I promised to write some more about degrowth after kicking off with Jason Hickel and Kohei Saito. Now it's the holidays and I have time, so here we go!
We are continually told by politicians and economists that economic growth is essential for our continued and improved wellbeing. It's not immediately obvious why this should be so - if we already have all we need to live a good life, why do we need to keep getting richer? The first clue to answering this question is to ask what our politicians and economists mean by 'economic growth' - what it is and what it is not. Here are three sets of thoughts.
Measuring something, but what?
Viewed simply, economic growth is an increase in what is produced and sold in a country over a given time. How do we even know what this total is? Well, in fact we don't, but the Australian Bureau of Statistics attempts to measure it by means of the Gross Domestic Product (GDP), as do their counterparts in various nations all over the planet.
The GDP is a strange beast. The first version of this measure (the Gross National Product) was developed during World War 2 by US economists as a way of taking stock of the national economy so it could be mobilised and reoriented towards the war effort. Simon Kuznets, one of its key architects, didn't think it was great general measure of economic wellbeing but, with various modifications, it has become central to the way we see a nation's economic health. If it goes up, we feel the economy is going well. If it goes down, or even if it stays the same, we feel it is going badly.
The first thing you need to understand about the GDP is that it's a proxy, not the real thing. What it measures is the sum of things (goods and services) that are exchanged for money in the legitimate economy. It doesn't provide any pointers about whether the things being exchanged are good or bad, helpful or unhelpful. Nor does it measure anything that is not exchanged for money, or where the exchange is hidden for various legitimate or illegitimate reasons.
This produces some perverse outcomes. For instance, if I hire someone to mow my lawn, this contributes to the GDP (unless they fail to declare their income to the tax department). If I mow the lawn myself, the only GDP contribution is the fuel I buy. Yet the output is exactly the same. If one of my children or grandchildren comes and mows it for me for love because they feel I am too old and frail to do it myself (I am not...yet!) this also does not register as part of GDP, even though once again the outcome is the same. Even if I pay my grandchildren to do it this doesn't register because it is treated as a gift and of course they don't file tax returns.
The GDP is, in fact, blind to pretty much any informal transaction. If I move to somewhere with no lawn and give my lawnmower away, or even sell it for a small sum, this is not measured even though it is a legitimate economic transaction. It is also blind to various lucrative industries like the sale of illicit drugs which account for unknown but substantial economic transactions which, for obvious reasons, are not reported on any official accounting system.
On the other hand, one way I could make a personal contribution to economic growth is to buy large quantities of alcoholic beverages from my local bottle shop and get blind drunk every evening. This would be a far more growth-positive economic strategy than my current one, which involves buying an occasional six-pack which sits in my fridge for months waiting for the occasion when I get visited by a beer-drinking friend or I feel the need for a tipple. Economic growth is good, right? Similarly, if I drive so badly that I write off a car every couple of years and have to replace it, this is much better for the economy than if I drive carefully and therefore keep the same car for years, or if I ride my bike or walk everywhere.
I could go on to discuss the military-industrial complex, the perpetual expansion of fossil fuels and other harmful industries but you get the picture. GDP measures various things, but it doesn't accurately measure the totality of our economic activity and is blind to whether the things it measures have any actual benefit and whether they cause harm. If money changes hands and this is visible to the bean counters, it contributes to GDP. It's a bizarre thing to use as the cornerstone of government policy.
Rich people's yacht money
One of the most pernicious things about the use of GDP as the measure of economic health is that is is blind to distribution. It gives us a gross figure - the total transactions in an economy. It will also give us a 'per person' measure which is just derived by taking the total and dividing it by the country's population.
We all know that this isn't how the world works. Some people eat sumptuous meals at expensive restaurants, others visit food charities to get them to the end of the pay fortnight. Some live in mansions, others sleep in their cars. So when we see that the economy is growing but numbers of homeless people are also increasing we have to ask, 'for whom is the economy growing?'.
At the same time, wages are not keeping pace with inflation, particularly for those on the lowest incomes. ACOSS's Inequality Report 2024 shows that from 2014 to 2019 median wages only just outpaced inflation. Then from 2021-23, when inflation increased, wages didn't keep up - a 4.2% increase in the median wage compared with inflation of over 6%. So those relying solely on wages went backwards. Between 2015-16 and 2019-20 (the most recent year they calculate this data for) the share of total national income earned by the bottom 40% of households declined from 21% to 18%, while that of the highest 40% increased from 63% to 65%. So while the super-rich see their assets go through the roof, the merely ordinarily rich slowly become better off and the poorest fall behind. Wealth is even more unequal - the highest 10% had average wealth of over $5m, while the lowest 20% had average net wealth of just $41k.
