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The Question of Growth by Jonathan Dawson

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‘Since the earth itself is developing without growing, it follows that a subsystem of the earth (the economy) must eventually conform to the same behavioural mode of development without growth.’  - Herman Daly

There was an interesting piece recently by the UK’s shadow Industrial Strategy Minister, Chi Onwurah, making the case for ‘smart, sustainable growth’ as remaining at the heart of Labour’s plans for the economy  

Interesting for several reasons.  First, because the steady-state/de-growth position is sufficiently on the radar of labour party activists and members that a shadow minister feels a need to try to de-bunk it.  Second, because Chi Onwurah demonstrates an encouragingly literate understanding of the field.  Here we have a shadow minister drawing on the work of pioneering ecological economist Nicolas Georgescu-Roegen and long-wave theorist Carlotta Perez.  This in itself is encouraging!

That said, and despite Ms Onwurah’s erudition, there are a three major holes in her defence of growth. 

First, she critiques Georgescu-Roegen’s application of the second law of thermodynamics (relating to entropy) to economics, on the grounds that entropy, or the dispersal of energy, applies only within closed systems – whereas the Earth is in fact an open system receiving ‘enough energy from the sun every hour to power the planet for a year’. 

However, the Earth is an open system with regards to energy, but not with regards to matter (excepting the occasional meteor shower).  As Mark Burton says in his critique of Ms Onwurah’s paper, ‘materials cannot be synthesised from sunlight and there are increasing carbon emissions from concrete and steel production, deforestation and soil destruction.’  In short, there are very real physical constraints to growth – irrespective of how much solar energy may be available to our economies.

Second, Ms Onwurah equates ‘steady-state’ economy with the end of innovation and dynamism.  She paints a picture of stasis, where the human gift for creativity lies idle as we fall into a sad state of lethargy and torpor.  But nothing could be further from the truth! 

Steady-state does not mean hitting the pause button on innovation.  Rather, it means redirecting innovation in ways that will enable us to reverse the ever-expanding throughput of energy and material in our economy.  In this process, many sectors and activities (agroecology, renewable energy technology and generation, care and craft activities, etc.) are likely to experience rapid innovation and growth, but within a context of overall contraction in material throughput.
As we remove subsidies, internalise externalities and shift taxation away from goods (employment, investment, innovation) to bads (earth despoiling activities in their multiple forms), so the innovation that will be favoured is that which minimises our impact on living systems. 

In the language of economics, the incentives will shift from favouring increases in labour productivity (a.k.a minimising the workforce and cashing in natural capital) to increases in resource productivity (doing more with less).

Third, Ms Onwurah suggests that steady state will be the equivalent to the global consumer class pulling up the ladder, abandoning the world’s poor to a life of impoverished misery.  Without growth, poverty will always be with us. 

However, this is to badly misread the data on trends in poverty which suggests that the benefits of growth accrue disproportionately to the already wealthy.  A recent UNCTAD study, for example, found that $111 of additional growth in GDP is required to achieve a $1 reduction in poverty for the poorest. 

Assuming 1993 – 2008 patterns of income growth, the study finds it would take 100 years for all the world’s population to reach a floor of $1.25 per day (purchasing power parity), and 200 years to achieve $5 per day (which the authors consider ‘a more realistic reflection of requirements to fulfil basic needs’). 

To achieve this, the global economy would need to expand by 15 times to hit the 100-year target and a staggering 173 times for the 200-year target.  (David Woodward, Incrementum ad Absurdium: Global Growth in a Carbon-Constrained World, UNCTAD, 2015).  

The report concludes that: ‘poverty eradication………….can be reconciled with global carbon constraints only by a major increase in the share of the poorest in economic growth far beyond what can be realistically achieved by existing instruments of development policy.’

The logic is clear: if the aim is to come back within planetary boundaries and reduce global inequalities, it makes sense to put these at the heart of policy-making rather than to assume they will magically manifest as a by-product of growth.

Jonathan Dawson is a senior lecturer and coordinator for MA Economics for Transition