Why do we have a growth fetish and what is needed to break it?
Posted by Paul Frijters on Friday, February 16, 2007
To rule is to look ahead, it has been said. Let us therefore cast our eyes at the virtually universal wish of nations and their population to achieve economic growth. Jared Diamond argues in his latest book ‘Catastrophe’ that this ‘growth fetish’ (as Clive Hamilton calls it) may well lead us as a species to eventual extinction because our fetish blinds us to the environmental dangers of economic growth. For those with an interest in our long-run survival it is thus no trivial matter to consider the effects, source, and potential remedy to this growth fetish.
The negative effects of economic growth have again been highlighted in recent months. The ongoing pressure on our scarce environmental resources has lead to a booming price of oil and other natural resources, which is good for the stock market price of BHP but probably not so good for the environment. Our increased demands on space have just last year for instance lead to the intentional burning of Portuguese Eucalypt forests by greedy entrepreneurs. The depletion of many of the ocean fishing grounds (already heavily over-fished) now seems nigh inevitable, as does the ongoing extinction of many associated species, simply because we’re catching more fish than our ocean support systems can endure and few countries dare to openly oppose their own fishing industries. Likewise, the UN 2005 Millennium Ecosystem Assessment tells us we’re about to lose over half of all tropical rainforests in the coming 50 years, mainly due to our increased activity as a species. The same report tells us soil erosion and salination are at the moment continuing unchecked. The increased energy activity that follows economic activity has very likely lead to the Greenhouse effect and is projected to worsen in coming decades. Though the Greenhouse effect may also have benefits on wildlife because of the increased biomass production associated with more CO2 in the air, it’s important to realize that its trajectory is completely unchallenged. Neither Kyoto nor the agreement between the US, China, India, Australia, nor anything else currently on the political agenda, is projected to make much change to the ever increasing emission of greenhouse gasses. Even if we discount the Greenhouse effect as a phenomenon with ambiguous environmental effects though, the environmental disaster we’re hurtling towards in other areas is closely tied to our growth.
There are other negative effects of the growth fetish closer to home: the demand we place upon other society members to be ‘more productive’ stigmatizes the roughly 2 million Australians dependent on the state and apparently unable to keep up with the current levels of productivity demanded; increased work stress associated with the pressure to be productive is partially responsible for the more than 700,000 Australians on disability benefits (the fastest growing category flowing onto DSP is ‘psychological stress’). Families and communities are similarly increasingly caught up in the economic rat race, with less time to spend on social relations.
World social commentators, such as the Dalai Lama or the previous and current pope, view these effects of the growth fetish with bemusement and advocate the widespread adoption of less materialistic oriented lifestyle. Some of these commentators argue it’s not a sin to be unemployed and living off the state; one where individuals are busy with their social relations rather than their bank account; one where governments adopt Gross National Happiness as the be-all and end-all of policy, such as adopted by the mountain state of Bhutan (incidentally, New Zealand official social statistics now indeed keep track of New Zealand’s happiness). Lord Richard Layard’s new book on happiness also takes this line and advocates a kind of ‘prozac nation’ solution to many of our current problems. If only we’d adopt happiness as the goal in stead of growth, these commentators argue, we’d be so much better off.
To be blunt, no major political party in any major country seriously challenges the growth fetish. The Australian Labor Party is as pro-economic growth as the Coalition Party. The 2004 debacle with the voter backlash in Tasmania after Labor adopted a relatively tough pro-tree stance in defiance of the pro-job pro-growth alternative, has probably taught it the hard way that Australian voters too are growth-obsessed. The recent education policy announcement of Kevin Rudd explicitly stated that the objective of better education was to become wealthier and thus firmly married Rudd to the goal of even greater prosperity. The Greens in their folly claimed the 2004 election result to be a success because they won some minor battles for seats, but in reality that election signaled that they had lost the war for the minds of Australian voters with respect to the environment. Indeed, Labor claims it can get Australia to grow even faster than Howard’s government can.
The political situation with respect to growth is exactly the same the world over: from the Chinese communists, to the BJP in India, to the French conservatives, to the Chilean liberals: the promise of higher economic growth is a key election pledge everywhere. Any party seriously advocating that economic growth is undesirable commits political suicide. It is in a sense fascinating that the world over, leaders and voters are completely ignoring their religious and spiritual leaders on the desirability of growth, but there it is. This reality means any serious environmental treaty that would affect growth and that requires global cooperation is dead in the water. This reality also means welfare recipients all over the Western world rightly fear reductions in their benefits.
