Prosperity Without Growth
by Tim Jackson
The Transition to a Sustainable Economy
Growth has delivered its benefits, at best, unequally. A fifth of the world’s population earns just 2% of global income. Inequality is higher in the OECD nations than it was 20 years ago. And while the rich got richer, middle-class incomes in Western countries were stagnant in real terms long before the recession. Far from raising the living standard for those who most needed it, growth let much of the world’s population down. Wealth trickled up to the lucky few.
Fairness (or the lack of it) is just one of several reasons to question the conventional formula for achieving prosperity. As the economy expands, so do the resource implications associated with it. These impacts are already unsustainable. In the last quarter of a century the global economy has doubled, while an estimated 60% of the world’s ecosystems have been degraded. Global carbon emissions have risen by 40% since 1990 (the Kyoto Protocol ‘base year’).
Significant scarcity in key resources – such as oil – may be less than a decade away. A world in which things simply go on as usual is already inconceivable. But what about a world in which nine billion people all aspire to the level of affluence achieved in the OECD nations? Such an economy would need to be 15 times the size of this one by 2050 and 40 times bigger by the end of the century. What does such an economy look like? What does it run on? Does it really offer a credible vision for a shared and lasting prosperity? These are some of the questions that prompted this report. They belong in a long tradition of serious reflection on the nature of progress. But they also reflect real and immediate concerns. Climate change, fuel security, collapsing biodiversity and global inequality have moved inexorably to the forefront of the international policy agenda over the last decade. These are issues that can no longer be relegated to the next generation or the next electoral cycle. They demand attention now.
Accordingly, this report sets out a critical examination of the relationship between prosperity and growth. It acknowledges at the outset that poorer nations stand in urgent need of economic development. But it also questions whether ever-rising incomes for the already-rich are an appropriate goal for policy in a world constrained by ecological limits. Its aim is not just to analyse the dynamics of an emerging ecological crisis that is likely to dwarf the existing economic crisis. But also to put forward coherent policy proposals that will facilitate the transition to a sustainable economy. In short, this report challenges the assumption of continued economic expansion in rich countries and asks: is it possible to achieve prosperity without growth?
The Age of Irresponsibility
Recession throws this question into sharp relief. The banking crisis of 2008 led the world to the brink of financial disaster and shook the dominant economic model to its foundations. It redefined the boundaries between market and state and forced us to confront our inability to manage the financial sustainability – let alone the ecological sustainability – of the global economy. This may seem an inopportune moment to question growth. It is not. On the contrary, this crisis offers the potential to engage in serious reflection. It is a unique opportunity to address financial and ecological sustainability together. And as this report argues, the two things are intimately related.
The current turmoil is not the result of isolated malpractice or simple failures of vigilance. The market was not undone by rogue individuals or the turning of a blind eye by incompetent regulators. It was undone by growth itself. The growth imperative has shaped the architecture of the modern economy. It motivated the freedoms granted to the financial sector. It stood at least partly responsible for the loosening of regulations and the proliferation of unstable financial derivatives. Continued expansion of credit was deliberately courted as an essential mechanism to stimulate consumption growth.
This model was always unstable ecologically. It has now proven itself unstable economically. The age of irresponsibility is not about casual oversight or individual greed.If there was irresponsibility it was systematic, sanctioned widely and with one clear aim in mind: the continuation and protection of economic growth. The failure of this strategy is disastrous in all sorts of ways. Not least for the impacts that it is having across the world, in particular in poorer communities. But the idea that growth can deliver us from the crisis is also deeply problematic. Responses which aim to restore the status quo, even if they succeed in the short term, simply return us to a condition of financial and ecological unsustainability.
A more appropriate response is to question the underlying vision of a prosperity built on continual growth. And to search for alternative visions – in which humans can still flourish and yet reduce their material impact on the environment. In fact, the voluminous literature on human wellbeing is replete with insights here. Prosperity has undeniable material dimensions. It’s perverse to talk about things going well where there is inadequate food and shelter (as is the case for billions in the developing world). But it is also plain to see that the simple equation of quantity with quality, of more with better, is false in general. When you’ve had no food for months and the harvest has failed again, any food at all is a blessing. When the American-style fridge freezer is already stuffed with overwhelming choice, even a little extra might be considered a burden, particularly if you’re tempted to eat it.
An even stronger finding is that the requirements of prosperity go way beyond material sustenance. Prosperity has vital social and psychological dimensions. To do well is in part about the ability to give and receive love, to enjoy the respect of your peers, to contribute useful work, and to have a sense of belonging and trust in the community. In short, an important component of prosperity is the ability to participate meaningfully in the life of society.
This view of prosperity has much in common with Amartya Sen’s vision of development as ‘capabilities for flourishing’. But that vision needs to be interpreted carefully: not as a set of disembodied freedoms, but as a range of ‘bounded capabilities’ to live well – within certain clearly defined limits.
A fair and lasting prosperity cannot be isolated from these material conditions. Capabilities are bounded on the one hand by the scale of the global population and on the other by the finite ecology of the planet. To ignore these natural bounds to flourishing is to condemn our descendents – and our fellow creatures – to an impoverished planet. Conversely, the possibility that humans can flourish and at the same time consume less is an intriguing one. It would be foolish to think that it is easy to achieve. But it should not be given up lightly. It offers the best prospect we have for a lasting prosperity.
