Who’s looking beyond growth?

london underground

Is there a way off the economic escalator?

Does economic growth have a place in the future of high-income countries? This hotly debated question covers many different debates, each with arguments to be taken seriously on both sides. There’s a long history to the beyond-growth perspective (Mill and Keynes wrote about it, for starters) but here’s a quick overview of current angles on the issue, with voices from both sides.

Three perspectives have been debated widely in recent years:

1. “Growth isn’t nearly green enough” – because in high-income countries the absolute decoupling of resource use from GDP is just not feasible on the scale required to tackle climate change. Tim Jackson, Paul Gilding and the new economics foundation are well-known proponents of this view. Counter arguments are made by Matthew Lockwood (would no growth be greener?), Cameron Hepburn and Alex Bowen (couldn’t the knowledge economy grow indefinitely without resource use?) and Chris Goodall (has the UK, for one, peaked in its material consumption?). I’m a sceptic, but let’s see if the OECD’s green growth strategy can indeed pull off the scale of absolute decoupling required…

2. “Growth isn’t benefiting those who need it” – because high levels of inequality and the structure of economies tend to direct gains to the already well-off. In the US, real wages have been mostly falling over the past 40 years and 2002-2012 has been described as ‘a lost decade’ for American workers. In contrast, in 2010 an estimated 93% of GDP’s recovery in the US went to the top 1% income earners, according to Emmanuel Saez at Berkeley.

3. “Growth isn’t making us happy” – because people’s reported ‘happiness’ doesn’t seem to rise beyond a certain level of GDP per capita. This is known as the Easterlin Paradox, and its argument was made widely known in Richard Layard’s Happiness. But critics such as Diane Coyle, and Helen Johns and Paul Omerod caution that the data used are not up to the job, and the income-happiness relationship shouldn’t be dismissed so fast.

While these three debates have been running for years, four newer perspectives have come on the scene:

4. “Growth isn’t coming back” – because in the US, the growth era is over. Robert Gordon of Northwestern University argues that in the US, a unique historical phase of long-term growth is coming to an end in the face of six headwinds – including income inequality, global outsourcing and debt overhangs. He predicts that US growth is shifting from its long-term trend of 2% GDP pc to a future of less than 0.5% per year.

5. “Growth isn’t likely if resource costs are rising”. Research led by Aled Jones and Victor Anderson at the Global Sustainability Institute (GSI) of Anglia Ruskin University in the UK is revisiting the issues raised by the classic 1972 Limits to Growth book (and its update) – but this time with more information, better computing power, and more up-to-date understanding of the science. In particular they are looking more closely at the role of resource constraints and rising prices in limiting future economic growth.

6. “Growth isn’t necessary for ‘capitalism’” – because efficiency and gains from trade – not economic growth itself – are at the heart of the market system, argues Noah Smith in The Atlantic. What about interest-based finance? Still feasible post-growth, he argues: the life events that cause us to borrow and lend won’t go away, and there was plenty of borrowing and lending in zero-growth periods of the Ming Dynasty and the Ottoman Empire.

7. “Growth isn’t likely when populations shrink”. In high-income countries with static or falling populations – such as Japan and Australia – concern is rising about the prospects for economic growth. Would a growing GDP per capita be sufficient, and could that be considered a national prosperity, even as total GDP falls? Given that a number of high-income countries face this possibility, it seems pretty important for them to have a positive vision of how to adjust to that new economic pathway.

I find some of these challenges to the future of economic growth far more compelling than others. Indeed, to anyone who buys into them all, I’d say beware, you doth protest too much.

But what’s strikes me is that one of the most frequent rebuttals to these arguments is ‘So you think growth is hard? Try no growth.’ It’s a serious point, but it’s rarely given serious consideration in economic research and debate. There are surprisingly few studies focused on whether a post-growth high-income economy could be managed to generate a shared prosperity (in the broadest sense).

Surely this area of economic research deserves far more attention. We can’t fully debate the merits or not of continually pursuing GDP growth if we have little sense of what the alternatives could look like. It may also be of immediate policy relevance for countries that already foresee a future of very low growth.

So who is on the case? Here are a couple of initiatives worth following.

How to go slower by design, not by disaster. A few years ago, Peter Victor at York University in Canada constructed a no-growth model of the Canadian economy – he describes it, and its implications, in his 2008 book Managing Without growth: slower by design, not by disaster”, and in this quick-tour 10 minute video.

GEMMA. More recently, Peter Victor teamed up with Tim Jackson at Surrey University to develop The Green Economy Macro-Model and Accounts. GEMMA is a macroeconomic model intended for societies that don’t want to pursue unending economic growth or can’t achieve it. The model can be used to analyze economic and financial stability, employment, and social outcomes in the context of resource and environmental limits. (If you like the techie stuff, they describe it as “a system-dynamic, stock-flow consistent macro-economic model – simulating the development of the real and financial economy under conditions of ecological constraint”). This is definitely one to watch…

I’m on the look-out for other research initiatives like these investigating the feasibility of achieving a shared prosperity in slow / low / no growth economies.

