How to manage without growth

Human progress seems to have been boiled down, in the minds of many, to a single notion – economic growth. All human advancement is, it seems, captured in this one variable; politicians and business commentators hold their breath as they receive the latest GDP statistics and our destiny is revealed in a number. Today, growth is the “the supreme, overriding objective of policy” for every government (except one, the Himalayan kingdom of Bhutan).

It might come as a surprise to learn that governments have not always had this growth obsession. In fact, economic growth only came into the policy picture 50 or 60 years ago, initially as a means to guarantee full employment in a post-war economy and avoid the horrors of the Great Depression. It quickly became the dominant policy goal in its own right. As the OECD makes clear, going for growth is now a basic assumption of economic policy and, outside the realms of green/ecological economics, it goes entirely unquestioned.

The recognition that growth has not always been the be all and end all of human endeavour is the beginning of an understanding of the damage that the obsessive pursuit of growth wreaks. We can challenge the growth imperative, unravel the assumptions behind it, and comprehend the environmental and human consequences of pursuing it with pathological desire. And with that understanding in place we can ask – is there an alternative to growth? It may be killing the planet but can we live without it?

Managing without growth

The most comprehensive response I have come across is Managing without growth: slower by design not disaster by Peter Victor, Professor of Environmental Studies at York University (Ontario).

Victor acknowledges that economic growth is still an essential part of the development agenda for many poor countries; however, it is no longer necessary for the wealthy nations. In these countries, as Herman Daly has argued, the costs of growth actually outweigh the benefits. Taking this position, Victor looks at the prospects for wealthy countries managing without growth in the future. This is the main purpose of his book, and he has taken his home country, Canada, as his example and developed some highly insightful economic models to explore low- and no-growth scenarios.

Tim Jackson’s excellent report on Prosperity without growth (see Barry’s review here) makes mention of Victor’s work (in Chapter 8, pp79-81), noting that there is almost no other attempt to use conventional economic modelling to investigate this ‘steady-state’ scenario. This gaping hole in economics research makes Victor’s work even more valuable.

Victor goes a lot more deeply into the analysis of the steady state economy than Jackson is able to show in a few pages or indeed I can do here. If you can’t track down a copy of the book, various speeches, reports, interviews and a slide show are all available on Peter Victor’s website, along with the detailed computer models discussed in the book that take a close look at:

— peak oil scenarios for the USA,
— scenarios modelling the changes needed to have an impact on CO2 emissions in high, medium and low income countries,
— what happens when Kate and Roberto go shopping for happiness, and
— low- and no-growth scenarios for Canada.

The models are also interactive, so we can modify the dashboard settings to run our own scenarios. For example, take a look at the impact that a $200/tonne carbon tax has on greenhouse gas emissions and other aspects of the Canadian economy.

Having examined a range of macroeconomic scenarios, from business as usual to disastrous collapse, Victor concludes that, yes (with careful planning and widespread public support), it is possible to bring an economy to a steady state low/no growth situation without causing a devastating depression.

The circumstances in which he considers a steady state can be achieved and maintained are addressed in the final chapter of the book.

Reduced work time in a steady state economy

Perhaps the most interesting of all the policy proposals is the call for reduced work time. As noted above, the focus on economic growth grew from a fear of mass unemployment. In the absence of growth, the obvious way of maintaining full employment is to reduce work time. Simply put, a 10% unemployment rate could be eradicated if the 90% in work cut their work time by around 4 or 5 hours a week. At the same time, further rebalancing could be achieved by making available more work for the underemployed and poorly paid and reducing the hours worked by the overemployed (the 60+ hours a week senior managers, for example). Of course, it is far from that simple in practice but this sketch gives a feeling for the scale of the reductions in unemployment and reductions in standard work time that could be achieved.

Essential ingredients of such a policy would include changes in work organisation so that firms don’t rely on overtime. Flexibility would be key to ensuring that standard working hours actually are reduced. Skills training to ensure there are people able to step into the available roles is also an essential requirement. Victor also cites research that suggests a relatively equal distribution of earnings is a fundamental precondition of reduced work time.

For many people, more free time translates into greater well-being through a better balance in life. For those who are unemployed, underemployed, or underpaid, more hours of well-paid work also means greater well-being. For people living in the wealthy nations, these two things can be achieved simultaneously. Surely this is the way that greater prosperity really will be achieved.

Interestingly, and just to show we’re up with the play here at Well sharp, reduced work time was the first proposal Barry put forward in his article on “Escaping the growth imperative.

Other policies for a steady state economy

Population: a stable population with an immigration policy that still caters to humanitarian interests is necessary condition for a no-growth economy.

Environment: quantitative targets for resource throughputs and waste outputs must be established. Limits to greenhouse gas emissions are essential, of course, though Victor does not strongly support any particular policy instrument although the computer model includes a revenue neutral carbon tax which is offset by reductions in personal income tax and company tax.

Poverty: A wide range of measure to deal with poverty and social exclusion are outlined, from universal child benefits and targeted transfers to skills training, job creation, community social and economic development, to institutional reform. An anti-poverty programme is an essential element of any understanding of prosperity, of course, in a steady state economy as in any other. Funding such a programme without a reliance on growth is a challenge, and the work time policy outlined above is central to such a programme.

Investment: Victor asks, what role would investment play in a no-growth economy? Investments in assets that conserve resource throughputs, for example investment in people rather than produced assets, should be made more attractive. Maintenance of existing capital stock will become much more important than investment for growth. These objectives can be achieved by a preferential tax treatment.

International trade: Many countries strive for export-led growth, apparently ignorant of the fact that, globally, net exports must be zero. If one country runs a trade surplus, another must run a deficit. Developing countries, which stand to gain the most from exports, should be allowed to do so while wealthy countries moderate their efforts to export in line with a move to a steady state. Furthermore, international trade agreements and global trade organisations should not be allowed to trample on the desire of communities to maintain production and services in their own localities.

Consumption: The character of consumption has to change in a steady state economy if we are to manage resource throughputs. Differential taxes can be introduced that favour durable goods, more useful goods and less environmentally harmful goods. Status goods (aka “luxuries”) could also be subjected to higher taxation. The advertising industry would need some serious attention too.

Summing up

Moving to a no-growth situation makes sense for wealthy nations for a whole variety of reasons. Peter Victor’s economic analysis shows that it’s possible. Generating the necessary discussion and debate, and creating the political will, is the real challenge now.

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