Growth tends to be used synonymously with all things that are good. Plants grow, children grow, how could that be bad? But, of course, even in nature, growth can be malign, as in the case of cancer cells.
In economics ‘growth’, or the lack of it, describes the trajectory of Gross Domestic Product and Gross National Product, two slightly different measures of national income (they differ, basically, only in that one includes earnings from overseas assets). The value of imports is deducted and the value of exports added.
Hence, an economy is said to be growing if the financial value of all the exchanges of goods and services within it goes up. The absence of growth gets described, pejoratively, as recession. Prolonged recessions are called depressions.
Yet, it is not that simple. An economy may grow, for example, because money is being spent on clearing up after disasters, pollution, to control rising crime or widespread disease. You may also have ‘jobless growth,’ in which the headline f igure for GDP rises but new employment is not generated, or environmentally destructive growth in which a kind of false monetary value is created by liquidating irreplaceable natural assets on which livelihoods depend.
The fact that an economy is growing tells you nothing about the ‘quality’ of economic activity that is happening within it. Conversely, history shows that in times of recession, life expectancy can rise, even as livelihoods are apparently harmed. This happens in rich countries probably due to force of circumstances, as people become healthier by consuming less and exercising more, using cheaper, more active forms of transport such as walking and cycling.
It is possible, in other words, to have both ‘economic’ and ‘uneconomic’ growth and we should not assume that growth per se is a good thing, to be held on to at all costs.
Growth isn’t possible
Why we need a new economic direction
nef
https://neweconomics.org/uploads/files/f19c45312a905d73c3_rbm6iecku.pdf
Introduction
From birth to puberty a hamster doubles its weight each week. If, then, instead of levelling-off in maturity as animals do, the hamster continued to double its weight each week, on its first birthday we would be facing a nine billion tonne hamster. If it kept eating at the same ratio of food to body weight, by then its daily intake would be greater than the total, annual amount of maize produced worldwide. There is a reason that in nature things do not grow indefinitely.
The American economist Herman Daly argues that growth’s first, literal dictionary definition is ‘…to spring up and develop to maturity. Thus the very notion of growth includes some concept of maturity or sufficiency, beyond which point physical accumulation gives way to physical maintenance’. In other words, development continues but growth gives way to a state of dynamic equilibrium – the rate of inputs are equal to the rate of outputs so the composition of the system is unchanging in time. For example, a bath would be in dynamic equilibrium if water flowing in from the tap escapes down the plughole at the same rate. This means the total amount of water in the bath does not change, despite being in a constant state of flux.
In January 2006, nef (the new economics foundation) published the report Growth isn’t working. It highlighted a flaw at the heart of the economic strategy that relies overwhelmingly upon economic growth to reduce poverty. The distribution of costs and benefits from global economic growth, it demonstrated, are highly unbalanced. The share of benefits reaching those on the lowest incomes was shrinking. In this system, paradoxically, in order to generate ever smaller benefits for the poorest, it requires those who are already rich and ‘over-consuming’ to consume ever more.
The unavoidable result, the report points out, is that, with business as usual in the global economy, long before any general and meaningful reduction in poverty has been won, the very life-support systems we all rely on are likely to have been fundamentally compromised.
Four years on from Growth isn’t working, Growth isn’t possible goes one step further and tests that thesis in detail in the context of climate change and energy. It argues that indefinite global economic growth is unsustainable. Just as the laws of thermodynamics constrain the maximum efficiency of a heat engine, economic growth is constrained by the finite nature of our planet’s natural resources (biocapacity). As Daly once commented, he would accept the possibility of infinite growth in the economy on the day that one of his economist colleagues could demonstrate that Earth itself could grow at a commensurate rate.
The most recent data on human use of biocapacity sends a number of unfortunate signals for believers in the possibility of unrestrained growth. Our global ecological footprint is growing, further overshooting what the biosphere can provide and absorb, and in the process, like two trains heading in opposite directions, we appear to be actually shrinking the available biocapacity on which we depend.
Globally we are consuming nature’s services – using resources and creating carbon emissions – 44 per cent faster than nature can regenerate and reabsorb what we consume and the waste we produce. In other words, it takes the Earth almost 18 months to produce the ecological services that humanity uses in one year. The UK’s footprint has grown such that if the whole world wished to consume at the same rate it would require 3.4 planets like Earth.
Growth forever, as conventionally defined (see Box 1), within fixed, though flexible, limits isn’t possible. Sooner or later we will hit the biosphere’s buffers. This happens for one of two reasons. Either a natural resource becomes over-exploited to the point of exhaustion, or because more waste is dumped into an ecosystem than can be safely absorbed, leading to dysfunction or collapse. Science now seems to be telling us that both are happening, and sooner, rather than later.
Yet, for decades, it has been a heresy punishable by career suicide for economists (or politicians) to question orthodox economic growth. As the British MP Colin Challen quipped in 2006, ‘We are imprisoned by our political Hippocratic oath: we will deliver unto the electorate more goodies than anyone else.
Box 1: What is growth?
The question is deceptive, because the word has many applications. They range from the description of biological processes to more abstract notions of personal development. But, when used to describe the economy, growth has a very specific meaning. This often causes confusion.
Growth tends to be used synonymously with all things that are good. Plants grow, children grow, how could that be bad? But, of course, even in nature, growth can be malign, as in the case of cancer cells.
In economics ‘growth’, or the lack of it, describes the trajectory of Gross Domestic Product and Gross National Product, two slightly different measures of national income (they differ, basically, only in that one includes earnings from overseas assets). The value of imports is deducted and the value of exports added.
Hence, an economy is said to be growing if the financial value of all the exchanges of goods and services within it goes up. The absence of growth gets described, pejoratively, as recession. Prolonged recessions are called depressions.
Yet, it is not that simple. An economy may grow, for example, because money is being spent on clearing up after disasters, pollution, to control rising crime or widespread disease. You may also have ‘jobless growth,’ in which the headline f igure for GDP rises but new employment is not generated, or environmentally destructive growth in which a kind of false monetary value is created by liquidating irreplaceable natural assets on which livelihoods depend.
The fact that an economy is growing tells you nothing about the ‘quality’ of economic activity that is happening within it. Conversely, history shows that in times of recession, life expectancy can rise, even as livelihoods are apparently harmed. This happens in rich countries probably due to force of circumstances, as people become healthier by consuming less and exercising more, using cheaper, more active forms of transport such as walking and cycling.
It is possible, in other words, to have both ‘economic’ and ‘uneconomic’ growth and we should not assume that growth per se is a good thing, to be held on to at all costs.
GROWTH ISN’T POSSIBLE
Why we need a new economic direction
by Andrew Simms, Peter Chowla, Victoria Johnson
New Economics Foundation (nef)
JANUARY 2010
https://neweconomics.org/2010/01/growth-isnt-possible
Four years on from NEF’s Growth isn’t Working, this new report goes one step further and tests that thesis in detail in the context of climate change and energy.
It argues that indefinite global economic growth is unsustainable. Just as the laws of thermodynamics constrain the maximum efficiency of a heat engine, economic growth is constrained by the finite nature of our planet’s natural resources (biocapacity).
As economist Herman Daly once commented, he would accept the possibility of infinite growth in the economy on the day that one of his economist colleagues could demonstrate that Earth itself could grow at a commensurate rate.
Whether or not the stumbling international negotiations on climate change improve, our findings make clear that much more will be needed than simply more ambitious reductions in greenhouse gas emissions. This report concludes that a new macro economic model is needed, one that allows the human population as a whole to thrive without having to relying on ultimately impossible, endless increases in consumption.