Prosperity and economic growth

Fander Falconí

Over the past two years much has been said in Europe about Tim Jackson’s book on ecological macroeconomics: “Prosperity without growth. Economics for a Finite Planet”, already translated into 30 languages. The author was responsible for the report on economics for the Sustainable Development Commission, an advisory body to the UK Government, in 2003-2011. Tim Jackson, well-known for his previous works on the social psychology of consumption, does not recommend the economic non-growth “medicine” to countries like India, China or Ecuador. But in countries where annual per capita income has reached USD 15 thousand, it is possible to verify that an increased income does not necessarily mean greater satisfaction or happiness. That is the so-called “Easterlin paradox”, corroborated through many a line of research.

Growth of the GDP per capita – after a certain threshold (USD 15 thousand per capita a year, for instance) – do not result in a higher degree of happiness within that people. This is known as the “Easterlin paradox”, which claims that happiness bears no relation with the income or consumption levels of people. Nowadays, psychologists are carrying out extensive research on this topic of happiness. In fact, Daniel Kahneman, was awarded the 2002 Nobel Prize on Economic Science for his work integrating postulates of psychology and economics. A true example of the disparity between economy and happiness is offered by wealthy countries’ societies. Today, an American citizen is almost three times as well-off as the average American in 1950. But despite their increased wealth, US citizens are not happier today than their fellow countrymen from fifty years ago.

On the other hand, we seem unable to detach economic growth from an ever-increasing consumption of energy and materials. The metabolism of society is on the increase. The relationships between material and energy flows and socio-economic activities have led to concepts like “social metabolism” – as an analogy to the digestive and excretory functions of the human body.

In Latin America, protests against great open-pit mining abound (in Argentina, Peru and Colombia, for instance), and we are well acquainted with the environmental damage or liability caused by gas and oil extraction in the Peruvian and Ecuadorian Amazonas. An entry on the debit side for one person implies an entry on the assets side for another. Human activities in connection with consumption and production generate this kind of rights and responsibilities, whose holders are the “agents” who interact within the economy. Economic activities, however, cause a different kind of liabilities that directly affect nature and us, human beings. These are called “environmental liabilities”.

That would explain why Tim Jackson, in line with other ecological economists, such as Kenneth Boulding, Nicholas Georgescu-Roegen, Herman Daly, Peter Victor, Joan Martínez-Alier (according to a Serge Latouche), is proposing a prosperous economy for rich countries, but one without growth. A slow-moving economy that would allow the planet to get back into shape.

At the launching of his book in Barcelona in January, professor Tim Jackson claimed: “It is time we stopped aligning development with the squandering of resources: give the planet a break; choose services that leave a light ecological footprint, such as light consumption of materials, low-CO2 emission jobs, and promotion of health and personal services”. He also stated that “the current financial crisis is related to the ecological crisis. One of the factors in the crisis that burst in 2008 was an increase in the price of raw materials like crude oil”. We are reaching the peak regarding oil extraction.

What must be at the heart of the economic boost in Europe, Japan and the United States is not consumption but public investment: in energy saving and renewable energies, as well as in the provision of community-oriented services. This “Cinderella” economy, as Jackson calls it, has so far been relegated due to the fact that it is not profitable to capitalists. Yet social and care services represent only half the average carbon concentration and foster human welfare. In Europe, however, they are cutting down health care and education in order to be able to pay back debts they should not have made greater in the first place, with the false illusion of continued growth. The examples of Greece and Spain are excellent to examine what is it that happens whenever neoliberal policies are pursued.

Growth is no longer a synonym of welfare. The European notion of reactivating consumer economy “with credits we cannot afford to pay back” must be rejected. “Economy must be focused on the true needs of people, not on meaningless consumption”.
Now, if economy experiences no growth, what will happen to employment? The number of unemployed people are certain to increase. It is then necessary to provide everybody with a basic citizenship income, as well as providing support to employment within the “Cinderella” sector. People need to feel useful. The stigma of unemployment is damaging to human welfare. Employment must therefore be provided to all, and given as much importance as all other social activities: family, friends, the community, creative leisure, physical activity. We might say, with Castoriadis: what would you rather have, a new friend or a new Mercedes Benz?

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4 Responses to “Prosperity and economic growth”

  1. If we really want “slow-moving economy that would allow the planet to get back into shape” we need to move beyond green growth as a tool for sustainability and poverty eradication. In less than 90 days the world might reach such a light agreement in Rio+20 that business as usual must have to stop because nature will not offer a “license to operate”. Biomimicry is a must!!

  2. Wilmer says:

    Great things have been inventing, in essence, due to the top countries of the world, specially things that follows the principle of creative destruction. However the objective and rationality implemented since 50’s in Economic Analysis and since the beginning of times in economic rationality don’t take into account that the unique restriction of the maximization utility problem is not far enough to get the optimal quantities of “n” goods. There’s a time to think back this rationality process and stablish a relation that can takes into account not only that the production, utility and “n” objectives functions shares the properties of desutility in the second derivative or lower acceleration of product but to stablish a transversality condition that can be admisible to prevent the extintion of that “n” goods. BEst regards from an Ecuadorian living in Madrid.

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