This growth fetish, which appears such a universal political force, has not just lead to outcomes one may think of as bad. Quite the contrary: many of the most positive developments in the last 50 years have arguably been due to our growth fetish and it is important to see these benefits in order to avoid deluding ourselves that we stand to lose nothing of importance if we’d manage as a species to give up our growth fetish. Take for instance the break-up of the Soviet Union in 1990. This break-up was self-inflicted by the communist hierarchy spearheaded by Gorbachov because they perceived their communist system as failing to deliver what was of real importance to them, i.e. economic growth. It’s thus the growth fetish that in my opinion diffused the capitalist/communist stand-off that so long threatened to destroy us all. More close in time, it is the growth fetish that is the true basis of the power of our ally, general Musharraf of Pakistan: he is able to curtail the Madrasses (religious schools where the Taliban were raised) and the religious ambitions of many in Pakistan on a platform of economic growth. There too, growth can outweigh religion. The promise that his policies hold in terms of economic growth is what has so far politically allowed him to be the West’s ally. The hope of the ‘War on terror’ is similarly that we can get various countries and their populations to join the international economic rat race and thereby dilute the effect of other ambitions they may have. The growth fetish hence to a great extent seems the chief source of tension reduction between nations and the chief reason why the number and severity of wars has been on a clear downward trajectory ever since the second World War. We are increasingly as nations bombarding each other with products in stead of missiles.
Where does this growth fetish come from, one may wonder? It’s certainly not a religious thing, for the world’s major religions don’t appear to have a growth fetish. Neither Hinduism, nor Confusianism, nor Islam, nor Christianity celebrate prosperity. They stop short of advocating poverty but they’re not far off and each of these religions indeed has a version advocating poverty as a means for achieving greater spirituality. The Franciscans are such a group in Christianity, and the late pope actually denounced our obsession with materialism as an evil on an equal footing with fascism and communism! Likewise, humility and simplicity is a virtue in Confucianism. Living simply is also a virtue in Hinduism and Islam. Our growth fetish is thus clearly not a religious dictum and stands apart from it.
One could wrongly surmise that our growth fetish is an obsession solely of some businessmen and high ranking civil servants. Yet happiness data shows this is not the case: populations genuinely on average respond to the economic fortunes of their countries, much more than they as individuals respond to individual incomes. When the Soviet Union became poor, life satisfaction plummeted much more than warranted by the limited importance of income for the happiness of individuals. When Russia began to experience fast growth in the late 1990’s, so did happiness levels recover. The same held for East Germany, and the 2003 study by Di Tela, McCulloch, and Di Tella on European and US data shows the same pattern for those countries: countries moving up the economic ladder indeed get a warm glow in terms of greater happiness levels. Rates of depression are similarly known to go up in great economic slumps, as do rates of suicide. Hence, it’s not just the elite, but the general population that truly values economic growth. Indeed, one could just notice the importance of economic growth during election times as pretty conclusive evidence that growth is important for nearly the entire electorate.
As the Nobel-prize winning author Elias Canetti already argued in 1960, it’s most likely a form of patriotism that underlies our growth fetish: ‘we’ like the idea that ‘our’ country is rich and powerful in the world and ‘we’ feel bad if ‘our’ country has lost standing. This idea is consistent with the happiness data showing how the income of the country as a whole is probably more important than the income of the individual. This idea is also consistent with the observation that the growth fetish is not due to religion, which after all is not nation-specific. It is consistent with the observation that the Soviet Union self-dismantled because its leader felt its country would ‘fall behind’ if the communist system was maintained. It is consistent with the observation that the Chinese communist party has defended it’s decision to abandon pure socialism on the basis of the necessity for the ‘Chinese nation’ to growth. In this regard, recall the words of Deng Xiaoping, the communist leader who initiated economic reform in the 70s, who argued that it didn’t matter whether a cat was black or white as long as it caught mice, with which he arguably meant that the purpose of an economic system was to provide growth to the country.
Our growth fetish is hence quite likely a tribal thing. We identify with our country and take part of our personal self-esteem from the perceived standing of our country in the world. This feeling is worth a lot to us, witnessed by the fact that it is that feeling that is called upon during wars; the tombstones of many soldiers read that they ‘fell for the glory of their country’; hence, the same tribal feeling leading to the growth fetish keeps our country together.
Consider in this light again the plea of environmentalists and certain happiness researchers to abandon economic growth as the be-all and end-all of national policy. It’s like asking a sports team to stop trying to win. It’s like asking families to stop having children. It’s essentially asking countries to stop doing the essential thing a country does, which is to advance patriotic pride by advancing the country’s standing through growth. It’s an idea as dead in the water as any one can think of.
This simple reasoning, which is by and large absent in environmental circles because of its devastating consequences for many of their pet policies, also leads to a simple prescription for those who wish us as a species to abandon the rat-race: one must do away with competing countries if one is to do away with the growth fetish. One must hope for a single country or an agglomeration of countries to take over the world and to establish a single bureaucracy under which all other patriotic feelings are subdued.
Is there any historical evidence to suggest that in the absence of competing countries one would enter a no-growth era? Surprisingly, the answer is yes. China in the late 15th century perceived itself so above the rest of the world that its leaders literally argued there was no need for China to keep growing. Its leaders perceived China to already be the greatest nation in the world and impervious to outsiders. Amazingly, the Chinese authorities then disbanded their international fleets and closed down many enterprises and hit upon a trajectory of no growth in the ensuing 4 centuries. Now, these decisions by the Chinese of course had many more aspects and political intrigue behind them, but they are nevertheless an example of a conscious choice against further expansion. This example is not the only one: Japan too closed itself down in the 17th century, actually regressing militarily and economically, simply because it saw no threat in the outside world or from the inside.
