Center for the Advancement of the Steady State Economy
Regular Contributors:  Herman Daly, Brian Czech, Brent Blackwelder, James Magnus-Johnston, and Eric Zencey. Guest authors by invitation.

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Five Myths About Economic Growth

by Brian Czech

Brian CzechMyth #1. It’s economic.

To be economic, something has to be worth more than it costs. Economic activity, per se, is more beneficial than detrimental. Technically speaking, “marginal utility is greater than marginal disutility.”

If you liked a rug, but liked your grandkids more, it wouldn’t be smart to grab the rug out from under them. That’s basic microeconomics. Yet if we look around and reflect a bit, doesn’t it seem like all that economic activity is pulling the Big Rug out from the grandkids at large? Water shortages, pollution, climate change, noise, congestion, endangered species… it’s not going to be a magic carpet ride for posterity.

Growth was probably economic for much of American history. But we have to know when times have changed and earlier policy goals are outdated. In the 21st century, when we’re mining tar sands, fracking far and wide and pouring crude oil by the ton into the world’s finest fisheries, trying to grow the economy even further is looking like a fool’s errand. That’s basic macroeconomics.

Myth #2. Economic growth is often miraculous.

Right now we’ve got the Chinese miracle. We’re supposed to be on the cusp of an Indian miracle. Seems like we already had a more general Asian miracle, having to do with “tigers.”

We’ve had Brazilian, Italian, Greek (yes Greek), Spanish and Nordic miracles. There’s been the Taiwan miracle, the miracle of Chile and even the Massachusetts miracle. Don’t forget the earlier Japanese miracle and more than one historic German miracle.

Let’s hope these aren’t the kinds of miracles they use to determine sainthood. Saint Dukakis, anyone?

No, economic growth was never, anywhere, a “miracle.” It’s never been more than increasing production and consumption of goods and services in the aggregate. It entails an increasing human population or per capita consumption; these go hand in hand in a growing economy. It’s measured with GDP.

Whoop-de-do, right? Maybe Wall Street investors and journalists are an excitable lot, and it’s easy enough to be surprised by a growth rate, but “miracle?”

Container ship.NOAA's National Ocean Service

Photo Credit: NOAA’s National Ocean Service

 

Myth #3. Growth isn’t a problem for the environment, because we’re dematerializing the economy.

Now that would be a miracle.

Let’s get one thing straight: The economy is all about materials. “Goods,” in other words. Oh sure, services matter too. But the vast majority of services are for purposes of procuring, managing or enjoying our goods.

The biggest service sector, transportation, is responsible for enormous environmental (and social) impacts. Transportation is instructive, too, about the relationship between goods and services. People don’t line up at cash registers demanding random acts of transportation. No, it’s all about moving materials—goods or people—from point A to point B, and moving them economically. Every form of transportation takes energy as well as copious supplies of materials (for vehicles and infrastructure) and space.

With all the talk of “de-materializing,” surely there must be services that transcend the physical, right? What about the Information Economy?

Myth #4. The human economy went from hunting and gathering through agriculture and on to manufacturing, and finally to the Information Economy.

Don’t forget our lesson from the transportation sector: no transportation for transportation’s sake. In the “Information Economy,” what’s all that information going to be used for? If it’s not going to be used in activities such as agriculture and manufacturing (and transportation) how is it going to matter for economic growth?

The fact is, there never was—or always was—an information economy. Pleistocene hunters needed to read mammoth tracks more than we need to read our Twitter feed.

Now when it comes to processing information, the computer was more or less a “revolutionary” invention, like the internal combustion engine was for transportation. But what’s less material about it? Just as today’s hunters have semi-automatic rifles with high-power scopes, they have (material) computers that help them gather information for buying more (material) guns, scouting more (material) terrain and shooting more (material) deer. Anything about that seem greener than before?

Information has proliferated alright, in lock step with the material goods and services it’s been used for. Yet to speak of the “Information Economy” seems like grabbing for some type of economic miracle, and we’ve all seen how cheap miracles are in economic rhetoric.

Myth #5. At least economic growth is egalitarian, because a rising tide lifts all boats.

Once upon a time the rising tide metaphor may have had some merit. In the 21st century—think resource wars, climate change, endang­ered species—it’s more like a rising tide flooding all houses. Which brings us back to Myth #1.

It seems like all the talk of economic growth was overblown, more the result of Wall Street excitement and political rhetoric than sober thought. Maybe what we really want is economic slenderizing.

