Growth is for babies: the limits of decoupling on a finite planet

Once we acknowledge that we are living on a sphere with a finite surface, we are faced with a conundrum for traditional economics based on the desirability of economic growth. Historically, economic growth has been associated with all kinds of wonderful things: greater longevity, lower infant mortality, better nutrition, wider horizons, political stability. Some go further and claim that, historically, growing economies have generally correlated with more open, more socially mobile and more democratic societies, while economic decline has been accompanied more often than not by repression and intolerance. Certainly, growth enables questions of distributive justice to be deferred. If everyone is getting better off, then inequalities in the rate of improvement can be ignored.

Yet if we wish economic activity to keep growing, there are planetary limits of just how much stuff we can process and consume. Smart economists quickly point out that an economy is not limited to material consumption. It is possible, they suggest, to decouple economic growth from material consumption such that GDP can still rise while material consumption falls or is stable. Such a goal is the economic holy grail, an absolute necessity if we wish ongoing economic growth. This is absolute decoupling. There is a more modest half-way house, relative decoupling, in which growth in material consumption is slower than GDP growth. The graph below illustrates the point. The x-axis is GDP growth and the y-axis is growth in material consumption. Each dot represents the changes experienced by a nation between 1980 and 2008. Light blue means GDP growth while material consumption declined. Purple means GDP grew faster than material consumption. Yellow means Material consumption grew faster than GDP.
The source is a fascinating SERI report filled with more figures and diagrams than you can poke a stick at. Thanks to Jeremy for the graph and for pointing out the report. Both the report and Jeremy's reflections are worth reading.

Most economies are in relative decoupling. But as long as material consumption continues to rise, planetary limits will inevitably kick in sooner or later. Even those nations that fall into the blue area manage to do so by only a small margin. Perhaps these are but the early days of more ambitious dematerialisation of economic growth. Or perhaps such decoupling is only available to economies that have exported their heavy industries to somewhere else. Since ecological threats are global in extent, no nation is truly an island (despite the conspiracy of cartographers claiming otherwise). Therefore, it is the global economy that needs to decouple, not simply a few richer nations.

First, the rate of decoupling is key. We are already exceeding the ecological capacity of the planet, drawing down on resources faster much faster than they are replenished. Therefore, slowly easing down our demands on ecosystems isn’t going to cut it. The rate of decoupling, according to Tim Jackson's calculations, needs to exceed anything previously accomplished by something like an order of magnitude.

Second, slower consumption will still ultimately exhaust non-renewable resources. Even if we managed to get back below planetary limits for renewable resources like wood or fish, this still leaves non-renewable resources. Reducing reliance on fossil fuels is all well and good, but we've already picked the low-hanging fruit. From here on, the energy, expense and likely damage increase for any further exploitation (as we’re already seeing in deepwater, Arctic and non-conventional drilling operations). Fossil groundwater in much of Saudi Arabia is now basically depleted after just a few decades of intensively irrigated wheat production. Slowing their consumption of wheat per unit of GDP won’t particularly help with this problem, which now means more crops needed elsewhere.

Third, even if we manage to achieve absolute decoupling, even if this is fast enough to get below planetary boundaries before ecological damage is so severe as to prevent further GDP growth and even if we quickly wean ourselves of all non-renewable resources, there is still a yet more fundamental theoretical problem, explained in more detail here. In short: continued growth of population will reach a limit, continued growth of energy will reach a limit (some fascinating details in the discussion here) and so with fixed population and fixed energy but growing GDP, energy will occupy an ever smaller portion of GDP, until it becomes small enough to be arbitrarily cheap – "But if energy became arbitrarily cheap, someone could buy all of it, and suddenly the activities that comprise the economy would grind to a halt."

At some point, the global economy will stop growing. This need not mean that human flourishing ceases or that no further improvements are possible. On the contrary, there are things better than growth. But it is critical that we acknowledge that growth is good for the early stages of an organism but pathological once it reaches maturity.

Growth is for babies (infinite growth is for tumour cells). Let us be grown ups.

Three things I didn't know about India

India, as the world's second most populous nation (soon to overtake China), has challenges that match its scale. Amongst them are poverty, ethnic and religious tensions, severe water stress and widespread malnutrition. Yet for the last few decades India has been experiencing a huge economic boom, fairly consistently posting GDP growth rates amongst the highest in the world.

This much I already knew. But I recently came across this article, (H/T Colin) which looks at Indian nutrition and points out some rather surprising (at least to me) realities. Here were three things I didn't know:

1. There are more malnourished children in India than in all of Africa.
2. Indian nutrition figures have declined significantly since the 1970s, despite rapidly rising GDP.
3. Urbanisation is often a very big step backwards nutritionally for the poorest, despite bringing (on average) a large rise in income, due city living having much higher costs.