Got any to share?

18 thoughts on “Who’s looking beyond growth?

  1. 22 May 2013 at 22:51

    Unrealistic of me, I am sure … at least at this horrific stage of the elitist game, but it would surely be nice to see “economic growth” given a new meaning: the efficiency of bettering oneself and the world in which we all share, all the marvelous things we could accomplish if betterment of self were the everlasting goal and not destruction and control. Yeah, that would be nice; but far too elevated I fear for this age of man. Still, I can hope.

  2. Ruth Mayne
    24 May 2013 at 20:57

    Great website and blog kate. We need you thinking about how some of these ideas might apply at local level eg for Oxford as a city, or Oxfordshire as a county. Would be good to chat about it with you.

  3. 11 June 2013 at 12:59

    The obsession with growth must end. Economic growth is all about selling, about finding new markets, about commodification. Its about systematic exploitation and eventual destruction of the natural resource base. This is not growth economics but violent economics. It unleashes violence against the poor, the biodiversity, the environment and the nature. Its consequences are catastrophic, but somehow we fail to look ahead, look beyond growth.

  4. 17 June 2013 at 09:14

    “The anti-values of greed, individualism and exclusion should be replaced by solidarity, common good and inclusion. The objective of our economic and social activity should not be the limitless, endless, mindless accumulation of wealth in a profit-centred economy but rather a people-centred economy that guarantees human needs, human rights, and human security, as well as conserves life on earth. These should be universal values that underpin our ethical and moral responsibility.”

    From my blog on post growth people-centered local economies

  5. Daniel Miller
    21 June 2013 at 15:37

    Hi Kate,

    Thanks for this great overview.

    If you have not already heard of it, you might be interested the Global Wellbeing & Gross National Happiness (GNH) Lab: http://mitsloanexperts.mit.edu/innovating-beyond-gdp/#sthash.9ZahE6ri.dpuf

    “… recently launched in Brazil and brings together some of the leading innovators to push us “beyond GDP,” helping us to develop alternative metrics and indices to measure not just economic gains, but a nation’s social and ecological well-being. We need not only different indicators of progress, but a different mindset. Rather than a concept of economic development that is just based on increases in material throughput, we need one that reflects the impact on and wellbeing of both people and planet.”

    An associated forthcoming book: http://www.amazon.com/Leading-Emerging-Future-Ego-System-Eco-System/dp/1605099260

    All the best,
    Daniel

  6. 23 June 2013 at 16:57

    Hi Kate

    Thanks for this useful summary!

    The Post Growth Institute has been working in this space since 2010.

    Please visit this link for more about us and what we’re up to now:

    http://www.indiegogo.com/projects/how-on-earth-a-book-for-a-new-economy/

    …and our Facebook page for post-growth related news, events etc:

    http://www.facebook.com/postgrowth

  7. 18 October 2013 at 10:18

    Smaller by Design not Disaster

    Peter Victor (as referenced in his book) paraphrased me with his use of “by design not disaster”, but changed this from “smaller” to “slower”. That one word change is highly important. Slower growth is still growth and does not address our problems (a point made long ago by Meadows et al.’s 1972 Limits to Growth). My original statement was as follows:

    “Modern economic growth has been locked-in to dependence upon fossil fuels and these are the historical source of the majority of GHG [Greenhouse Gas] emissions. Humanity is facing the transformation of the economy away from this dependence; that transformation will come whether humanity chooses to plan for it or not. A permanently smaller material economy has been positively advocated, by literature on steady-state economics, as something for which we should be planning. Smaller by design, rather than smaller by disaster.” (Spash, 2007 p.712)

    Spash, C.L., 2007. The economics of climate change impacts à la Stern: Novel and nuanced or rhetorically restricted? Ecological Economics 63, 706-713.

    1. 18 October 2013 at 11:18

      Thanks for this comment Clive – I have been enjoying reading your work over the past year. That’s an great phrase that you coined and it’s good to see its original source. I actually think both phrases are interesting because they focus attention on different parts of the debate. To my reading of it, ‘smaller by design’ focuses on the need to reduce the economy’s material throughput, which is evidently required. ‘Slower by design’ focuses on the need to reduce the economy’s monetary throughput in GDP. Whether or not these two things (material and monetary throughput) can come apart is of course the whole green growth debate. And I think it’s a debate well worth having, given the extraordinary uptake of ‘green growth’ as a paradigm, while its fundamental tenets remain unproven and under-explored.

      All that said, the title of Peter’s book is of course ‘Managing Without Growth’ and his models explicitly explore different scenarios of low growth followed by no growth, in every case with the aim of reducing material throughput. So I don’t think he is upturning the meaning of your original phrase.

      I’d love to discuss all these issues further with you. I’ll be in Vienna in mid-Jan – it would be great to meet up if that works.
      Cheers, Kate.

      1. Peter Victor
        21 October 2013 at 23:25

        I agree with Clive Spash about the importance of reducing material throughput. One of the main obstacles to doing so is the concern of some that it will entail slower economic growth. In ‘Managing without Growth’, I examine the implications of slow/no growth in an attempt to help remove this obstacle. From my perspective there’s no real difference between us on these issues. Kate is correct!

