough to find. The modern economy is structurally reliant on economic growth for its stability. When growth falters - as it has done recently - politicians panic. Businesses struggle to survive. People lose their jobs and sometimes their homes. A spiral of recession looms. Questioning growth is deemed to be the act of lunatics, idealists and revolutionaries.
But question it we must. The myth of growth has failed us. It has failed the two billion people who still live on less than $2 a day. It has failed the fragile ecological systems we depend on for survival. It has failed spectacularly, in its own terms, to provide economic stability and secure people's livelihoods.
Today we find ourselves faced with the imminent end of the era of cheap oil; the prospect (beyond the recent bubble) of steadily rising commodity prices; the degradation of forests, lakes and soils; conflicts over land use, water quality and fishing rights; and the momentous challenge of stabilizing concentrations of carbon in the global atmosphere. And we face these tasks with an economy that is fundamentally broken, in desperate need of renewal.
In these circumstances, a return to business as usual is not an option. Prosperity for the few founded on ecological destruction and persistent social injustice is no foundation for a civilized society. Economic recovery is vital. Protecting people's jobs - and creating new ones – is absolutely essential. But we also stand in urgent need of a renewed sense of shared prosperity. A commitment to fairness and flourishing in a finite world.
Delivering these goals may seem an unfamiliar or even incongruous task for policy in the modern age. The role of government has been framed so narrowly by material aims and hollowed out by a misguided vision of unbounded consumer freedoms. The concept of governance itself stands in urgent need of renewal.
But the current economic crisis presents us with a unique opportunity to invest in change. To sweep away the short-term thinking that has plagued society for decades. To replace it with policy capable of addressing the enormous challenge of delivering a lasting prosperity.
For at the end of the day, prosperity goes beyond material pleasures. It transcends material concerns. It resides in the quality of our lives and in the health and happiness of our families. It is present in the strength of our relationships and our trust in the community. It is evidenced by our satisfaction at work and our sense of shared meaning and purpose. It hangs on our potential to participate fully in the life of society.
Prosperity consists in our ability to flourish as human beings – within the ecological limits of a finite planet. The challenge for our society is to create the conditions under which this is possible. It is the most urgent task of our times.
15th July 2009 - Herman Daly, Adbusters magazine
Growth is widely thought to be the panacea for all the major economic ills of the modern world. Poverty? Just grow the economy (increase the production of goods and services and spur consumer spending) and watch wealth trickle down. Unemployment? Increase demand for goods and services by lowering interest rates on loans and stimulating investment, which leads to more jobs as well as growth. Overpopulation? Just push economic growth and rely on the resulting demographic transition to reduce birth rates, as it did in the industrial nations during the 20th century. Environmental degradation? Trust in the environmental Kuznets curve, an empirical relation purporting to show that with ongoing growth in gross domestic product (GDP), pollution at first increases but then reaches a maximum and declines.
Relying on growth in this way might be fine if the global economy existed in a void, but it does not. Rather, the economy is a subsystem of the finite biosphere that supports it. When the economy's expansion encroaches too much on its surrounding ecosystem, we will begin to sacrifice natural capital (such as fish, minerals and fossil fuels) that is worth more than the manufactured capital (such as roads, factories and appliances) added by the growth. We will then have what I call uneconomic growth, producing "bads" faster than goods – making us poorer, not richer. Once we pass the optimal scale, growth becomes stupid in the short run and impossible to maintain in the long run. Evidence suggests that the us may have already entered the uneconomic growth phase.
Humankind must make the transition to a sustainable economy - one that takes heed of the inherent biophysical limits of the global ecosystem.
On What a World with Less Growth Might Look Like
Simply ask the question: What would the us look like if we had one-half of our current energy consumption? I think there are two ways to kind of get a handle on that. The first is to go back in us history to such a time when we did live off of one-half of the current levels of energy consumption. That would put us somewhere around 1960. And gee, life in 1960 wasn't bad. There were all sorts of good things – you were a long way from freezing in the dark, and life was quite good, materially good, and so forth.
Another way of thinking about it is to take the same year and look for another country with half the energy consumption per capita, like France, and life in France is pretty good. So society could cut energy consumption in half and, if it was done diligently, it wouldn't be a big deal in terms of how it would affect people's welfare. If we limit the scale of the economy, certainly there would be much higher energy costs, and so you just have to make adjustments now toward more efficiency. You would also have to address distribution or equity issues, but these examples show limiting scale doesn’t mean well-being has to suffer. I believe it could improve.
It's also important to ask the parallel question. We've just looked at life in a steady-state economy, what does it look like in a continually growing economy? It wouldn't look like it looks today, over time it would be increasingly different. As we continue to grow, the remaining biosphere becomes more scarce - less air, fewer trees and fish, and more congestion and pollution.