The causes, consequences and possible responses to these challenges are complex and it is not my intention to address them just now. Yet reading this piece has reminded me once again why GDP is insufficient on its own as a measure of social health. It is possible for GDP and something as fundamental as nutrition to be heading in opposite directions, even over a country as large as India and over the space of four decades (ensuring this isn't a statistical blip based on small sample size).

So next time a politician tries to scare you or bribe you by referring to "the economy", remember the limitations of GDP.

Corporate failure: more than a few bad apples

With all the current discussion about News International and its parent company News Corp, many pixels are being devoted to a discussion of just how things went so wrong. After a string of recent revelations, the claim, maintained by News executives for years, that it was one (or then a few) bad apple(s) in an otherwise honest company now appears as either deluded, deceitful or the result of seriously deficient oversight. Since it is nearly always better to assume incompetence rather than conspiracy, at best Tuesday's parliamentary inquiry revealed a string of failed leaders - spanning media editors, senior corporate executives, police and politicians - who remained dangerously out of touch with what was going on around them. At worst, collusion, corruption and cover up on an industrial scale dwarf the significance of the original criminal data acquisition. Whatever the true nature of the rot, it goes beyond a couple of apples, whether at the top or bottom of the pile.

When confronted with misdeeds on this scale, a common reaction (which I notice in my own instincts) is to seek to put a face on the problem, a single individual who can be held ultimately responsible. We want the buck to stop somewhere. The legal pursuit of the questions of who knew what when is important and such investigations are likely to take some time. In the meantime, an impatient public desires visible signs of justice. If we cannot get convictions just yet, we will settle for resignations.

We so desperately want to be able to find someone to blame, some focus for our fury at the damage caused by a system of corruption in which media, police and politicians were too close and saw their own good in terms of a small circle than the national interest they claimed to be representing. We want to know that our violated trust is being taken seriously. Resignations serve as symbolic steps in this direction; they speak to a collective desire to start again and are a metaphor of what it looks like for an organisation to repent.

But there are deeper questions at stake. Individuals did indeed commit crimes and moral failures (either of commission or omission). Many participated in looking the other way, being willfully blind to what was going on because it was more convenient to maintain deniability (or perhaps they continue to mislead political authorities). But to leave the analysis at the level of individuals fails to take account of the dynamics that can exist at a supra-individual level. The whole can often be greater than the sum of the parts. If the only lessons we take away from this saga involve the need for greater personal integrity, we miss the opportunity to ask how the very structures might have served to sideline, subvert or dilute integrity.

There are individual failures, but also failures of structure, failures of collective imagination. They are failures of systems that are based on seeking the wrong kinds of inclusion, systems that punish those who speak up while rewarding those who conform without questioning the quality of what is shared. Whether a for-profit corporation can simulatenously claim to be serving its shareholders and the common good is an interesting question, as is whether a political system in which an MP is required to win more votes than any other candidate every five years encourages a myopic and image-driven politics.

When a corporation is accountable to its shareholders' interests and those interests are understood in narrow financial terms (as they usually are), then the only place that ethical considerations enter into it is the impulse to avoid anything unethical insofar as it hurts the bottom line. Therefore, the recent fall in News Corp shares is the real crime Rupert and his various officers have committed.

But of course that way madness lies, and the reaction of the public to this scandal is partly media-driven hysteria (the very same hysteria that News have used to successfully to drive sales) and partly genuine moral outrage that speaks to a standard other than the bottom line. There is more to living well than making a profit and there is more to a flourishing nation (or world) than a growing GDP. Therefore, there must be more to a healthy company than a rising share price. Let us resist the colonisation of our ethical thought by cost-benefit risk analysis that seeks to put a price on everything. The language of money cannot adequately translate the full complexity and richness of our moral existence and to rely on it to do so is to abdicate our responsibility for pursuing good and shunning evil.

Amidst the repeated failure of not just scattered individuals but of our most trusted social institutions - of corporations and parliaments, banks and police, sensationalist newspapers and a reading public that buys them - it may be worth considering again the apostle Paul's exhortation to his readers in Rome, who were at the heart of a vast empire with powerful cultural incentives to fit in: Do not be conformed to this world, but be transformed by the renewing of your minds (Romans 12.2 NRSV). This is addressed not simply to the individual believers, but to the church as a whole. It is an invitation to a way of corporate existence based on the good news of God's mercies (verse 1). The church, of course, is not immune from moral failure. Yet the good news here is an invitation to discover anew a source of belonging that does not require us to narrow our moral vision lest we stick out, but which gives us permission to find fresh ways of thinking and seeing amidst a culture that has lost its way. The church has no monopoly on wisdom, has not cornered the market in corporate governance or collective integrity. Yet in its practices of humility, confession, forgiveness and love of neighbour to the glory of God, in its memory of Jesus accepting the outcast and breaking bread with the traitor, in its grasp of the promise of a Spirit who leads into both honesty and new begingings, it has something that is genuinely different and worth rediscovering and sharing by each generation.

