Off the Pedestal: Creating a New Vision of Economic Growth

Is anything in America more faithfully followed than economic growth? 

Its movements are constantly watched, measured to the decimal place, deplored or praised, diagnosed as weak or judged healthy and vigorous. Newspapers, magazines, and cable channels report endlessly on it. Promoting growth may be the most widely shared and robust cause in the United States today.

If the growth imperative dominates U.S. political and economic life, what happens when growth hits some serious stumbling blocks?
When I was in school in England, the dean of my college told us when we first arrived that we could walk on the grass in the courtyard — but not across it. That helped me love the English and their language. Here is another creative use of prepositions: there are limits to growth, and there are limits of growth.

Let’s first take up the limits of growth. Despite the constant claims that we need more growth, there are limits on what growth can do for us. The ecological economist Herman Daly has reminded us that if neo-classical economists were true to their trade, they would recognize that there are diminishing returns to growth. Most obviously, the value of income growth declines as one gets richer and richer. Similarly, growth at some point has increasing marginal costs. For example, workers have to put in too many hours, or the climate goes haywire. It follows that for the economy as a whole, we can reach a point where the extra costs of more growth exceed the extra benefits. One should stop growing at that point. Otherwise the country enters the realm of “uneconomic growth,” to use Daly’s delightful phrase, where the costs of growth exceed the benefits it produces.

There are some, myself included, who believe that the U.S. is now experiencing uneconomic growth. If one could measure and add up all the environmental, security, social and psychological costs that U.S. economic growth generates at this point in our history, they would exceed the benefits of further ramping up what is already the highest GDP per capita of any major economy.

Though not widely accepted, the case is strong that growth in the affluent U.S. is now doing more harm than good. Today, the reigning policy orientation holds that the path to greater well-being is to grow and expand the economy. GDP, productivity, profits, the stock market, and consumption must all go up. This growth imperative trumps all else. It can undermine families, jobs, communities, the climate and environment, and a sense of place and continuity because it is confidently asserted and widely believed that growth is worth the price that must be paid for it.

But an expanding body of evidence is now telling us to think again. The never-ending drive to grow the overall U.S. economy is ruining the environment; it fuels a ruthless international search for energy and other resources; it fails at generating the needed jobs; it hollows out communities; and it rests on a manufactured consumerism that is not meeting the deepest human needs. Americans are substituting growth and consumption for dealing with the real issues — for doing things that would truly make us and the country better off.

It is time for America to move to post-growth society where the natural environment, working life, our communities and families, and the public sector are no longer sacrificed for the sake of mere GDP growth; where the illusory promises of ever-more growth no longer provide an excuse for neglecting to deal generously with our country’s compelling social needs; and where true citizen democracy is no longer held hostage to the growth imperative.

Another way of pointing out the limits of growth is to consider the long list of public policies that would slow GDP growth, thus sparing the environment, while simultaneously improving social and individual well-being. Such policies include: shorter workweeks and longer vacations, with more time for children and families; greater labor protections, job security and benefits, including generous parental leaves; guarantees to part-time workers and combining unemployment insurance with part-time work during recessions; restrictions on advertising; a new design for the twenty-first-century corporation, one that embraces re-chartering, new ownership patterns, and stakeholder primacy rather than shareholder primacy; incentives for local and locally-owned production and consumption; strong social and environmental provisions in trade agreements; rigorous environmental, health and consumer protection, including full incorporation of environmental and social costs in prices; greater economic and social equality, with genuinely progressive taxation of the rich (including a progressive consumption tax) and greater income support for the poor; heavy spending on neglected public services; and initiatives to address population growth at home and abroad. Taken together, these policies would undoubtedly slow GDP growth, but well-being and quality of life would improve, and that’s what matters.

Of course, it is clear that even in a post-growth America, many things do indeed need to grow: growth in good jobs and in the incomes of the poor and working Americans; growth in availability of health care and the efficiency of its delivery; growth in education, research and training; growth in security against the risks of illness, job loss, old age and disability; growth in investment in public infrastructure and in environmental protection and amenity; growth in the deployment of climate-friendly and other green technologies; growth in the restoration of both ecosystems and local communities; growth in non-military government spending at the expense of military; and growth in international assistance for sustainable, people-centered development for the half of humanity that live in poverty. These are all areas where public policy needs to ensure that growth occurs.

That’s one case against growth — the argument that we should no longer prioritize growth, much less fetishize it as we do now. I believe this case will be pressed with increasing urgency in the years ahead, and I doubt we’ll miss our growth fetish after we say good-bye to it. We’ve had tons of growth — growth while wages stagnated, jobs fled our borders, life satisfaction flatlined, social capital eroded, poverty mounted, and the environment declined.