We can hence as a species free ourselves from the growth fetish and history shows us how: some country or agglomeration must gain control over all others to the extent that we no longer feel in competition with other countries. Just like a central tax office forces all to pay for the services we all enjoy, so too would a central world administration most likely curtail the environmental impact of our economic activities for the benefit of all. A true environmentalist should be in favor of world government and indeed should not be too squeamish as to how such a government comes about. An environmentalist who simultaneously wishes to maintain national sovereignty is essentially in denial as to what is needed. This is why the voluntary agreement of Kyoto is so feeble and why the hopes of its proponents that Kyoto is the start of a serious voluntary curtailing of our growth is probably misguided.
We can speculate as to how a world government would come about. Given current technological military proliferation, its hard to envisage a single country actually conquering the rest of the world. No, it is more likely that some common disaster is what is needed for nations to effectively self-dismantle and submit to a world government. Even that is hard to imagine in our own lifetime yet it would seem possible in future centuries. In this light, the environmental disasters we’re experiencing and hurtling towards may at some distant future moment, when the dust of history has settled, be seen as the necessary catalyst for a world government to emerge who could seriously address these issues. What this thought practically means for proponents of environmental measures (including myself) is that we should become warm advocates of increased military power for world organizations and that we should help set up as best as possible the various embryonic structures needed for a future system of world government to function.
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35 Responses to “Why do we have a growth fetish and what is needed to break it?”
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I doubt that there is a clash between economic growth and a clean environment. Sure there is a clash between the growth of some industries (such as coal power) and a clean environment, but more economic growth will not necessary lead to a worse environment. Indeed a strong economy will (a) be able to pay for more expensive but cleaner options (such as renewable power to replace coal) and (b) pay for more research into alternatives (such as clean coal).
Posted on 16-Feb-07 at 2:33 pm | PermalinkThx for the post Paul - lots of interesting content in there even if I disagree with the thrust of the argument!
Your post certainly raises very deep points about what drives us. I realise that the response I’m about to give to it does not address your points at their deepest level, but then the aims of policy are best if they’re kept fairly practical.
It seems to me that the standard economic response to this is to say that you’re misunderstanding correlation with causation. Of course at any given technology if we’re polluting with GDP at $1 trillion we’ll (roughly) double the pollution if GDP is $2 trillion. But this reminds me of a debate I had with Tim Flannery on tele where he was arguing that we’d exceeded Australia’s ‘carrying capacity’. We may have given current technologies, but if we grow faster we can devote any proportion of that growth to better environmental protection.
People could have said that Sydney was overpopulated when it had a few hundred thousand people. It was certainly overpopulated when it was pumping raw sewage into the ocean next to Bondi. But with better technology – and regulation aimed at addressing the environmental problems – growth becomes a friend to the environment.
We should be devoting more of our GDP growth to protecting the environment – no doubt about it. And more as we grow. And we will, and perhaps we won’t do enough of it. But the alternative of low growth – well it’s scary. As I think some of your examples hint at, it robs us of our optimism – a scary thing to do for instance in politics. Things usually turn nasty quickly in politics in the absence of growth.
It seems to me so much more compatible with a kind of Ockham’s razor to aim your concerns at the problem – which is the externalities of growth rather than growth itself. And it’s standard fare in the way economists look at the world – I think it’s superior to the alternatives. Perhaps not superior in a ‘spiritual’ sense – whatever that means, but spiritual leaders have never been much chop at political leadership.
As for world government? Isn’t that a pretty big experiment to run on a pretty flimsy and speculative hope that it will quell the urge to enrich ourselves. I was going to say it’s a sledgehammer to crack a nut, but I suspect the ‘nut’ it’s cracking will turn out to be a whole lot more resilient than a nut. If so your massive experiment is for what?
Posted on 16-Feb-07 at 2:50 pm | PermalinkKen Miles, there is no clash except that growth-based tribalism cannot see a cleaner choice if there is a cheaper choice. When we are able to get rid of spectator sports obsessions (another meaningless tribal activity)(as opposed to playing sport), then we can get rid of the growth fetish. It will be the same technology. Clean tech itself won’t get rid of the growth fetishes preferences.
Posted on 16-Feb-07 at 2:56 pm | PermalinkMeika, the simple solution is to put a price on environmentally negative activities. A carbon tax, which reflects the damage done by carbon dioxide, would be a great start to getting the “growth-based tribalism” side working for you, rather than against you.
