Life was bad enough, even before the Government chose to put our economy into a tailspin. A cost of living crisis fuelled by war in Ukraine, inflation at its highest for 40 years, public debt at a level not seen since the Second World War, and warnings of recession. Their solution? To slash taxes and regulation to encourage greater spending and investment, all of which should – so the theory goes – lead to our salvation: economic growth.
I’m no economist, as perhaps this post will prove, but I can see why growth seems self-evidently a good thing.
A growing economy is one in which “the resources available to the population – goods and services, wages and profits – are increasing.”Gov.uk
More resources should mean a higher standard of living, with greater tax receipts to fund stronger public services. I understand that. And I can see that, over the last decades, it’s economic growth that has lifted millions out of poverty, increasing wealth and happiness around the world.
Unfortunately, though, it’s also left us with a devastated planet on the verge of dangerous, self-perpetuating instability. So, given that a rush to growth means building more, buying more and burning more fossil fuels, what I don’t understand is how anyone can so confidently premise our future on eternal growth when it’s growth itself that risks that future?
Gross Domestic Product
It’s worth looking briefly here at what we mean by ‘growth’. The headline metric is Gross Domestic Product, or GDP. Simply put, GDP is the total value of all goods and services produced within a country in any given time period. So if I buy a solar panel, the value of that panel is included within the UK’s GDP. As is the fee I pay the electrician to install it.
Conceived in the US in the aftermath of the Great Depression, GDP is now used across the world as the foremost indicator of a nation’s economic size and success, the signal figure against which policies are gauged and our path to the future is defined.
The problem is that, by counting only in currency, it overlooks that which cannot be measured in currency. Which means that GDP is blind to inequality, blind to physical and mental wellbeing, blind to job quality, blind to our natural and social capital. GDP couldn’t care less if a nation’s wealth is spread across a population or hoarded by the few. It couldn’t care less if you can walk down the street in safety at night, nor how long you wait for an ambulance.
Recognition of this failure is not new. As far back as 1968, Robert Kennedy, brother of JFK, criticised Gross National Product, a similar measure to GDP, by saying it ‘measures everything, in short, except that which makes life worthwhile.’
But it’s worse than that: GDP actively skews the accounting against sustainability. As the typical example goes, according to GDP, a vast, carbon-sequestering forest has no value until it’s cut down and sold. By the same criteria, my home has no value until it burns down and is rebuilt. GDP is fuelled by devastation.
It also fails to account for the future. GDP would soar if we fish on an industrial scale – until we’ve caught every last fish, at which point the entire system on which we’ve built our ‘wealth’ would collapse.
And the consequence of GDP’s blindness to what’s really important can be seen across the world. In the US, where GDP growth has averaged 3% over the last 60 years, over 37 million still live in poverty. Perhaps most conclusively, the current state of our planet demonstrates the gap between what GDP claims as success, and the reality of what that looks like.
These, then, are the two principle problems with GDP. Firstly, inherent within its use as a metric of success is a need for growth; without growth, GDP measures only failure. And, second, it’s a dangerously blunt instrument, measuring only one aspect of a nation’s health and penalising so much of what’s important.
The usual answer to these well recognised shortcomings is to call not for growth at any cost, but ‘green’ growth. The idea is that by decoupling growth from emissions and environmental exploitation, we can continue to enjoy the benefits of growing GDP while staying within appropriate planetary boundaries. Sounds good, eh?
Except, of course, green growth still falls short when it comes to recognising inequality, wellbeing and so much else. More, it assumes a mass deployment of speculative, negative-emissions technologies. Meanwhile the efficiencies so relied upon by green growth proponents have been overwhelmed by population growth and increases in affluence.
It’s certainly possible to decouple GDP from emissions, and the UK has been a world-leader in the effort: between 1985 and 2016, real GDP per head grew by 70.7%, while carbon dioxide emissions declined by 34.2%.
But these changes are in large part a consequence of switching out fossil fuels for renewable energy. That’s the relatively easy stretch of the path to net zero. There are no similar substitutes for land, water and other raw materials. After a certain point, it’s just not possible to do more with less.
And, crucially, whatever decoupling is taking place is not being done on anything like the scale or at anything like the speed required. There are millions around the world clamouring just to survive, let alone enjoy our high standard of living, yet the money we wealthier nations have pledged to help them develop without burning fossil fuels has failed to materialise. Emissions continue to climb. Our ecological impact has worsened.
Green growth sounds so appealing, but the best of intentions cannot ignore the fact that an increase in production leads to greater demand in energy and materials. Chasing green growth is like running down an escalator that’s accelerating upwards.
“There is little evidence that GDP growth can be decoupled in the long-term (ie. it is not sustainable).”Study: Is Decoupling GDP Growth from Environmental Impact Possible?
Alternatives to endless growth
There are some promising alternatives. Doughnut economics proposes a more dashboard approach, where GDP is just one of many metrics, all of which are bounded by a commitment to a healthy planet. Another alternative is degrowth, which calls for lower levels of consumption, primarily in wealthier countries, prioritising instead on products and services that instead improve quality of life for all – more radical, perhaps, but Covid showed us the level of realignment possible when necessary. And, degrowthers argue, this time we could do it in a controlled manner that leaves no one behind.
‘Today we have economies that need to grow, whether or not they make us thrive; what we need are economies that make us thrive, whether or not they grow.’Kate Raworth, Creator of the Doughnut of social and planetary boundaries
Around the world, there are cities and even countries casting off the traditional obeisance to GDP. But to do so at an impactful scale means not just implementing a new economic model, but wrestling the current one from a century of convention and the many embedded interests. Financially, politically and socially, we’re addicted to growth, embedded within a system that demands it. If we stop growing – according to the rules of our system – we all suffer. Yet if we continue to grow exponentially, we’ll also suffer. Many already are.
In light of which, our Government’s plan to raise ourselves beyond our current woes by unshackling the markets and lowering taxes in a sprint for growth is misguided, to say the least. Rather than reducing regulation, we need more, to push the markets towards recognising not just capital, but the value of people and planet. Because wealth is more than just money. And it is possible to live a good life without eternal growth. At some point we need to believe that.
For more on balancing efficiency with sustainability, check out this TedED animation from the World Economic Forum: