Economy, by definition, means prudently managing resources, yet in practice growth consumes them, unsustainably. We need a new narrative, say the Greens, that decouples progress from growth: this might be a myth and it is a gamble, but so is growth

Here is a spectre of some straw men. Huddled around a carbon-emitting camp-fire, they scorn even the primitive fun of chewing on a mammoth bone: it’s burlap and lentils for these guys, if they’re lucky.

Here’s the other quite different idea, suggested by the Greens at their ‘sustainable economy’ conference: how do we prosper and develop, within ecological limits? How do we live well, sustainably?

“Questioning growth is deemed to be the act of lunatics, idealists and revolutionaries. But question it we must. The myth of growth has failed us,” says UK Sustainability Commissioner Tim Jackson. Growth has failed to enrich our poorest. Inequality, Jackson says, is worse now than it was 20 years ago. Exponential growth has been disastrous already ecologically. It can’t continue.

‘Sustainability’ is bandied around a lot more often than it’s defined. But we know what isn’t sustainable: unlimited growth.

In the last quarter century, Jackson says, the global economy has doubled, while an estimated 60% of the world’s ecosystems have been degraded. In a world in which “nine billion people all aspire to the level of affluence achieved in the OECD nations … Such an economy would need to be 15 times the size of this one by 2050 and 40 times bigger by the end of the century.”

It is also on the cards that one of these days, for one reason or another, the growth will simply stop, or become harder and harder to sustain. So whether or not you care about the environment bit, at the very least, non-growth based resilience would seem to be a good economic insurance policy.

And yet, growth is what we know and believe in. Even Jackson, who calls it a myth, acknowledges the alternative is untried:

The fundamental question is this: can you really make enough money from these activities to keep an economy growing? And the truth is we just don’t know. We have never at any point in history lived in such an economy … virtually no attempt has been made to develop an economic model that doesn’t rely on long-term growth … there is no macro-economics for sustainability and there is an urgent need for one.

But it isn’t feasible, he says, to just bolt some green technology and policy on to the existing growth and consumption model: “simplistic assumptions that capitalism’s propensity for efficiency will allow us to stabilise the climate and protect against resource scarcity are nothing short of delusional. Those who promote decoupling [growth from resource use] as an escape route from the dilemma of growth need to take a closer look at the historical evidence — and at the basic arithmetic of growth.” The sums, he says, don’t add up.

So, the call is for a new kind of macroeconomics. At the Greens’ conference, party spokesperson Kennedy Graham said:

There are challenges each party has to confront in economic policy. The Greens, for example, challenge National and Labour in their commitment to economic growth. We question whether they are indistinguishable in that respect. How will you preserve the planet if you insist on continuous growth? ... For their part, National and Labour challenge the Green Party to be economically realistic. How are we, they say, to ensure jobs are retained and tax revenue is maintained without growth? How are we to avoid capital flight and carbon leakage if we insist on strict financial regulation and emission trading schemes? …

We must, he said, collectively confront and work through those challenges. Also, “For us Greens, … We must meet the normal expectations of voters …” (my emphasis).

People who actually know stuff about economics need to analyse whether the Greens’ well-meant policies would be regressive. They need to do this by reference to more than received wisdom and right-wing truthys (as opposed to factys).

But the theory, anyway, is of a different kind of decoupling, untangling notions of progress from growth, for continued sustainable development:

Development can continue after growth has ceased. … technological change, economic distribution and the resulting quality of life remain dynamic … a continually increasing quality of human life through material sufficiency, knowledge accumulation and cultural advancement … A steady state economy does not entail economic contraction, which is the natural fear of governments … ecological economics distinguishes between a successfully-functioning steady-state economy and a failed growth economy which aspires to grow but may slip into recession. It is misdirected growth that has caused the problem …

Jeanette Fitzsimons calls it “the politics of enough”: “humans should stop when they have enough so that other living things can survive … affluent humans should stop when they have enough so that others may have enough too.” And it is, in the end, going to be as much about the politics, and the psychology, as the economics.

What does that mean for ordinary people’s lives in practice? How would living within the carrying capacity of the planet look? “I’ve never lived in a commune, there’s no nakedness, I’ve never cleaned my sheets in the river using stones,” Fitzsimons told Next magazine earlier in the year. David Suzuki, more alarmingly, called txting and iphones “unnecessary toys”.

But the bigger point is about defining and measuring prosperity, not just saying 'no' to stuff: if we continue to define it in terms of consumption, and require consumption to achieve it, we will lose, because the governing principles are bigger than our politics; so we might as well start thinking now about how to manage differently.

