Uneconomic growth
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Uneconomic growth, in welfare economics, human development theory and some forms of ecological economics, is economic growth which reflects or creates a decline in human well-being. The concept is variously attributed to Herman Daly and Marilyn Waring, though other theorists are also often credited:
For instance, in Daly's 1999 Feasta Lecture, "uneconomic growth in theory and in fact", he cites John Ruskin, then William Nordhaus and James Tobin as having identified the issue. His own colleagues John Cobb and Clifford Cobb developed, with Daly, a formal analysis that emphasized "the cost of GNP growth - in other words, the social and environmental sacrifices made necessary by that growing encroachment on the eco-system." [1] (http://www.feasta.org/documents/feastareview/daly.htm). See other articles below by Jonathan Rowe, Linda Baker, Judith Silverstein, Ted Halstead, and the theory that has led to a potential solution: the Genuine Progress Indicator.
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Good vs. bad growth
The term itself is controversial as present techniques of managing money supply and setting reserve policy at most central banks assumes that "all growth is good" and "all inflation is bad".
Under these assumptions, policies that many consider ecologically or socially nonsensical can be defended politically as making "economic sense" - a term that can be considered just as nonsensical, since an economy cannot exist without a supporting society and natural climate and ecology.
For example, in 2001 the G. W. Bush administration declared that the Kyoto Protocol was "dead" as it "did not make economic sense for America." When Bush further omitted greenhouse gas controls from a 2002 pollution control bill, despite objections from some in his own cabinet, this was widely considered, especially in Europe and Canada, as a commitment to an ideology in which all forms of growth must be good, regardless of their impact on other peoples or nations, or on the climate and ecology, on which all life and economy depend. In other words, Bush proved he did not believe in 'uneconomic growth'.
In Europe this decision was largely taken as being foolish or at best selfish. Most infrastructural capital is very specialized for the current climate and natural ecology that it is installed in, and would be useless in a drastically different environment, e.g. that of Europe is very dependent on the warming of the Gulf Stream, and the agricultural economy would collapse there without this warming. Whether American greenhouse gases would actually cause this to happen, of course, is an open science question. But, if they did, growth in America could destroy capital in Europe, and that in itself proves that uneconomic growth can happen under some circumstances. War is another example.
Difficult to detect
However, this demonstrates two central problems with theories of 'uneconomic growth' - first, they are necessarily global in scope while nations are not - and second, typically they rely on long-term longitudinal studies that can be performed only looking backwards across relatively long spans of time, while a political decision must typically be made without time to gather data, and of course must look forward not backward. This issue has been extant since the very beginnings of the theory of uneconomic growth:
As part of the analysis that led to the creation of human development theory out of the older fields of welfare economics and ecological economics, in the 1990s, it was claimed that well-being in all developed nations peaked in the period 1979-1982, and had been declining (although GNP and GDP had been growing) since. Thus some growth was assumed to be ultimately 'uneconomic', that is, damaging well-being rather than enhancing it. But, of course, the damage had already happened, and many policies were put in place in the 1980s and 1990s to promote growth as such, not improve well-being, which according to the "trickle-down" theory of economic management, was supposed to improve proportionate to growth. There was a substantial debate about these ideas at the time, which has developed a sharper focus over time:
Underlying theories of value
Critics of the idea of uneconomic growth argue that, whether well-being is increasing or decreasing, people must take deliberate steps to accelerate its increase or limit its decline (in the long run, everyone's quality of life must decline to zero - death). These steps lead to remediation, medical, or other expenditure that shows up as economic growth legitimately. Life causes harm and economies can mediate that if individuals have freedom to choose their own remedies. Whether growth has caused harms of its own, they say, is not the same question as whether the growth itself is human activity seeking an increase in their well-being. This "pursuit of happiness", they argue, is one of the key goals of a free society (it appears in the US Declaration of Independence), and cannot be characterized easily in economic terms.
These critics often argue that stricter standards of moral purchasing, especially for governments, are of more use than attempts at measuring intangible 'well-being' across the whole population. Such attempts to invent objective standards of value must fail since there is little or no consensus on what constitutes well-being. However such critics do in fact apply uniform standards of what degrades well-being, in what they choose to ban or differentially tax:
As an example, the G. W. Bush administration called in 2002 for Americans to cease using imported illegal narcotic drugs on the grounds that they provided funds to terrorist organizations - clearly a call for expressing a moral choice in buying and consumption decisions. But paradoxically, it did not call on Americans to reduce their foreign oil consumption, leading to the Detroit project, a series of ads which parodied the Bush ads, and accused SUV drivers of funding terrorism and destroying the climate (thus likely creating even more anti-US terrorists) by driving gas-guzzlers. Both sides agreed that some standards of moral purchasing should apply, but differed sharply on which products, and which impacts, mattered.
Hopelessly political?
The question of economic versus uneconomic growth is, as this example shows, hopelessly 'political' in that it cannot be separated from the basic beliefs about market systems that different factions have. A larger discussion of these definitions and decisions is in the article political economy, which focuses on challenges to the assumptions of dominant technical paradigms in economics, including that of 'growth'.
A closely related question is whether there can be such a thing as full cost accounting - since people vary on what costs they believe are assignable to what outcomes.
See also
- economic growth
- political economy
- measuring well-being
- moral purchasing
- money supply
- welfare economics
- human development theory
- ecological economics
External links
- "The Growth Consensus Unravels" by Jonathan Rowe. Dollars and Sense, July-August 1999, pp. 15-18, 33.
- "Real Wealth: The Genuine Progress Indicator Could Provide an Environmental Measure of the Planet's Health" by Linda Baker. E Magazine, May/June 1999, pp. 37-41.
"The GDP Myth: Why 'Growth' Isn't Always a Good Thing" by Jonathan Rowe, and Judith Silverstein. Washington Monthly, March 1999, pp. 17-21.
- "If the GDP Is Up, Why Is America Down?" by Clifford Cobb, Ted Halstead, and Jonathan Rowe. Atlantic Monthly, October 1995, pp. 59-78.
- [Herman Daly], first annual Feasta interview (http://www.feasta.org/documents/feastareview/daly.htm), 1999, on "uneconomic growth in theory and in fact"