What Students Can Do
As a student taking an economics course, when something doesn't seem right, raise questions about it. In a polite way, push the issue with the professor in class. For instance, students can ask, "Is it really defensible to base all of our theory on the notion that people are completely self-seeking atoms of utility maximization?"
Another thing students can build on is that economics does recognize a distinction between market versus public goods. Market goods are rival and excludable. My shirt is rival and excludable because it's my property and if I wear it, you can't wear it. Students can raise issues with how the whole set of goods that are non-rival are dealt with. Is the best way to deal with non-rival goods going around and making them more artificially excludable? Maybe they should be free? Where is the benefit from making knowledge artificially scarce? Many non-rival goods such as knowledge can be used sustainably in that we can all use a given piece of information as much as we want without using it up.
Certainly, much knowledge could be transferred freely to benefit the developing world. But instead, we see the opposite happening under free market ideology: "free trade" agreements include provisions on "trade related intellectual property rights" (TRIPS). This is not about free trade so much as it is an attempt to police us intellectual property rights worldwide by using the sanction of trade restriction.
15th July 2009 - Joseph Stiglitz, Adbusters magazine
Everybody likes to have their articles approved by others in the profession. If you stand outside the mainstream, you’re not going to get the accolades you get when you’re in the mainstream. It’s sort of like a club – it’s a lot easier being a member of the club than not being a member of the club. Part of the difficulty is that the club is trying to focus on the issues of the day: in one period the issue is inflation, in another period it’s unemployment. With that shortsighted focus, there is quite often a failure to see the broader picture. The economics establishment has particular views on “orthodox theory,” and at various times it shifts from one thing to another. Monetarism was the orthodoxy for a while, even though there was no scientific basis for monetarism. It was a big fad; almost everyone was a monetarist. And then, almost as fast as monetarism came in, people discovered it wasn’t working and they abandoned it. When inflation became the big problem in the 1970s, people forgot about the big lessons of Keynesian economics. The lessons hadn’t disappeared, but the world was focusing on inflation.
Now, we’re in another episode where the economy is going through a serious downturn and people are thinking about why economies go into downturns. It turns out that the theories most people have been talking about for the past 15 to 20 years aren’t very helpful in addressing current issues.
On Why Introductory Textbooks Continue to Teach the Old Models
I think there are two reasons for that. First, it’s easier. Demand and supply are easier to explain than theories of imperfect information, or at least some people think they are. Second, there is a bit of a political agenda. It’s not a surprise that Mankiw [author of Principles of Economics] was on the Council of Economic Advisors under President Bush and they tried to push forward a particular ideological view that markets work perfectly. I don’t think most people think the economy is functioning perfectly.
Financial markets are dealing with information and risk, and those are topics books like Mankiw’s – the old-fashioned textbooks – simply don’t deal with adequately. And that’s the real danger: if people learn outdated economics and they wind up trying to make a decision about regulation – or another aspect of economic policy – they are simply not equipped to deal with the problem.
On the Invisible Hand
A simple way to explain why the invisible hand doesn’t work is to ask: Did the top executives’ pursuit of self-interest in the case of Enron lead to global economic efficiency? Did the managers of the big banks – Citibank, Merrill Lynch, all the ones dealing in subprime mortgages – lead to economic efficiency for the American economy? I think it’s pretty clear it didn’t, and one can see why it didn’t. These managers were pursuing their own bonuses, but maximizing their income was not consistent with maximizing societal welfare. Adam Smith said that maximizing self-interest and social interest were coincident, and I think that sort of dramatic illustration shows that they are not.
I think what we’ve realized is the world cannot afford an extension of our lifestyle to the rest of the world. The problem is that India and China are on the way to trying to imitate our lifestyle. These are two countries with 2.4 billion people. Growth in China has been unbelievable, growing close to ten percent for 30 years. China is already the second largest producer of automobiles, and if it continues on that path, the planet is really at risk. But we say, “Oh you can’t do this. It’s alright for us to have this profligate lifestyle but you can’t, because you might damage the planet.” What we have to say is we are changing our lifestyle and there has to be a global compact, a social compact, that we all have to have a lifestyle that treats the planet with the respect that it needs.
A healthy economy involves using our time efficiently and getting enjoyment out of our time. Spending two hours commuting is not a good use of anybody’s time. There are many ways in which we are very inefficient. We have not thought through efficient land management. I was in a meeting recently in France where in the central city they were talking about how to redesign the whole city to make it environmentally more efficient, to make sure there is less waste, that the energy that is put out is captured and used and reused. So there are lots of things we can do to increase our overall efficiency.
|Climate Change & Environment|
|Global Financial Crisis|
|Global Conflicts & Militarization|
|IMF, World Bank & Trade|
|Poverty & Inequality|
|Aid, Debt & Development|
|The UN, People & Politics|
|Food Security & Agriculture|
|Health, Education & Shelter|
|Land, Energy & Water|
|Economic Sharing & Alternatives|