21 September 2010

Growing Problems on the Road to Recovery

Excerpt from International Institute for Environment and Development (IIED) via SWTR, 4 March 2010

'Economic growth is unquestioningly assumed to be a ‘good thing’.

Mainstream economic theory, developed world political leaders, the IMF, the World Bank, the WTO, financial markets and the majority of the public back the view that economic growth is essential for economic stability. And in the short term they are right.

If economies don’t grow there is likely to be growing instability in financial markets, mass unemployment and the end of the economic and political order as we know it. It’s undeniable that this would be worrying to live through.

In the long term, however, prolonged economic growth might be the cause of far more instability than meets the eye. It is no secret that growth has always entailed ever-increasing consumption of resources and energy. We might become more efficient – more output for each unit we put in – but efficiency gains have always been more than offset by more growth. Relative resource use (the ratio of inputs to outputs) may have fallen over the years, but absolute resource use has never stopped growing. Economic growth has always entailed physical growth of the economic system in the form of ever increasing flows of matter and energy. Economic growth and resource use are now, and will remain for the foreseeable future, firmly coupled.

...and the Limits to Growth

The problem is, as ever, the fact that we’ve only got one Earth. The economy must be housed within the physically finite limits of the planet’s ecosystems. Since it can’t expand to be greater than this, economic growth is going to have to stop at some point. So the real question is not whether economic growth will stop, but when and how.

In fact, there are strong arguments to be made for a controlled transition to a zero growth economy in order to keep within planetary limits. The Centre for the Advancement of the Steady State Economy has been advocating this as a more appropriate government economic strategy target for developed economies for several years.

Another commentator exploring the possibility and desirability of a zero growth economy is Tim Jackson, professor of sustainable development at the UK-based University of Surrey. Jackson headed the team from the government’s Sustainable Development Commission who produced the report Prosperity Without Growth. He followed this up last year with a book of the same name, in which he discusses what such an economy might look like, and the steps we might take to get there.

Some of the pressure for adopting an economy that functions within natural limits is coming from researchers in the physical sciences. A recent paper from the Stockholm Resilience Centre, also published in UK science journal Nature, Planetary Boundaries: Exploring the safe operating space for humanity suggests that there are nine boundaries (for example, climate change and biodiversity loss) that if breached for extended periods would be likely to cause sudden changes highly detrimental to the continuance of life as we know it. The paper estimates that humanity has already overshot at least three of these boundaries.

On a more positive note, French President Nicolas Sarkozy has commissioned Joseph Stiglitz, the Nobel prize-winning US economist, to lead a starry team of fellow economists in investigating measuring economic success beyond the growth-centric GDP. A draft report was published last year and the French premier was very supportive of the report at its launch...

An End to Growth?

The end of economic growth seems to be less of a question of if than of when and how. The recession has undoubtedly caused great suffering for many in both Northern and Southern countries. But does the problem lie with the recession itself or the fact that our economic and belief and social systems are poorly set up to cope without constant and steady growth?

The recession has usefully highlighted some of the global economy’s more dysfunctional aspects. Should we not use this as an opportunity to re-examine some of these aspects and try to fix them? And the more so, if we accept that the current recession is seen not as an isolated event but a taste of things to come if we stick to the ‘business as usual’ path.

Re-engineering the global economy to work without growth is not just a sensible precaution against breaking key planetary constraints and the inevitable consequences. It is also an ethical necessity if we believe the current Northern economic dominance to be unjust and that Southern economies have a right to develop.

Continued growth is not possible indefinitely. Ecological and economic shocks should be expected to increase in frequency and magnitude as we push the boundaries of earth’s capacity to house and sustain the economy and our abilities to distribute the products of the economy efficiently and fairly. It would therefore seem prudent for stability and survival to re-engineer economic systems to cope without growth.

Nevertheless, even for the most ardent of ‘steady statists’, the task of building a zero growth economy is daunting. Perhaps the scariest part is not a world without growth but the transition to such a system. Like any addiction, getting ‘clean’ can be painful even when it´s clearly necessary.

In the same way that national governments delay making necessary cuts to reduce their deficits, it is easy to succumb to the temptation to put off the inevitable day of reckoning for as long as possible. Yet an end to growth must happen. We’re sitting on the only planet we’ve got. Surely it is better to have some proactive control over the transition rather than passively wait for the limits to be breached?

All this begs the question; are we hoping for the right kind of recovery?'

1 comment:

  1. "All this begs the question; are we hoping for the right kind of recovery?"

    While the recession has been painful for many, it also led to a number of positive developments. Fewer automobiles were manufactured and produced, for example. Our growth and consumption-obsessed culture sees this as a bad thing, but the good news was that people were getting by with less and we were extracting resources at a slower rate.

    Yes, to aim for a recovery back into our old high-consuming, perpetual-growth-worshipping ways, is self-destructive.

    Dave Gardner
    Producing the documentary
    Hooked on Growth


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