Posted on 16-Feb-07 at 3:31 pm | PermalinkWhatever the dangers of growth, Paul, in my view they pale beside those of your proposed solution. The one undoubted virtue I see in your piece is the frank acknowledgement that any such change will neither be welcomed by most of the world’s citizens nor be imposed without force. In your words, “A true environmentalist should be in favor of world government and indeed should not be too squeamish as to how such a government comes about.â€
Setting aside for a moment the underlying premises that in your view make this such a pressing issue, whatever makes you think any such world government would act in the way that you consider so necessary? Are we to be blessed with a new order of philosopher-kings who not only share your view of wisdom but at the same time have the necessary brutality to take and hold power? An unlikely outcome, I would have thought. If it takes power rather than it being voluntarily ceded — and I confess I can’t quite imagine how this could happen — is there anything in mankind’s history that suggests this won’t in turn be fought by multiple insurgencies forever and ever, amen? If, on the other hand, the sort of catastrophe that might sufficiently concentrate people’s minds to peacefully bring about world government should occur (an outcome I once again struggle to imagine), would that not in turn make it entirely unnecessary? The shift in perceptions whose absence you so regret would have occurred and largely voluntary cooperation would then of itself take matters generally in the “right†direction.
I’m afraid I see no in principle difference between this sort of elitist vision and the “dictatorship of the proletariat†so disastrously foisted on Russia by Lenin et al. Because, as you readily acknowledge, its goals would also run directly counter to human nature, as with all such utopian dreams force and more force, corruption and more corruption would I fear be the inevitable outcome.
As for the premises that lead you to this drastic conclusion, they seem to me highly questionable. Catastrophic environmental and climate changes are certainly a possibility, perhaps a probability, even without any anthropogenic component. The world has, after all, suffered through several ice ages just in the last million years, any one of which would have utterly decimated human life as we now know it. Our understanding of the earth’s climate, with its untold and interrelated positive and negative feedback mechanisms, is far from comprehensive. It is, necessarily, a work in progress and obviously a critically important one. Certainly, that we ought to take as many steps as we can to reduce our impact both on land, in the sea and in the air is I think mere commonsense. Even if it turns out our contribution to the current warming trend is not as great as most now believe, or that some other macro factors will in due course overwhelm this trend, this is certainly no reason to throw up our hands and do nothing. Like Ken and Nicholas, however, I think we’d do well not to underestimate our ability to produce solutions as well as problems.
Even with my inclination towards smaller rather than larger government, I see absolutely no reason, either philosophically or practically, why it cannot be part of the role of governments to continually work at establishing and revising limits and guidelines on environmental issues which the markets can then set about meeting in the most efficient fashion. Then at least man’s ingenuity can be harnessed rather than continually fighting it. Imperfect, frustrating, often mired in petty politics and the crassest self-interest as it will likely always be, this process is in my view still by far our best chance of dealing with these challenges. It is always easier, and less destructive, to cut with the grain.
Your view about the engine of the “growth fetish†also seems to me a little unrealistic. Despite the calls by the US administration post 9/11 for its citizens “to go out and buy a SUVâ€, I see little evidence that we are driven to grow and produce wealth for the good of the nation. It is instead, I think, simply one expression of our inherent drive as individuals to better ourselves, to create meaning and security, to fend off thoughts of death and the void. It may not — as the Dalai Lama and every other spiritual leader through the ages would contend — be the most evolved form of expression but we must work with what we have. I don’t see how we can ever go back to some prelapsarian paradise, assuming such ever existed, and the chances of evolving towards less materialistically rooted passions seems to me somewhat better in a wealthy society than a struggling one. Much less a dictatorial one.
At any rate, and more to the point, I don’t see that we have any true choice. To try to forcefully arrest these powerful innate drives within man would in my view bring about a true hell on earth. And even then, I suspect, achieve few of the stated goals.
Posted on 16-Feb-07 at 6:17 pm | PermalinkI also agree with Nicholas, Ken and Ingolf, while also welcoming Paul to Troppo.
I notice that the UN 2005 Millennium Ecosystem Assessment, whose gloomy predictions seem to have triggered Paul’s piece (although they’re not actually as uniformly gloomy as Paul implies), doesn’t recommend solutions remotely like Paul’s “low growth” world government proposal. It recommends a range of measures and is quite optimistic that they would succeed in dealing with the identified problems while still allowing a growing, prosperous international economy. here is a short extract:
Posted on 16-Feb-07 at 6:35 pm | Permalinkthe demand we place upon other society members to be ‘more productive’ stigmatizes the roughly 2 million Australians dependent on the state and apparently unable to keep up with the current levels of productivity demanded; increased work stress associated with the pressure to be productive is partially responsible for the more than 700,000 Australians on disability benefits
This is a piss take, right? You can’t possibly be arguing that people should be prevented from working hard because it makes welfare recipients feel bad?
Posted on 16-Feb-07 at 8:17 pm | PermalinkI can’t believe you’re all taking this post as a serious one. Surely you can see that Paul is having a great time sending up the whole anti-growth Hamiltonian movement? Very effective post in that sense, Paul.