Better than growth

Is growth good? Australia needs more economic growth like a kick in the head.

The pursuit of ever more goods and services is not delivering what most people want, but their opposite. Rather than meaningful work and rest amongst genuine communities in tune with healthy natural environments, we are overworked (or unemployed), families and communities are fragmented and we are living well beyond our ecological means.

Many studies have shown that once a basic standard of material well-being has been achieved, further increases in consumption levels do not correlate with higher levels of reported happiness, health or mental well-being. Instead, we are fatter, more stressed and more depressed than previous generations. And worst of all, we are squandering our inherited ecological wealth at an alarming rate. Our average ecological footprint (the third largest in the OECD) means that were everyone to live like us, we would require four Earths. Australia has the highest percentage of threatened vertebrates and plant species in the world. Our carbon footprint is the highest in the OECD, despite possibly being the developed country most directly threatened by climate change.

The ongoing quest for growth all else is killing us, since growth without reference to its context is cancer.

So am I then a cheerleader for what economists quaintly call "de-growth" (i.e. recession), or am I perhaps advocating the dramatic overthrow of the present order? Both are too simplistic. It is possible to argue that creative, practical reforms are possible (and necessary). Things don't have to be this way and the alternatives don't have to involve living in caves or blood on the streets (though these could be some of the ultimate results of business as usual).

The Australian Conservation Foundation has recently released a very interesting 40-page report called Better Than Growth, which lays out three problems with our obsession over GDP growth and suggests eight areas in which a re-conceived better-than-growth economy would be an improvement over current assumptions and practices. Each of the eight areas receives a brief chapter suggesting creative changes to Australia's economic system. Here is the outline:

1. Better progress: improving quality of life, not quantity of wealth
Emphasising measurements of social and individual wellbeing, and ecological health, will give us better results than focusing on narrow economic measurements such as GDP.

2. Better work: balancing paid and non-paid work, family and leisure time
While some australians are unemployed, many more are overemployed. We’d be better off reducing average working hours and increasing time available for leisure, family, community and our democracy.

3. Better production: making cradle-to-cradle manufacturing a reality
Rather than producing disposable goods that are destined for the tip, we should reorient design and manufacturing toward completely reusable products.

4. Better consumption: stepping off the consumer treadmill
Overconsumption is at the root of many social and environmental challenges. Government can support people to become smart consumers; to consume less and consume smarter.

5. Better markets: aligning prices with social and environmental impacts
Ensuring that the full environmental and social costs are included in the price tag of goods and services will stimulate a cleaner economy.

6. Better business: matching private incentives with long-term public goals
Businesses that focus too much on short-term profits are unlikely to be part of a long-term transition to a more sustainable economy. Supporting non-profit business models and ensuring that executive compensation rewards long-term performance are needed.

7. Better taxation: rewarding work, not waste
Shifting taxes away from productive activity such as income generation and towards pollution and resource use would create jobs while improving environmental performance throughout the economy.

8. Better regulation: fixing cost-beneft analysis
Much government analysis depends on cost-benefit calculations which are based on faulty assumptions and exclude the full value of the natural environment. We should insist that cost-benefit analysis include all aspects of wellbeing.

Fortunately, many of the solutions are staring us in the face. As William Gibson said, “The future is here, it’s just not widely distributed yet." In each of this report’s sections, we outline some of the best thinking from around the world on what is needed to transform to a better-than-growth economy. All of these ideas and specific policy recommendations are already being implemented or seriously considered somewhere around the globe.

The full ACF report is available here.
H/T Greg.

Beyond GDP: policy by numbers

David Cameron has announced that he wants UK policy to be directed more by a measure of its citizens' general well-being than national GDP alone.

This is an important development.

The problems with basing government policy on GDP (as most nations do) are manifold. A war, an increase in the divorce rate or a natural disaster can each increase GDP, illustrating the fact that human economic activity is not identical with human flourishing. Of course, there is a basic level of material well-being required for a good life: nourishing and reliable food, safe water, shelter from the elements, somewhere comfortable to sleep, access to human relationships and perhaps a few other things (a dram of whisky from time to time, perhaps). But the bigger picture on which we base our social policy has to be bigger than just GDP. Yet in our obsession with measurement, we end up measuring GDP because it is so easily measured.

