13 April 2009

Growth: recipe for salvation or catastrophe?

One thing the nations of the world agree on during the current economic crisis is a need for growth. "The message is growth first," says John Kirton, director of the G20 research group at the University of Toronto. Some world leaders, like U.S. President Barack Obama and British PM Gordon Brown, emphasize stimulus, and others, like German Prime Minister Angela Merkel and French President Nicolas Sarkozy, emphasize regulation, but all support growth.

The need for a rejuvenated economy is overwhelmingly obvious, but is growth the panacea world leaders, uncritically supported by the mass media, think it is? They seemingly refuse to recognize that growth has limits. The planet is finite. And we are exhausting it. We are well past the point where it can sustain itself against our ravenous demand for growth.

Actually, growth hasn't been doing us all that much good lately. At least not us rich folks. Inequality is higher in the OECD countries than it was 20 years ago, and middle-class incomes in Western countries were stagnant in real terms long before the recession. Growth has, however, benefited poor nations. In China and India, for example, it has lifted millions of people out of poverty and we in the West can hardly criticize that. Nonetheless, we are left facing the outcome of billions more people aspiring to the level of affluence of the wealthier nations. To achieve that equality, the world economy will have to increase 15 times by 2050 and 40 times by the end of the century. At that rate, we will soon have an environmental crisis that will dwarf the existing economic crisis ... if it doesn't already.

The challenge, therefore, would seem to be less about restoring the destructive economic model of the past and more about replacing it with a sustainable yet balanced model, a world economy that reduces exploitation in the West while allowing undeveloped countries to catch up, an economy less about growth and more about sharing. The current crisis presents an opportunity to take up this challenge, to take a serious look at the structure of the world economy and consider serious changes.

An essential start is redefining prosperity. We seem to rely solely on GDP to measure our economic status even though it's more a yardstick of exploitation than of human welfare. There are a number of indexes out there that focus on human well-being generally, including the state of our environment, rather than solely on consumption as the GDP does. Any new definition must in its international application redefine prosperity so as to allow room for much-needed growth in poorer nations.

A recent report entitled "Prosperity Without Growth: The Transition to a Sustainable Economy," issued by the Sustainable Development Commission, the British government's "independent watchdog on sustainable development," presents a thorough analysis on how to shift to a world economy the planet can live with. The report recommends 12 steps to achieve a sustainable economy. These include investing heavily in jobs, assets and infrastructure for a green economy, increasing financial prudence, developing more environmentally sound measures of economic accounting and prosperity, sharing work and improving work-life balance, reducing economic inequality, creating healthier and more resilient communities, reversing the culture of consumerism, imposing clear global limits on resource use and pollution, creating ecological-based tax systems, promoting technology transfer to undeveloped countries, and funding investment globally in renewable energy, energy efficiency, and the protection of carbon sinks and biodiversity in developing countries. Each of these steps is expanded upon in detail in the report.

Economic growth has become discordant with both environmental sustainability and human well-being, and it is time for world leaders to seek economic structures that are compatible with these elements. Unfortunately, they are rising to the challenge only with reluctance ... if at all.

1 comment:

  1. It's worth pointing out that an important part of the analysis going into the Prosperity without Growth report was "made in Canada." Peter Victor of York University conducted workshops for the SDC during the consultation phase of the project and his macroeconomic model and prescription for sharing work are key components of the report.

    Victor's book, Managing: Slower by Design, not Disaster without Growth was published in October 2008. I will be doing whatever I can to put the recommendations of this report on the agenda in BC and Canada.