Posted on 16-Feb-07 at 8:55 pm | PermalinkIt’s misconceived I suggest to regard growth as the result of some kind of international economic Olympic Games mentality. Growth is an absolute requirement of a capitalist market economy. Freezing things at any given level of activity and saying “OK no more growth” is simply not an option: the economy would collapse. I suppose it’s an option if an authoritarian government emerged out of the chaos and implemented a Soviet-style controlled economy but I can’t imagine any circumstances in which that would occur as an act of free choice in liberal democracies.
For better or worse we’re stuck with global capitalism as the context in which the human race will respond to global warming. For the reasons that Paul summarises I’m pessimistic about the likely outcome, but I’m also convinced there’s not a hope in hell that an effective institutionalised response can be imposed on the market system.
Posted on 17-Feb-07 at 7:59 am | PermalinkKen Lovell,
Without wishing it for a moment, I can’t see why the economy would collapse if it got no growth. Where’s your evidence for that statement? Japan got next to no growth for a decade - didn’t collapse. Didn’t look like collapsing.
Posted on 17-Feb-07 at 9:33 am | PermalinkNowhere in this debate do I see a distinction between the two components of growth; productivity growth and population growth. All the arguments for growth centre around productivity growth, and no one can argue with that (except some extreme environmentalists on the grounds that the resulting growth in consumption contributes to resource depletion).
But what good comes from population growth?
The adverse impact of growing consumption on global warming, water supplies, peak oil, biodiversity, forest destruction, etc., etc. is, I would have thought, now beyond question. So how do we retain the benefits of growth without the environmental damage? In principle, it is, I believe, to aim for population decline.
The world economy has been growing in recent years at about 4½%, of which population growth accounts for about 1% and productivity growth about 3½%. To prevent further environmental damage (catastrophy?) world economic growth should be reduced to zero or thereabouts. We don’t want to discourage healthy productivity growth, (and even if we did it would be nigh impossible in a world economy geared to high savings ratios and self-sustaining growth). So world population growth has to be reduced from plus 1% to minus 3½%. A tall order, but that’s where the debate should be.
Posted on 17-Feb-07 at 8:45 pm | PermalinkI thought Paul just argued that.
Personally, we have two children and we are definitely not stopping there. N Gruen is exactly right on this issue (and Julian Simon and Bjorn Lomborg).
But of everyone, KP’s favourite blogger put it best, in a post beautifully titled ‘Begin the Cull‘:
Posted on 18-Feb-07 at 7:28 am | PermalinkNicholas I’m responding to a post that says in part ’some country or agglomeration must gain control over all others to the extent that we no longer feel in competition with other countries.’ The implication is that once we all felt ourselves to be citizens of one world the urge to grow wealthier would disappear. Not wanting to write a 5,000 word critique of this proposition I was perhaps a little simplistic.
Maybe I should have said ‘the reasonable expectation of growth’ is an absolute requirement of a capitalist economy. Owners of capital look for opportunities to make it grow. That’s what motivates them. Remove that possibility and you create a zero sum economy. Any competitive activity would be directed at changing existing distributional arrangements because the creation of additional wealth would no longer be possible. We would be in a literally unprecedented situation where the old assumptions underpinning models of the economy no longer held good. A whole new range of institutions would have to evolve along with a new model of the role of the State.
I’m unable to imagine how this could be done as an act of deliberate policy, by means of any existing political arrangement. I can fuzzily envisage it happening as a response to traumatic events, but only after a prolonged period of chaos and hardship.
Posted on 18-Feb-07 at 12:43 pm | PermalinkThis post raises too many issues at once! I’m loathe to contribute another essay-length comment, but I think these points, at very least, need to be made:
1. As far as preserving the environment is concerned, what matters is that technologies are sustainable, not whether there is growth or not. If a society is using technologies that are not environmentally sustainable, then it will come unstuck whether it is growing or not, though of course the faster it grows the sooner it will come unstuck. On the other hand, an economy based on renewable energy and recycling could in principle keep growing.
2. It might be helpful as you refine your position to consider that GDP growth is not the same thing as consumption growth. An episode of GDP growth right now would be a very good thing if it happened to reflect a burst of investment in sustainable technologies, as Nicholas pointed out.
3. Like a couple of other commmenters, I doubt that competition at the national level is the motive for growth. Per capita income growth in advanced societies is largely a consequence of technical innovation, which is the outcome of a pretty chaotic process of engineers, entrepreneurs and managers seeking fame and fortune. I certainly wouldn’t want to any government policies, national or international, to be directed at putting an end to that.
4. Nonetheless, like you, and unlike most of the people who populate this blog, I take the happiness issue very seriously. Beyond a certain point, per capita GDP doesn’t make people happier in the long run, and that’s because their main motivation is to outdo the Joneses. They would be much better off using their higher productivity to decrease their working hours and concentrate on things that have a far greater potential to raise their long term happiness than material consumption, like cultivating friendships and learning the violin.
