Throughout the world, GDP growth continues to dominate as the key benchmark for assessing economic success. Yet when it comes to shaping economic policy for the future, Molly Scott Cato argues that measures of economic health that ignore environmental damage, human wellbeing and global injustice are no longer fit for purpose.

It’s hard to argue the case for living within planetary limits rather than chasing economic growth. This is because to everyday people it is completely obvious that you cannot grow forever within a limited planet. But to economists it is just as obvious that exponential growth is unproblematic, in fact benign. There are many issues where economic orthodoxy runs directly counter to common sense but the issue of economic growth is probably the one where the stakes are highest.

Ecological economists have attempted to make a scientific case for the need to end growth or for “degrowth” by pointing to the way that the ever-growing economy is pushing us beyond the safe operating limits of the only planet we will every seriously hope to inhabit. The Stockholm Resilience Centre has developed a model including nine planetary boundaries that must be respected if humanity is to continue to develop and thrive for generations to come. These include crucial supports for life on earth including land, water, climate and the integrity of the biosphere. Back in 2015, they published an article in Science stating that “society’s activities have pushed climate change, biodiversity loss, shifts in nutrient cycles (nitrogen and phosphorus), and land use beyond the boundaries into unprecedented territory”.

This failure to respect planetary boundaries was a central concern of the grandfather of ecological economics, Herman Daly, whom we sadly lost last year. He made 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.” One could make the same case more simply by saying that we should focus on the quality of the economy, rather than its size.

Questioning the link between growth and wellbeing

While economic growth is almost fetishised by most economists, so that the word “recession” is a fearful prospect, the view is gaining ground that many of the social and environmental problems that plague us arise directly from a narrow focus on the size of the economy. In spite of recent falls in real incomes, we have levels of wealth our parents could only dream of. Yet we have record rates of mental illness: 70.9 million prescriptions for antidepressants were given out in 2018, compared with 36 million a decade earlier. Far from adding to wellbeing, citizens are caught in the cognitive dissonance of trying to aspire to the adman’s lifestyle while knowing that this lifestyle is destroying our planet.

The view is gaining ground that many of the social and environmental problems that plague us arise directly from a narrow focus on the size of the economy.

Beyond a certain – and surprisingly limited – material level, there is consistent evidence across a range of societies that more does not make us happier. Clearly, I am writing this from the perspective of a privileged life in a wealthy Western democracy. Growth over the past few centuries has guaranteed me this lifestyle and it would be both morally repugnant and politically unconscionable to argue that growth should not enable those in the low-income countries of the world to also achieve a comfortable lifestyle. It seems much more doubtful that the energy-intensive lifestyle I enjoy could be shared with all the world’s citizens without destroying the very life-support systems we all depend on. So establishing a global standard is a central question underpinning the idea of climate and environmental justice and one that cannot be resolved by the market.

Governments face vital political choices

The critics of growth falter when asked what measure should replace GDP growth as a signal of a successful economy. This seems to me to rather miss the point. Clearly any Chancellor would need a way to measure the economy to gain a sense of how much money was available for investment. But a wise Chancellor would assess which aspects of this economy s/he would seek to encourage (the building of buses and adult education perhaps) and which s/he would seek to limit (advertising for leisure flights or online gambling). To commit oneself whole-heartedly to growth as the key indicator of success would mean to embrace economic activity that is undermining human happiness, leading to the extinction of precious species, and destroying the natural world that is, ultimately, the source of all wellbeing.

This is not a new discussion. The wonderful The Growth Illusion by Richard Douthwaite included a subtitle that summed up the argument nearly 25 years ago: “How economic growth has enriched the few, impoverished the many, and endangered the planet”. We’ve seen the appointment of a Happiness Tsar, chat about a “wellbeing economy” and ‘work-life balance’, and the publication of a report calling for Prosperity Without Growth, that was quietly shelved. While these arguments are won or lost, the relentless expansion of the economy into the biosphere continues. Habitats are destroyed, species lost, lives blighted.

We need a government to have the courage not just to say that it will prioritise wellbeing when measuring its economy – as New Zealand has done – but actually to accept that a smaller economy might be a happier and healthier economy.

This post and the post “Can we make growth work for everyone?” by Paul Ekins are published in connection to the public LSE event “Is There an Alternative to ‘Growth. Growth, Growth’?” Watch the recording of the event here.

All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science.

Image credit: Photo by Ed Robertson via Unplash.