It’s the beginning of a new year, which means that hot on the heels of the end of year lists and reviews, tis the season of predictions. One of the more notable ones is the Financial Times survey of economists, which asks leading economists about the state of the economic recovery, inflation, housing prices, etc.
This is the third time the survey has run in this form, and it’s interesting to go back and look at previous years. Looking at 2011, I can’t help but notice how optimistic many people were about the state of the economy. There’s a general feeling that the recovery won’t be fast, but that it’s definitely underway. Growth was likely to slow, but a slip back into recession was deemed unlikely. “Chances of a true double dip remain low” says one. “The recovery does seem to have some reasonable momentum behind it and a double dip looks a remote possibility” says another. Others thought recession was a 50/50, but only one economist out of 78 doubted the recovery entirely.
As it happens, the economy see-sawed through 2011, growing one quarter and declining the next, and finally succumbed to the infamous ‘double dip’ in 2012. By then the economists had changed their tune, and ‘deterioration’ is a word that features repeatedly throughout the 2012 survey results. “Households borrowed too much and banks lent too much” said Nicholas Barr of LSE, “both sectors will continue to retrench. Deterioration is more likely than improvement.”
What of 2013 then? It’s somewhere in the middle. There are hopes that the economy will recover, but nobody expects it to be anything other than slow. Many suggest we’re on something of a plateau: “we will be bumping uncomfortably along the bottom” says one, another says the economy will “plod along near zero”. Vicky Redwood of Capital Economics says “we simply do not see where meaningful growth will come from next year.”
Perhaps there’s a consensus forming that this is not a simple recession, that something is different this time round. Some might want to call it a depression – there are certainly some similarities between our current situation and the Great Depression of the 1930s. The economy dropped lower then, but recovered faster. Five years on from the 1930 crash, the economy had made up all the losses and more. We’re nowhere near that.
Being an optimist, I’d like to believe that there’s a slow evolution going on in our economics. The first hurdle was to accept that the economy wasn’t going to bounce back to growth any time soon. We may have cleared that one. The second hurdle is to ask how much that matters.
That’s where we need to go next, asking some new questions, looking again at our assumptions. We might find that growth isn’t as essential as we thought, or not in the ways that we expected. For example, GDP growth doesn’t always deliver rising incomes. Neither does it necessarily raise people out of poverty. It might not be necessary for job creation either, given that unemployment figures in Britain improved this year while the economy stalled. We know from Japan’s example that an economy can continue to function on a plateau for decades without catastrophic losses in quality of life.
There are two ways to see this waning of economic growth. We can see it as ‘falling behind’ in the mythical global race that David Cameron referred to again in his New Year’s message. Or we can take a broader view of it – perhaps it isn’t stagnation or collapse, but maturity, an economy coming of age. Nothing in nature grows forever, after all. We reach adulthood and stop growing. Is the economy, which can only exist within the bounds of the biosphere, outside the rules that govern life on this planet?
As I’ve written about before, that doesn’t mean we can be complacent about the economy. But we need to start asking some bigger questions about what the economy is for and what we want it to do for us. Those questions have been unwelcome in economics circles for some time, but I think we’re creeping closer all the time.
How much is enough? The love of money, and the case for the good life is a father and son effort – Edward is a philosophy professor, his father Robertis an economic historian and cross-bench peer in the House of Lords. The book straddles economics and philosophy effortlessly. It doesn’t answer the question of the title in a literal sense, but is rather “an argument against insatiability, against that psychological disposition which prevents us, as individuals and as societies, from saying ‘enough is enough’.”
The authors begin with Keynes’ futuristic essay on the ‘economic opportunities for our grandchildren’, which I just happen to have written about the other week in a similar vein. Keynes imagined a future where everyone’s basic needs are met, and they are able to pursue leisure and culture instead of working. Why didn’t this happen, the authors ask. Why are we still working so hard, when we already have so much?
Their theory is that as consumer society has developed, tendencies that have always been there in human nature have morphed from vices into virtues. Where it used to be frowned upon, the desire for money has become the central motivation of a whole civilization. There’s no single point when people sat down and decided it should be that way, but rather a number of philosophical shifts. Neoclassical economics is one. The liberal thought of John Rawls is another, which argued that there was no single definition of a good life, and that the state should be neutral towards its citizens’ aspirations. The consequences haven’t been all bad. Capitalism has delivered the goods in many ways, but we find ourselves in this strange situation, surrounded by affluence unimaginable to previous generations, but ill equipped to enjoy it.
