Economy and the environment:growing pains


That is the big and controversial question posed in an excellent new report from one of the government’s own advisory groups, the Sustainable Development Commission. For a bunch of Whitehall insiders even to title a report Prosperity Without Growth? is brave and possibly foolhardy – especially amid a bitter recession when growth is sorely needed. But by the same token, a crash this big must make us reflect on how we ended up in this mess – or else run the risk of repeating it. And in the UK, the obsession with growth shares the blame. As chancellor, Gordon Brown was proud of his economic record. In budget speeches he would rattle off GDP numbers, sounding like a rather smug road drill. Yet the sources of this British growth were dangerously narrow. In the dying days of the great boom, in early 2007, finance and business services accounted for almost half of it. The headline numbers were indeed splendid; but there was to be a terrible twist in the tale.

To be fair, Mr Brown was only giving the voters what they apparently wanted. For decades, GDP growth has been associated with prosperity and national success. Yet GDP is merely a calculation of all the marketable goods and services an economy produces. It takes no account of where the income comes from or how it is shared out, rendering it a flawed yardstick of progress or wellbeing. Cleaning up another Exxon Valdez would increase GDP – but it is a boost we would be better off without.

The environment is often the biggest casualty of our reckless pursuit of growth. Industrialising countries swap agrarian poverty for congestion, pollution and natural degradation so that, as the economist Jayati Ghosh notes, soil quality in India has dropped 30% in the last 10 years. Over in the rich world, we fret over carbon emissions and global warming. The solution, say optimists, is green growth; but that appears ever more optimistic. Rather than use this crisis to shift towards a low-carbon economy, politicians prefer safety-pin solutions: an auto bailout here, a VAT cut there.

In any case, placing all our chips on decarbonisation is risky. To be in with a fighting chance of keeping global warming down to 2C – while still growing both population and GDP at current rates – there would need to be a 21-fold drop in the carbon content of a unit of economic output by 2050. To achieve that at the same time as allowing developing countries to get out of poverty would require a 130-fold improvement in carbon use. Technology and emissions trading on their own cannot pull that off in time.

All of which could leave Europeans and Americans with little option but to ease off the economic accelerator, even while Africans and Asians keep developing. Instead of working feverishly while accumulating and consuming ever more, we could live at a slower pace and have more time for socialising and interests. Economists have touched on these ideas before, but never developed them. When greens talk approvingly about a “steady-state economy” they are swiping a phrase from John Stuart Mill. Even Keynes, back in fashion as the godfather of consumption policies, talked beguilingly of a go-slow future in which “we shall once more value ends above means”. Such debates must be revisited while there is still time; or we may find ourselves staging them in the shadow of an ecological cataclysm.