What’s wrong with Growth?

David’s post from yesterday: (Economic-security-a-green-alternative-to-the-growth-obsession) reminded me of something we wrote some time ago, for a different audience.

With a new title and a couple of minor amendments, here it is:

What’s wrong with Growth?

Globally, GDP growth is ecologically unsustainable and, as pursued at present, is leading to severely unjust social outcomes. As greens, we know this only too well.

We know we are depend on and are consuming non-renewable resources at an alarming rate.
– At current rates of consumption and current population, the most optimistic estimates suggest world oil reserves would last 93 years. Less optimistic projections suggest oil reserves would be exhausted in 41 years.(i) But it’s not just oil.

We know the ecological impacts of our actions are threatening our future. Extractive production, pollution, and wasteful consumption are leading to:
– Climate change
– Habitat loss
– Species extinction

We know that growth has benefited only a small proportion of the worlds’ people.
– By the World Bank’s estimate, 2.7 billion people live on less than US$2 a day.
– Eradicating this sort of crushing poverty is an urgent moral imperative, but the reality is that “the benefits of growth accrue only very weakly to the poorest members of the global community”.
– For example, between 1980 and 2001, for every $1 increase in global income per person, 4c reached those on less than 2 dollars a day. 4% of additional income generated by the world economy is shared by 44% of the people in the world. (ii)

Even within wealthy NZ, we know that an alarming split has developed between the life chances and economic vulnerability of different groups and individuals in our society.
– Maori men have a life expectancy of 69 years while non-Maori men have a life expectancy of 77 years; Maori women have a life expectancy of 73 years while non-Maori women have a life expectancy of 82 years.

We know that the earth cannot support us all consuming at “developed nation” rates.
– The earth’s biologically productive area is 11.5 billion hectares. That’s 1.8 ha per person. But the developed world requires much more than that 1.8 ha to produce the resources we each use and to absorb the waste we each generate.
– We would need 3.7 planets to support everyone at developed world levels of consumption. (iii)

Nevertheless, social justice demands that our basic rights to food, housing, and health be extended to all 6 billion of our fellow humans.
– And as Herman Daly has pointed out, such needs are irreducibly material.(iv)

Finally, while efficiency and ingenuity in the form of new technologies can help, so far, growth has never been completely “dematerialised”, or de-coupled from additional resource use and environmental impacts.

However, despite the unsustainable nature of GDP growth as outlined above, our present economic system and basic political consensus both inherently depend on GDP growth.

At the firm level, due to the profit motive and the dynamics of competition, the imperative is “grow or die”.
– Firms constantly seek ways to improve productivity, reduce costs, innovate and gain size and market power – growth helps with these pressures, by providing economies of scale, resources for branding and advertising, resources for research and development. If they don’t grow, firms risk losing market share, and being driven out of business or being taken over.
– This is especially true for companies that have been publicly floated on the stock exchange, because the share price depends not only on current performance, but also on expectations about rates of future growth.v
– A firm operating in a competitive market is therefore subject to a very urgent need to create more, produce more, and sell more in order to stay in existence.

At the national level, if the economy doesn’t grow, economic problems ensue.
– For the government, faster growth improves fiscal position, slower growth worsens it (due to falling tax take, and increasing social welfare expenditure needs). (vi)
– With high overseas debt and huge current account deficits, New Zealand is very vulnerable to exchange rate meltdown and capital flight.

At the national level, if the economy doesn’t grow, social and political pressures mount.
– Without (sufficient) growth, distribution of the returns on production becomes a zero-sum (or win-lose) game. That is to say, in absolute terms, some will become more wealthy and some will become less wealthy.
– The current political consensus has a materialistic legitimation: the broad popular agreement on the country’s general direction for the past 60 years has been founded on the ability to simultaneously maintain/increase consumption, social wage, and profit. Without growth, this political legitimacy is threatened as social realities and power structures become more visible.

It certainly does seem that we have a problem: growth is unsustainable but our economy is founded upon it.

Therefore, we ask:
1. Can we have economic growth without increased resource use and environmental impacts?
2. What impacts would a cessation or reversal of GDP growth have on our current economic, political, and social systems?
3. What do the answers to these questions suggest for green movement strategy in the medium-term?

David Parker & Barry Larsen, 24/1/07

NOTES
i. 2006 extraction rates of 85 million barrels per day US Energy Information Administration estimates reserves at 2.9 trillion barrels = 93.4 years at 2006 extraction rates. Oil & Gas Journal, Dec 2003, estimated 1.27 trillion barrels of oil remain in world wide reserves = 40.9 years at 2006 extraction rates.
ii. Poverty data from World Bank (2001) cited in NEF (2006) Growth isn’t working. Retrieved from http://www.neweconomics.org. Other data from NEF ibid. Incidentally, the NEF argues that the same rate of poverty reduction achieved (on the basis of growth) between 1980 and 2001 could have been achieved by redistributing 0.12% of the income of the richest 10% of the world’s population. You have to wonder, if that happened, would those richest 10% even notice?
iii. See http://www.footprintnetwork.org. “Developed world” footprint is taken as an average of North America + EU footprint data.
iv. See http://www.dieoff.org/page37.htm
v. See http://www.oligopolywatch.com/2005/08/16.html.
vi. See Statistics NZ Retrieved from http://www.ssc.govt.nz/display/document.asp?docid=2905&pageno=10
Commonwealth Budget Office, Australia, retrieved from http://www.cbo.gov/showdoc.cfm?index=6060&sequence=6

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