The notion of the ‘good life’, is important here. Essentially, the authors argue that all through history, people have had a vision for what makes a good life – friendship, leisure, respect, and so on. Wealth was a means to that end, and you got rich so that you could buy yourself that better life. The difference now is that we no longer have an end in mind; we do not know what wealth is for. The “assumption that there is a good life, and that money is merely a means to its enjoyment, has been shared by every great civilization but our own” they suggest. “In the face of this massive agreement, it is our own devotion to accumulation as an end in itself that stands out as an anomaly, as something requiring explanation.”
That ‘massive agreement’ is no idle phrase, as the book draws from a wide range of sources, both Western and Eastern. It weaves its logic through Goethe, the book of Revelation, the Brahmasutras. Within two pages you might take in Machiavelli, Milton, Marx, and Diogenes of Sinope, who “lived in a barrel and threw away his only bowl after seeing a child drink water from his bare hands.” If you enjoy this kind of philosophical rockhopping, it’s a real joy to read, and reminds me of Margaret Atwood’s writing on debt. If you don’t, well, consider yourself warned.
In the process of critiquing acquisition without end, Skidelsky and Skidelsky have little time for the mantra of constant economic growth, but they reach their postgrowth perspective through philosophy. That’s an angle I’ve not considered much, but far as they’re concerned, this moral and ethical perspective on growth is more compelling than the usual two approaches, happiness economics and natural limits. The book dedicates a chapter to each of these, and their critique of happiness economics is the most thoughtful I’ve read, drawing on the definition and experience of happiness.
Unfortunately, the same can’t be said of the chapter on the natural limits to growth. They begin by saying that the famous Limits to Growth report predicted a population and resource crisis by the end of last century, using this as a springboard to bemoan the apocalyptic undertones of the environmental movement. I’ve lost track of how many times I’ve read this sort of thing, and it discredits Skidelsky and Skidelsky. The Limits to Growth model runs to 2100, not 2000, so their observation is a false one and it makes their comments sound hackneyed and secondhand. They also focus their critique around extremist green writers such as Paul Ehrlich or James Lovelock, rather than the hundreds of more moderate and considered writers in the field. Having done that, it’s not surprising that they conclude that natural limits to growth are a quasi-religious idea propagated by people uncomfortable with wealth in the first place. This is uncharacteristically weak.
“For the affluent world, growth is no longer a sensible goal of long term policy” they write. “But we regard this as an ethical truth, not as a conclusion of scientific fact.” I’d say it’s both, and books like Mark Lynas’ The God Species might set them straight on the entirely quantifiable natural limits of the carbon cycle or the nitrogen cycle. (Lynas actually draws the opposite conclusion – that the limits to growth are a scientific reality, but not an economic or ethical problem.)
But let’s put that aside, as sustainability is clearly not the authors’ area of expertise. The concluding chapters attempt to define ‘the good life’, the worthy goals of our pursuit of wealth. They narrow it down to seven things: health, security, respect, personality, harmony with nature, friendship, and leisure. This is what wealth is for, and if we lose the end goal, we may sacrifice these things in the pursuit of an empty ‘more’.
How does that perspective translate to actual policy? There are some old friends among the ideas here – limiting advertising to slow the creation of new wants, focusing on ending inequality, shorter working hours and more leisure time, the citizen’s income, localism, and ending the dominance of finance, which they describe as “in love with itself, but increasingly bereft of useful things to do.”
Whatever you think of those specific proposals, it’s not enough to shrug off the question, say Skidelsky and Skidelsky: “simply to blunder on without having a view about what wealth is for, is an indulgence rich countries can no longer afford.”
I agree, and I hope How much is enough? is widely read, because it opens up a whole new perspective on the growth question. Its ecological blindspot aside, it’s a very good book.
Over the last couple of weeks, I’ve been struck by a series of good news stories that have accidentally been reported as bad news stories. Here they are:
- Fewer new cars were registered on Britain’s roads this year.
- The supermarket chain Tesco has posted its lowest growth figures for 20 years.
- The British arms company BAE Systems is facing a wave of redundancies.
All of these were reported in the business section, in sombre journalism full of words like ‘disappointing numbers’, ‘weakness’, ‘lacklustre performance’. Why? Because things are supposed to grow. Companies are supposed to get bigger every year. Sales can only ever go up. Market share can only ever expand.
