This blog is a continuation of our previous blog, and part of a larger series of blogs on the topic of the local and international impacts of the changing global economy.
Part 2: The mainstream vision of unlimited economic growth made sense decades ago when the human population of the world was relatively low and natural resources for human consumption appeared to be endless. In this worldview, money and human labor were the limiting factors, while natural resources were abundant. It made sense, in this context, not to worry too much about environmental destruction and social disruptions, since they were assumed to be relatively small and ultimately solvable. It made sense to focus on the growth of the economy as a primary means to improve human living standards. It also seemed reasonable to measure the economy in marketed goods and services and to measure the success of an economy by the number of goods and services produced and consumed.[i]
But the world has changed dramatically and rapidly in the last 60 years. We now live in a world relatively full of humans and the infrastructure that we built. In this new world, human populations and labor supply are enormous, while the natural resources to support human life are now seen as limited. There is a dawning recognition that the growth model eagerly adopted by industrialized countries is no longer working for the world we know today.[ii] Our model of growth is geared towards a time in the past that differs from the reality of today. All this is happening at the expense of our natural world, which is being battered by the demand to produce more for human consumption and absorb its wastes.
Perhaps a new measurement of economic well-being and a rethinking of economic growth is needed. Yet, the commitment to growth is so deeply ingrained in our way of thinking that to question it is regarded as an affront to capitalism. Our purpose in raising this issue is merely to examine and question the over-reliance on economic growth in our society and not to advocate for the overthrow of capitalism.
The fact is that a growing economy tells us nothing about the quality of economic activity that is happening within it. For example, when British Petroleum’s (BP) oil leak spewed crude oil into the Gulf of Mexico beginning in April 2010, it actually contributed to an increase in the GDP! The number of dollars spent on cleaning up after disasters, such as the BP oil spill, Hurricane Katrina in 2005, pollution clean-up of Love Canal in New York in 1978, or the costs of containing widespread diseases such as H1N1 (swine) flu in 2009, all contribute to an increase in the GDP. Americans are experiencing “jobless growth” in the aftermath of the 2008 financial crisis, yet GDP rises modestly. The economy is not generating new employment, while liquidating irreplaceable natural assets is creating environmentally destructive growth. For example, those in the logging industry contribute to an increase in the GDP by cutting trees for lumber products, but if the forests that are cut are old-growth forests that take centuries to replace, it is actually harmful to the general long term well-being of the economy and the population. Growth in GDP doesn’t differentiate if an economic activity has a positive or negative impact on the environment or the population. Spending money on prisons, pollution and disasters pushes up GDP just as surely as spending on schools, hospitals and parks.[iii]
Individuals support growth policies because they accept the commonly-held notion that growth will give them and the next generation a better standard of living. Governments seek growth as a remedy for just about every imaginable problem. Economists believe growth to be essential for full employment, upward mobility, and technical achievements. Politicians encourage growth because it expands the economic pie, and they can postpone hard choices.[iv] Growth, development, progress, advancement, gain, success, improvement, and prosperity are deeply embedded assumptions that are considered cause for celebration in today’s economy. Systems thinkers refer to these qualities as structural reasons for the continuation of growth.
Mainstream economics is frozen in its myopic obsession with growth. But growth has a surprising drawback. The industrial world has come to expect its mature economies to grow by a certain percentage, usually 3 percent a year. That expectation evolved out of several centuries of experience with capital creating more capital. At this 3 per cent growth rate, the economy will double in just over 23 years. The 10 per cent growth rate in recent years of rapidly developing economies, such as China and India, will double the size of those economies in less than 7 years. This astonishing rate of growth is seen as unsustainable when viewed from a broader, more holistic systems approach.
For example, we now know that growth can solve some problems while creating others. Growth of anything physical, including the human population and its cars, houses and factories, cannot continue indefinitely. The earth is finite. There are limits to the rate at which humans can extract resources (crops, timber, fresh water, fish, etc.) and discharge wastes (greenhouse gases, toxic substances, and polluted water) without exceeding the carrying capacity of the earth. As is now becoming apparent, the human economy cannot maintain present flows at their current rates for very much longer. The good news is that we can reduce our ecological footprint by lowering population growth, altering consumption, and implementing more resource-efficient technologies.
The challenge for those who take a holistic view of the converging crises of climate change, global poverty and economic inequality is how to confront the dogmatic belief that humanity’s prosperity is dependent on the growth of GDP. Even a cursory analysis of economic growth reveals its dangerous shortcomings: growth pursued at all costs is ecologically unsustainable, socially unjust, and unnecessary.
Critical Thinking Questions for Educators:
1. What might a measurement of economic well-being look like, and how would it contrast with our current emphasis on gross domestic production?
2. What are some examples of situations that stimulate GDP growth in the near term but are harmful to the overall economy and environment in the long term?
[ii] Richard H. Robbins, Global Problems and the Culture of Capitalism, (Boston: Allyn and Bacon, 1999) 1.
[iii] Simms, Growth Isn’t Possible, NEF.
[iv] Donella Meadows, Dennis Meadows, and Jorgen Randers, Limits to Growth: The Thirty Year Update, (White River Junction, Vermont: Chelsea Green Publishing Company, 2004) 6.