Prosperity without growth?

Ronald Reagan once said, “There are no great limits to growth, because there are no limits of human intelligence, imagination, or wonder.”  In the United States, growth is mostly unquestioned as a source of prosperity and happiness.  In fact Reagan, under the influence of economist Milton Friedman, believed that the U.S. could prosper, as long as the economy was freed from government influence.  Neo-classical assumptions rule U.S. economic development, to the point where politicians of the right and the left wings both fervently believe it in. Barack Obama, during a campaign speech in Berlin, said:

“This is the moment when we must build on the wealth that open markets have created, and share its benefits more equitably. Trade has been a cornerstone of our growth and global development. But we will not be able to sustain this growth if it favors the few, and not the many. Together, we must forge trade that truly rewards the work that creates wealth, with meaningful protections for our people and our planet. This is the moment for trade that is free and fair for all.”

Obama, like Reagan, believed that growth was essential, but he felt that we should take some of the surplus and provide it to the poorest Americans.  He also understood the importance of “meaningful protections for… our planet.”  Based on the policies his White House has proposed during the first 18 months of his administration, Obama clearly believes that we can protect the planet – preventing runaway anthropogenic climate change – by relative decoupling, a reduction in the ecological intensity per unit of economic output.  Like Reagan, he has faith that Americans will continue to discover technology that will make unending growth possible, with greater efficiency and greater performance.

However, that faith in human innovation is running directly into the ecological limits that Earth provides.  With a growing population, with increasing standards of living, unending growth is in doubt.  In Prosperity Without Growth, Tim Jackson examines the dilemma of growth, and how prosperity and flourishing relate to it.  He writes that: “the truth is that there is as yet no credible, socially just, ecologically sustainable scenario of continually growing incomes for a world of 9 billion people (the United Nations projected 2050 global population).”

If we assume that continuing growth is not sustainable, then what norms can guide economic activity?  Jackson identifies an important factor that helps to inspire our need for growth, our “tendency to imbue material things with social and psychological meanings:”

“Consumer goods provide a symbolic language in which we communicate continually with each other, not just about raw stuff, but about what really matters to us: family, friendship, sense of belonging, community, identity, social status, meaning, and purpose in life.”

With the limits of growth, on an Earth with an expanding human population, finding ways to circumvent that opulence, to find a way to short-circuit the positional race.  In the United States, that race was known under the mantra ‘Keeping up with the Joneses.‘  The task, it seems is to decouple those important qualities, which Martha Nussbaum identified in her essay “The Good As Discipline, The Good as Freedom,” from material opulence.    In contemporary societies, the institutions that can best influence and nurture that decoupling would be religious and community groups.  Institutions that would be most affected by that kind of shift would be groups like the Chamber of Commerce, that favor growth at all costs.

Additionally, another norm that can help to guide the transformation of the economy, and society, would be an emphasis on quality in everything that we produce.  Right now, the goal of growth encourages the production of cheap, disposable objects that consumers will need to replace.  These cheap goods are often produced on the other side of the Earth from where they are consumed, in Third World economies.  An emphasis on quality, and the nurturing of artisan producers, would help develop local economies to sustainably, and collectively, prosper.  The nurturing of local production would also reduce transportation, and environmental costs.

Our companies are designed to maximize efficiency at the cost of people and the planet.  To trace one example, by making meat production local, the meat becomes more expensive; however, that meat better bears its cost to the environment and to our continued prosperity.  This emphasis on quality and local production would impact the global business world, namely the companies which have grown on such a scale as to become more powerful than many States.   For example, ConAgra is a dominant player in food production.  They are already being affected by the locavore movement, and have bought numerous brands in order to find a niche in that economy.  The question of course, is whether we, as consumers, will nurture the artisans instead of the ConAgras of the world.

Advertisements

Indeed, the world is ruled by little else.

Economist Milton Friedman

John Maynard Keyes wrote in 1945 that “the day is not far off when the economic problem will take the back seat where it belongs, and the arena of the heart and the head will be occupied or reoccupied, by our real problems – the problems of life and of human relations, of creation and behavior and religion.”  In the United States, we have pursued a policy of unquestioned growth and expansion, following the recommendations of prominent economists with an ardor that borders on religiosity.  However, the economic problem, as Keynes described it, has not taken a back seat, but rather has the developed world in the grip of a severe recession.

In the United States we have always looked to economists for the magic to make our economy go.  Milton Friedman, winner of the Nobel Prize in Economics, believed that a free market economy could expand and prosper with minimal government interference. Alan Greenspan, an admirer of Friedman, was revered as an enabler of unending growth during his service as Chairman of the Federal Reserve; he received the Presidential Medal of Freedom, the inaugural Harry S. Truman Medal for Economic Policy, the inaugural Thomas Jefferson Foundation Medal in Civilian Leadership, and was named both a Knight Commander of the British Empire and a Commander of the French L’Egion D’honneur.  Presidents from Ronald Reagan to George W. Bush all trusted Greenspan with the keys to the economy.  During the same time period, Bill Clinton, a Democrat, trusted economist Larry Summers’ advice that deregulation of banking and finance would also lead to continued growth; that was the height of Milton Friedman’s influence.  Barack Obama appointed Summers to be Chairman of his Economic Council despite the fact that his policies were partly at fault for the current economic crisis.  Why do all of these Presidents, from Reagan on the right to Obama on the left, put so much faith in these economists?  Keynes, in The General Theory of Employment History and Money (1935), addressed this question.  He wrote that:

“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.”

The economic policies of the United States have become more and more complex since Keynes’ time.  Over the decades, as the United States left the Gold standard, and created a dynamic economy reliant on the growth of consumption and continuous expansion, we have relied and trusted economists to make it all work.  Most Americans who do not work on Wall Street have trouble understanding even some of the basic terminology and concepts used in finance today.  Many of us learned what a Collateralized Debt Obligation was last year, and discovered how debt was securitized in such complex ways that even some of the old hands in charge of major firms didn’t really understand.  Americans trusted economists to drive our growth, and while many don’t understand the problems we face, they expect economists to create a deus ex machina to miraculously get us out of the recession and onward to unending growth.