The Dilemma of Growth
Having this vision to hand doesn’t ensure that prosperity without growth is possible. Though formally distinct from rising prosperity, there remains the possibility that continued economic growth is a necessary condition for a lasting prosperity. And that, without growth, our ability to flourish diminishes substantially. There are three related propositions in defence of economic growth. The first is that material opulence is (after all) necessary for flourishing. The second is that economic growth is closely correlated with certain basic ‘entitlements’ – for health or education, perhaps – that are essential to prosperity. The third is that growth is functional in maintaining economic and social stability. There is evidence in support of each of these propositions. Material possessions do play an important symbolic role in our lives, allowing us to participate in the life of society. There is some statistical correlation between economic growth and key human development indicators. And economic resilience – the ability to protect jobs and livelihoods and avoid collapse in the face of external shocks – really does matter. Basic capabilities are threatened when economies collapse.
Growth has been (until now) the default mechanism for preventing collapse. In particular, market economies have placed a high emphasis on labour productivity. Continuous improvements in technology mean that more output can be produced for any given input of labour. But crucially this also means that fewer people are needed to produce the same goods from one year to the next. As long as the economy expands fast enough to offset labour productivity there isn’t a problem. But if the economy doesn’t grow, there is a downward pressure on employment. People lose their jobs.
With less money in the economy, output falls, public spending is curtailed and the ability to service public debt is diminished. A spiral of recession looms. Growth is necessary within this system just to prevent collapse. This evidence leads to an uncomfortable and deep-seated dilemma: growth may be unsustainable, but ‘de-growth’ appears to be unstable. At first this looks like an impossibility theorem for a lasting prosperity. But ignoring the implications won’t make them go away. The failure to take the dilemma of growth seriously may be the single biggest threat to sustainability that we face.
The ‘Iron Cage’ of Consumerism
In the face of the evidence, it is fanciful to suppose that ‘deep’ resource and emission cuts can be achieved without confronting the nature and structure of market economies. There are two interrelated features of modern economic life that together drive the growth dynamic: the production and consumption of novelty. The profit motive stimulates a continual search by producers for newer, better or cheaper products and services. This process of ‘creative destruction’,according to the economist Joseph Schumpeter, is what drives economic growth forwards.
For the individual firm, the ability to adapt and to innovate – to design, produce and market not just cheaper products but newer and more exciting ones – is vital. Firms who fail in this process risk their own survival. But the continual production of novelty would be of little value to firms if there were no market for the consumption of novelty in households. Recognising the existence, and understanding the nature, of this demand is essential. It is intimately linked to the symbolic role that material goods play in our lives. The ‘language of goods’ allows us to communicate with each other– most obviously about social status, but also about identity, social affiliation, and even – through giving and receiving gifts for example – about our feelingsfor each other. Novelty plays an absolutely central role here for a variety of reasons. In particular, novelty has always carried important information about status. But it also allows us to explore our aspirations for ourselves and our family, and our dreams of the good life.
Perhaps the most telling point of all is the almost perfect fit between the continual production of novelty by firms and the continuous consumption of novelty in households. The restless desire of the consumer is the perfect complement for the restless innovation of the entrepreneur. Taken together these two self-reinforcing processes are exactly what is needed to drive growth forwards. Despite this fit, or perhaps because of it, the relentless pursuit of novelty creates an anxiety that can undermine social wellbeing. Individuals are at the mercy of social comparison. Firms must innovate or die. Institutions are skewed towards the pursuit of a materialistic consumerism. The economy itself is dependent on consumption growth for its very survival.The ‘iron cage of consumerism’ is a system in which no one is free. It’s an anxious, and ultimately a pathological system. But at one level it works. The system remains economically viable as long as liquidity is preserved and consumption rises. It collapses when either of these stalls.
Keynesianism and the Green New Deal
Policy responses to the economic crisis are more or less unanimous that recovery means re-invigorating consumer spending so as to kick-start economic growth. Differences of opinion are mainly confined to how this should be achieved. The predominant (Keynesian) response is to use a mixture of public spending and tax cuts to stimulate consumer demand. We could highlight the emerging international consensus around a very simple idea. Economic recovery demands investment. Targeting that investment carefully towards energy security, low-carbon infrastructures and ecological protection offers multiple benefits. These benefits include:
• freeing up resources for household spending and productive investment by reducing energy and material costs
• reducing our reliance on imports and our exposure to the fragile geopolitics of energy supply
• providing a much-needed boost to employment in the expanding ‘environmental industries’ sector
• making progress towards demanding global carbon reduction targets
• protecting valuable ecological assets and improving the quality of our living environment for generations to come.
In short, a ‘green stimulus’ is an eminently sensible response to the economic crisis. It offers jobs and economic recovery in the short term, energy security and technological innovation in the medium term, and a sustainable future for our children in the long term. Nonetheless, the default assumption of even the ‘greenest’ Keynesian stimulus is to return the economy to a condition of continuing consumption growth. Since this condition is unsustainable, it is difficult to escape the conclusion that in the longer term something more is needed. A different kind of macro-economic structure is essential for an ecologically-constrained world.