Posted on 18-Feb-07 at 9:23 pm | PermalinkJames, on your point four, I completely agree. And I’d be a little surprised if many — or perhaps even most — others here also didn’t.
The only question at issue, to my mind, is whether people be allowed to reach that conclusion themselves or have it forced upon them. Various forms of encouragement, education and example might of course all be useful in hastening the process.
Posted on 19-Feb-07 at 8:46 am | PermalinkI basically agree with most of the sentiments of everyone above. Like Patrick, I doubt the contention from the footprint literature that we can ‘only have’ about 8 million Australians and that in the long run the rest has somehow got to go. I too dont think there’s overly much to really worry about in Australia in the coming decades in terms of the environment. Although Ken and I differ in details (I DO think our ‘capitalist system’ is ultimately sustained by an Olympic Games mentality: that international rivalry prevents the state bureaucracy from driving the entrepreneurs into the ground by means of overregulation) we seem in remarkable agreement about the impossibility of having a liberal national democracy without growth. I agree with all the commentators who said that voluntarily dismantling nation states wont happen and that politics without growth is a very scary place indeed. And I believe, with Nick, Ken, and James that the most difficult link in the argument is about the possibility of having indefinite growth and a sustained environment.
Just to put it in context, the argument contained 4 steps:
1. The environment is put under increasing strain with more wealth.
2. The desire to have more wealth is an incredibly strong force within countries, overpowering environmental concerns and even religion.
3. Any environmental plan that requires joint coordination by free states involving serious impediments to growth will be subject to free riding and will fail.
4. The desire for growth comes out of rivalry between countries (in a psychological sense) and hence can only be gotten rid of if nation states are effectively dismantled.
I agree with Nick and those following his line that the weakest link is step 1. Why couldnt we have both growth and a sustained environment and simply discourage the effects of growth we dont like (i.e. taxing externalities)? The problem with the belief in the possibility of sustainable growth is that it is not honest about what people really want in terms of more wealth: becoming wealthier to many people means being able to travel more; it means having bigger houses and bigger cars; it means to consume food that takes more effort, space, and natural resources to make (i.e. meat in stead of plants); it means to have more appliances that use resources to take over more chores in the home, at work, and in travels; etc. I have stopped believing that the whole planet can have all that we here in Australia take for granted without a lot more strain on the environment. I for instance ask myself how we’re going to accommodate the wish of 2 billion Chinese and Indians who aspire to travel the world by airoplane, and the only answer I can come up with is ‘by having more airoplanes that take up more fuel, more runways, more everything’. Even if you tax them, they are not going to give up on that wish and their phenomenal economic growth is going to allow them to dominate world air travel in no less than 20 years (China apparently just ordered an enormous consignment of Russian planes). I do not see how we can be more wealthy in the sense that real people aspire to be wealthy without a lot more strain on the environment. However, I hope to be proven wrong and agree with Nick that ‘living with the problem’ is what we’re going to do as a country into the foreseable future.
Posted on 19-Feb-07 at 9:56 am | PermalinkPaul, I share your concerns, but you have not addressed the population issue.
Nicholas gives the example of how economic growth allowed Sydney’s sewage problem to be solved. But this was really an argument for productivity growth (resulting from investment in technology, etc.). Population growth didn’t solve the problem; it caused the problem in the first place, and actually impedes solutions because it diverts scarce investment resources away from capital deepening (e.g. research) to capital widening (e.g. houses).
Here’s another example. Melbourne now has grade 3 water restrictions. But if Melbourne’s population had been held at one million, or even two million, we wouldn’t need restrictions at all.
Ken L., wealth accumulation is inherent in the economic process by which productivity growth occurs, based on a given ratio of savings to GDP, and those savings converted to capital wealth by investment. Population growth, on the other hand, has a wealth diluting effect, in much the same way that large families have an inherited-wealth diluting effect. (Wealth being public wealth as well as private wealth, and natural wealth as well as accumulated capital.)
James, environmental damage can be caused by consumption of capital goods as well as consumer goods. Even a research officer may work in an air conditioned building and consume lots of paper.
If all natural resources were renewable sure there would be fewer environmental problems, but many are not renewable; they are destroyed forever by human settlement.
I was taken by your example of the violin. Some of us find happiness sitting under a large shady tree listening to the birds without being drowned out by traffic noise. But those opportunities are diminished by the destructive forces of urban population growth.
Ken M., taxing environmental externalities is not simple, as you say. Market externalities are complex in theory and difficult to identify, measure and internalise in practice (whether it be by taxes or quantitative restrictions). Furthermore, internalisation merely reallocates resources; it doesn’t recover depleted resources.
Patrick, think carefully about the sort of life your 2+ children and their children and grand children will inherit in 50 years time, or 10 years time if the latest prediction that global warming could increase the frequency and severity of droughts proves to be correct (a terrifying prospect).
“Flannery has two children. Will he allow them to live?†This is typical of the emotional, anti-intellectual nonsense that clutters up public debate. It is similar to the way politicians fob off difficult questions they can’t answer by diverting discussion to something trivial and irrelevant.
