Our Obsession With Growth Must End
Pulled from Comments Section. Fred Dobbs Commentary
NY Times magazine – July 17
Pioneering Economist Says Our Obsession With Growth Must End, NYT, David Marchese
Growth is the be-all and end-all of mainstream economic and political thinking. Without a continually rising G.D.P., we’re told, we risk social instability, declining standards of living and pretty much any hope of progress. But what about the counterintuitive possibility that our current pursuit of growth, rabid as it is and causing such great ecological harm, might be incurring more costs than gains? That possibility — that prioritizing growth is ultimately a losing game — is one that the lauded economist Herman Daly has been exploring for more than 50 years. In so doing, he has developed arguments in favor of a steady-state economy, one that forgoes the insatiable and environmentally destructive hunger for growth, recognizes the physical limitations of our planet and instead seeks a sustainable economic and ecological equilibrium. “Growth is an idol of our present system,” says Daly, emeritus professor at the University of Maryland School of Public Policy, a former senior economist for the World Bank and, along with the likes of Greta Thunberg and Edward Snowden, a recipient of the prestigious Right Livelihood Award (often called the “alternative Nobel”). “Every politician is in favor of growth,” Daly, who is 84, continues, “and no one speaks against growth or in favor of steady state or leveling off. But I think it’s an elementary question to ask: Does growth ever become uneconomic?” …
(lengthy interview at the link)
There’s an obvious logic to your fundamental argument in favor of a steady-state economy, which is that the economy, like everything else on the planet, is subject to physical limitations and the laws of thermodynamics and as such can’t be expected to grow forever. What’s less obvious is how our society would function in a world where the economic pie stops growing. I’ve seen people like Peter Thiel, for example, say that without growth we would ultimately descend into violence.
To me that suggests a fairly limited and grim view of human possibility. Is your view of human nature and our willingness to peacefully share the pie just more hopeful than his? First, I’m not against growth of wealth. I think it’s better to be richer than to be poorer. The question is, Does growth, as currently practiced and measured, really increase wealth? Is it making us richer in any aggregate sense, or might it be increasing costs faster than benefits and making us poorer? Mainstream economists don’t have any answer to that. The reason they don’t have any answer to that is that they don’t measure costs. They only measure benefits. That’s what G.D.P. is.
There’s nothing subtracted from G.D.P. But the libertarian notion is logical. If you’re going to be a libertarian, then you can’t accept limits to growth. But limits to growth are there. I recall that Kenneth Boulding said there are two kinds of ethics. There’s a heroic ethic and then there’s an economic ethic. The economic ethic says: Wait a minute, there’s benefits and costs. Let’s weigh the two. We don’t want to charge right over the cliff. Let’s look at the margin. Are we getting better off or worse? The heroic ethic says: Hang the cost! Full speed ahead! Death or victory right now! Forward into growth! I guess that shows a faith that if we create too many problems in the present, the future will learn how to deal with it.
Do you have that faith? [Laughs.] No, I don’t.
Historically we think that economic growth leads to higher standards of living, lower death rates and so on. So don’t we have a moral obligation to pursue it? In ecological economics, we’ve tried to make a distinction between development and growth. When something grows, it gets bigger physically by accretion or assimilation of material. When something develops, it gets better in a qualitative sense. It doesn’t have to get bigger. An example of that is computers. You can do fantastic computations now with a small material base in the computer. That’s real development. And the art of living is not synonymous with “more stuff.” People occasionally glimpse this, and then we fall back into more, more, more.
But how would a country continue to raise its standard of living without growing its G.D.P.? It’s a false assumption to say that growth is increasing the standard of living in the present world because we measure growth as growth in G.D.P.
If it goes up, does that mean we’re increasing standard of living? We’ve said that it does, but we’ve left out all the costs of increasing G.D.P. We really don’t know that the standard is going up. If you subtract for the deaths and injuries caused by automobile accidents, chemical pollution, wildfires and many other costs induced by excessive growth, it’s not clear at all. Now what I just said is most true for richer countries. Certainly for some other country that’s struggling for subsistence then, by all means, G.D.P. growth increases welfare. They need economic growth. That means that the wealthy part of the world has to make ecological room for the poor to catch up to an acceptable standard of living. That means cutting back on per capita consumption, that we don’t hog all the resources for trivial consumption. …
(footnotes at the link)
But the libertarian notion is logical. If you’re going to be a libertarian, then you can’t accept limits to growth. But limits to growth are there.’
The first sentence perhaps says all you need to read. Most here do not believe this. I do not believe this. The second sentence may be true, FWIW. The third one may be self evident.
For the last 40 years we’ve seen that GDP growth does NOT mean higher living standards, so it is time to question whether continual economic growth is as important as it seems. We’ve had growth, but for most Americans, that has just meant that they have gotten a smaller and smaller piece of the pie. An hour of work in 2022 gets one a much smaller fraction of the GDP than an hour of work did in 1952, and most Americans’ living standards are a function of how many hours they can work.
Thiel is correct about the possibility of violence, but he doesn’t state his assumptions. The reason growth has not translated into higher living standards for most Americans is that most of the increased GDP has gone into elite competition, that is, it has been absorbed by members of the elite like Thiel and turned into competitive tokens rather than the goods and services that people need. Thiel assumes, possibly correctly, that if GDP growth stops, then the elite will resort to violence as part of their competition.
