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Solutions

Let’s say this at the outset – abandoning growth economics as our overriding policy does not mean returning to the dark ages. It doesn’t have to mean austerity, or a world without change. Some growth would still be possible. But it would be different. And let’s be honest – this is a theory in development. There are no easy answers for transitioning beyond growth. We just know we can’t carry on as we are.

The key is not to eliminate growth altogether, but to slow and eventually begin to reverse material growth – that’s the throughput of resources, as inputs into the economy and outputs as waste. If we can identify the maximum sustainable use of a given resource, we can then fix that limit and make sure we don’t go over it. Rather than always consuming more of everything every year, we would stabilise our resource use. Growth would still happen if it was driven by efficiency. Overall, the economy could begin to level off into a steady state.

Let’s look at some ways of doing this. These are summaries, and you can click on the titles for more on each one. I’m adding more good ideas as I come across them, and feel free to leave a comment and add to the list.

Changing what we value
The primary measure of success for states is the Gross Domestic Product, which is essentially a measure of economic activity. It was developed during the Great Depression, as a way of taking the pulse of a sputtering economy.

However, GDP measures quantity rather than quality. It takes all economic activity as equally good, even though much of it may be harmful to society, health, or the environment. For example, one in four adults in the UK is obese, but the fizzy drinks industry grew by 7% in 2008 and this was reported as good news. GDP welcomes the industry’s contribution to the economy without ever asking if we need more fizzy drinks or not. As Nobel prize winning economist Simon Kuznets says, “goals for more growth should specify more growth of what and for what.”

How you measure success will determine how you organise society, and at the moment all policy is subordinate to a rising GDP. That needs to change, and there are a variety of options available. The UN uses a Human Development Index, but this doesn’t factor in the environement. James Tobin and William Nordhaus developed the Index of Sustainable Economic Welfare as a way of measuring quality of life. My own favourite is the Happy Planet Index, which balances economic growth with human development and environmental sustainability.

These alternative (or complementary) metrics are step one in resolving the growth paradox. Until we have chosen to look beyond the narrow goals of economic growth, we won’t even see the opportunities to create a better system. (…more on metrics)

Working hours
Stanley Jevons was an economist who observed the effects of coal efficiency in steam engines, and concluded that “as technological improvements increase the efficiency with which a resource is used, total consumption of that resource may increase, rather than decrease.” This counter-intuitive observation, that efficiency may in fact increase consumption, is known as Jevon’s paradox.

Our industrial economy expresses this paradox on a grand scale. Since the 1950s, increasing mechanisation has improved our industrial efficiency by 400%. This efficiency means that we can produce the same amount of goods in less time, and that presents us with a choice: either work less, or make and sell more stuff. Given that we work longer hours than we did in the 1950s, it should be obvious which one we chose.

In a steady state economy, the “gains from technical progress should be taken in the form of leisure rather than more production”, says Herman Daly. Slowing the amount of work being done in the economy once we have enough, would mean everybody had more leisure time. In order to avoid an unemployment crisis, working hours could be limited. This was done during the great depression, sharing the same amount of work amongst more people. (…more on work)

The Tobin Tax
Every time there’s a recession, there’s a renewal of interest in a tax on foreign currency transactions. It gets a mention, gets rebuffed by a politician or two, and then sinks again until the next time the markets are in crisis. This time around it’s been mentioned by Archbishop Rowan Williams, and by Ethiopia at the Copenhagen summit. The reason it keeps coming back is that is is a fundamentally good idea.

Over $2 trillion flows through our globalised economy every single day, 95% of it purely speculative. The power of this ‘digital herd’ of investors is formidable – witness the collapse of Iceland’s economy in 2008, or the crash of the Asian Tiger economies in the late 90s.

Applying a small percentage tax to international currency movements would generate income from an otherwise unproductive financial practice – a 0.25% tax could raise the phenomenal sum of $300 billion a year. The tax would slow the movement of money. With a small penalty for moving the capital, speculators would be a little slower to whip their money out of an economy, and this would reduce the volatility of the global money system – a crucial factor in moving away from the growth imperative. (…more on Tobin)

Cap and trade
At the risk of angering both free-market economists and environmentalists, cap and trade is a concept that a steady state economy could find very useful. It is currently being trialled in the area of carbon emissions, but if we wanted to limit the material throughput of the economy, a similar scheme could be used for other resources such as oil or even water.

In theory, a cap and trade system established a sustainable base line of a given resource. Those who wish to use it are then given an allocated amount. If they use less of it, they can sell on their allocation to those who need more. This creates an incentive to use fewer resources, and drives efficiency. It’s a useful market mechanism for pricing in environmental damage.

It could also slow the depletion of natural resources, or at least manage to decline safely. To do this, the limit or ‘cap’, would be reduced each year. This would make the decline of a resource predictable, and avoid the wild price swings that we are currently experiencing with oil.