Individual bits of the policy framework laid out by Jackson and the Greens don’t stray so far after all from the familiar. There’s some Keynesian economics (public spending on public goods, as consumption slows, and the reported prediction of Keynes himself, that one day, growth would have to stop). We hear often enough already about the need to rebalance our books, and write a new type of policy, and tax some things other than income, like consumption, or pollution.

The big picture, though, is huge. This is a global challenge, not just a local one. However, it's not about being business-friendly or unfriendly’ (thus risking capital flight), but friendly to the right types of business and business activity: the Jeremy Moons, Rob Fyfes, and Phillip Millses of this world, who can see and believe in a new way of business being. You can call it picking winners, if you want. I call it writing policy.

Politics aside (and they won’t be put aside) this is “a policy challenge of the highest order”. Blandly, Jackson says it requires “tackling systemic inequality,” and “addressing the culture of consumerism”. Sort of like fat and sugar, we are hardwired for these. However, the bones of a proposal are scattered about the place. We just have to assemble and flesh them out.

Comments (22)

by stuart munro on November 24, 2010
stuart munro

I'm not sure that rejecting growth is the necessary path. Certainly gross wild biomass extractions are not things you'd want to grow, but there are large areas of economic activity that don't relate to the natural world so much - education perhaps. Financial engineering. Law.

A certain amount of environmental hope is placed on the adoption of greener technical solutions to currently wasteful practices. Suppose someone creates a better dye-based photo-voltaic cell. The uptake of that technology would be a form of economic growth even though its environmental impact would be (could be) a net positive. I think that a new economy driven by these kinds of innovations is the probable best path out of NZ's decades of stagnation.

If a green industry paradigm became established, it could drive the change toward an ecologically sounder way of life - from the front, as a pursuit of advantage, a carrot instead of a stick.

Entrenched interests are going to do all kinds of gymnastics to avoid sticks like carbon taxes - which makes green innovation all the more crucial.

 

by Claire Browning on November 25, 2010
Claire Browning

Stuart, yes a distinction does need to be drawn between economic growth in the abstract, and material growth in population, resource consumption, pollution -- the latter being the ecological constraint.

They may not always be the same thing. Maybe you can have some of the former without the latter. That's what I understood to have been meant by 'decoupling', though.

It may also be that you can have some growth in the short to medium term that helps transition and is therefore a net positive: reorienting to energy efficiency, public transport, and so on. I am pretty sick of hearing about the 'green new deal', but that's it.

Without ruling out either of those, I think the "rejection of growth" (as you term it) is rejecting growth as the founding principle and panacea -- as opposed to sustainability as the first principle.

If you can achieve some sustainable growth (plus development), well great. However, the proposition is that the kind of continual growth we need today, just to keep things ticking over, sets up all sorts of perverse incentives, and defies basic logic.

Whatever we end up deciding is the economic place of growth (if any), it would end up looking quite different to the present system. That's all.

by Nandor on November 25, 2010
Nandor

Thanks for this Claire. A good piece IMO

Stuart - two points I'd make. One is that although we may want growth in some parts of the economy, that doesn't mean that the economy as a whole must grow. So yes, we need growth in microgeneration technology (for example) but we also need a decrease in gross carbon emitting energy generation. A steady state economy doesn't mean a static economy, but rather a dynamic economy that keeps within ecological bounds.

My second point is that there are actually very few activities that don't use natural resources. I would have thought there were considerable natural resources involved in the provision of education, to cite one of your examples, especially as classrooms become more computerised. I don't mean we should cut education, but simply that it is not a free lunch, resource wise.

I agree that we should be pursuing a less resource intensive economy - both in terms of technological innovation, but more importantly in terms of less consumption. Resource efficiency on its own may actually increase net resource use, as the Jevons Paradox demonstrates, unless acompanied by other measures to limit the scale of the economy.

by Claire Browning on November 25, 2010
Claire Browning

Last week I wrote about David Cunliffe. He had said:

“The Labour Party now recognises that the neo-liberal economic model cannot provide the basis for navigating the economic, environmental and social challenges of our times.”

And, “We must live within the capacity of the Earth to support us. ... The Earth is not just there for human utility.”

And, “If the situation is as serious as we think, we must do the hard yards to back out of this corner … We have to ask the hard questions; ask what policies are available to get us from a collision course with nature to a future that is both more just and more sustainable.”

Mr Cunliffe is giving another talk today: Towards Tomorrow -- Labour's New Economic Framework.

The synopsis says (my emphasis):

The global financial crisis has raised fundamental issues about economic management, including the regulation of financial markets and the appropriate monetary and fiscal policy responses. Many developed countries are now faced with several more years of signficant fiscal difficulties and rising national debt. In New Zealand's case, the wider global issues are compounded by many decades of relatively modest economic growth. ...