This is a problem, because if we actually follow through on that, it takes us to places we don’t want to go. “Healthy” end of year growth figures are celebrated, but is anybody pausing to ask what happens if those figures continue unquestioned, year after year?
When the first post-growth thinkers began to formulate the possibility of a steady state economy, it was in response to future scenarios. The famous report The Limits to Growthexplores some of these scenarios, predicting an eventual peak and decline of industrialisation. At the time, these were speculative, projections and extrapolations. They were warnings: if current trends continued, we’d hit the natural limits of the biosphere, and new economic perspectives were needed to avert that inevitable outcome.
Economics without growth has returned to the agenda more recently. Thirty or forty years on, it’s no longer speculative. We’re not talking about future scenarios, we’re talking about the visible realities of price spikes, shortages, a destabilising climate and a global economy on a knife edge. Look back at those graphs in The Limits to Growth, and you’ll see the forecasted peaking of industrial society falls right about now.
The word ‘unsustainable’ is itself future facing, denoting the impossibility of sustaining something in the longer term. At some point, the practice in question must therefore move from being unsustainable to being unsustained. So Richard Heinberg is calling it: this is that moment. We were warned that sooner or later we’d hit the limits to growth, and now we have. The warnings, he argues, were “a message appropriate to the 1970s and 80s. We didn’t change direction then, and now we are nearing or at the point of declining energy, declining freshwater, declining minerals, declining biodiversity… and a declining economy.”
Heinberg made his name as a peak oil communicator, but peak oil only gets a short section here. The killer factor that makes this the beginning of the end for economic growth is debt. The cheap energy of fossil fuels has driven growth economic growth for over a century, but it is the debts that we’ve run up in the latter decades that make future growth impossible. The US spends 20% of tax revenues just paying off the interest on its debts. Millions of American homes are underwater, consumer credit the millstone around our necks. Having piled billions into bailouts and stimulus packages, there’s nothing left in the kitty to handle the transition that climate change and resource depletion requires.
And that means that growth is pretty much over. There will still be growth, a year here, a quarter there, but sustained long term growth isn’t possible under current circumstances. It relied on debt and fossil fuels, and we can’t secure enough of either to continue. Instead, we need to focus on making the transition to a post-growth economy, that is re-localised, resilient, and that serves human needs.
Needless to say, this is not a popular message. Even now reviewers will be sharpening their quills in readiness to tear Heinberg’s argument apart. It’s a matter of principle. To say that growth isn’t possible, or isn’t desirable, is a matter of economic excommunication. (As Tim Jackson says, politicians “physically recoil” when he tells them the title of his book, Prosperity without Growth.) But that doesn’t mean Heinberg is wrong, and the book deals with all the obvious ripostes (efficiency, decoupling, innovation, etc).
If you’ve been following the post-growth conversation, this book is a must read, putting the economic and environmental limits together to suggest that ‘peak debt’ is just as much a threat as peak oil. If you’re new to post-growth economics, it’s not a bad place to start either. It is meticulously researched and well argued, if a little technical in places. It is bold, wise, and profoundly counter-cultural. Yes, it’s gloomy, but it’s also full of ideas for making things better, and people and movements already headed in the right direction. The End of Growth is likely to be the most hated and ridiculed economics book of the year, but the chances are it’s the most important too.
I noticed my MP Gavin Shuker raised a question recently, asking the Department of Environment, Food and Rural Affairs what definition of sustainable development they were using.
Here’s MP Richard Benyon’s reply. Note what order the definition comes in:
On 28 February, the Government set out their vision of sustainable development as an approach which allows us to realise our vision of stimulating economic growth, tackling the deficit, maximising well-being and protecting our environment. This should be achieved without negatively impacting on the ability of future generations to do the same.
Progress should mean working within the Earth’s limits to ensure that people aren’t just well-off financially, but happy and healthy. It means closing the gap between the very rich and the desperately poor, because progress can’t just mean the improvement of the lives of 5% of the population. Progress means peace, and cooperation, and more beauty in the world. It means figuring out a way to live on the planet so that our children and our great-great-great grandchildren can enjoy the same wilderness we’ve enjoyed, and not just in a zoo or on television. Progress should mean that we put our collective energy into elevating our spiritual and emotional growth, instead of protesting against this or that political party or the latest atrocity against nature and humanity. Increasing beauty, happiness and well-being of all: I’ll take that sort of progress over the latest high-tech, plastic entertainment gadget any day.
Margaret Emerson, Four reasons why progress isn’t always progress