Managing Without Growth: Slower by Design, not Disaster
Managing Without Growth: Slower by Design, not Disaster
by Peter Victor (Edward Elgar Publishing 2008)
260pp. including bibliography and index
Review by Derek Paul
Hundreds if not thousands of intellectuals across the world have by
now come to their own conclusion that continued economic growth on this
planet no longer makes sense, since the present rates of consumption in
developed countries are unsustainable. Nevertheless,
any mention of an economy without growth brings derision in business
and government circles, to the point that it cannot seriously be
mentioned. It is a non-starter. But the facts are that in the developed
countries our economies have grown too much along with our populations,
and these countries have mostly allowed their ecological footprints to
become much larger than the biological capacity of their land and
fisheries to sustain them. For instance, the ecological footprint of
the Netherlands exceeds the biological capacity of its lands by a
factor greater than four! A plot of the world’s ecological footprint
from 1961 to 2005 is to be found in Peter Victor’s fig. 6.1. This most
enlightening graph is key to the necessity for change in the way we run
our economy. For more than 20 years, we have been living off the bounty
that should belong to future generations.
It requires a great deal of temerity to embark upon a serious work on
an economy without growth, and it needs skilled presentation to bring
it off. Peter Victor has managed this well, beginning with much of the
history of growth, excellently referenced, and providing a fine list of
earlier authors who have warned of the impossibility of growth
continuing indefinitely. By citing key works in economics at every
stage, the author builds up a case no economist could lightly dismiss.
It is essential that economists and people in business read this book,
because it plots possible first stages toward a future economy that
will eventually have to be sustainable. It behooves others to read this
book too, as it contains the elements with which one can defend oneself
against the nonsense protagonists of growth can hurl at anyone
proposing new economic thinking.
The centerpiece of this volume is chapter 10, which describes an
aggregated economic model capable of projecting economic futures that
would follow from diverse policies or scenarios. The model is called
LowGrow, and had already been published in an academic paper. LowGrow
tells us very candidly that one could pursue a no-growth policy that
would be disastrous, but it also reveals alternative slow-growth paths
leading to no-growth that are beneficial in all respects. None of the
graphs in chapter 10 shows a sufficient reduction in greenhouse gas
emissions, but then all the scenarios plotted were based upon market
forces being the only ones operating. Considerably more progress in
reduction of ghg emissions could be achieved by adding further
regulations or incentives beyond the basic no-growth policy. LowGrow
has the great merit of looking at poverty and poverty reduction. The
author’s final graph, fig. 10.6, shows a LowGrow result in which the
GDP grows slowly, leveling off in 2035, while ghg emissions are
slightly reduced; unemployment is reduced relatively more; poverty is
reduced yet more; and the debt-to-GDP ratio becomes very low, almost
negligible. Chapter 10 also makes us consider the length of the working
week, since the trend of weekly working hours has been downward since
1870, and likely will have to drop further in a no-growth economy – to
maintain high employment. The major success of LowGrow is that it
demonstrates objectively the possibility of a no-growth economy at a
higher per capita GDP than we have now and with much less poverty. In
the end it is people who make decisions. Since an economy without
growth is unavoidable in the long term, the question is how best to
steer society in that direction. Peter Victor has demonstrated
disastrous routes as well as very beneficial ones. We have been warned.
Critics of the discipline of economics, disparagingly called the dismal
science, will be disappointed to see the GDP used as the measure of
economic output. This much-discussed topic has been treated many times,
but still financial gurus across the world continue to use GDP, knowing
full well that it is an inaccurate measure of the health of the
economy. Any alternative to GDP is fraught with complications, and
would be harder to sell to conventional or conservative readers, so the
author has retained the GDP, while making its limitations very clear.
In this way he will at least be using language familiar to his readers
- who ought to be very many, as this is a timely and important book.
Managing Without Growth has few errors and they are unimportant. The
most complex and difficult part is chapter eight, which deals with
economic growth and happiness, the general progress indicator,
consumption, useful goods, status goods and public goods. The same
chapter introduces another model, called HappyGrow, and also the
concepts of utility and marginal utility in economics. One could well
write a whole book on these topics, wisely kept to a single chapter by
the author. He would have done well to explain better the usefulness of
the economic concept of utility, which is somewhat obscure in chapter
eight. He failed to define marginal utility, though its definition can
be deduced from fig. 8.7 and the definition of utility in 8A Annex.
Somewhere in the annals of economic history, there must be a rationale
for the definition of utility being a logarithmic function of
consumption but, in chapter eight, the reader is left to make an
educated guess.
People who believe they have souls may be disheartened (dispirited?) to
find that they are but robots or consumers in economic theory, but they
are allowed happiness and happiness indices, so this should be some
compensation. But note, they don’t get their happiness by loving
someone and constantly giving of their best or praising God; happiness
comes from being employed, consuming just the right amount, and gaining
status on a relative scale that is different for each person. Wow!
Tags: economy