Prosperity Without Growth

At the end of March, just before the G20, the Sustainable Development Commission released a provocatively titled report: “Prosperity Without Growth“. I didn’t actually hear about it when it first came out but only stumbled across it later via an email newsletter.

At first I thought, ‘Well, I must not have read the paper properly that day.’ But a retrospective search turns up only two Guardian articles (one news, one opinion), a cranky opinion piece in the Times, and nothing in the Telegraph, Independent, or Economist.

This is disappointing. The report asks serious questions about how our society seeks to improve the lives of its citizens and it’s been almost entirely ignored by the mainstream media. And while the blogs do take up some of the slack, the debate isn’t always as rigorous as one might hope.

Having now read some comments from around the web, and re-examined the original report, I think part of this apathy is because of the definitional baggage and misunderstanding that surrounds the concept of economic growth. Let me explain what I mean.

According to the SDC, the report is an examination of the “connections and conflicts between sustainability, growth, and wellbeing.” This seems straight-forward and as expected, there is lots of interesting material in there about resource consumption, the sociology of consumption, debt levels and so on. But the problem is that the term “economic growth” isn’t clearly defined anywhere and so people tend to get carried away with what they believe economic growth to be, rather than properly digesting the report’s message.

So let’s start afresh and tread carefully. The Google consensus defines economic growth in two parts: 1) an increasing production of goods and services in an economy 2) as measured by real GDP.

At first glance, Prosperity Without Growth appears to focus primarily on part 1, the consequences of production and consumption processes. In this context, growth clearly relates to issues such as increasing absolute resource consumption, the feedbacks between improvements in labour productivity, consumption and employment levels, the links between the continual production and consumption of novelty and so on. But the second part of the definition – that is, growth as measured by changes in real GDP – is covered in a less obvious way. As far as I can tell, no where does the report say that the growing value of economic output is a bad thing. The problem is the pursuit of growth in GDP, a measure which fails to account sufficiently for the finite nature of natural resources (apart from market scarcity effects) and the fact that increased GDP does not necessarily mean happier healthier people.

So, for example, when blog commenters say that failing to pursue GDP growth will deny those in poverty a chance to improve their condition, they’re assuming that GDP is a good measure of well-being. It’s at best an imperfect measure and in fact, we could raise the GDP per capita in our hypothetical poor society in all sorts of ways that don’t actually improve the well-being of those we’re trying to help. We could gain this new “wealth” by depleting our natural capital stocks (e.g. by over-harvesting forests, fisheries) or by concentrating any societal income gains with the already well-off.

As a commenter in this forum suggested, perhaps the best way to understand these issues is via this thought experiment from 1966: the idea of the spaceman (resource constrained) versus the cowboy (unconstrained) economy.

In the cowboy economy, consumption is regarded as a good thing and production likewise; and the success of the economy is measured by the amount of the throughput from the “factors of production”…The gross national product is a rough measure of this total throughput…

By contrast, in the spaceman economy, throughput is by no means a desideratum, and is indeed to be regarded as something to be minimized rather than maximized. The essential measure of the success of the economy is not production and consumption at all, but the nature, extent, quality, and complexity of the total capital stock, including in this the state of the human bodies and minds included in the system. In the spaceman economy, what we are primarily concerned with is stock maintenance.

What I would argue is that Prosperity Without Growth is concerned with the physical, social and economic characteristics of the spaceman economy. It is not saying that societies should stop trying to increase their “wealth”; it is saying, in part, that how we measure wealth – or rather prosperity – is inseparable from the way we go about achieving our goals. Indeed measurement issues are explicitly addressed in the report’s policy recommendations: #4, to improve macro-economic accounting and re-assess the use of GDP and #7, to develop a new measure for a more widely defined notion of prosperity. (Although in retrospect, perhaps this could have been highlighted more clearly. The SDC’s info page on the report doesn’t mention these definitional issues at all and I think fails to distinguish why the report is different from all the other world-is-going-to-hell-in-a-handbasket stuff that’s already out there.)

Sadly, it seems that these shades of gray are too subtle for many in both traditional and web medias to grasp. And if these concepts are not brought to the attention of the wider public and given the debate they deserve, it seems unlikely that the political system will respond and use the present economic crisis to re-assess what it means for us to be prosperous.