This review first appeared in the Times Literary Supplement on the 10 May, 2018 under the title: Greed is not Good.
The subject of growth is popular with economists, not so much with ecologists. It has been much studied and written about – by philosophers, theologians, scientists, environmentalists – as well as economists. John Stuart Mill in 1857 launched the idea of a “stationary state” – a system of zero growth in population and physical stock, but with advances in technology and ethics.[i]
Nicholas Georgescu-Roegen, student and protégé of Joseph Schumpeter explained the relevance of thermodynamics to economics: the physical fact that mankind can neither create nor destroy matter or energy, only transform it. When we burn a log fire, the logs, heat, ash, smoke, and invisible gases generated, do not disappear. They are merely transformed from a usable form of energy to an unusable form, and cannot be recovered. Entropy is a measure of that unusable energy.
For Georgescu-Roegen the terms ‘production’ and ‘consumption’ obscure the fact that nothing is created and nothing destroyed in the economic process — everything is simply transformed. And because our ecosystem is both finite and closed, the growth of the economy – a sub-system of the ecosystem – is limited by this finitude. Georgescu’s work was seminal to the establishment of ecological economics as an academic sub-discipline in economics.
In his new book, The Growth Delusion David Pilling, a distinguished Financial Times journalist, brings added urgency to this long-standing debate about what he calls the “cult of growth”. One catalyst for the book was Pilling’s experience as head of the FT’s Tokyo bureau. Japan he writes, is “regularly written about as though it were some kind of basket case stuck in perpetual stagnation and without the wits to haul itself out of misery…Japan’s supposed misery – as measured by nominal GDP – really didn’t feel like misery at all. Unemployment was extremely low, prices stable or falling, and most people’s living standard rising. Communities were intact, certainly in comparison to those in America, Britain and France. Crime was low, drug use almost non-existent, the quality of food and consumer goods world class, and health and life expectancy among the highest in the world. And yet, viewed through the prism of economics, Japan was an abject failure.” [ii]
Japan’s lack of economic “growth” turned out to be a flawed measure of its actual condition.
However, while Pilling takes sharp aim at “the cult of growth” it quickly becomes clear that the real target of his book is a single, totemic number: the aggregate measure of the value of a nation’s goods and services produced during a given period – Gross Domestic Product or GDP. A number he argues, that is the driving force behind the cult of endless, exponential growth. “Growth as measured by GDP has become the overlord of measures” he writes: “….the number we use to define success”. Growth has been elevated to an article of faith for most politicians. “The idea of not maximising growth has become almost unthinkable in modern political discourse….growth has become all we care about.”
And yet, and yet: does blame for the “cult of growth’ really lie with a number? While it is true that GDP fails to account for well-being and sustainability, surely it is not just the failure of measurement that is the problem, but the economic policies that drive GDP?
Before WW2 the concept of ‘growth’ scarcely existed, as Geoff Tily explains in On Prosperity, Growth and Finance. Instead economists discussed and debated levels of economic activity. Was the level of employment, investment, or output too high, or too low? If so, what change was required in economic policy? By the 1960s, economists began to reframe the key concept of ‘levels’ of economic activity, and invented the term ‘growth’.
In nature growth begins with birth, moves to maturity and ends in death. In economics ‘growth’ is expected to expand continuously, and to be boundless.
The key advocate for the concept of ‘growth’ was Samuel Brittan of Pilling’s newspaper, the FT. He proudly identified himself as a ‘growthman’. At a time of full employment, he and other economists raised the bar of economic expectations. Full employment was not a sufficient goal. It was to be abandoned. Instead the concept of growth was adopted as the goal of all economy policy by the newly-founded OECD in 1961. An extraordinary fifty per cent growth target was set for Britain for the whole of the 1960s:
“…the world had officially been set a systematic and improbable target: to chase growth. Nobody seems to have paused to consider whether growth derived as the rate of change of a continuous function was a meaningful or valid way to interpret changes in the size of economies over time.” [iii]
In his conclusion, Piling compares GDP to the speed dial on a car dashboard. But his attack on that totemic number amounts to an attack on the dial – and not on the speed at which the car is travelling, or on the driver applying the pedal. The book is a comprehensive review of the impact of the ‘growth delusion’ on a range of economies. It is also a timely warning of how fast the global economy is speeding towards a range of dangerous roadblocks – climate change, populism, financial crises. Tackling these threats requires policy changes; not just adjustments to our system of economic measurement.
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[i] Quote from Herman E. Daly (p.3) Beyond Growth, Beacon Press, 1996.
[ii] P. 15, David Pilling, The Growth Delusion, Bloomsbury Publishing, 2018.
[iii] Geoff Tily, On Prosperity, Growth and Finance, Policy Research in Macroeconomics (PRIME), 2015.