The case that there are limits to growth — not that we shouldn’t grow but that we can’t grow — is based on the reality that we are entering a new age of scarcity and rising prices that will constrain growth. The world economy, having doubled in size three times since 1950, is now phenomenally large — large even in comparison with the planetary base that is the setting for economic activity.

Today’s huge world economy is consuming the planet’s available resources on a scale that rivals their supply, and it is releasing almost all of those resources, often transformed and toxic, back to the environment on a scale that is beyond the environment’s assimilation capacities, thus greatly affecting the major biogeophysical cycles of the planet. Natural resources are becoming increasingly scarce, and the planet’s sinks for absorbing waste products are already exhausted in many contexts. According to the Ecological Footprint analysis, Earth would have to be 50 percent larger than it is for today’s economy to be environmentally sustainable.

In effect, humans have entered a new geological epoch — the anthropocene. As Paul Crutzen and Christian Schwägerl explained in an article on Yale Environment 360: “It’s a pity we’re still officially living in an age called the Holocene. The Anthropocene — human dominance of biological, chemical and geological processes on Earth — is already an undeniable reality.”

If we now live in a world where the natural resources and environmental sinks needed for economic activity are becoming more scarce across a wide front, we should see prices rising. And indeed we do. Prices of many things are rising rather rapidly: oil, coal, food, and numerous non-fuel minerals. Lithium and rare earths are probably not far behind.

If these patterns hold, as seems likely, and one factors in the economic losses due to climate disruption and the higher energy prices due to climate protection policies, it’s hard to imagine that economic growth won’t be slowed. Moreover, as noted earlier, the increasing scarcity of the atmospheric sink for greenhouse gas emissions is going to challenge growth among the affluent countries. Reducing carbon emissions at required rates may not be possible in national economies that are stressing growth maximization.

Author Richard Heinberg and many others have been calling attention to the looming challenge of peak oil. After much controversy, the reality of peak oil is now widely accepted. Oil production did actually reach its all-time high in 2005 and has plateaued since. Peak oil, the point of maximum production after which production begins to decline, may thus have already happened, but, if not, a widely held view today is that oil will have peaked and begun to decline before 2030, perhaps a decade or so hence.

In 2005, the U.S. Department of Energy released the now-famous “Hirsch Report,” Peaking of World Oil Production, which warned that “the problems associated with world oil production peaking will not be temporary, and past ‘energy crisis’ experience will provide relatively little guidance.” But the report recommended accelerating development of oil sands and coal liquefaction and other steps that would send the world rushing down a path that would exacerbate the already grave challenges of global warming. Clearly, it makes no sense to separate the two challenges: energy supply and climate change must be dealt with together — and soon. Clearly, today we are not prepared or preparing for either.

Many who have looked at the combined challenge of energy and climate change have concluded that our civilization, having completed its exuberant, flamboyant phase, is headed toward a dramatic simplification and re-localization of life and the end of economic growth as we have known it. Some even see the collapse of modern civilization as just a matter of time.

In The Transition Handbook, the bible of the fast-growing Transition Town movement, Rob Hopkins identifies three scenarios: adaptation, which assumes “we can somehow invent our way out of trouble”; evolution, which requires a collective change of mindset, but assumes that “society, albeit in a low-energy, more localized form, will retain its coherence”; or collapse, which assumes that “the inevitable outcome of peak oil and climate change will be the fracturing and disintegration, either sudden or gradual, of society as we know it.”

The eventual outcome will likely involve elements of all three of these scenarios, occurring at different times and different places. Hopefully, the “evolution” scenario will predominate.

“Within this century, environmental and resource constraints will likely bring global economic growth to a halt…,” Canadian political scientist Thomas Homer-Dixon wrote in Foreign Policy earlier this year. “We can’t live with growth, and we can’t live without it. This contradiction is humankind’s biggest challenge this century, but as long as conventional wisdom holds that growth can continue forever, it’s a challenge we can’t possibly address.”

So there we have it: the traditional solution that America has invoked for nearly every problem — more growth — is in big trouble. If we are going to move beyond growth, we will need to build a different kind of economy. We Americans need to reinvent our economy, not merely restore it. We will have to shift to a new economy, a sustaining economy based on new economic thinking and driven forward by a new politics. Sustaining people, communities and nature must henceforth be seen as the core goals of economic activity, not hoped for by-products of market success, growth for its own sake, and modest regulation. That is the paradigm shift we must now begin to pursue and promote.

This article first appeared in Yale Environment 360 on May 30, 2011.