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The growth report – an economic health check for January

February 1, 2011

A few weeks ago I sketched five reasons why the UK economy is going to struggle to grow this year.  To me, these aren’t reasons to despair, but reasons to ask more questions about growth in the first place. Like a dog chasing its tail, pursuing growth in a fully developed, over-consuming society is a waste of energy and ultimately futile.

Since infinite growth in a finite universe is illogical, I believe a post-growth economy is actually inevitable sooner or later. We’ll get there eventually, hopefully by planning it and steering ourselves there, rather than ending up there by painful default. The occasional growth reports that I put together here are really a sort of check-up on our progress, intentional or otherwise, towards that post-growth society.

So in review, here’s January’s economic health check on the UK economy.

  • The Office of National Statistics recently announced its latest quarterly growth statistics, and Britain’s economy shrank by 0.5% in the last three months of 2010. This was due in large part to a severely cold December, but growth would have been “flattish” even without that.
  • New inflation figures were also released, clocking in at 3.7%. This too was higher than anyone expected. Since wages have stagnated, it means that we’d actually be getting poorer as individuals even if the economy was growing.
  • Inflation means there’s too much money in the system, which is counter-intuitive when the banks are apparently reluctant to lend. The way to control inflation is to raise the price of money – the interest rate. That’s still being held at a record low at the moment of 0.5%. This is a huge dillemma for the monetary committee. If they raise interest rates, it will be more expensive to invest, and low investment means lower job creation at just the time when the government needs aggressive expansion to offset its budget cuts.
  • The FAO’s Food Price Index is at an all time high, and the price of oil tipped back towards $100 a barrel because of concerns over Egypt’s stability (and thus access to the Suez Canal).
  • Data from this morning shows the average house price falling o.1% in January.

In response to this welter of bad news the government has promised a “budget for growth” in March.

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Humankind’s biggest challenge this century

January 5, 2011

“Humankind is in a box. For the 2.7 billion people now living on less than $2 a day, economic growth is essential to satisfying the most basic requirements of human dignity. And in much wealthier societies, people need growth to pay off their debts, support liberty, and maintain civil peace. To produce and sustain this growth, they must expend vast amounts of energy. Yet our best energy source — fossil fuel — is the main thing contributing to climate change, and climate change, if unchecked, will halt growth.

We can’t live with growth, and we can’t live without it. This contradiction is humankind’s biggest challenge this century, but as long as conventional wisdom holds that growth can continue forever, it’s a challenge we can’t possibly address.”

Thomas Homer-Dixon writing in Foreign Policy magazine’s series on ‘unconventional wisdom‘.

Richard Heinberg on his book ‘The end of growth’

December 7, 2010

Richard Heinberg delivers his monthly ‘museletter’ by video, talking about his new book ‘The End of Growth’.

Gordon Brown calls for global growth pact

December 6, 2010

Gordon Brown disappeared from public life after the election, concentrating on being a good backbench MP, and on writing a book on the financial crisis. Beyond the Crash is now being trailed, and there’s an excerpt in the papers today.

In it, he calls for a global growth pact to secure recovery and ensure ongoing economic growth.

Stronger, more sustainable growth will not happen just by hoping for Asian consumer spending to rise. Nor from simply hoping for private investment to recover swiftly and strongly. It will require an agreement among the economic powers of the world, bigger, more imaginative, and more lasting than even the Marshall Plan for Europe: a constantly updated plan for economic growth.

He also calls for “a new academic discipline of global growth economics”. I’m calling for that too, but I don’t think we mean the same thing.

Enough is Enough: a report from the Steady State Conference

November 17, 2010

Earlier this year I attended the Steady State Economy conference in Leeds, organised by CASSE and Economic Justice for All. It was a fascinating day of talks and seminars. Part of the aim was not just to come together to hear some interesting speakers, but to contribute to the debate too. Workshops on various areas of policy were recorded and ideas pooled, and the result is Enough is Enough: Ideas for a sustainable economy in a world of finite resources.

CASSE’s Brian Czech describes the report as “the single most complete collection of steady state policy initiatives, tools, and reforms in the literature. That alone makes the report worth its weight in steady state gold.”

Browsing it this morning, it’s certainly a valuable contribution to making the steady state economy more visible, showing what it looks like and how we get there. I was pleased to find a couple of my ideas made the cut too.

You can also watch videos of all the presentations on the CASSE website.

A forest of exponentials

November 17, 2010

We believe that an exponentials analysis can alone explain an impending collision between an economic system which, by its nature, must grow, and a finite resource set which, ultimately, cannot grow. When this collision eventuates, it is likely to be one of the most important changes in the lifetime of anyone reading this report.

The aforementioned report, somewhat intriguingly, is from city brokerage firm Tullett Prebon. Dangerous Exponentials is their latest strategy briefing, and it argues that the economy faces a ‘forest of exponentials’. The money supply, energy use, and population are all rising at unsustainable curves.

Very wrong for a very long time

November 10, 2010

As limits to economic growth become more binding, the economists who made their reputations by pushing economic growth as panacea become uncomfortable. Indeed, were basic growth limits recognized, very many very prestigious economists would be seen to have been very wrong about some very basic issues for a very long time.

Herman Daly on why steady state economics has been ignored for 40 years.