Book Review: Prosperity without Growth?
by Charles Siegel
When a British government commission publishes a report calling for an end to economic growth, it suddenly seems that our world is changing. Growth has been the central goal of economists since the beginning of the industrial revolution. But Prof. Tim Jackson, the Economics Commissioner of the UK’s Sustainable Development Commission has written a book that sums up the current state of our knowledge about economic growth and shows convincingly that growth should end.
We have all heard about the environmental effects of growth, such as resource depletion and global warming. The conventional wisdom is that we can deal with these effects by shifting to better technology, but this book argues that there is no plausible scenario in which better technology alone can reduce greenhouse gas emissions sufficiently if growth continues at its present pace. “The global economy is almost five times the size it was half a century ago. If it continues to grow at the same rate the economy will be 80 times that size by the year 2100.” This rapid rate of growth is likely to overwhelm attempts to use better technology to reduce greenhouse gas emissions.
If we are serious about avoiding the worst effects of global warming, we must move beyond this sort of technological fix and deal with economic growth itself.
Ending economic growth does not have to involve sacrifice. The evidence shows that, beyond a certain point, growth does not increase our well being. For example:
International comparisons of self-reported happiness show that higher per capita income correlates with greater happiness until income reaches about one-half to two-thirds of what it is in the United States today. Beyond that level, there is no correlation of higher income and increased happiness. In the United States and several other developed nations, higher income has not brought increased happiness during the last several decades.
Indexes that correct the GDP to measure well-being more accurately have similar results. For example, the Genuine Progress Indicator shows that, until the 1970s, American’s well-being increased as income increased, but since then, Americans’ well-being has declined, though per capita GDP has continued to increase.
International comparisons of other measures of well-being, such as life expectancy and educational achievement, have also similar results. Increased income does not improve well-being after per capita income reaches about half of what it is in the United States today.
We in the developed nations are at a point where economic growth does us little or no good. But growth threatens to do us and the rest of the world great harm by causing global warming, higher resource prices, and potential ecological collapse.
Yet it seems hard to break our addiction to growth. The conventional wisdom says that growth is needed to reduce unemployment and to promote economic stability. As we can see during the current recession, when growth falters, businesses reduce their levels of investment and lay off workers, making the economy les efficient and increasing unemployment. It also seems that we need growth to pay off our high levels of personal and national debt.
In response to these concerns, this book cites the studies of Peter Victor, a Canadian economist, who has run computer models of how the Canadian economy would react to the end of growth. Results are dramatically different as he changes the values for macroeconomic variables such as the savings rate, the rates of public and private investment, and the length of the work week. In one run, the end of growth brings economic instability, high unemployment, and rising poverty. In another run, the end of growth brings economic stability, cuts both the unemployment and poverty rates in half, and reduces the ratio of debt to GDP by 75%. In part, the difference comes because the second scenario has a higher savings rate, a lower rate of private investment, and a higher rate of public investment.
In addition “unemployment is avoided … by reducing both the total and the average number of working hours. Reducing the working week is the simplest and most often cited structural solution to the challenge of maintaining full employment with non-increasing output.” The end of growth would make life easier by reducing the amount of work we have to do.
There are very few macroeconomic studies of this sort, and far more are clearly needed.
The book consistently emphasizes that a two-fold change is needed for an end of growth: in addition to these economic changes, we need social changes that shift our emphasis away from materialistic values. Unfortunately, the book is weaker on these social changes than on economic changes. It calls for a shift from an economy that aims at opulence or utility to an economy that aims at human flourishing, but it never provides a convincing vision of what life could actually be like in a society where people have a comfortable standard of living and have abundant free time to develop their their talents and their humanity as fully as possible. There is a long tradition of philosophical writing about this subject, going back to Aristotle, but this book, written by an economist, is not strong on philosophy.
Despite this limitation, Prosperity Without Growth? is the best summary available of the economic issues involved in ending growth. It is required reading for everyone working to avoid ecological collapse.
The fact that it is published by a British government commission offers hope that we may do better than just avoiding collapse. If we follow the suggestions here, we could have a far better world at the end of this century than we have today, with widespread prosperity that is devoted not to empty consumerism but to living well .
Charles Siegel is the author of The Politics of Simple Living