What can be counted, counts. That is at the heart of why GDP sends us up the wrong policy paths. Measuring what is easily measurable, we find we end up prioritising quantity over quality. The economy may be growing, but are our lives any better as a result?

There are various attempts at alternative indices. The UN supports the Human Development Index (HDI), a measure that relates per capita GDP to both life expectancy and education in order to suggest a more rounded picture of flourishing. This has the advantage of being still quite measureable, but still has GDP has a very significant component of the index, despite the fact that numerous studies (as well as traditional wisdom from many cultures) point out that beyond a certain level of material well-being, the benefits of extra personal wealth suffer from rapidly diminishing marginal returns. It also lacks any account of the ecological cost of the development in question, which could be (and often is) being gained at the expense of future generations.

Another measure is the Happy Planet Index (HPI), which focuses on the relation of life expectancy, subjective level of well-being and ecological footprint, thus claiming to measure how efficiently human well-being is delivered per unit of ecological impact. This approach gives a very different list of national rankings to the HDI (for instance, the USA comes 114th out of 143 countries studied, between Madagascar and Nigeria). Including ecological footprint sinks pretty much all the "developed" countries. For comparison, here are recent rankings of GDP per capita and here are recent HDI rankings.

Yet relying so heavily on self-reported levels of satisfaction (while trendy) has its drawbacks, as can be noted via the observation that the inhabitants of Huxley's Brave New World would have scored off the charts, and from counting the suspicious number of totalitarian, autocratic, repressive and/or highly corrupt societies that make it into the HPI top twenty.

And so while I am actually a big supporter of moving away from GDP-obsessed policies, I am ambivalent about the apparent necessity of replacing it with another number. Measurements are not irrelevant, and evidence-based policy making is a step forward in many areas. If we must have metrics, by all means let us develop better ones than GDP. But let the numbers be our servants, not our masters, since so much that is of the highest importance in the life of a society cannot easily be measured in numbers. Quality is not always reducible into quantities.

Obesity: personal or structural?

Ross Gittins puts the boot into GDP as a measure of economic well-being once again, this time by pointing out that obesity is win-win-win for GDP. He reviews a book that argues that the sudden and dramatic surge in obesity since the 1980s shows that it is a structural problem with the way we organise our society rather than a few individuals who lack self-control.

The relationship between individual moderation and social structures is complex. Like the debate between light and deep green, this problem doesn't have a simple answer. Of course it is both-and, rather than either-or, but where does the emphasis lie, and so where ought the weight of our attention and exertion rest?

If GDP goes down, so what?

"Keep falsehood and lies far from me; give me neither poverty nor riches, but give me only my daily bread. Otherwise, I may have too much and disown you and say, ‘Who is the LORD?’ Or I may become poor and steal, and so dishonour the name of my God."

- Proverbs 30.8-9.

It has long been known that above a certain level of having basic needs met, increasing material wealth does not correlate with increased happiness or satisfaction with life. An interesting, though brief article in the NYT on rethinking the measure of growth mentions more economists in Asia's growing economies questioning whether the pursuit of ever higher GDP is costing us the earth.

Sometimes ecological concerns are critiqued as patronising or colonialist: developed nations telling developed nations that they can't get as rich as us. Or ecological responsibility is seen as a luxury that only the wealthy can afford: "First comes a full stomach, then comes ethics," wrote Brecht in his Threepenny Opera (1928). But the reality is that developed nations must learn joyfully to embrace less, and developing nations must be liberated from the idea that a western lifestyle is the only life worth aspiring to.

The ecological credit crunch

We are living beyond our means, running up a debt of up to US$4,500,000,000,000 every year. The parallels between the credit crisis and the ecological crises are not accidental. Both are symptoms of the myth of infinite growth.

The differences, however, are crucial. The financial crisis is primarily (as far as I understand it) a crisis of trust: financial institutions who are no longer sure from whom it is safe to borrow. The responses by governments have been to act as a kind of credit backstop, stopping (or slowing) the corrosive effects of cycles of mistrust.

The ecological crises are a crisis of life: of too many human lives living lifestyles that undermine the stability of all living things. This helps give some idea why governments have not responded with a similar urgency and zeal as they have done in relation to the credit crisis. Not because the problem is smaller or less pressing, but because it is far larger and more difficult. How do millions and millions of people radically change their assumptions and consumptions?
H/T Box the Jack. Make sure you also read this post on his blog boxologies: GDP is a speedometer, the question is "where are we headed?".
Photo by ALS.