But it wasn’t until the Second World War that our modern understanding of growth began to enter the consciousness of governments and international agencies. According to one scholar, ‘there is hardly a trace of interest in economic growth as a policy objective in the official or professional literature of Western countries before 1950’. Pumping up the war machine proved that growth could be rapid, if necessary, and pointed the way to future expansion. In 1943 the US National Resources Planning Board reported to President Roosevelt: ‘Our expanding economy is likely to surpass the wildest estimates of a few years back and is capable of bringing to all of our people freedom, security and adventure in richer measure than ever before in history.’3 Less than two decades later, the future US President Ronald Reagan summed up this view during his stint as host of a hugely popular 1950s TV drama programme sponsored by General Electric. Every Sunday night a young, rock-jawed Reagan confidently told American viewers: ‘Progress is our most important product.’
In his 1978 book, The Rise and Fall of Economic Growth, HW Arndt adds that a statement by the US Council of Economic Advisors in October 1949 ‘was perhaps the first explicit official pronouncement in favour of economic growth as a policy objective in any Western country’. With the arrival of the ‘Cold War’ in the 1950s and growing tensions between the Soviet Union and the West the notion of growth took on another dimension. Increasing per-capita GDP was trumpeted as a measure of who was winning the battle between two contending economic systems. Within a few decades, growth became the ultimate metric of progress and economic health around the world. As Arndt notes, the case for economic growth was based on the belief that steady, rapid and indefinitely increasing productive capacity was the key to higher living standards, which were both ‘desirable and demanded’ by the citizenry of the world.
This slavish devotion to growth economics still dominates the mindset of governments, mainstream economists and their uncritical boosters in the media, trade unions, big business and academia. All major power groups in society now assume that a growing economy is the sine qua non of social progress. As long as a rising tide lifts all boats, it’s full steam ahead and we can avoid hard choices.
As the former World Bank Chief Economist and ex-president of Harvard University, Lawrence Summers, put it: ‘We cannot and will not accept a “speed limit” on American economic growth. It is the task of economic policy to grow the economy as rapidly, sustainably and inclusively as possible.’4
Adapted from Peter A Victor, Managing without growth, Edward Elgar, 2008.
Darwin’s long battle has disturbing echoes today. Like his detractors in Victorian England, we are also mired in an illusion that blocks our understanding of critical forces at work in the world. But the myth that envelops us – our blind faith in limitless economic growth – is more dangerous and even more deeply rooted.
We have abiding faith that the economy will grow forever, that there are no limits to the wealth we can create from the natural resources of this bountiful planet. Our financial systems are premised on growth; government policies are based on growth; corporate profits, jobs and incomes are hitched to growth.
Growth equals prosperity. The equation has been drummed into us for so long that it has become received wisdom. Growth brings employment, wealth, material and social progress, happiness and stability. Growth is the key to combating poverty. It makes the world a better place.
Indeed, an unwavering belief in progress is the quintessential modern idea. History is linear. Science, technology, democratic governance and liberal humanism greased by native ingenuity, will lead to the improvement of the human species. And economic growth is the vehicle for arriving at that destination.
Loosening bolts in the growth engine
But lately the bolts have begun to loosen in the growth engine. The global environment is under severe stress and has already been irreparably damaged. In 2005 the UN Millennium Ecosystem Assessment, a collaborative work of more than 10,000 scientists, found 60 per cent of ‘ecosystem services’ – things like climate regulation, the water cycle, pollination, global fisheries, natural waste treatment – were degraded or being used unsustainably.
‘Human activity is putting such a heavy strain on the natural functions of the Earth,’ the report warned, ‘that the ability of the planet’s ecosystems to sustain human endeavor can no longer be taken for granted.’
But discounting the environment is only part of the problem – and one that we will explore in depth in a later chapter. There are also a growing number of thinkers who are beginning to challenge the status quo in fundamental ways by asking hard questions.
What if the emperor has no clothes? What if endless economic growth is a chimera that causes more problems that it solves?
Many ecologists believe we have entered an era of ‘uneconomic growth’ where more fevered economic activity actually depresses living standards and levels of happiness. It doesn’t take much of a stretch to see what they mean. We can have a booming economy alongside growing inequality and fewer jobs – i.e. jobless growth. We can have shopping malls full of digital gadgets and showrooms replete with bigger, shinier automobiles – but how much better off are we if we spend three hours a day in traffic jams, worry over bigger debts and have less time for ourselves and our families? The volume and pace of growth tell us nothing about the quality of growth. And shouldn’t that be our main concern?
But before we get too caught up in the downside of growth, let’s backtrack for a moment to answer some basic questions. What exactly do we mean by economic growth? How does it work and why has it become so central to our lives?
Today, the standard measure of growth is Gross Domestic Product or GDP – the total value of all goods and services produced in a country within a given period. It’s usually calculated over the course of a year. GDP as a measure of growth is now so entwined in our lives that it’s barely given a second thought. It’s one of those things that most people don’t question: more is good; less is bad. You only need to peruse the avalanche of daily media reports to validate this assumption. Here’s an edited snippet from a recent news report that gives you an idea of how commonplace the language of growth/GDP has become.
Global outlook turns darker
…Calling the risks of a worldwide slump “alarmingly high” as it warned of decelerating economies, the IMF puts the odds of global growth falling below 2 per cent – effectively a recession – at one-in-six.
At that rate of growth, the global economy is too weak to keep up with population growth.
‘A key issue is whether the global economy is just hitting another bout of turbulence in what was always expected to be a slow and bumpy recovery or whether the current slowdown has a more lasting component,’ the IMF said in its ‘World Economic Outlook’, released in advance of the annual World Bank-IMF meeting in Tokyo…
The IMF sliced its global growth forecast to 3.3 per cent this year from 3.5 per cent in its previous reading in July, which would mark the slowest expansion since 2009, when the world was emerging from the deepest slump since the Great Depression.
The influential agency has also reduced its projected growth in 2013 to 3.6 per cent from 3.9 per cent just three months ago and 4.1 per cent in April. But it warned ominously that even the lower projection for 2012 and beyond ‘depends on whether European and US policy-makers deal pro-actively with their major short-term economic challenges.’5
This