"does growth any longer make us richer, or is it now making us poorer?"

[pscot]

This is a clip from a lecture y economist Herman Daly, given June 1 at the University of Maryland. The full textis at the Oil Drum.

http://www.theoildrum.com/node/5464#more

A steady-state economy is incompatible with continuous growth—either positive or negative growth. The goal of a steady state is to sustain a constant, sufficient stock of real wealth and people for a long time. A downward spiral of negative growth, a depression such as we are entering now, is a failed growth economy, not a steady-state economy. Halting an accelerating downward spiral is necessary, but is not the same thing as resuming continuous positive growth. The growth economy now fails in two ways: (1) positive growth becomes uneconomic in our full-world economy; (2) negative growth, resulting from the bursting of financial bubbles inflated beyond physical limits, though temporarily necessary, soon becomes self-destructive. That leaves a non-growing or steady-state economy as the only long run alternative. The level of physical wealth that the biosphere can sustain in a steady state may well be below the present level. The fact that recent efforts at growth have resulted mainly in bubbles suggests that this is so. Nevertheless, current policies all aim for the full re-establishment of the growth economy. No one denies that our problems would be easier to solve if we were richer. The question is, does growth any longer make us richer, or is it now making us poorer?

I will spend a few more minutes cursing the darkness of growth, but will then try to light ten little candles along the path to a steady state. Some advise me to forget the darkness and focus on the policy candles. But I find that without a dark background the light of my little candles is not visible in the false dawn projected by the economists, whose campaigning optimism never gives hope a chance to emerge from the shadows.

We have many problems (poverty, unemployment, environmental destruction, budget deficit, trade deficit, bailouts, bankruptcy, foreclosures, etc.), but apparently only one solution: economic growth, or as the pundits now like to say, “to grow the economy”-- as if it were a potted plant with healing leaves, like aloe vera or marijuana.

But let us stop right there and ask two questions that all students should put to their economics professors.

First, there is a deep theorem in mathematics that says when something grows it gets bigger! So, when the economy grows it too gets bigger. How big can the economy be, Professor? How big is it now? How big should it be? Have economists ever considered these questions? And most pointedly, what makes them think that growth (i.e., physical expansion of the economic subsystem into the finite containing biosphere), is not already increasing environmental and social costs faster than production benefits, thereby becoming uneconomic growth, making us poorer, not richer? After all, real GDP, the measure of “economic” growth so-called, does not separate costs from benefits, but conflates them as “economic” activity. How would we know when growth became uneconomic? Remedial and defensive activity becomes ever greater as we grow from an “empty-world” to a “full-world” economy, characterized by congestion, interference, displacement, depletion and pollution. The defensive expenditures induced by these negatives are all added to GDP, not subtracted. Be prepared, students, for some hand waving, throat clearing, and subject changing. But don’t be bluffed.

Second question; do you then, Professor, see growth as a continuing process, desirable in itself-- or as a temporary process required to reach a sufficient level of wealth which would thereafter be maintained more or less in a steady state? At least 99% of modern neoclassical economists hold the growth forever view. We have to go back to John Stuart Mill and the earlier Classical Economists to find serious treatment of the idea of a non-growing economy, the Stationary State. What makes modern economists so sure that the Classical Economists were wrong? Just dropping history of economic thought from the curriculum is not a refutation!

Here are some reasons to think that the Classical Economists are right.

A long run norm of continuous growth could make sense, only if one of the three following conditions were true:
(a) if the economy were not an open subsystem of a finite and non-growing biophysical system,
(b) if the economy were growing in a non physical dimension, or
(c) if the laws of thermodynamics did not hold.

Let us consider each of these three logical alternatives. (If you can think of a fourth one let me know.)

(a) Some economists in fact think of nature as the set of extractive subsectors of the economy (forests, fisheries, mines, wells, pastures, and even agriculture….). The economy, not the ecosystem or biosphere, is seen as the whole; nature is a collection of parts. If the economy is the whole then it is not a part of any larger thing or system that might restrain its expansion. If some extractive natural subsector gets scarce we will just substitute other sectors for it and growth of the whole economy will continue, not into any restraining biospheric envelope, but into sidereal space presumably full of resource-bearing asteroids and friendly highly-evolved aliens eager to teach us how to grow forever into their territory. Sources and sinks are considered infinite.

(b) Some economists say that what is growing in economic growth is value, and value is not reducible to physical units. The latter is true of course, but that does not mean that value is independent of physics! After all, value is price times quantity, and quantity is always basically physical. Even services are always the service of something or somebody for some time period, and people who render services have to eat. The value unit of GDP is not dollars, but dollar’s worth. A dollar’s worth of gasoline is a physical amount, currently about half a gallon. The aggregation of the dollar’s worth amounts of many different physical commodities (GDP) does not abolish the physicality of the measure even though the aggregate can no longer be expressed in physical units. True, $/q x q = $. But the fact that q cancels out mathematically does not mean that the aggregate measure, “dollars’ worth”, is just a pile of dollars. And it doesn’t help to speak instead of “value added” (by labor and capital) because we must ask, to what is the value added? And the answer is natural resources, low-entropy matter/energy—not fairy dust or frog’s hair! Development (squeezing more welfare from the same throughput of resources) is a good thing. Growth (pushing more resources through a physically larger economy) is the problem. Limiting quantitative growth is the way to force qualitative development.