Hon David Cunliffe will detail Labour's bold new economic policy narrative, building on the new direction announced by Labour Leader Phil Goff at the party's landmark 2010 conference. Mr Cunliffe will outline why the assumptions of the pre-GFC world need to be re-examined and how Labour's modern, active approach will lift growth and protect jobs for New Zealanders.

I wish he'd make up his mind. Anyway, all may become clearer, in an hour or so.

by Mark Wilson on November 25, 2010
Mark Wilson

As is it did during their last reign Labour's strategy will make the poor poorer and the rich remove their capital and expertise.  

by Petone on November 25, 2010
Petone

Good thoughtful post Claire.

Coping with resouce depletion and climate change are huge issues for this century, but replumbing the economic system could be bigger still.  It is probably a necessary pre-requisite for coping with the other issues.

Re "the bones of a proposal are scattered about the place", about the best collection is at http://steadystate.org/

.. and in particular their (ironically named, from a NZ perspective!) "Enough is enough" report:  http://steadystate.org/enough-is-enough/

Steadystate.org is from Herman Daly et al.  Herman makes an interesting analogy about our current model of economy, that for it to stop growing is like an airplane stopping in flight. It is not designed for it.  Fine for a helicopter, but not for an airplane.  What we need is an economy that is designed to function without requiring perpetual growth.

Stuart:
The probem with your PV example is Jevon's paradox, ie the observation that such improvements in efficiency merely tend to encourage more growth.
Another real-world observation is that there has never been any growth in any economy without growth in its energy consumption
And another is that there has never been a reduction in any economy's energy use, without a contraction in that economy.

The argument isn't definitive, but these observations strongly suggest that our current economic model is not suitable for a finite planet. It is suitable for a frontier society that exploits available resources then moves on, but now we have nowhere new to move on to.

by stuart munro on November 25, 2010
stuart munro

It is probably that some kind of economic growth will remain necessary even within a biologically steady or improving system. And we should not discount the possibility of improving - along the lines of the reafforestation of Japan Jared Diamond describes in Collapse.

A great many environmentally pernicious practices are not driven by economic constraints at all, but by a cyclopean mindset. Consider packaging - I am sure I 'consume' more packaging in a month than my grandfather used to in a year - display cards & blister packs & what have you. But the driver for much of this packaging is not me, but the convenience of big box retailers, who do not want to employ the staff to serve customers for small items - so they are packaged with lots of hard plastic to make theft inconvenient, for display on hooks.

Legislating limits on packaging would presumably create jobs then, a return to counter service and shops stocking a wider range of items. It ought also to reduce freight costs.

This might allow me to shrink my footprint without reducing my consumption choices to burlap, lentils, and genetically re-engineered mammoth.

by Raymond A Francis on November 25, 2010
Raymond A Francis

Some interesting points Claire

In my economics classes the point often made was if you are not going forward (growing) you will be going backwards

I have always struggled with this but I do know it is very difficult to establish a static, stable, sustainable state

I think we are going to have to look long and hard at having to do this for our survival

by tussock on November 25, 2010
tussock

Growth is just an accounting trick to do more now with less taxes by getting the "richer" future to pay the bills. Unfortunately, the richness of the future is strongly linked to the amount of fossil fuels they'll burn, so our clever communal tax dodge is going to cause them some rather big problems with the peak oil and the climate change.

They'll just have to reboot the money supply, probably base it on something other than a fractional reserve, and bootstrap a solar-electrical economy on a mere 5:1 EROI, which might not even be possible. Interesting times ahead.

Future people will weigh more than their cars, which will go faster if they pedal harder. Either that or they'll revert to coal gassification, go live up a hill, and wonder why we built everything important under the high tide mark.

 

by Petone on November 25, 2010
Petone

Fully agree Tussock.

I did start work on an electric bike project a while back, but stopped when the oil price (amongst other things) caused the world economy to tank, in turn taking down oil prices and thus the market for bikes.

That and because our government takes hard-earned cash from us wealth-creators south of the Bombays and spends it on new motorways to take more cars into the Auckland isthmus, where there is no room to fit them,  to idle in traffic jams burning up our grandchildren's share of the world's oil.

by Mark Wilson on November 25, 2010
Mark Wilson

Sorry Petone - more tax comes out of Auckland than the rest on NZ - Wellington is heavily subsidised.

by Claire Browning on November 26, 2010
Claire Browning

Thanks Raymond. If you've had economics classes, you're one up on me. I simply don't know if the 'steady state' idea works. Even if, in theory, it can work, the putting of it into practice is going to meet some quite formidable obstacles.

