Home > The Economics Profession, The Economy and the Planet > Debate: Should GNP growth no longer be a goal in advanced economies? – Phase 2

Debate: Should GNP growth no longer be a goal in advanced economies? – Phase 2

from Edward Fullbrook

Climate scientists are divided over whether “the tipping point”, the point at which positive feedbacks make climate change accelerate and irreversible, thereby endangering the survival of the human species, has been reached.  But the pessimists do not claim to know for sure and so agree that humankind should act to diminish the possibility of civilization’s point of no return ever being passed.  True, some elements of the general public do not regard the possibility of future generations beyond the next one or two as a matter of much importance. But people idealistically inclined do.  

The first phase of this debate [here] became centred on avoiding or coping with a falling rate of profit.  To me this seems analogous to tending to a leaky tap when the house is on fire.  Given that the planet is finite, success or failure at avoiding the tipping point depends on the scale of the global economy, and that mainly on the scale of advanced economies.  Few climate scientists dispute that the present scale with present technology is unsustainable.  Meanwhile the World Bank forecasts that by the end of the century global economic output will have risen almost tenfold.  There is a problem here.  For idealists it is an immeasurably bigger problem than the rate of profit.  Shouldn’t economists, and not just specialists, be thinking about it?  As Geoff Davies points out, it will require a change of world view.  Like Davies, I believe that such a change is possible.  But time is short and it will take much work, much agonizing, much debate.

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  1. January 18, 2011 at 9:50 am

    Dear Edward,

    The energy crunch will come sooner than climate change. Its consequences are even more severe– the ramifications extend to food, water, transport. Unless “something turns up” to replace oil (none of the alternatives is adequate) the realistic prospect is for economic decline and not the economic growth, and the future looks stark indeed.

    Avner

  2. January 18, 2011 at 9:57 am

    It’s nice to see this debate continue. To be sure, I am very much in favour of avoiding disastrous climate change and other ecological catastrophes. Unfortunately I remain skeptical about the ability of mankind to stick together and solve the problem by means of peaceful cooperation. The postwar social consensus in Western welfare states was based on continuous GNP growth, because that allows everyone’s income to grow, at least in principle. If GNP growth stops, the distribution problem becomes much more pressing. Robert Costanza wrote this in the first issue of Ecological Economics: “we do not have to worry so much
    about how an expanding pie is divided, but a constant or shrinking pie
    presents real problems”. If we can solve the distribution problem without GNP growth, then GNP growth is no longer necessary (in advanced economies).

  3. Peter Radford
    January 18, 2011 at 7:59 pm

    If, as I do, you believe that modern economics was conceived to illuminate and explain the phenomena of the newly industrial world back in the 1800’s – which all of its traditions have sought to do. Then you have to accept that the metrics it developed were applicable to that task. GDP/GNP being just one example. The subsequent challenge then becomes to redefine economics to make it capable of explicating the economies we will live through in the future. Before we invent new metrics, we need to assure ourselves that we have the right theories that call forth those metrics.

    Do we?

  4. January 19, 2011 at 12:28 am

    Yes, we need a change of world view, to one in which we accept a “sufficient” level of material stuff, and find the value and meaning of our lives elsewhere, such as loving relationships, creative work or spirituality (whatever that might mean to you).

    However there are also technical challenges for economists:
    1) What mechanisms, at present, drive the exponential growth of the material economy?
    2) What mechanisms might be called upon to ensure more equitable (and fair) distribution of wealth and employment?

    Question 1 needs to be addressed and answered before we can say how to bring about a steady or slowly shrinking material economy. Exponential growth is driven by positive feedback(s). These feedbacks would need to be neutered or reversed, by strategic interventions (such as ending perverse subsidies, imposing taxes, providing beneficial subsidies). I have tentatively identified a few candidates, but I think a thorough debate will be required to find all the main ones. (And we need to distinguish diagnosis from remedy. Marx’s diagnosis was penetrating, his proposed remedy rather less so.)

