Growth means money, not happiness or sustainability. By GDP-per-head, the United States outranks all EU nations, bar Ireland and Luxembourg. Toss other factors into the standard-of-living mix – wellbeing, equality, longevity, environmental impact – and the US slides down the table, coming 108th out of 140 nations in the Happy Planet Index.
Critics argue that the current growth model is simply not sustainable. According to some, we actually need to shrink the economy to save the planet. De-growth, according to its advocates, is the only way to prevent catastrophic climate change and exhaustion of the world’s resources. An economic growth rate of 3 or 4 percent a year means a doubling of human consumption every 20 years. By some estimates we will need two Earths to keep us going by 2030.
Yet the world does not want to stay poor. Billions in Asia, Africa and Latin America are aspiring to own iPads, air-conditioning and flat-screen TVs. Can the rich world just call time on growth at the very moment the citizens of emerging economies are poised to enjoy benefits Westerners now take for granted? In China, the embrace of the market saw over half-a-billion people pulled from poverty between 1981 and 2007. De-growth would mean the poor staying poor.
What do our readers think? We had a comment from Tom arguing that part of the problem is how we measure success. Economic growth is, according to Tom, the wrong way to measure progress; there are other factors, such as social and environmental costs, that should be measured as well.
To get a response, we spoke to Paul Allin, co-author of the book “The Wellbeing of Nations” and a visiting professor at Imperial College London. His research interests include the measurement of national wellbeing, as well as measures that go beyond traditional economic statistics such as GDP to include quality of life and environmental sustainability. What would he say to Tom?
I agree very much with what Tom says. Indeed, many people are already saying those sorts of things. I get back to the Stiglitz and Fitoussi report published in 2010: “Mismeasuring Our Lives – Why GDP Doesn’t Add Up”. They argued for a wider spread of measures to be taken into consideration.
In fact, wider measures of progress are already available. It’s not that GDP is the only thing published by statisticians, it’s just that GDP gets a lot of media attention. Here in the UK, for example, people forget that the Office for National Statistics already puts out wider measures of economic wellbeing and measures of the state of the environment. All of these were brought together in the UK under a programme called “Measuring National Wellbeing”. So, having the measures is not sufficient – we actually have to do something with those measures.
To get another reaction, we also spoke to Alessandro Magnoli Bocchi, founder and CEO of Foresight Advisors and a former senior economist with the World Bank. What would he say to Tom?
Tom is right. We need to measure success in multiple ways. Many indicators should be taken into consideration and GDP is one. We should not abandon GDP; it is a necessary measure of success, but it is not sufficient on its own.
First of all, we need to know what kind of society we want to build. Then success is the degree of achievement of that goal. So, I take from Tom that the society he wants to build is one that still grows, so GDP is still important. But it’s got to be inclusive growth, so the Gini coefficient is important. It has to have low levels of pollution, and high levels of education, health, and gender equality, so the Millennium Development Goals are important. So, I’m saying that GDP is important, but then you have to add other things.
Tom is right, but there are already people who are thinking about this. There have been institutions such as the World Bank that have adopted a multi-formed approach to measuring success. If the objective is to build an inclusive and more equal society that still grows, we need to consider all of the above. If you look only at GDP you risk having an incomplete picture, but at the same time you cannot ignore GDP.
We also had a comment from Peter, who believes that low growth isn’t necessarily a bad thing. He believes Europe doesn’t need to grow more then 2% per annum to remain prosperous. In fact, Peter argues that low growth could even be beneficial, helping to limit the amount of natural resources we consume. Is Peter right?
I don’t think we, as yet, know the precise values of what growth rates should be. I would take a broader view and say we need to look at a wider set of measures and see what we’re doing to the environment in our own country and around the world, and a good way of doing that is to use a broader set of measures that are used internationally. The United Nations is trying to do that under its Sustainable Development Goals. So, the principle is certainly to take a broader look at all these issues. I don’t think I’m in a position to be able to say what any individual country’s growth rate should be. That’s more for governments to work out on the basis of a broader set of measures.
Finally, what would Alessandro Magnoli Bocchi say to Peter’s comment? Would he agree that there are benefits to low growth?
No, I disagree with Peter. Growth is needed for convergence. Developing countries need to grow in order to catch-up in terms of living standards. If you really want a society with growth, wealth, inclusiveness, good hospitals and schools, you need to be wealthy so you need to grow. Go and try to explain to a mother from the Amazon, or Kosovo, or Russia that their children should not have the same levels of education and health as others because somebody decided that too much growth is bad, and they probably would not vote for Peter in elections. They would be right.
When growth is fast, then income inequality rises. This is one of the costs of fast growth. But to remedy that we have policies. Government should regulate fast growth and make sure the Geni coefficient doesn’t deteriorate.
But to say “We are rich, let’s grow at 2%” is a complacent view. If you are rich, you attract migrants, so you cannot be growing at 2% if you need to absorb millions of migrants. Society is constantly changing. There is immigration, there is ageing, there are new needs. So a static view is the wrong one to have. We need a dynamic view, and we should always have some growth to meet those changes.
Should we focus less on economic growth and more on wellbeing? Can too much growth be a bad thing? Are there benefits to focusing less on growth and more on environmental sustainability? Let us know your thoughts and comments in the form below and we’ll take them to policymakers and experts for their reactions!