Gr**th and G*P: don’t mention the G-Words

from Geoff Davies

The recent exchange between Jason Hickel (and here and here) and Dean Baker (and here) on whether humanity can have a viable future and still have ‘economic growth’, nicely highlights the way old concepts and words can trap us in unproductive debate and action.

The way forward is to recognise the need for a fundamental re-framing of the nature and purpose of our societies, and their economies. The terms growth, GDP, capital and capitalism are so ill-defined, confused or inappropriate they only hinder debate.

Specifically, the source of the apparent disagreement is, first, the pretence that Gross Domestic Product is a measure of the quality of our lives, and second the common presumption that a shrinking GDP is a disaster.

Perhaps the main reason a growing GDP has become an obsession with politicians and economic policy makers is that, in our poorly-managed and mis-managed market societies, a shrinking GDP commonly comes with rising unemployment and limited political prospects.

But GDP is not accounting, it is a crude tally of the ways we spend money. It was never intended to be a measure of the quality of a society, but it has come to be used in that way. GDP indiscriminately counts as positive contributions things like food production, truck production, clear-felling forests, creating and cleaning up after oil spills, car crashes and intrusive cancer treatments. Caring for baby at home and growing backyard vegetables count for zero. GDP is simply the sum of our activities that involve money, regardless of whether they are useful, useless or harmful, and its use grossly distorts our priorities.

Proper accounting involves a balance sheet, the good stuff on one side and the bad stuff on the other, so you can see whether what you are doing is worth the trouble. The Genuine Progress Indicator has such a balance sheet, as do triple-bottom-line approaches. You might quibble about the details of those measures, but at least their approach is defensible.

The problem with the arguments about Growth, Steady State, Degrowth, Post-Growth and so on is that they are still (commonly) conducted in terms of GDP. But GDP is a hopelessly confused and incomplete measure not meaningfully related to anything we want.

It seems that Hickel and Baker understand the challenge but they still argue from within the old framing, and thus perpetuate it. If we stop talking about GDP and growth we can find the things we agree on, and get on with doing them.

A way forward is first to distinguish quality from quantity. We can, and must, reduce the quantity of resources we extract, use once, and dump: by learning again to re-use everything. However there is no reason we cannot continue to improve the quality of the things we make and do. This is how the living world has been working, for about four billion years now.

What comprises quality, in our things and in our lives, is for us to decide. If quality is a clever, non-toxic, recyclable, portable telephone, then we can have that. If quality is time to smell the flowers and eat healthy local food we can have that too. If quality is a daring sport, or singing and listening to an opera, we can have them so long as no-one or nothing is harmed by our activities.

Notice I haven’t said anything about money. The price of things is a secondary feature determined by the particular way in which we create, use and destroy money. The fundamental purpose of money, commonly overlooked, is to facilitate exchange. The economy is not money, the economy is the things we make and do and exchange.

Some of the Hickel-Baker debate involved capital and the propensities of capitalism. These are both very loaded and ill-defined terms, but in this context capital means money (representing a claim on things) and capitalism carries the expectation that money can be used to acquire more money (and thus a greater claim on things).

A basic problem with capitalism, as usually practised in recent centuries, is that it has led to great concentrations of ownership, and thus of economic and political power. Well we have other forms of ownership, some of them collective, that can allow rewards to flow more fairly, and with less harm to people and the world. So let us focus on our agreed rules of ownership (of things and money) and make them work better for our common interest.

If, as we shift our society to a form that has some hope of survival, some people’s jobs are removed, then let us address that challenge directly by supporting them until they establish a rewarding life for themselves, instead of relying on abstract aggregates of this or that use of money, and a few ineffectual economic levers, that may result in some replacement jobs that may or may not be useful and rewarding.

If we relegate money (and the associated financial and banking systems) to its proper place of facilitating what we do, and focus instead on what we do, then the net price of everything, the GDP, becomes irrelevant, as does its possible increase or decrease.

So let us move to clean energy, to a circular economy that extracts and dumps far less material, and to systems of money and ownership that facilitate what we want. As we do so we will probably find the quality of our lives improving, along with the quality of myriad non-human lives around us. That is what is important.

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Dr. Geoff Davies is a retired geophysicist at the Australian National University