Ratio Juris: Foreswearing the bad habits of capitalist economic growth

“GDP, the yardstick of economic success, is choking us and the planet”

By David Pilling, for the Los Angeles Times, February 25, 2018

“There are 7.6 billion people alive today annually churning out goods and services worth around $75 trillion. By the end of the century there will be roughly 11 billion people. If each of them achieved a U.S. standard of living and if the U.S. economy keeps growing at about 3%, the global economy would need to expand nearly 100 times. Chen would have to work overtime. And the world would choke in trash, its air becoming more toxic and its forests more depleted.

It’s not Malthusian to wonder how much more the planet can take. Walter Berglund, the quirky hero of Jonathan Franzen’s novel Freedom, says that only economists believe endless growth is optimal. In biology, it is called cancer.

Part of the problem is how we measure growth. Gross domestic product, our principal measure of economic well-being, is a child of the manufacturing age. It conflates progress with production and consumption. It is out of date. Invented in the U.S. in the 1930s, it struggles to make sense of modern economies in which the quality of services and the pace of technological change are paramount.

In terms of GDP, there is no ‘bad’ production …. If a factory produces chemicals, steel, plastics or electronics, everything it makes contributes to GDP. And any pollution that it pours into the rivers or spews into the air is — from a statistical standpoint — invisible. But the negative side of production is not, as we might imagine, somehow subtracted. Quite the reverse: Money subsequently spent on cleaning up the mess, or on treating cancers associated with toxins, also counts towards GDP. [….]

Can we not simply factor the hidden cost to nature into all our products and then call a halt to growth, as some environmentalists advocate? My view is that those who advocate an end to growth on environmental grounds are deluding themselves.

First, people in wealthy countries have no moral authority to tell people in poor ones that, because rich nations have messed up the world, poor ones must pay the cost by staying poor. That simply doesn’t wash. Second, if countries want to catch up, so do individuals. Everywhere, the less-well-off want to close the gap with the wealthy. The rich, for their part, want to preserve their privilege by becoming richer still. Government policies may temper this rat race. But human nature is a powerful force that is likely to keep the perpetual-growth wheel spinning. Doomsayers may claim that this condemns humans to lunge blindly over the precipice, destroying nature and themselves in the process. They may be right. Yet there is just a chance we can have it both ways: keep growing and preserve the resources that make growth possible. But only if we redefine what growth means.” [emphasis added] The full article is here.

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Critiques of the GDP index of economic growth have been around for at least 40 years, so this is nothing new, although as global economic crises accelerate, perhaps mainstream economists and privileged policy makers will wake up from their deep sleep. After George Land, there are three principle forms of growth: accretive, replicative, and mutual, with conventional forms of economic growth being essentially accretive. As Raghavan Iyer (one of my former teachers) wrote in 1979, the predominant form of socio-economic growth

“… cannot continue indefinitely. Even more important, such growth is inequitably distributed around the globe, proliferating like a cancer in the industrialized world, while condemning billions elsewhere to famines and poverty. [….] The real question, as in post-Paretian formulations of social justice, concerns the elevation of the bottom line of the impoverished. Growth per se is less the cause of the current crisis than is its anarchic nature. Unlike living Nature, which effortlessly exhibits orderly organic growth, we have no general scheme for harmonious development of the world, even though mankind’s salvation depends on the possibility of just such a global plan. This is not a matter of merely drawing up a world-wide economic program but rather of finding a pattern of development which respects the regional diversity of the planet, a global system of interdependent components, each of which would contribute its economic, cultural, and natural resources to the whole. The pluralistic character of the earth, its plasticity of function, must be preserved. We cannot be theoretically committed to any monistic conception of ontological scarcity or survival for its own sake. [….] Political, social, and cultural changes are also relevant to any new global organization and critically affect the possibility of fundamental economic reform as well as being affected by it.”—From the chapter, “Global Pointers,” in Raghavan Iyer, Parapolitics: Toward the City of Man (Oxford University Press, 1979): 242-245. (This book is dedicated to ‘heroic pioneers and humble exemplars everywhere.’)

Suggested alternatives for measuring and assessing different sorts of “growth” (classified as both ‘replicative’ and ‘mutual’) which go beyond the presuppositions and assumptions of neoclassical and welfare economics are found, for example, in these two titles:

Brighouse, Harry and Ingrid Robeyns, eds. Measuring Justice: Primary Goods and Capabilities (Cambridge University Press, 2010).
Ghosh, B.N. Beyond Gandhian Economics: Towards a Creative Deconstruction (SAGE Publications, 2012).
Nussbaum, Martha C. Creating Capabilities: The Human Development Approach (Belknap Press of Harvard University Press, 2011)
Nussbaum, Martha C. and Amartya Sen, eds. The Quality of Life (United Nations University and Oxford University Press, 1993).