The World Economic Forum held its annual meeting in Davos, Switzerland last month. The official theme was "Resilient Dynamism," a catchphrase that makes about as much sense as the futureless economic policies trotted out at the meeting. At least the attendees had something to ponder at cocktail hour. The mission of the forum, on paper at least, is "improving the state of the world." And there is clear room for improvement: trillions of dollars of public debt, billions of people living in poverty, escalating unemployment, and a distinct possibility of runaway climate change.
The popular solution to these problems is sustained economic growth. In fact, the first item of the Davos meeting's global agenda was "how to get the global economy back on to a path of stable growth and higher employment" The thinking is that if we could just get people to produce and consume more stuff, then we could also pay off the debt, create jobs, eradicate poverty, and maybe even have some money left over to clean up the environment.
It's tempting to believe this economic fairy tale. But if growth is the cure to all of our ills, why are we in such a bind after sixty years of it? Even though the U.S. economy has more than tripled in size since 1950, surveys indicate that people have not become any happier. Inequality has risen sharply in recent years, and jobs are far from secure. At the same time, increased economic activity has led to greater resource use, dangerous levels of carbon dioxide in the atmosphere, and declining biodiversity. There is now strong evidence that economic growth has become uneconomic in the sense that it costs more than it's worth.
Maybe it's time to consider a new strategy—an economy of enough. Suppose that instead of chasing after more stuff, more jobs, more consumption, and more income, we aimed for enough stuff, enough jobs, enough consumption, and enough income.
To build a successful economy of enough, we would first need to eliminate the "growth imperative"—factors that make the economy reliant on growth. These include reliance on inappropriate measures of progress, creation of debt-based money, and the use of aggregate growth as a tool (albeit a blunt one) for generating jobs. With key policy changes, it is possible to dismantle the growth imperative and build an economy that works for people and the planet.
Let's start with measures of progress. Our main economic indicator, GDP, is a good measure of economic activity—of money changing hands—but a poor measure of social welfare. It lumps together desirable expenditures (food, entertainment, and investment in education) with expenditures that we'd rather avoid (war, pollution, and family breakdown). In the language of economics, GDP does not distinguish between costs and benefits, but counts all economic activity as "progress."
Instead of GDP, we need indicators that measure the things that matter to people, such as health, happiness, and meaningful employment. We also need indicators that measure what matters to the planet, such as material use and carbon emissions. In fact, we already have these indicators; the problem is that we largely ignore them, because we are so fixated on GDP. If the goal of society could be changed from increasing GDP to improving human well-being and preventing long-term environmental damage, then many proposals currently seen as "impossible" would suddenly become possible.
What about jobs? If we forgot about GDP, would the economy spiral into recession? The evidence for a relationship between economic growth and job creation is much weaker than you might expect and varies remarkably between countries. In the U.S., for example, a 3 percent increase in GDP tends to be accompanied by a 1 percent fall in unemployment. In France, the same amount of GDP growth reduces unemployment by about half a percent. In Japan, there is no relationship whatsoever. Clearly it is possible to break the connection between economic growth and unemployment. We just need the right economic policies.
If the goal of society could be changed from increasing GDP to improving human well-being and preventing long-term environmental damage, then many proposals currently seen as "impossible" would suddenly become possible.
One of these policies is work-time reduction. Over time, we have become more efficient at producing goods and services, such that it now takes us less time to produce the same amount of stuff as it did a few decades ago. But instead of using the benefits of technological progress to reduce working time, we have mainly used them to produce and sell more stuff. This may work in an economy where the goal is more (i.e., continuous growth), but not in one where the goal is enough. What we can do instead is use the benefits of technological progress to gradually shorten the working day, week, year, and career. Besides increasing leisure time, this would help keep people employed by distributing available work more equally.
Finally, there's the financial system. Most people don't realize it, but nearly all of our money is created by private banks. Banks are able to create money because they can issue loans far in excess of their deposits. This debt-based monetary system drives three things: (1) economic growth, as the need to pay back an ever-increasing amount of debt requires an ever-increasing amount of economic activity, (2) inflation, as the money supply tends to grow faster than the amount of real wealth that's available in the economy, and (3) instability, because if the banks stop lending, the whole house of cards collapses. If we want to take a stab at the heart of the growth imperative, and also prevent future financial crises, the answer is simple: stop banks from creating money out of thin air, and transfer this power to a public authority.
It's hard to believe that many folks in Davos (or anywhere else, for that matter) came away with a clear understanding of what "Resilient Dynamism" means. But one thing is certain: an economy founded on perpetual growth has no shot at being resilient. Maybe we could classify such an economy as dynamic, since it will continue to displace people and communities and erode the life-support systems of the planet. While the economic elites interpret "Resilient Dynamism" to fit their agenda, perhaps the rest of us should employ some plain language and let them know that enough is enough.