 

 

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16 Responses to “Five Myths About Economic Growth”

  1. John Doyle says:

    Good list. I agree. I have spent a lot of time, being semi-retired I could not do in the past understanding the truth about money and finance. It is utterly different from mainstream thinking [actually non thinking]
    I also am of the opinion we have to crash first before any reset, like to a sustainable economy, will get a hearing. The change over is enormous. Renewables are not a solution. They are based on fossil fuels and we don’t have the spare energy slaves to make it work on a grand scale, especially now energy is getting too costly both for suppliers and for consumers. Renewables are just for local use. It would take the equivalent of 200 three Gorges dams to match the electricity equivalent of one year’s petroleum consumption. So there we have Myth#6.

  2. Greg Gerritt says:

    The more I study economic development, the more obvious it becomes that most of what passes for development is actually the rich stealing. Old industrial economies like New England are going to shrink, and for 90% of the populaiton shrinkage began 20 years ago. the pretense at growth is about giving subsidies to millionaires for real estate transactions with the intention of inflating the tax base, which cities then do not tax anyways.

    Our goal in this work has to be to make the transition as painless and non violent as possible. The way i approach it is to be in every public deb ate in my community with an ecolo9gical healing and economic justice as the way forward framing to counteract the boosterism of the shills for the rich.

    Yesterdeay i met with the policy director for the State Treasurer and reminded her that they were never going to meet their investment return expectations on the state3 pension investments, becasue if they did in a low growth environment, all it would be doing is making 90% of the people of Rhode Island poorer.

  3. Karen says:

    I would love to see you debate Paul Krugmen or Steve Moore. I heard their Freedom Fest debate and was frustrated that resource limits were not even discussed. Have you ever thought about having a debate of ideas like their Freedom Fest?

  4. Karen says:

    Continuing …they could publish it in their papers and it would give you guys some much needed publicity.

  5. Holly Dressel says:

    Exceedingly helpful for teaching purposes, and depressing that such absolutely obvious and immutable facts are still so unknown to the public that it’s required. We should be on step 9 of re-vamping an alternative economic theory, not still explaining why this one doesn’t and cannot work. Could we have maybe that list sometime too? Thanks again!

  6. Charles Hall says:

    Good start Brian. But not enough for my taste about energy, peak oil, EROI etc.

    John (and others)

    May I suggest Hall and Klitgaard “Energy and the Wealth of Nations: Understanding the biophysical Economy. (Springer or amazon) ” Will greatly expand your perspective.
    Comes with a personal guarantee: If you do not think it worth the money I will buy it back for what you paid for it.

  7. Guido says:

    We are components of the Earth, that’s an psychophysic Organism. Economic growth is a terrible pathology of the Earth. I hope its end is near.

  8. Of course I agree with all this, but I find the post disappointingly general and vague. If we want SSE/degrowth to be taken seriously we have to do more than offer a critique of GDP growth, and provide clear, concrete, strategic policy options and proposals for how support for them can be won in the context of our (corporately) captured liberal democracies.
    Moreover it is necessary to counter the green growth lobby/and their naive optimism. An example can be found in the latest New Climate Economy report, that although now pretty much admitting that absolute decoupling isn’t happening, persists in the fantasy that we can mitigate climate change while growing economies, with the latter being facilitated by the former actions. Their background report on aviation and shipping in particular needs detailed analysis and response since it suggests enormously increasing global transportation while reducing emissions, through tech efficiency gains, without thought of what such a trade boost means for extraction, production and waste. The very general discussion in Brian’s post is just not sufficient for this task.
    CASSE really does need to think more clearly about the building and support of social movements to secure a post-growth future and pay heed to the need of decision makers to have practical proposals to work with.

  9. Emily Dale says:

    For many of my almost 90 years I have viewed the term “economic growth” as a fallacy. One entity’s “growth” comes at the expense of another’s and always will.