We could end economic growth and reinstate the “socialist” economic policies of the post-World War II era which would let us raise living standards without growing the GDP. This would still have an ecological impact and, worse, might drive members of the elite like Thiel to violence. Still, it is interesting to ponder a zero growth economy, one with a static population and static GDP. One way to imagine it is to construct an input-output model, much like the one Leontief developed during World War II. Then do a singular value decomposition. In a static no-growth economy, one would expect eigenvalues near unity and the eigenvectors to reveal interesting relationships in economic production.
In a dynamic economy, one expects eigenvalues larger than one roughly corresponding to growing sectors and eigenvalues less than one roughly corresponding to shrinking sectors of the economy. I’ve never even tried to do this exercise, and it is hard to say if it can be done usefully given how dependent we are in productive, as opposed to extractive, sectors of foreign economies. During World War II, the US economy was less intertwined with the world economy, and the war itself eliminated further foreign factors.
My analogy would be with Biosphere, the second one as they called it, not the current one. That was an attempt to build an isolated ecology and revealed just how little we knew about how things worked. It ended rather ignominiously with a lot of rancor and bad press. I expect we understand a lot less about our own economy than we like to believe.
“for most Americans, that has just meant that they have gotten a smaller and smaller piece of the pie. An hour of work in 2022 gets one a much smaller fraction of the GDP than an hour of work did in 1952, and most Americans’ living standards are a function of how many hours they can work.”
Has not output increased per hour of labor?
sure, but the income of those who produced the increased output has not
Yes, which is the point I am making and Sandwichman would also. Time is not the measurement, product/part through is.
growth is measured in dollars. so if the price of fancy baskets and other crafts goes up, we could have endless growth without destroying the planet.
not what you mean by growth? fine if you like the taste of oil.
the real problem seems to be that if we don’t keep growing our armaments, someone else will keep growing theirs and take away all our fancy baskets.
GDP growth in recent times in the US has mostly been a matter of population growth although it has been noisy around financial shocks and pandemics. Without growth then liberal economics with its debt financed deficit spending would weigh heavily on future generations either by means of high inflation or taxation, which are both the scourge of elites. The US dollar dominant global reserve currency Ponzi scheme requires stabilization via debt and growth to maintain its exorbitant privilege to buy ever more fancy baskets made in China or somewhere else where people are poorer than in the US. Collecting offshore economic rents is very sensitive to volatility in exchange rates. If elites could not collect economic rents from poorer nations, then they would actually have to work for a living. Just printing money backed by inflation instead of debt securities destabilizes elites even more than it destabilizes currency exchange rates.
The military industrial complex is a different matter. Mostly it finances the donor class with kickbacks from the government that they bought. Bombing poor brown people has usually been necessary to turn over inventory before it reaches its expiration date. Ukraine is a much different matter. After they split from the old USSR, then they surrendered their nuclear weapons on a dubious promise from first world nations that Ukraine would have first world support if any second world nation invaded them. However, first world nations could not prevent Ukraine from being destroyed by its invader, but merely used the opportunity to turn over their military arsenal inventory without the need to war with poor brown people. The status quo of the donor class has been preserved. The threat of nuclear war protects our fancy baskets, but nuclear war does not preserve the status quo of the donor class.
I think I vaguely knew about your first paragraph…though it’s good to have it expressed here so we can think about it some more.
I’m not so sure about the second, but I am afraid you might be right. again, worth thinking about. but who has time for that?
I am afraid that I might be right most of the time. It really sucks.
if I am right about even half of the three things i think about, it’s the end of the world.
so that’s all right.
My guess would be that ‘growth’ is more about increasing wealth, increasing productivity, increasing employment and increasing population. Hopefully leading to higher standards of living.
Much of this must have to do with more efficient manufacturing, more use of semiconductors & machinery, less actual physical labor.
Some of this is no doubt of interest to libertarians, but not all would be.
no doubt. but just exactly what does “increasing wealth” mean? for me wealth is free time. for you it is more plastic toys?
what do you have against physical labor. do you prefer being stuffed in a cubicle all day doing meaningless “brain” work?
more semionductors and more machines? ….do what end?
productivity? and how exactly is that measured? (hint: dollars of profit per hour of labor?)
but don’t worry about it too much.
here is as good a place as any. I have jsut learned about a move to eleiminated the WEP (windfall elimination program) of Social Security. the WEP is designed to stop well-off people with perfectly good pensions from work not covered by FICA to take a FICA covered job for a short period of time and then claim SS benefits which are calculated as if those FICA wages were a lifetime of earnings that left the person among the very poor …those very low lifetime wages are credited at a much higer rate toward SS pensions than higher lifetime earnings….helping to eliminate dire poverty in old age.
the well off people feel cheated because they are not getting the higher rate added to their SS benefits.
I have watched a video of one of their rallies, with full support from democrat politicians. telling me that the stupid greed of people is unbounded and the left is as sure to kill Social Security as the right.
So what does “growth” have to do with that? good question. worth thinking about.
Well the group of people with good pensions but little SS earnings is heavily education workers. Not exclusively, but enough so that Democratic Party officials feel heat over it.