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Page added on April 21, 2016
Limits to Growth: Policies to Steer the Economy away from Disaster
Ed.note: This article was based on a longer paper which can be found here.
If the rich nations in the world keep growing their economies by 2% each year and by 2050 the poorest nations catch up, the global economy of more than 9 billion people will be around 15 times larger than it is now, in terms of gross domestic product (GDP). If the global economy then grows by 3% to the end of the century, it will be 60 times larger than now.
The existing economy is already environmentally unsustainable. It is utterly implausible to think we can “decouple” economic growth from environmental impact so significantly, especially since recent decades of extraordinary technological advancement have only increased our impacts on the planet, not reduced them.
Moreover, if you asked politicians whether they’d rather have 4% growth than 3%, they’d all say yes. This makes the growth trajectory outlined above all the more absurd.
Others have shown why limitless growth is a recipe for disaster. I’ve argued that living in a degrowth economy would actually increase well-being, both socially and environmentally. But what would it take to get there?
In a new paper published by the Melbourne Sustainable Society Institute, I look at government policies that could facilitate a planned transition beyond growth – and I reflect on the huge obstacles lying in the way.
Measuring progress
First, we need to know what we’re aiming for.
It is now widely recognised that GDP – the monetary value of all goods and services produced in an economy – is a deeply flawed measure of progress.
GDP can be growing while our environment is being degraded, inequality is worsening, and social well-being is stagnant or falling. Better indicators of progress include the Genuine Progress Indicator (GPI), which accounts for a wide range of social, economic and environmental factors.
Cap resources and energy
Environmental impact is driven by demand for resources and energy. It is now clear that the planet cannot possibly support current or bigger populations if developing nations used the same amount of resources and energy as developed nations.
Demand can be reduced through efficiency gains (doing more with less), but these gains tend to be reinvested in more growth and consumption, rather than reducing impacts.
A post-growth economy would therefore need diminishing “resource caps” to achieve sustainability. These would aim to limit a nation’s consumption to a “fair share” of available resources. This in turn would stimulate efficiency, technological innovation and recycling, thereby minimising waste.
This means that a post-growth economy will need to produce and consume in far less resource-intensive ways, which will almost certainly mean reduced GDP. There will of course be scope to progress in other ways, such as increased leisure time and community engagement.
Work less, live more
Growth in GDP is often defended on the grounds that it is required to keep unemployment at manageable levels. So jobs will have to maintained in other ways.
Even though GDP has been growing quite consistently in recent decades, many Westerners, including Australians, still seem to be locked into a culture of overwork.
By reducing the average working week to 28 hours, a post-growth economy would share the available work among the working population. This would minimise or eliminate unemployment even in a non-growing or contracting economy.
Lower income would mean we would have less stuff, reducing environmental impact, but we would receive more freedom in exchange. Planned degrowth is therefore very different to unplanned recession.
Redirect public spending
Governments are the most significant player in any economy and have the most spending power. Taking limits to growth seriously will require a fundamental rethink of how public funds are invested and spent.
Among other things, this would include a swift divestment from the fossil fuel economy and reinvestment in renewable energy systems. But just as important is investing in efficiency and reducing energy demand through behaviour change. Obviously, it will be much easier to transition to 100% renewable energy if energy demand is a fraction of what it is today.
We could fund this transition by redirecting funds from military spending (climate change is, after all, a security threat), cutting fossil fuel subsidies and putting an adequate price on carbon.
Reform banking and finance
Banking and finance systems essentially have a “growth imperative” built into their structures. Money is loaned into existence by private banks as interest-bearing debt. Paying back the debt plus the interest requires an expansion of the monetary supply.
There is so much public and private debt today that the only way it could be paid back is via decades of continued growth.
So we need deep reform of banking and finance systems. We’d also need to cancel debt in some circumstances, especially in developing nations that are being suffocated by interest payments to rich world lenders.
The population question
Then there’s population. Many people assume that population growth will slow when the developing world gets rich, but to globalise affluence would be environmentally catastrophic. It is absolutely imperative therefore that nations around the world unite to confront the population challenge directly.
Population policies will inevitably be controversial but the world needs bold and equitable leadership on this issue, because current trends suggest we are heading for 11 billion by the end of this century.