However, the same is true of growth, and the obstacles there are insurmountable.

We've given that idea a good long try. All the media energy and attention and time spent on when growth might start again, what fraction of a percent we grew or shrank this quarter, are we looking at a W or a V shaped recession, etc, seems like a bit of a failure of imagination. I just think it's about time we started giving objective, considered air-time to some alternatives.

by Petone on November 26, 2010
Petone

Mark,

You're right about the financing of Akld's roads.  Wikipedia's comment on the matter could almost have been written by you last night: "While there is a widespread belief in New Zealand that taxes gathered in the rest of the country are extensively spent in Auckland, in terms of transport, the reality has been different for many years."

Which makes our current road-building spasm  http://www.stuff.co.nz/sunday-star-times/business/4366408/Going-down-the...

..marginally less insane than I was making out.  But only marginally.  Not only is it a bad idea by conventional economic analysis, it is a near criminal waste of resources when you consider the likelihood of major changes being needed in the years ahead to transition from oil. A transition to more public transport, compact cities, biking and walking, and electric vehicles and/or biofuels when necessary is in itself going to take a lot of resources.  Meanwhile NZ is investing in the opposite direction.

 

by Nandor on November 26, 2010
Nandor

If you were referring to Cunliffe's speech to the Institute of Policy Studies, Claire, there was a brief nod to NZ investing in clean and green innovation but no attempt at all to address the issues he raised in the previous speech. Shame really.

by Claire Browning on November 26, 2010
Claire Browning

Hi Nandor. Hey - it's really nice to have you commenting here, and yes, I was referring to the IPS speech (IPS-organised, open to anyone). I stuck it out for about 40 mins, then I had somewhere else to be.

Here's the full text of it. I didn't miss much; nor did the rest of you.

This one went up on Scoop. Labour party policy, 2011 stump speech.

The other didn't, and clearly wasn't.  

by Mark Wilson on November 26, 2010
Mark Wilson

Hi Nandor,

After your retirement from parliament (conveniently after you qualify for your parliamentary pension) are you actually doing any work at all?

by Nandor on November 26, 2010
Nandor

Mark - MPs elected for the first time from 1999 on get no parliamentary pension, or any other perks for that matter. Nada. Zip.Since leaving parliament I've been working and studying (including some environmental and natural resource economics as it happens). Why do you ask? You offering me a job?

 

And thanks for the welcome Claire. I've been enjoying your writing.

by Claire Browning on November 27, 2010
Claire Browning

Okay Mark, that's enough. Nandor, you won't get a reply from Mark this week, because he's off air.

by Petone on November 29, 2010
Petone

An article was posted in Australia last week
http://www.energybulletin.net/stories/2010-11-25/economic-growth-zero-su...
that is relevant to this and a couple of other recent pundit posts.

The IEA's World Energy Outlook 2010 was released a couple of weeks ago, which amongst other things states that conventional oil production peaked in 2006, and forecasts that by 2030 OECD usage will have dropped by 6 million barrels/day.

In analysing the WEO 2010, the Australian article notes the following points:
- that the IEA's forecasts have been growing steadily more pessimistic in recent years. (and by the way.. NZ government has always unquestioningly relied upon the IEA forecasts that have for years forecast the peak to be around 2037)
- that the IEA is in effect forecasting an end to growth in the OECD as while energy efficiency improvements are possible, the extent of improvements required for the OECD to grow are very unlikely to occur.
- that a cycle of economic recovery causing high oil prices causing recession is likely.  ie the same warning as in Clint Smith's NZ Parliamentary Library Research Paper
- and that Fractional Reserve Banking and Fiat currencies may need to be reformed along steady-state economy lines, ie issues considered by Kennedy Graham's economic conference.

by al loomis on December 06, 2010
al loomis

good news: this will fix itself. reduced population through war, starvation, disease and loss of habitat will green up the planet, and the more the corporate orcs promote 'growth,' the faster the environment will stabilize.

bad news: not sure the stabilization point will have room for h. sap., or any other life form. so it goes...

by Denis Frith on December 09, 2010
Denis Frith

The stated objectives are admirable. Unfortunately credibility is eroded by a common misunderstanding of the dynamics of the operation of civilization. It irreversibly uses the limited natural capital, such as oil, at a high rate. The rate has increased as the economy has grown. But the rate will decrease in the future as the natural capital becomes scarcer. Growth will cease and and the economy will transition to contraction but the consumtion of natural capital will continue as fast as ecological forces will permit.

by Mark Graham on December 09, 2010
Mark Graham

Can't we have economic growth that is not environmentally damaging?

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