Is Economic Growth Good For Us?

ImageIn the world today, we are brought up on the idea that “growth is good”. We rejoice when we hear that the economy has grown, because it means we’re getting richer as a country and hopefully as individuals. But is this really the case?

The problem with the business-as-usual approach

This business-as-usual approach is based on a belief that economic growth must continue indefinitely in order to support a growing population and push people out of poverty. This seems logical at first glance. However, there is one crucial thing that supporters of the business-as-usual approach are ignoring: the natural environment on which the economy (and society) relies for survival.

Natural resources are being treated as if their supply is endless, and the environment is expected to cope with increasingly large amounts of pollution. But the truth is that many natural resources are limited in supply, such as crude oil and coal. Those that are renewable, such as forests or fish stocks, can only renew themselves at a particular pace. In addition, land, air and water resources can only absorb certain types of pollution, at a particular rate.

Globally, as well as in South Africa, we’re already suffering from resource overshoot. In their Living Planet Report 2010, the World Wide Fund for Nature (WWF) found that we are using the earth’s resources at a rate 50% faster than the earth can produce them, and releasing more carbon dioxide than ecosystems can absorb.

Thus, an economy based on finite resources, and which exceeds the capacity of the environment to renew and restore itself, cannot keep growing indefinitely.

Economic growth: What is it really measuring?

The other concern is that economic growth doesn’t necessarily translate into greater prosperity for a country’s citizens. Firstly, the economic growth figure itself is only a neutral measure of spending. Besides housing and food purchases, for example, it also includes money paid for “negative” services such as cancer treatments or the cleaning up of oil spills. A rising economic growth figure could in fact mean that human health in the country is deteriorating, or pollution is increasing. So, economic growth alone cannot be a measure of increasing prosperity or quality of life.

In addition, economic growth doesn’t necessarily mean that the increased wealth is shared fairly across the population. In fact, the UNDP’s Human Development Report in 2011 noted that income inequality is deteriorating at a country level across much of the world. So the supposed “trickle down” effect of economic growth to the poor is not taking place as predicted.

If not business-as-usual, then what?

Tim Jackson’s book, Prosperity Without Growth: Economics for a Finite Planet is a reality check for business-as-usual supporters. No fringe scientist or tie-dyed hippie, Jackson is Economics Commissioner on the Sustainable Development Commission, an independent advisory body to the UK government. He presents a well-argued, lucid case for a sustainable economy, and explains what that would look like and how we could get there. He also skilfully ties this in with the current economic crisis and the problem of debt.

Jackson begins by examining the goal behind the goal, which is not economic growth itself but the prosperity it is supposed to bring. This is something we frequently forget as we conduct business and put all our focus on the bottom line. He looks at the link between wealth and happiness (which is a lot weaker than you might have expected) and why rising incomes are accompanied by an increasing frequency of depression. The factors affecting our perception of the quality of our lives are varied, and surprisingly our financial situation has only a little direct influence when compared to partner and family relationships, for example.

Jackson notes that while growth is unsustainable, de-growth is no more sustainable as it leads to a spiral of recession. A steady state economy needs to be achieved, but how? The author explores the solution of decoupling, which in essence is the decreasing of reliance on natural resources – a strategy of efficiency. While necessary, decoupling may only ever reduce the rate of growth, not eliminate it. Searching for other solutions, Jackson investigates the impact of consumerism, Keynesian economics and the Green New Deal, and ecological macro-economics. Finally he offers a plan to allow society to flourish within ecological limits, and suggests strategies for governance to bring this about. He concludes with chapters on the transition to a sustainable economy, and a vision of lasting prosperity for the world.

Jackson writes clearly and accessibly, without “dumbing down” the content. It is a great and pertinent read in these times, and well worth the space on your Kindle.

Published July 2012 on Sharenet’s MarketViews

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