Anyone who casually dismisses the idea that there is a limit to how many people Earth can support should be given a Petri dish with a swab of bacteria. Watch as the colony grows until it consumes all of the available nutrients or is poisoned by its own waste.
The first thing needed is a global fund that focuses on providing the education, empowerment and contraception required to minimise the estimated 87 million unintended pregnancies worldwide every year.
Eliminating poverty
The conventional path to poverty alleviation is the strategy of GDP growth, on the assumption that “a rising tide will lift all boats”. But, as I’ve argued, a rising tide will sink all boats.
Poverty alleviation must be achieved more directly, via redistribution of wealth and power, both nationally and internationally. In other words (and to change the metaphor), a post-growth economy would eliminate poverty not by baking an ever-larger pie (which isn’t working) but by sharing it differently.
The richest 62 people on the planet own more than the poorest half of humanity. Dwell on that for a moment, and then dare to tell me that redistribution is not an imperative of justice.
So what’s stopping us?
Despite these post-growth policy proposals seeming coherent, they face at least four huge obstacles – which may be insurmountable.
First, the paradigm of growth is deeply embedded in national governments, especially in the developed world. At the cultural level, the expectation of ever-increasing affluence is as strong as ever. I am not so deluded as to think otherwise.
Second, these policies would directly undermine the economic interests of the most powerful corporations and institutions in society, so fierce resistance should be expected.
Third, and perhaps most challenging, is that in a globalised world these policies would likely trigger either capital flight or economic collapse, or both. For example, how would the stock markets react to this policy agenda?
Finally, there is also a geopolitical risk in being first to adopt these policies. Reduced military spending, for instance, would reduce a nation’s relative power.
So if these “top-down” policies are unlikely to work, it would seem to follow that if a post-growth economy is to emerge, it may have to be driven into existence from below, with communities coming together to build the new economy at the grassroots level.
And if we face a future where the growth economy grows itself to death, which seems to be the most likely scenario, then building up local resilience and self-sufficiency now will prove to be time and energy well spent.
In the end, it is likely that only when a deep crisis arrives will an ethics of sufficiency come to inform our economic thinking and practice more broadly.
25 Comments on "Limits to Growth: Policies to Steer the Economy away from Disaster"
makati1 on Thu, 21st Apr 2016 7:08 am
Must be Spring in the Us. The bullshit is flying fast and furious. Now if some of it would actually be put on the fields…
Davy on Thu, 21st Apr 2016 7:18 am
Like I said optimism bias is at every level even this good article. There are no solutions and the fine solutions this article offers are doors long since closed. They are a light dressing on a gaping wound. What we need is a complete change in our critical thinking and to discard the optimism bias. This article could be rewritten with a pessimism bias. It could focus on these issues as predicaments without solutions but with options to adapt and mitigate. It could come to the conclusion that death and collapse is ahead.
Yet, if it did acknowledge the inevitability of collpase the conclusions and profoundly important findings would be dismissed and rejected. The article would not be fit to be published by most normal sources. So, in that regard I guess this pessimistic “lite” optimistic biased academic look at the world is the best we can do. If humans cannot get past “the best we can do” and get to “can and will” then we are finished as a civilized species. Something may survive our civilization but it will not be what we have become. In fact it is likely better we just crash and burn then we can be strengthened as a species by the rigors of evolution. That is if we are not driven to extinction.
Cloud9 on Thu, 21st Apr 2016 7:33 am
How in a declining energy setting are we going to be able to work less? In the pre oil age, the 19th century, a seventy hour work week was not uncommon. Being raised on a farm setting in the 1950’s it was very common to hear we will work from can to can’t. In other words, we would work from when we can see to when we can’t see. Hog killing started before the break of day. During freezes, we stayed up all night burning tires in an effort to raise the temperature a few degrees. During picking season, we picked until the fruit was gone.
Our entire monetary and political system was built on the premise of exponential growth. One city after another is filing for bankruptcy. Layoffs, declining services, and failing pension funds are the current trend. The only exponential growth that we can observe is debt. The only short term solution is an exponential growth of the money supply. Every government on the planet is printing to prop up the system. This ends as it always does. It ends in the death of money and societal collapse. Death comes slowly at first and then all at once.