    So, some candidates. Excessive credit creation, leaving us always scrambling to pay off debts. Inequitable rewards, creating poverty, and the empty promise that “growth” will eliminate poverty. Inequitable distribution of employment, a subset of the previous point. Saturation consumerist propaganda, also known as marketing. The presently wealthy, who only want their business to grow (and use their excessive political influence accordingly).

    Question 2: taking the same approach, there are mechanisms that transfer wealth from the many to the few. Bank credit is more available to the wealthy (Grameen Bank microcredit shows us how to change that). Political influence ditto. The imbalance of power between employees and employers (especially large ones). Community wealth (e.g. the emergent value arising from proximity of businesses, customers, services) being captured by private interests (that’s a big one). And so on, there may be quite a long list.

    This discussion can move beyond the limited and false dichotomy of capitalist vs. socialist. Government taxes and transfers are a crude, after-the-fact form of intervention, and we can be a lot smarter. Conservatives rail against “wealth transfers” when the latter are meant to compensate for inequality, but never want to know about the wealth transfers built into our system thanks to centuries of dominance of the political system by the wealthy. If we simply reduced/eliminated the unjustified wealth transfer mechanisms so people got a fairer reward for their contribution, our societies would be more equitable and peaceable. Poverty will be eliminated by attending to distribution, not by more growth.

  5. January 19, 2011 at 6:16 pm

    GNP or GDP growth should not be a governmental goal, because the proper governmental goal is to protect the right of individuals to set their own goals, free from the coercive harm of others. With compensation paid for any environmental damage, and with no subsidies or imposed costs on enterprise and consumption, those persons who wish to increase their wealth would increase GDP, and those who prefer to indulge in leisure would be neutral on GDP. Any imposed governmental GDP goal interferes with individual goals, and is thus pernicious.

  6. January 19, 2011 at 7:31 pm

    i’m a 100% for gdp growth. of course, renormalized (kadanoof. r p feynman) so its iq. not showing up here, so its dieoff.

  7. A.J. Sutter
    January 24, 2011 at 3:14 pm

    1. (re Avner’s comment:) Much of the hand-wringing over “peak oil” seems to accept the notion that GDP/GNP growth is a good thing, but that we’ll miserable be the oil “crisis” will force us to forego growth. But whether “peak oil” is for real, or whether there will be a workable substitute that might permit continued growth, perhaps after a hiccup (or not), are open questions. A better line of inquiry might be to decouple growth from the peak oil hypothesis, and examine whether or not growth itself is a Good Thing.

    2. Apropos of the pie (redrockreason’s): The distribution problem already is an issue. During the past 30 years, growth in per capita GNP/GDP has been accompanied by declines in median income in the US, Japan and elsewhere. The claim by fans of growth that the pie is increasing is disingenuous.

    3. (a) Apropos of metrics (Peter’s): should gaming the value of some “appropriate” metric be the goal of policy? Or should the goals be more qualitative, the indicators more subordinated (and less synthetic) in their roles, and the “metrics” include more political activity by the citizenry? E.g., wouldn’t the “happiness” of a country be better expressed through political means (including elections but not only) than through a survey?

    (b) Here is a more theory-based question, though, about why GDP growth rates are metrics at all: Neoclassical theory says that prices are ordinal, and that their absolute values don;t have any meaning. (E.g. Lionel Robbins said in 1945 that “Value is a relation, not a measurement,” and prices represent “arrangements in a certain order.”) But GDP is a sum of cardinal prices. Why should the rate of change of this sum have any meaning at all, if the cardinal values of the prices themselves don’t? (Apropos of Ishi and renormalization (more in K. Wilson sense): according to microeconomics the relations are invariant under a scale transformation — so what justifies privileging one scale over all others?)

    4. I’m surprised that none of the comments in this thread and its predecessor mention the many decades’ worth of prior thought that’s been give to this debate, including Illich and Tim Jackson in English; Castoriadis, Kende, Gorz, Méda, Latouche, Gadrey, Flipo, &cccc in French; Magnaghi, Pallante &c in Italian … Not everyone is cloning Herman Daly’s views. “Décroissance” is in the vocabulary of most educated people in France (even if they don’t agree with it), why is it such a novelty here?

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