The Center for Global Awareness is releasing our 6th book this summer: Connecting the Roots of a Holistic System: The Global Economy, A Brief Edition. The book is for students in grades 9-12 and non-economic major undergraduate students. To celebrate this event we are publishing a series of blogs this summer that summarize the essence of Chapter 4 in the book: The Impact of Neoliberalism in the United States: Ten Consequences. We hope you follow and enjoy the blog series! The following is the second blog in the series.
Impact #2: Unbridled Economic Growth
Let’s talk hamsters, big hamsters. Some of you may have a hamster for a pet. Hamsters don’t weigh very much. But let’s imagine for a moment that from birth to puberty a hamster doubled its weight each week. Instead of leveling off in maturity as animals do, the hamster continued this trend. How much do you think the hamster would weigh on its first birthday? We would be facing a nine billion metric ton hamster! If it kept eating at the same ratio of food to body weight, its daily food intake would be greater than the total, annual amount of corn (maize) produced worldwide! Hardly a sustainable pet.
Nature knows when things should stop growing. I love to watch my spring flowers grow. My children grew up to be responsible adults. There are lots of different ways in which we use the word grow. Growth means to spring up and develop to maturity. In other words, growth gives way to a steady-state balance in nature in which the rate of inputs is equal to the rate of outputs. For example, a bath would be in balance if water flowing into the tub from the tap then escaped down the drain at the same rate. The total amount of water in the bath does not change, despite being in a constant state of flux.
Growth cannot continue forever. There are limitations. Impact #2, economic growth, is where wealth increases over time as the economy adds new market value to goods and services. Growth and capitalism are two sides of the same coin. Capitalism is different from other economic systems because of its built-in tendency to expand and create new wealth. Through history, the invention of new technology went on at an even-handed pace, often needing decades or even centuries to develop. But under capitalism technology has sped up. The capitalist economy is a machine whose output is economic growth.
The Western economy faithfully follows economic growth. Watch any newscast or read any news report about the economy, and I wager that they will mention the word growth. Economists constantly watch growth’s movements, measure it to the decimal place, praise or criticize it, and judge it as weak or healthy. Every global, national, corporate, local, and academic institution wants to grow. I hope to grow my organization – the Center for Global Awareness – and sell lots of educational books. In our daily lives we assume that growth is one of those good things. Promoting economic growth may be the most widely shared and powerful cause in the world today. Some say it is the new world religion.
Through history humans have sought more comforts and surplus food to make their lives easier and more secure. As populations have grown, so have their economies. Yet, the specific policy of economic growth has a short history. Since 1945, it has come to be a central feature of U.S. economic policy. In 1949, a government report stated that growth would be a new key principle for the economy, rather than economic stability. Hopping on the economic growth band-wagon were big business and organized labor, which both saw in growth a way to further their interests. Economic growth meant that Americans would produce and consume more goods and services. Workers in factories and businesses would have jobs and thus spend their wages on more consumer goods. Americans were eager to shed the hardship of the depression years and start a new way of life based on a seemingly endless supply of comforts. Economic growth and consumer spending went hand and hand.
Another advantage to the policy of economic growth was that economists could scientifically measure it. They came up with the Gross Domestic Product (GDP) – an official measure of a country’s overall economic output. It is the market value of all final goods and services made within a country in a year. Since Americans have an unshakable faith in numbers, they widely considered GDP to be a good measurement of a country’s living standards. A high GDP is often a stand-in for measuring the standard of living. This measurement assumes that when the GDP is up, the country’s living standard also improves. A recession negatively describes the absence of growth. Prolonged recessions are depressions. A scientific number joined to rising living standards was important to American and later the world.
Unlimited 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. But the world has changed in the last 60 years. We now live in a world full of humans and all the things associated with our lives. In this world, the available labor supply is enormous, while the natural resources to support human life are limited. There is a dawning recognition that the growth model industrialized countries eagerly adopted is no longer working for the world we know today. It is geared towards a time in the past. All this is happening at the expense of our natural world, which is battered by the demand to produce more for human consumption and absorb our wastes.
The fact is that a growing economy tells us nothing about the quality of our economic activity. For example, when the British Petroleum’s (BP) oil spill spewed crude oil into the Gulf of Mexico beginning in April 2010, it actually added to the GDP! The number of dollars spent on cleaning up after disasters, such as the BP oil spill or Hurricane Katrina in 2005, all add to an increase in GDP. Growth in GDP doesn’t say if the activity is good or bad. Spending on prisons, pollution and disasters pushes up GDP just as surely as spending on schools, hospitals and parks.
Mainstream economics is frozen in its one-eyed fixation with growth. But growth has a surprising drawback. The industrial world has come to expect growth of around 3 percent a year. At this rate, the economy will double in just over 23 years. The 10 per cent growth rate of some rapidly growing economies, such as China and India, will double the size of those economies in less than 7 years. This astonishing rate of growth is unsustainable.
The challenge for those who take a holistic view of environmental crises, global poverty and inequality is how to face up to persistent belief that humanity’s prosperity is dependent on the growth of GDP. This type of economic growth is unsustainable, unjust and unnecessary.
- Why do you think your nation wants to continually grow its economy? What are the dangers to this way of thinking? What are the benefits?