In 2007 Zimbabwe was printing a one dollar bill. In 2008 they were printing a fifty trillion dollar bill. In less than 24 months their currency died. When faith in the monetary system is lost, the die off begins and the work week extends.
theedrich on Thu, 21st Apr 2016 7:33 am
¿Deep crisis? What deep crisis? The world is full of Robin Hoods who promise to massacre Whitey, after which there will be love, peace, fraternité, égalité, and so forth. The coloreds will lie down with White women, and Jesus’ promises of heaven on earth will come true. And with all of the evil rich gone (except, of course, Sörös and company), the wealth will be distributed evenly, just like Stalin and Mao said it should be.
Odd, though. Somehow paradise never seems to result from all the lofty verbiage and wars to end all wars. Maybe we just need to build bigger bombs.
peakyeast on Thu, 21st Apr 2016 7:46 am
The 0.001% are saving us all – without their accumulation of extreme wealth and nothing to use it all on they have curbed pollution, consumption and limited resource depletion.
Thank god for all those super rich – we need more inequality…
🙂
dave thompson on Thu, 21st Apr 2016 7:48 am
400 + nukes untended by industrial civilization will decide the outcome.
penury on Thu, 21st Apr 2016 9:28 am
If you read the article the conclusion is easy to see? the human ape is going away, but in true human tradition we are going to make certain that everything else goes with us.
Apneaman on Thu, 21st Apr 2016 10:25 am
For many their life is already an economic disaster even in the richest country in the world. Also happening in other rich countries to varying degrees.
http://www.cbsnews.com/news/the-surging-ranks-of-americas-ultrapoor/
http://www.rollingstone.com/politics/news/six-ways-america-is-like-a-third-world-country-20140305
http://www.wsj.com/articles/third-world-america-1446594670
Apneaman on Thu, 21st Apr 2016 10:26 am
continued
http://www.salon.com/2013/12/10/look_at_the_stats_america_resembles_a_poor_country_partner/
http://www.washingtonsblog.com/2014/08/u-s-now-third-world-country.html
http://www.city-data.com/forum/economics/2242426-america-becoming-third-world-country.html
Plantagenet on Thu, 21st Apr 2016 11:12 am
Be careful what you wish for.
Those hoping for a “de-growth” society will get one as soon as the next recession hits—-and its going to be a doozy!
Cheers!
PracticalMaina on Thu, 21st Apr 2016 11:31 am
But I thought fracking was here to save us all Plant?
Boat on Thu, 21st Apr 2016 12:38 pm
PracticalMaina
Fracking just made energy much cheaper. Not a save all.
HARM on Thu, 21st Apr 2016 12:50 pm
“If the rich nations in the world keep growing their economies by 2% each year and by 2050 the poorest nations catch up, the global economy of more than 9 billion people will be around 15 times larger than it is now, in terms of gross domestic product (GDP). If the global economy then grows by 3% to the end of the century, it will be 60 times larger than now.”
Any bets on how likely this is?
To infinity and beyond!
Boat on Thu, 21st Apr 2016 1:50 pm
Rich nations? Who would that be. Less poor might be a better description.
Anonymous on Thu, 21st Apr 2016 1:55 pm
Think about how hard it is to fix even the ‘simplest’ issue the article raises, the first one. The GDP comment. Right now, every talking shit-head on the ‘toob’ talks about 1% growth this, or 1.5% growth that. THey are simply repeating numbers fed to them by, economists. Using the ‘standard’ definition of ‘growth’. Even the easiest thing on that last, changing a deeply flawed measuring metric, is making very little progress. At the current rate, it would take decades, if not longer, LOL, to drop GDP as it is currently used from common use and reference.
And that is by far, the easiest thing done. The other issues, would directly impact the wealth and power and comfort, of those 62 people the author mentions+a great many others besides, so they are not going to happen-at least not voluntarily. There is really nothing wrong with anything in the article, but an entire system was built up to incentivize the very behavior the author would like to see changed. As Im sure most of us of would as well. IoW, the ‘behavior’ of the system, is baked into it.
