Economic Growth Has Failed Us. What's the Alternative?

Economic growth is supposed to deliver
prosperity. Higher incomes should mean better choices, richer lives, an
improved quality of life for us all. That at least is the conventional
wisdom. But things haven't always turned out that way.

Growth
has delivered its benefits, at best, unequally. A fifth of the world's
population earns just 2 per cent of global income. Inequality is higher
in the OECD nations than it was 20 years ago. Far from improving the
lives of 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 growth.
As the economy expands, so do its ecological impacts. In the last
quarter of a century an estimated 60 per cent of the world's ecosystems
have been degraded. Global carbon emissions have risen by 40 per cent
since 1990. Significant scarcity in key resources - such as oil - may
be less than a decade away.

On the other hand, when growth
stalls, as it has done over the past year, things go quickly from bad
to worse. Firms go out of business, people lose their jobs and a
government that fails to respond appropriately will soon find itself
out of office. Dynamics are vital here. Continuous improvements in
technology mean that fewer people are needed to produce the same goods
from one year to the next. So if output doesn't expand, there is a
downward pressure on employment and a spiral of recession looms. Growth
is necessary within this system just to prevent collapse.

In
short we find ourselves locked between the horns of an uncomfortable
and deep-seated dilemma: growth may be unsustainable, but 'de-growth' -
a contraction in economic output - appears to be unstable. Questioning
growth in these circumstances is deemed to be the act of lunatics,
fanatics or idealists.

Business as Unusual

The prevailing wisdom
calls instead for a 'decoupling' of economic activity from material
throughput. Since efficiency is one of the things that modern
capitalist economies are good at, decoupling has a clear appeal as a
solution to the dilemma of growth. And at first sight, this logic fits
the evidence: global carbon intensity fell almost 25 per cent in the
last couple of decades, for instance.

But efficiency
improvements are continually offset by increases in scale. Global
carbon emissions rose by 40 per cent even as the carbon intensity fell.
We need to be decoupling much much faster. In a world of nine billion
people, all aspiring to ever-increasing western incomes, carbon
intensities would have to fall by over 11 per cent per year to
stabilise the climate, 16 times faster than they have done since 1990.
By 2050, the global carbon intensity would need to be only 6 grams per
dollar of output, 130 times lower than it is today. Rethinking basic assumptions

In
this context, simplistic assumptions about capitalism's propensity for
efficiency are nothing short of delusional. A much deeper
re-examination is called for. A different kind of economics is needed.
The balance between consumption and investment, the split between the
public and the private sector spending, the nature of productivity
improvements, the conditions of profitability: all of these are likely
to be up for re-negotiation in the new economy.

The role of
investment is crucial. Sustainability demands enhanced investment in
sustainable technologies and infrastructures, in ecological maintenance
and protection. These investments are different in kind from
conventional investments in labour productivity and they won't
necessarily deliver continual consumption growth. A different concept
of economic resilience is going to be needed. And the fetishisation of
labour productivity will have to be renounced.

Fixing the
economy is only part of the problem. Addressing the social logic of
consumerism is also vital. This task is far from simple - mainly
because of the way in which material goods are so deeply implicated in
the fabric of our lives. But change is essential. And some mandate for
that change already exists. A latent disaffection with consumerism and
rising concern over the 'social recession' have prompted grassroots
initiatives to seek out 'alternative hedonisms' - sources of identity,
creativity and meaning that lie outside the realm of the market.

For
at the end of the day, prosperity goes beyond material pleasures. It
transcends material concerns. It resides in the health and happiness of
our families. It is present in the strength of our relationships and
our trust in the community. It is evidenced by our satisfaction at work
and our sense of shared meaning and purpose. It hangs on our potential
to participate fully in the life of society.

Prosperity
consists in our ability to flourish as human beings - within the
ecological limits of a finite planet. The challenge for our society is
to create the conditions under which this is possible. It is the most
urgent task of our times.