“Bigger Isn’t Better”

A thoughtful op ed from today’s Ottawa Citizen by Peter Victor, the author of “Managing Without Growth” (Edward Elgar)  on the case for a no growth future.

http://www.ottawacitizen.com/business/fp/Bigger+better/1590471/story.html

Here’s an extract:

“Although no 21st-century Keynes has emerged to prepare the intellectual ground for such a change in thinking, we do have a body of knowledge built up over many decades and now thriving under the name of “ecological economics.”

Ecological economists understand economies to be subsystems of the earth ecosystem, sustained by a flow of materials and energy from and back to the larger system in which they are embedded. It is understandable that when these flows were small relative to the earth they could be ignored, as they have been in much of mainstream economics. Economists are not alone in treating the economy as a self-contained, free standing system largely independent of its environmental setting. It is a widely held view that environmental protection is just one among multiple competing interests to be traded off against the economy.

And anyway, this mainstream perspective teaches that if resource and environmental constraints are encountered, scarcities will be signalled by increases in prices that will induce a variety of beneficial changes in behaviour and technology. Should this system of scarcity-price-response fail then economists can estimate “shadow” prices which can be imposed directly through taxes or used indirectly through policies based on cost-benefit analysis to fix the problem.

To ecological economists, this is an inadequate response to the myriad problems of resource depletion, environmental contamination and habitat destruction confronting humanity in the 21st century. They question the pursuit of endless economic growth and contemplate a very different kind of future.

In my own work, I have examined whether and under what conditions a country like Canada could have full employment, no poverty, much reduced greenhouse gas emissions, and maintain fiscal balance, without relying on economic growth. Using a comparatively simple model of the Canadian economy I have explored scenarios in which these objectives are met. The ingredients for success include a shorter work year to reduce unemployment yet retain the advantages of technological progress, a carbon price to discourage greenhouse gas emissions, and more generous anti-poverty programs.

4 comments

  • Peter Victor makes a cogent case that summarizes a lot of what I learned in grad school about ecological economics. He was also a major player in the UK Sustainable Development Commission report Prosperity Without Growth, which is excellent.

    But I am not convinced that governments are so narrowly obsessed with economic growth above all other objectives. Governments care about employment, inflation, poverty, the state of infrastructure and social services among other things — albeit to greater and lesser degrees.

    In some sense, growth is endogenous; it is not explicitly targetted by governments or central banks. But governments cannot ignore growth either and its absence leads to greater poverty and social disruption. So that is the crux of the problem we find ourselves in.

    I think that the key issues are the ecological economics ones — the depletion of resources beyond a “sustainable” harvest and pollution beyond the earth’s capacity to absorb it — rather than economic growth per se. These are highly correlated over the course of human history, but if we were to be able to get a handle on energy and material inputs to production, and the additional output of pollution, why should there not be growth?

    But a problem with the Prosperity Without Growth document is that it fails to tackle whether capitalism is suitable to a sustainable economy, and to challenge private control over key sectors of the economy. And while it challenges excess consumption it never points at the distribution of that consumption and who the real culprits are.

    Anyway, Victor is advancing an important argument. He will be on a PEF panel coming up in Toronto, and I get to chair, so it should be highly stimulating!

  • “But I am not convinced that governments are so narrowly obsessed with economic growth above all other objectives.”

    If growth is not the dominant discourse inside and outside government I do not know what is. Almost every idea these days finishes with “and it is good for growth too”, or “it will raise productivity too.” In fact I think economic growth out ranks sex as the major NA discourse. Although, apparently, sex is great for economic growth too!

  • Comment reformatted to remove formatting typo:

    Marc wrote, “But governments cannot ignore growth either and its absence leads to greater poverty and social disruption.”

    But that is EXACTLY the argument that Peter Victor makes in Managing without Growth and that Tim Jackson reiterates in Prosperity without Growth report makes. The absence of growth would lead to greater poverty and social disruption UNLESS certain policies were also adopted, key among which is the reduction of working time.

    Again, the question of “getting a handle on energy and material inputs” is one that Victor and Jackson (along with Bill Rees) confront head on and conclude is that it is delusional to expect any such thing. Why? Because we’ve already had large reductions in relative energy and material inputs but these have been accompanied by large increases in absolute inputs. The Jevons paradox explains why. Lower inputs lead to lower costs which lead to higher consumption.

    This is not to say that aggregate growth must be banished under any circumstances. In fact, it may be that higher growth may be necessary under the transition to a steady-state economy.

    Now, if one believes (on the basis of what evidence?) that shorter working time is a “spear aimed at the heart of capitalism,” then maybe it isn’t practicable, but…

    In his 1943 essay, “The Political Aspects of Full Employment,” Michal Kalecki addressed the similarly vexing question of whether capitalism could accommodate itself to full employment. Rather than construct a tortuous paraphrase, I leave it to the reader to substitute the phrases, “sustainable development,” “prosperity without growth” or “shorter working time” for full employment.

    ‘Full employment capitalism’ will, of course, have to develop new social and political institutions which will reflect the increased power of the working class. If capitalism can adjust itself to full employment, a fundamental reform will have been incorporated in it. If not, it will show itself an outmoded system which must be scrapped.”

  • I agree with Marc that we can drive a wedge between economic growth and environmental impact. The only wedge that will do so is strong environmental policy.

    And this will be cheaper than letting the environmental costs build up. Big Oil and their shills rail at the expected costs of addressing global warming (1-3% of GDP) but ignore the costs of letting it proceed (20-30% of GDP).

    However, this is far from saying that we need economic growth. Indeed, the growth imperative (and I agree with Travis that growth is the paramount government objective) is more about staving off redistribution than anything else.

    With the masses able to buy ever-more trinkets, they are less likely to demand that the elites share the wealth that capitalism provides them.

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