The writer must be and americant, because at no point, is the corporate-military welfare state of the uS ever singled out for criticism. Its is *implied* in a couple of places that welfare-capitalism is to blame,(in a roundabout way), but its never defined as the source of these problems. This is why change will never happen on its own. The ‘problem’ is always defined by its symptoms, and only, rarely, by its causes.
peakyeast on Thu, 21st Apr 2016 2:15 pm
They want to eradicate povery?
If they do it by redefining poverty – then yes I can see it happen. Living at less than 0.1$ a day is poverty. Wupti – problem solved.
However, if they intend to increase all the poor peoples consumption – then where is the resources coming from?
I can see it happen in the USA in two ways:
1. The government insists that those that live in poverty register at a central office paying a registration fee of 1000$ in order to be allowed to call themselves poor and be in the statistic.
2. The government just puts poor people into prison because they dont have any income, but they are alive which means they are either tax evading or stealing. Thus they are not poor anymore, but prisoners.
onlooker on Thu, 21st Apr 2016 7:07 pm
All this economic talk ad nauseum is missing the point. The planet and the huge human population on it are now in severe overshoot. Nothing humans do or not do now will make a difference. It is like rearranging chairs on the Titanic. We no longer control our destiny. The Elites I think do seem aware of this. That is why rumblings and rumors exist of how the elite are preparing for collapse. I do not see any of their preparations giving them any special privilege or immunity to avoid adverse outcomes. Those who are able to survive will do so because they are prepared in survival skills, are located in a favorable area and have some good luck on their side.
makati1 on Thu, 21st Apr 2016 7:15 pm
So true, Onlooker. So true.
Davy on Fri, 22nd Apr 2016 5:35 am
A new look at $GOLD$
“Pimco Economist Has A Stunning Proposal To Save The Economy: The Fed Should Buy Gold”
http://www.zerohedge.com/news/2016-04-21/pimco-economist-has-stunning-proposal-save-economy-fed-should-monetize-gold
“First I must remind you there are only two avenues out of a debt crisis – default or inflate – and inflation is just a slow-motion default.”
“The problem the world’s major economies now face is that any attempt to depreciate their currencies to improve the terms of trade must effectively come out of the pockets of their partners; this creates a classic prisoner’s dilemma. Thus the interesting twist of a Fed gold purchase program.”
https://en.wikipedia.org/wiki/Prisoner%27s_dilemma
“The notion was simple: Increase monetary velocity via financial repression to create inflation, depreciate nominal debt and deleverage both the public and private economies of the U.S. The toolkit of financial repression would include, but not be limited to, near-zero overnight interbank borrowing rates, massive asset purchase programs (also known as quantitative easing or QE), term surface restructuring (known as Operation Twist) and good old-fashioned jawboning, in this case taking the form of distant forward guidance.”
“A massive Fed gold purchase program would differ from past efforts at monetary expansion……Global consumers are more familiar with gold than the banking system, thus this avenue of monetary expansion might finally lift the anchor on inflationary expectations and their associated spending habits. The USD may initially weaken versus fiat currencies, but other central banks could soon buy gold as well, similar to the paths of QE and NIRP. The impactful twist of a gold purchase program is that it increases the price of a widely recognized “store of value,” a view little diminished despite the fact the U.S. relinquished the gold standard in 1971. This is a vivid contrast to the relatively invisible inflation of financial assets with its perverse side effect of widening the income gap.”
“gold is not an asset; rather, it should be considered an alternate currency. Pundits often describe the five factors that define “money”: Its supply is controlled or limited, It is fungible/uniform – this is why diamonds cannot qualify, It is portable – this is why land cannot qualify, It is divisible – thus art cannot be money, and It is liquid – this means people will readily accept it in exchange. By this definition, gold is certainly a form of money”
“Many people will rightfully dismiss the gold idea as absurd, as just another fanciful strategy to print money; why not just buy oil, houses or some other hard asset? In fact, why fool around with gold; why not just execute helicopter money as originally advertised? I would answer the former by noting that only gold qualifies as money; and as for the latter, fiscal compromise on that order seems like a daydream in Washington today – don’t expect a helicopter liftoff anytime soon.”