Posted on 19-Feb-07 at 9:36 pm | PermalinkIngolf
It seems that one man’s moral suasion is another’s intolerable coercion. I might post something on this question in the near future rather than take it further here.
Robert
I confess to having ignored population growth, which is why I couched my arguments in terms of productivity and per capita output. Once you bring population in, then everything depends on how many people we’re willing to share this continent with. Even if our own fertility rate is below 2.0, there’s still a strong moral argument to accept millions more of the world’s destitute and desperate. But while I might be willing, saint that I am, to accept a 50% cut in my consumption, I don’t necessarily have a right to demand that my fellow citizens do the same. So I put it in the too-hard basket. But I agree that it’s a big variable in the equation.
Posted on 19-Feb-07 at 10:44 pm | PermalinkAgreed, James. I guess it’s questionable how well moral suasion really works anyway. Still, the ultimate determinant is surely whether we can actually choose to say no — or yes as the case may be — or whether the full weight of the state is brought to bear on our choice.
Posted on 19-Feb-07 at 10:56 pm | PermalinkJames,
Count me amongst the people who take happiness seriously, though I prefer ‘utility’ as it summons up a couple of extra hundred years of serious thinking. I think it’s a bit of a pity that the focus on this metaphysical entity ‘utility’ ever got lost. Marshall and Pigou made a lot of commonsense saying the kinds of things that Layard’s now saying using the idea of happiness.
Posted on 20-Feb-07 at 12:52 am | PermalinkRobert, I omitted a discussion of population growth for the very reason you cite: in recent times and in the medium term future, most of the growth in consumption has come from growth per capita. Now I do worry about productivity growth because what does that productivity basically mean? It means people can with less time combine more of the other production factors (including the environment) into new goods, i.e. it to a large extent means greater pressure on the environment.
As to the long-run, the UN population projections (which are shared by Angus Maddison and others) are for the world population to increase to about 10 billion by the year 2050 and thereafter to decrease slowly, mimickick what’s already happening in various OECD countries. Many economists believe the main reason for falling fertility levels in the West is that kids cost so much. You dont get wages out of them and their schooling lasts long and is costly. That reality is likely to start to hold for many other populations too, implying similar pressures there (which is what underlies the UN projected decline).
In order to achieve zero net growth, things are not as bad as you suggest. its true that in recent times world growth percapita has been around 3.5%, but that is most likely a catch-up phenomenon. The long-run growth figure for Europe and the US is closer to 1.5% and hence a 1.5% decline in population would suffice. That’s still a lot.
There are no projections for the very long run in terms of population so all we can do is make an educated guess. Mine would be that the world population will hit a more or less stable plateau. The reason is simple: I think it likely that in the long run countries will become sufficiently worried about declining populations that they will start to compensate parents for having kids to the degree that populations are kept stable.
Hence in the long run I think it will be about productivity growth, not population growth.
Posted on 20-Feb-07 at 9:20 am | PermalinkPaul, the 3½% growth rate in world GDP per capita experienced in recent years may well be a catch-up, but it may also reflect the emergence of India and China as growth economies. And how many other third-world countries will join the growth bandwagon in future?
I agree the trend of population growth is downward, but 10 billion by 2050 is still a very worrying figure. And if some countries are concerned at declining populations and take measures to arrest it, how can that help the environment?
You are a brave man to question the desirability of productivity growth – like Daniel in the lion’s den? Even if there was community acceptance of the need for a decline in the growth rate of productivity and per capita incomes, it would be very difficult to achieve in economies locked into self-sustaining growth. Savings ratios would have to decline appreciably, although I believe Australia’s overall savings ratio has declined from about 25% gross (and 9% net) four decades ago to about 19% gross (and 3% net) now. So maybe we are nearly there!
Posted on 20-Feb-07 at 12:41 pm | PermalinkSetting aside the desirability of restricting GDP growth, it seems to me productivity is being seriously mischaracterised in this discussion. For a given level of production, higher productivity means achieving that goal with less inputs. Not only labour but also materials and energy. I fail to see how this in itself can be a bad thing. The question of what is to be done with the labour, materials and energy thereby freed is of course another matter entirely.
Posted on 20-Feb-07 at 2:15 pm | PermalinkHi Ingolf,
Posted on 20-Feb-07 at 2:27 pm | Permalinkthe interpretation of productivity growth is a matter of perspective. If you see technological progress as labour-enhancing (such as in the Swan-Solow model) then productivity growth is the same as saying you can use up more capital (which would include environmental capital) in an hour than you previously could at the same wage as before. Now of course, one could spend this extra productivity by increasing leisure time and thus keeping total output constant. That wont happen though if relative concerns are important. Its tought to explain leisure choices without such relative concerns. Ask yourself for instance why the average number of hours worked in the formal economy per person of working age has remained roughly constant since the 60s in this country, if not because of the fact that neighbours are locked in a race to keep up with each other.