  10. Tom Kelly says:

    Although I agree wholeheartedly with the myth definitions suggested by Brian and that the growth agenda which is still in full swing with no evidence that recent attempts to breath life into it have done anything but dig us deeper into global debt by filling the pockets of the perpetrators. I would suggest that we are watching maintaining life support on an all but dead patient, with no prospect of future life even if it survived this crisis.
    I like the suggestion that we perhaps need “economic slenderizing”, but I would have some difficulty in describing the enormity of the task to the IMF, World leaders, bankers, and captains of industry, even if they suddenly agreed that measures taken in the past to stimulate economy were no longer relevant to today’s situation.
    I think I agree with John that a serious economic crash is the only thing that might make them see sense, but the impact on we humans across the planet might well be catastrophic, with global conflicts firing off through shear desperation. e.g ever more massive migration problems from poor to richer countries.
    In historical times disasters both natural and man-made sometimes occurred, which wiped out substantial numbers of lives and at the time were devastating, but they created targets for recovery programmes, and there were still lying there the as yet undiscovered natural resources waiting to be exploited by human ingenuity. Exponential growth rates of population starting with relatively small numbers did not appear to be unmanageable. Today we don’t have the same disasters, but , because of our growing expertise in medical science we have a population which is growing rapidly, with minimum infant deaths, and increased longevity at the other end, and the same exponential increments result in huge numerical additions to population.
    On top of all that we are rapidly reaching the end of the road for extracting natural resources, while our leaders still plan for huge increases in air travel, and continuing space exp[loration as if tomorrow will never come.
    In conclusion : our world is in an awful mess, and there are no easily implemented answers.
    If there is one, it is essential that population growth must become negative with a target sustainable figure, probably no more than half what it is at present. We could be talking about centuries to achieve this.

  11. Steve Edmondson says:

    I very largely agree with Tom Kelly. The root cause of mankind’s troubles lies with over population. Hooked as they are on material wealth, western societies must be held to account for wrecking much of the natural environment, a process that many of the respondents clearly understand.
    And who can blame citizens of poorer nations wanting a share of the seductive lifestyle of the arrogant, wealthy west? Let us not forget that European and later North American cultures have colonised, subjugated and imposed their thoughtless, trivial values on otherwise sustainable simple cultures since, just about, forever. Globalisation of commerce and manufacturing had continued the process, and speeded up the decline. This looks likely to continue.
    Is there a solution that would ensure the survival of humankind? Sadly I think not. The best we can hope for is a rapid realisation of the dire state of things and a quick global meltdown that leaves sufficient caring peoples to rebuild a sustainable world.

  12. Steve Cullinan says:

    John Doyle “It would take the equivalent of 200 Three Gorges Dams to match the electricity equivalent of one years petroleum consumption”…? Don’t doubt, but do you have a source?

  13. Brian Czech says:

    Yes of course, Mark. Have you read Supply Shock? That’s where you’ll find at least some of what you’re looking for. An 800-word blog post is what it is: something quick and general to get readers and publics onto a topic, seeking deeper answers. Thanks. And for technical starters on the myth of green growth see: http://steadystate.org/wp-content/uploads/Czech_Technological_Progress.pdf.

  14. Andrew D says:

    Thanks for the post. One point I feel like I’ve struggled arguing with others is the lack of de-coupling of some economic growth from resource depletion.

    For example – take computer gaming. Yes it uses electricity and some hardware, but surely the:
    (i) purchase of a £30 game and playing it for 300 hours; or
    (ii) paid subscription to a blog site

    uses less energy than a lot of other activities. Surely we’re doing more of this on average, which represents some de-coupling? I appreciate the impact might not be sufficient and may be heavily outweighed by population growth / increased average consumption, but are you saying that there is zero de-coupling?

  15. Aquifer says:

    The analogy that always made sense to me is the obvious one – Mother Nature’s “system” that has been responsible for producing, sustaining, maintaining all life forms for eons …

    Simply – life forms are physical “objects”, not disembodied bits and bytes. As such we depend on physical inputs, food, water, air that are not infinite in amount but continuously recycled through the system. And each entity cannot consume ever growing amounts without, per force, crowding others out – MN answer, built-in limits to physical growth, and not just on a macro level – think about what you, I, or anyone, would be like as an adult if we continued to grow at the same rate we did as a child … Does ANYONE out there think that would be a desirable goal to pursue …. This is true for just about any life form out there – and i suspect that no one out there would argue that the paradigm for “perpetual” growth in the biophysical world – cancer – is a suitable model for ant system any thinking person would wish to pursue …

    In fact, as we mature, we tend to shrink in size, individually requiring less “input” to sustain us – i.e. MN system requires “shrinking” at one end to provide for “growth” on the other. Likewise, if “economies” are really systems for sustaining and maintaining life forms, insofar as they involve, as they must, the management of physical inputs and outputs, as they “mature”, they, it seems to me, perforce, must not simply “contemplate”, but actively incorporate, the same concepts ….

    It has always struck me as rather strange that those who argue for “growing” green economies have ignored the basic fundamentals that the original “inventor” of green (MN) has laid out …

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