Davy on Fri, 22nd Apr 2016 5:39 am
I am not advocating the above policy only referencing the increasingly desperate attempts of modern man to maintain economic activity to save his skin. There is no escaping limits of growth but there is also no limits to man’s imagination.
onlooker on Fri, 22nd Apr 2016 5:50 am
To me this seems more a case of actions being done to maintain some level of confidence and reliability within the system so the big bucks do not abandon it in mass. Investments of all kind depend on a certain level of confidence. I think what we are seeing now is the veil being lifted and all players big and small are seeing a very unstable and flimsy economic system. In reality on Main st. for everyday folks the economy is mired in an increasingly deep funk which is evident to us normal folk. So, this is also about luring the last of the foolish wealthy to hand their money over to other wealthy. Just a sideshow really. The whole growth/debt system is quickly unraveling.
Davy on Fri, 22nd Apr 2016 5:54 am
“These SEC Insider Emails Reveal Why No Bankers Have Gone To Jail”
http://www.zerohedge.com/news/2016-04-21/these-sec-insider-emails-reveal-why-no-bankers-have-gone-jail
“Kidney pressed on and pushed the agency to bring charges against Egol, Tourre’s superior at Goldman, arguing that the SEC should at least interview him. According to Kidney, Muoio once again hindered the investigation and dismissed the idea, saying that the agency knew what Egol would say. “That’s a cardinal sin in an investigation,’’ Kidney said that he told Muoio. “You can’t assume what somebody will say.”
“Kidney also wanted to go after those who made the most money on the Abacus fraud: John Paulson and more importantly, the person who invented the trade that made John Paulson a billion dollars, Paolo Pellegrini. In late October of 2009, Kidney circulated a long memo arguing that the SEC should consider charging Paulson & Co., John Paulson himself, and Paolo Pellegrini, who was the hedge fund executive who worked on the Abacus deal.”
“Each of them knowingly participated, as did Goldman and Tourre, in a scheme to sell a product which, in blunt but accurate terms, was designed to fail,” Kidney’s memo said. “In other words, the current pre-discovery evidence suggests they should be sued for securities fraud because they are liable for securities fraud.”
“Once again, Muoio intervened: Some of Kidney’s colleagues initially supported his idea to pursue scheme liability, but Muoio seemed to think that doing so would hurt the agency’s solid but narrower case against Goldman. “I continue to have serious reservations about charging Paulson on our facts,’’ Muoio wrote. “And I worry that doing so could severely undermine and delay our solid case against Goldman.” He was, of course, referring to the “case” in which not a single Goldman banker would be charged criminally, and only a 20 year old trader would see a civil lawsuit filed against him. Muoio’s viewpoint, again, prevailed.”
“Kidney reflected on why the SEC has so miserably failed in its mission. The oft-cited explanations — campaign contributions and the allure of private-sector jobs to low-paid government lawyers — have certainly played a role. But to Kidney, the driving force was something subtler. Over the course of three decades, the concept of the government as an active player had been tarnished in the minds of the public and the civil servants inside working inside the agency. In his view, regulatory capture is a psychological process in which officials become increasingly gun shy in the face of criticism from their bosses, Congress, and the industry the agency is supposed to oversee. Leads aren’t pursued. Cases are never opened. Wall Street executives are not forced to explain their actions.”
onlooker on Fri, 22nd Apr 2016 5:56 am
A system of the Rich, by the Rich and for the Rich.
JuanP on Fri, 22nd Apr 2016 8:03 am
Russia to dominate global organic, non GMO food market, http://russia-insider.com/en/business/russias-looking-dominate-organic-food-market/ri14024
Kenz300 on Sat, 23rd Apr 2016 8:54 am
Too many people demand too many resources……yet the worlds population grows by 80 million every year…..
How many charities are dealing with the same problems they were dealing with 10 or 20 years ago with no end in sight. Every problem is made worse and harder to solve by the worlds growing population.
If you can not provide for yourself you can not provide for a child.
Rescuing Homeless Children From the Streets of India
https://www.youtube.com/watch?v=cpaR_pTVeBk
Poverty in the Philippines.
https://www.youtube.com/watch?v=9M5PAS8Lr10