Hi Paul,
Agreed, although I might quibble with the last characterisation. Still, that’s of no matter. No, my point was simply that productivity in and of itself was a good thing. As I said, what’s done with the labour, materials and energy thereby freed at a given level of production is a separate issue.
Posted on 20-Feb-07 at 2:38 pm | PermalinkPaul,
While I agree with you that the ‘arms race’ in earnings IS a driver of the phenomenon - and thus in some sense socially irrational, you do seem rather locked into the neoclassical concept of work as disutility. People do like work. So another thesis (which I think should also be considered seriously as I’m sure it’s part of the answer - yet not one you even mention) is that people get satisfaction from their work and that formula made famous by the 8 hour day - eight hours for sleep, work and play is about right. If there’s no strong reason to reduce our workload because our life is roughly in balance - we don’t.
It is for me. I suspect it is for you too. You’re not in there at work all day thinking of the money. If you were it’s unlikely you’d be much good at what you do.
Which reminds me of another point. One of the reasons you do what you do (forgive my presumption and I’m happy to retract) is the glory. You like to be thought of as smart and that’s also smart in comparison with others. Now that might be irrational for you (in some theoretical sense I’m not sure I can get my head around as it would require me to think of an ideal you who was actually not you but different) but it is (we’re all hoping) socially beneficial. Indeed, it’s a positive sum game. You might be a smidgeon less happy than your truly rational self, but the additional intellectual output you manage is worth more than your marginal disutility.
There - get out of that!
Posted on 20-Feb-07 at 2:46 pm | PermalinkHi Nick,
I fully agree with every line of your argument. Standard economic arguments apply: science is no different from other professions in that competition between self-motivated (and I would say extremely vain) individuals leads to higher effort of each concerned, hopefully to the benefit of society as a whole. So what? Did you really expect scientists to be saints and would you trust a saint?
Posted on 20-Feb-07 at 3:02 pm | PermalinkAs to work-is-joyful, I also agree that’s true for many, which makes it even harder to envisage productivity growth as leading to something else than greater use of environmental production factors. Your observation just strengthens the case that it will be tough to give up growth.
Well, yes, but I don’t want to give up growth - can’t see any point in it. I want to address the external costs of growth. I regard growth itself as very healthy. Human even!
Posted on 20-Feb-07 at 3:18 pm | PermalinkAlso I think there is quite a big difference between your output and the output of lots of other paid work. There are strong external spillovers from your work - because you release your intellectual property for all to use. Most people don’t do that - they build houses, write mortgages, clean dunnies whatever. If they work harder than is rationally optimal for them, there’s likely to be a social loss corresponding to their disutility. In your own case I’m suggesting that your disutility if that it is is nevertheless outweighed by external benefits. (Though it’s all highly uncertain).
And this is different again from the zero sum game of (for instance) house location where one person’s meat is another’s poison and all could benefit from calling a halt to the arms race.
Posted on 20-Feb-07 at 3:26 pm | PermalinkIngolf, “What is to be done with the labour, materials, etc. is a separate issue entirely”. No, it’s not a separate issue. It’s all part of the growth process. Governments committed to full employment will ensure that those resources are fully employed, and so they will be employed producing additional goods and services. It’s the environmental damage created by this additional production that Paul is concerned about.
Posted on 20-Feb-07 at 3:35 pm | PermalinkRobert, you seem to be ignoring the qualifier “in and of itself”. I was simply clarifying one narrow aspect of the broader subject of growth and environmental impact. Namely that higher productivity enables a given standard of living to be attained with less environmental effect.
I wasn’t arguing about whether various imperatives may in turn ensure that the resulting savings are “invested” in yet higher standards of living.
Posted on 20-Feb-07 at 7:40 pm | PermalinkIngolf, so what conclusions do you come to regarding the net environmental impact of productivity growth, taking into account the additional output as well as environmental savings on the previous output? This is the billion dollar question!
Posted on 20-Feb-07 at 8:41 pm | PermalinkIndeed, Robert, if not more. So long as the aspirations of most lean towards material betterment, I don’t think there’s much doubt the net impact will be negative.
Still, should the current moderate focus on cleaner technologies, conservation, sustainability and greater efficiency grow, I could imagine the possibility of economic growth combined with reduced environmental impact so I don’t think the relationship need be entirely linear. Particularly not within the more developed nations.
Posted on 21-Feb-07 at 12:35 am | Permalink[...] Paul Frijters’ inaugural post last week raised several interlocking issues on the theme of growth fetish. I’d like to revisit one of them, namely the contribution of income to happiness. The timing is good, because one of our honours students is doing a dissertation on the topic. He and I are both sympathetic to the thesis outlined in Happiness: Lessons from a New Science by Richard Layard. [...]
Posted on 21-Feb-07 at 11:24 pm | Permalink[...] an aside… Dr Paul does have a particuarly good post on the “growth [...]
Posted on 22-Feb-07 at 2:05 am | Permalink