  8. 8 April 2014 at 16:47

    Here is a quote from my new book, Hints for Managing Collapse (April 2, 2014), pages 84-85:

    In a steady state economy, growth is balanced by contraction. However, this “reversion to the mean” would require planning and governmental control, which do not work very well even with a surplus of cheap oil energy. The steady state economy is a nice idea but unlikely to be viable. It certainly does not have enough proponents to even be tried at any level.

    A contracting economy, on the other hand, is the default model, and it does not need proponents. It is just a description of what happens when the growth economy fails – or even slows down. For example, we have been in a de facto contraction phase in the national and global economies for several years now, even though the American economy continues to grow at 2-3% per year. This is because consumer expectations and credit – whether for homeowners or municipal governments – are based on the economy not only expanding, but expanding at an increasing rate.

    Almost everyone buys into this nonsense. Liberals and conservatives both believe “the good times are just around the corner.” They buy and consume based on the continuous growth model. Of course this leads to ideological inertia. “We will pay for it later.” This is a deadly game.

  9. 10 April 2014 at 17:11

    I think you may be asking exactly the right questions Kate, given that Prof Kevin Anderson at the Tyndall Centre has stated that “economic growth over the coming two decades is incompatible with meeting our international obligations on climate change”(http://kevinanderson.info/blog/avoiding-dangerous-climate-change-demands-de-growth-strategies-from-wealthier-nations/) and Sir David King has acknowledged that “it’s impossible to have economic growth if we allow climate change to continue” (http://t.co/zd2HxqFIRm)

    If these two esteemed gentlemen are correct, then future economic growth isn’t even an option, and we’re long overdue serious investigation of what the future might look like without it. With that in mind, I’m focusing my attention on TEQs, as a policy framework for contractions in energy use/emissions, and look forward to following your ongoing work.

    1. 10 April 2014 at 17:20

      Thanks Shaun – I like these quotes from Anderson and King – both arguing a very different causal relationship between growth and climate change, but both demanding thought about post-growth economies. Of course others argue that growth could be compatible with addressing climate change, through sufficient absolute decoupling of GDP and GHGs. Whether or not this is technically, socially, and politically feasible is a wide open question. And if it is not feasible, then we still face the question of whether a post-growth approach to addressing climate change is technically, socially and politically feasible. This is the ultimate rock-and-a-hard-place challenge….

      1. 11 April 2014 at 17:24

        Kate,

        In 1996 we began with a question about the purpose of economics:

        “At first glance, it might seem redundant to emphasize people as the central focus of economics. After all, isn’t the purpose of economics, as well as business, people? Aren’t people automatically the central focus of business and economic activities? Yes and no.”

        The paper would lead on to our work in business for social benefit and while in Ukraine with our main focus on childcare reformeveraging was at Sumy in 2010 at the Economics for Ecology conference where the core argument from the original treatise was presented as the concluding part of our presentations on the economic crisis of 2008.

        http://www.p-ced.com/1/projects/ukraine/sumy/iscs2010

        “Economics, and indeed human civilization, can only be measured and calibrated in terms of human beings. Everything in economics has to be adjusted for people, first, and abandoning the illusory numerical analyses that inevitably put numbers ahead of people, capitalism ahead of democracy, and degradation ahead of compassion.”

        1. 16 April 2014 at 15:23

          Thanks Jeff. I’m sure you’re aware of this, but when looking at Economics for Ecology be careful not to forget about all the non-human beings who are also affected by our abstract economics. They are real too!

          1. 16 April 2014 at 17:28

            Indeed Kate, as the 2009 paper said:

            “Thus the issue of ecology economics is not only ‘the third bottom line’, it might be more aptly renamed the economics of survival of the human species. That includes everyone, regardless of one or another economic hypothesis or theory they might prefer. We can endlessly debate and discuss von Mises/von Hayek free market economics/capitalism which proved successful except for the times it failed, and then study why it failed – repeatedly, the most recent failure in September 2008. We can endlessly debate and discuss opposing Keynesian government interventionist economics/capitalism, which proved successful except for the times it failed. That has been an alternating pattern for the past eighty years in Western capitalism. We can discuss the successes and failures of various flavors of communism and fascism. At this point, the simple fact is that regarding economic theory, no one knows what to do next. Possibly this has escaped immediate attention in Ukraine, but, economists in the US as of the end of 2008 openly confessed that they do not know what to do. So, we invented three trillion dollars, lent it to ourselves, and are trying to salvage a broken system so far by reestablishing the broken system with imaginary money.

            Now there are, honestly, no answers. It is all just guesswork, and not more than that. What is not guesswork is that the broken – again – capitalist system, be it traditional economics theories in the West or hybrid communism/capitalism in China, is sitting in a world where the existence of human beings is at grave risk, and it’s no longer alarmist to say so.

            The question at hand is what to do next, and how to do it. We all get to invent whatever new economics system that comes next, because we must.”