Relocalization
Economic growth pulls us outwards towards a global society, our drive for profit geared towards the cheapest possible production. This has brought us all kinds of cultural exchanges and has certainly lowered prices, but the price has been very high in both environmental and human rights costs.

Without wanting to turn our backs on the best aspects of globalisation, a steady-state economy would need to be smaller and more compact. That means re-localisation, which Colin Hines describes as “a positive discrimination in favour of the local,” in his book on the subject. Thanks to the work of the Transition Towns movement, we’re well on our way to seeing what this looks like in practice, with local food, building materials, and even local currency initiatives.

Beyond corporations
One of the drivers of economic growth is the corporation model of business, where shareholders want a return on their investment and require the business to expand. This results in a aggressive and unstable business arena, where companies are constantly absorbing competitors and building as much of a monopoly they can get away with.

The cooperative model could help solve this problem. By putting a company into the hands of the workers, you create a working, profit sharing community. You may already know about the John Lewis Partnership, but there’s an intriguing list of companies that already work this way, including United Airlines, Polaroid, or the Hill and Tribune media group.

Interest and usury
Fundamentally, the main reason that the economy needs to grow is to pay off the interest on the money we have collectively borrowed. This has become all the more urgent, given the spike in public debt in the aftermath of the credit crunch. If Britain’s levels of growth fall below the rate of interest on our loans, we won’t be able to keep up our repayments. This is something of a trap, and it goes someway to explaining why usury was banned for thousands of years!

At the individual level this plays out through negative equity. If the economy slows and the housing market slumps, home owners can be left with mortgages that are bigger than the value of their houses. The economy is always blamed, and quickly stimulated and put back on the path to growth, but the deeper problem is an unjust system that relies on debt to feed economic growth. The word mortgage says it all, derived as it is from the French for ‘death grip’.

There are alternatives, and many of them are usefully employed in Islamic banking. Where traditional lending places all the risk on the borrower, “what Islamic Finance emphasizes is the idea that the investors should share the risks involved in whatever projects they are investing in” says Joel Myers of Adbusters, “and that they should be investing in real things, whether it’s land improvement projects, housing, or helping start up a new business.”

——–

Those are just a few of the possible solutions for moving beyond growth. There are others, including taxing consumption rather than income, relocalization, resource quotas, de-coupling, and controlling advertising. I’ll get to more of them in time.

If all of this sounds like too much, and you’re wondering how we start, here are some first steps.

Jesus talked about God’s care for people who are lost
Tax collectors and other notorious sinners often came to listen to Jesus teach. This made the Pharisees and teachers of religious law complain that he was associating with such despicable people – even eating with them!

So Jesus used this illustration: “If you had one hundred sheep, and one of them strayed away and was lost in the wilderness, wouldn’t you leave the ninety-nine others to go and search for the lost one until you found it? And then you would joyfully carry it home on your shoulders. When you arrived, you would call together your friends and neighbors to rejoice with you because your lost sheep was found. In the same way, heaven will be happier over one lost sinner who returns to God than over ninety-nine others who are righteous and haven’t strayed away!
15:1-7

3 Comments leave one →
  1. February 28, 2010 9:29 pm

    Simply put, we need growth that increases GDP and Genuine Progress Indicator, GPI. Wars don’t do this. As President Bush demonstrated, wars create jobs that increase the deficit and deplete the economy by destroying capital, both human and physical. Investing in local clean, sustainable energy uses government spending today to build for the future.

    Suppose we installed a 50 kilowatt photovoltaic solar array and a 2000 liter solar hot water heater on each of the 100,000 public schools in the USA. They would provide electricity and hot water without pollution. They would pay for themselves quickly, and last a long time – 25 to 40 years.

  2. January 6, 2011 1:12 pm

    I am dubious about Larry’s statement that we need growth in GDP, if it is the type of growth which GDP measures that is destroying the planet because it is making too many demands upon natural resources.

    A Genuine Progress Indicator makes a lot more sense. Presumably it would measure activities which are sustainable. Instead of, for example, burning fossil fuels we substitute renewable energy and thereby create more jobs and help the environment. The idea of putting PV on school roofs is the sort of thing we should be doing.

    So there would still be growth but it wouldn’t be destructive as much growth is at present.

    Should this affect our message to the general public? I have read some posts which indicate that a lot of erroneous ideas about us, for example, that we want a low standard of living and regress to a more primitive way of life. One said we shouldn’t be using computers because they are not sustainable.

    It’s worth thinking about whether we should try to change this image.

    • January 6, 2011 2:36 pm

      GDP is a notoriously blunt instrument for measuring progress, and the sooner we move beyond it the better. I was pleased to see the British government commissioning a complementary wellbeing index last year, that’s a positive step.

      As for changing the message, yes, there needs to be a more balanced perspective. Warnings and dire prophesies don’t motivate people. We need more vision, a sense of possibility.

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