(c) If resources could be created out of nothing, and wastes could be annihilated into nothing, then we could have an ever-growing resource throughput by which to fuel the continuous growth of the economy. But the first law of thermodynamics says NO. Or if we could just recycle the same matter and energy through the economy faster and faster we could keep growth going. The circular flow diagram of all economics principles texts unfortunately comes very close to affirming this. But the second law of thermodynamics says NO.

So—if we can’t grow our way out of all problems, then maybe we should reconsider the logic and virtues of non-growth, the steady-state economy. Why this refusal by neoclassical economists both to face common sense, and to reconsider the ideas of the early Classical Economists?

(more)

[aquart]

1. Unrestricted all-consuming growth is called cancer, isn't it?

I mean, something has to feed the growth. Ever expanding CEO salaries and bonuses are fed by meagerly paid benefit-free foreign workers, for instance.

[silverweb]

2. Yup. A malignancy.

Great word.

Unrestricted, unregulated growth is malignant. Just let your mind riff on the word, its root, its various forms, and its meanings.

It fits the context very well.

[drm604]

3. This is saying something I've been thinking for a long time.

How can anyone believe that constant growth for an indefinite amount of time is possible? It seems like common sense that there are going to be limits. I don't like this fact. In fact I hate it. But it seems unavoidable.

[Kutjara]

4. Limits are what define us.

An artist with unlimited freedom quickly becomes a dilettante. A leader with unlimited power quickly becomes a tyrant. A civilization without limits quickly chokes on its own decadence.

Unfortunately, so-called "late-stage" capitalism recognizes no limits. Its fundamental operating principle is that the Earth is unlimited. Labor is unlimited. Resources are unlimited. Technology is unlimited. The only limit, apparently, is time. Everything has to be done RIGHT NOW!

Capitalism is incapable of sustaining life. It consumes and extinguishes life. Life is just another resource to be consumed.

For any sane human being (if such a thing exists any more) production and consumption are merely means of sustaining or enhancing life. The sane person desires food, water, shelter, transportation, because those things allow life to be lived more fully. The insane person desires possessions as ends in themselves. Possessions become meaning; symbol becomes substance. We sacrifice our lives to become consumers. Consumption, in a literal sense, is death.

Capitalism is a parasite, a virus, a cancer. It lives to consume and consumes to live. It does not and cannot have any other goal. "Caring Capitalism" is an oxymoron. Such a thing can't exist. A limited planet produces limited options. For every gain, there is a loss. "Growth" in the West inevitably leads, through an intricate web of interdependencies, to "shrinkage" in thousands of desperately poor regions that can't afford to shrink any more. Such inequities are not a byproduct of Capitalism; they are Capitalism. Winners and losers baby! Which side are you on?

In a small, limited ecosystem (like this tiny planet we inhabit), the only rational goal should be to equalize the gains and losses across all life. Not just human life, but all life. Everything we have is precious, because, for all we know, this small blue marble is the only life-sustaining haven in an otherwise empty Universe. Imagine if, contrary to the best imaginings of scientists, writers, painters, and filmmakers, we truly are alone out here: Earth is all there is. Isn't it our duty to enhance, rather than diminish, life? Shouldn't we be carefully husbanding the incredible, fragile, beautiful and transcendental gift we've been given? Shouldn't we be encouraging the emergence of new modes of living rather than hastening the extinction of the ones that exist? Shouldn't we, to reduce the argument to the simplest possible level, value a virus more than an iPod? If we are just an ephemeral physical epiphenomenon, isn't every single cell all the more precious?

Yet, through a process I can only call economic genocide, we have reduced everything that isn't rich, privileged , First-World, and human to the status of near non-existence. Capitalism thinks only in terms of the consumer and the consumed. If you aren't one, you're the other. When Capitalism fuses with politics, it mutates into an ideology that confuses consumption with popular will . When it fuses with religion, it transforms ruthless exploitation with virtue. When, in the worst of all possible worlds, Capitalism fuses with both politics and religion...well, thats when all the lights go out. And the lights truly have gone out now. For all of us.

[gtar100]

6. We've been having all these bubbles burst in the economy. Maybe the final bubble bursting

will be capitalism itself. The only foreseeable end to capitalism is it choking on its own waste within this finite ecosystem.

We can lament the fate of the earth, but the earth did it to itself. We came from the earth, we are part of the earth and not separate from it. Maybe a correction is coming but that correction is in the form it always takes - massive death (recycling). There is a great deal of grief in thinking about this. I know so many personally and the potential for humanity is truly awesome if we could only escape from our self-destruction. But what can one do?

What happened to that idea about there being a tipping point where if enough people woke up, changed, did what was right for the world, that the rest of the world would follow? It seems more and more people are taking ecology seriously now (if not in name, at least in practice) under the threat of illness, poverty and death. We really are in a race to fix things (if we even can) and the main obstacle that stands in our way is this insane worship of capitalism. I'd change everything right now if I could. But ignorance is my chain to this system.

[Ghost Dog]

5. Great lecture. In a nutshell:

"Development (squeezing more welfare from the same throughput of resources) is a good thing. Growth (pushing more resources through a physically larger economy) is the problem. Limiting quantitative growth is the way to force qualitative development."

Rec'd.