Why there’s no sense in no growth

Spectator Business

February 2009

Some economists advocate smaller populations, simpler lifestyles and less choice as the only way to husband the planet’s scarce resources. But is that really how we want to the future to be?

The economic forecast is nothing but doom and gloom. Stores are slashing prices and jobs. Factories are scaling back production and grinding to a halt. Consumer and business sentiment is glum. US President-elect Barack Obama’s proposed $825 million stimulus package for the US economy involves tax cuts and a New Deal-style spending package which will build everything from roads to convention centre hotels to golf courses.

And some economists are frustrated. Way beyond the accusation that Obama’s proposed spending package is a call to roll out the pork barrel, some say the kind of spending he is proposing is fundamentally flawed. We don’t need to grow the economy to get ourselves out of the pits. Instead, they say, it’s time to do exactly the opposite – to change our paradigm to one which encourages ‘no growth’. They see the world as a place where abundance is inevitably being overtaken by scarcity, and they proclaim that the only way to live with it is to slow down.

‘No growth’ (or ‘steady state’) economic adherents are above all neo-Malthusians. They are concerned with the burden the growing population places on the world. At the beginning of 2009, the world’s population is estimated to be around 6.7 billion, and according to the US Census Bureau it will reach 9.5 billion by 2042. Population growth is impinging on a number of natural resources, including water. Zero-growth economists cite the concerns raised by the fact that the world’s supply of underground water is being rapidly depleted, because countries such as China, India and the US have failed to limit how much deep groundwater is pumped out for industrial and agricultural use. They say there is a real risk that agriculture in these three countries (that alone hold more than half the world’s population) will suffer irreparable damage. With less arable land to feed their populations, no-growthers are convinced that the future is unsustainable unless there is an utterly radical change of economic course.

Advocates of steady-state economics also point to the living resources that are impacted by the pressures of a growing population. A 2006 study by an international group of ecologists and economists showed that if current rates of fishing continue, we will run out of food from the sea by 2048. Besides overfishing, pollution and other environmental factors caused by more and more humans on the Earth are helping to wipe out important species around the globe. The rate at which we’re eating the oceans has increased in the last two decades: in 1980 we fished just over 6,000 different species of fish, of which 13.5 per cent had ‘collapsed’ (i.e. were at least 90 per cent below their historic maximum catch levels). In 2006, almost 8,000 species were being harvested, of which 29 per cent had collapsed.

No growth advocates cry, ‘Enough! It can’t go on’. They hold out the spectre of a world like Pixar’s last film Wall-E if we don’t slow down. In it, Earth at its end looms large – a planet over-run by garbage, where cities run into each other and polluted rivers, oceans and land can support no more life. The human race takes to space, leaving a ruined world behind.

While their arguments share some concerns of the environmentalist movement, their remedies are very different. No-growth advocates claim we need not only to slow down population growth but in fact to reduce the world’s population. Donald Mann, the president of the Virginia-based Negative Population organisation, states that in order to reduce the size of the US economy to a level that would no longer have a negative impact on its resources and environment, the US will need to cut its population roughly by half. The argument quickly dissolves into how limits on fertility and immigration will solve the problem. Quite how these goals will be met is not clear, however. You only have to look to China to discover the kind of draconian political and financial measures required to limit fertility. Unfortunately for the no-growth advocates, not even China’s measures work particularly well.

Despite population growth falling from 1.2 per cent in 1978 to 0.52 per cent in 2007, China has some of the most serious environmental issues in the world.

If it takes ruthless one-party-state communism to implement population control, it might take something similar to implement the other necessary adjunct of ‘no growth’, which is a heavily redistributive tax regime. No-growth guru Robert D. Feinman advocates a minimum tax rate of 50 per cent to ‘redistribute to those not otherwise receiving income’. What happens when those people are brought up to the mean isn’t specified. But he does say that in a no-growth economy the need for capital investment will be less, so the banking sector will contract. This will limit the places people have to put their money, thus driving up stock prices and demand for government bonds.

And if high taxes, limited investment horizons and draconian population controls weren’t enough, steady-state economics also dictates that we should produce only what we need, with little to no surplus. Trade isn’t a high priority for them, but rather – as another of their leading lights, Bill McKibbon, advocates – communities should seek to be as autonomous as possible.

And what would such a delightful society look like? According to Feinman, it would be akin to living under the regime of a ‘mature industry that has saturated its market’. He cites a few examples, including the former American telecom monopoly AT&T. Laudable points, according to Feinman, include the fact that AT&T stock paid a steady dividend year after year and was recommended to widows and orphans for investment purposes. While he admits that there was no incentive for innovation, he doesn’t point out the deteriorating service levels and extraordinary pricing regimes introduced by the monopoly that led to it being broken up in 1984.

Not all no-growthers present such a glum picture, however. According to Bill McKibben, we might all be a lot happier if we just had less stuff. He cites surveys over the past 60 years which showed that Americans were most happy in the 1950s, and that their happiness quotient fell by 5 per cent between 1970 and 1994. In the UK, as in Japan, satisfaction has apparently remained steady despite rapid growth. The point isn’t that growth caused depression and anxiety, but that ‘it didn’t alleviate them’. According to McKibben, growth should meet basic needs because these do create happiness, but no further. While there are people for whom food, shelter and healthcare need to vastly improve – this isn’t the case everywhere. And with redistributive taxes to help iron out the differences between us, the zero-growth advocates think we’ll all be laughing soon.

If all-this sounds like something of a rag-tag collection of complaints about modern life, you’ve got it largely right. Perhaps luckily for the majority of us, the palatability of what no-growthers advocate in terms of policy is not likely to be a real vote winner. Slash immigration, institute fertility control, raise taxes, cut agricultural production, be happy. As anyone familiar with US President Jimmy Carter’s 1979 ‘malaise’ speech knows, it isn’t the best tactic to tell people they’ve had it too good for too long and it is time to pull up your bootstraps and limit your consumption. A little more than a year after he gave this famous speech, Ronald Reagan offered Americans a more optimistic (and materialistic) outlook, and they offered him the White House.

To give the ‘steady-staters’ their due, there are many economists who – while not advocating zero growth – do say we should change the way we look at growth. Martin Wolf of the Financial Times wrote in an online debate recently that we should incorporate environmental degradation and resource depletion into how we measure countries’ growth. When we do, it’s apparent that growth hasn’t ‘been as fast as we thought it was’. Other respected economists, such as Deutsche Bank’s Pavan Sughdev, say we should incorporate the costs of destroying rainforests and biodiversity into GDP – and until we do we won’t get a true picture of what ‘growth’ really looks like.

The pursuit of all-out growth and the urge to accumulate vast wealth have brought the world to a grim state of economic paralysis and fear this winter. But to say that we need to stop where we are, or even take two steps backwards, and live in suspended animation – paying higher taxes for less choice and the opportunity to live under some sort of monopolistic autocracy, is hardly realistic. It takes no account of human aspiration or imagination. Frankly, it’s enough to make you want to put the no-growthers in Pixar’s rocket: there may be a planet where their ideas would work, but it isn’t this one.

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