A little while ago I read someone on social media suggesting that whenever we hear politicians talking about 'the economy' (as in 'we won't take climate action if it harms the economy', or 'lower taxes are good for the economy') we should delete 'the economy' and replace it with 'rich people's yacht money'. This where the economic growth is going.
With this in mind, we could understand the term 'economic growth', as measured by the GDP, as a rhetorical trick played on ordinary working people. We are told that the economy must keep on growing so that we will have the resources to fix our homelessness problem, pay everyone a decent wage and so on. But our decades of steady growth have been accompanied by a worsening of these problems. Why? Because this growth is providing rich people with yacht money, not going to meet the basic needs of poor people.
Eating tomorrow's lunch today
A final issue with economic growth, as measured by GDP, is that it doesn't incorporate any measure of sustainability. It is a purely short-term measure, showing the output of the economy each year but blind to any reduction in resources. When we mine minerals, the more we mine the more the economy (rich people's yacht money) grows, but the minerals in the soil are steadily depleted. The faster the yacht money increases, the sooner the minerals will run out. The same applies to any natural resource - forests, agricultural soil, fish stocks, climatic stability.
Measuring the economy in this way doesn't simply leave us open to the risk of future harms - it makes them almost certain. There are great rewards to be had by eating tomorrow's lunch, and any politician who suggests we should stop doing this will be labelled an extreme leftist (which in the circumstance may actually be a compliment). No politician in Australia, outside the Greens and a few brave independents, is game to take steps to genuinely rein in such future-eating - for instance, by imposing a carbon price, phasing out the coal and gas industries or developing a proper set of environmental protection laws. Rich people's yacht money is just too important to be curtailed in this way.
Measuring what matters
I began this article by suggesting that degrowth can seem like a fantasy. In actual fact, the failure to address sustainability makes degrowth an inevitability. If we gorge on tomorrow's lunch today, we will have to go hungry tomorrow, and most likely on each of the subsequent days if we have eaten not only the food but the soil it is grown in.
Hence, the real question is not 'should we pursue degrowth?' - we are already doing that, although the penny has not yet dropped - but 'how should we manage it?'. If we simply plough ahead, pretending it's not going to happen, it's almost certain to be the poorest who will suffer while the rich do everything in their power to protect their yacht money. If you doubt it, look at what is happening in the US right now. So those of us who think the rich should have their yacht money curtailed to ensure the poor can still live need to give some thought as to how that can happen.
I will, of course, be taking about this in subsequent posts. Here I want to close by talking about measures. If the GDP is such a poor measure of our economic wellbeing, what else could we use instead? Fortunately, there is no shortage of alternative measures. Here's just a few of them.
The Sustainable Development Goals
This is a set of goals adopted by all the UN member states in 2015, and consists of 17 goals and 169 targets. The goals include no poverty, zero hunger, good health and wellbeing, quality education, gender equality, clean water and sanitation, affordable and clean energy, decent work and economic growth, industry, innovation and infrastructure, reduced inequality, sustainable cities and communities, responsible consumption and production, climate action, biodiversity on land and sea, peace, justice and strong institutions, and partnerships to achieve these goals. It's a pretty comprehensive list of things which make for good human life, a sustainable planet and peace and wellbeing, with economic growth nested among a host of practical wellbeing measures. Sure it's complex, but we're talking about governments here, they have resources to measure such things. It's currently measured at a global level, and I'm sure you won't be surprised to learn we are lagging on many of these measures.
At the opposite pole of complexity is the Human Development Index, which is based on just three measures - human health, measured by average life expectancy at birth; education, measured by average years of schooling for adults aged 25 and over; and standard of living, measured by Gross National Income per capita. The index is calibrated to reduce the importance of income per capita as it increases, reflecting an understanding that as you get wealthier an increase in your income is less significant to your wellbeing. It's not perfect by any means - it still doesn't really properly account for distribution, and doesn't address sustainability, but at least it measures wellbeing along with production and consumption. This is measured on a country-by-country basis and the results show that the highest scores are for wealthy countries with strong social democratic traditions.
The Genuine Progress Indicator
The Genuine Progress Indicator (GPI) is an alternative to the GDP initially developed in 1995 by the US not-for profit Redefining Progress. It was used around the world in the late 1990s and early 2000s although interest has dropped off in recent years. It combines a set of 26 indicators encompassing the economy (consumption, inequality, prices, underemployment), environmental indicators (pollution, habitat loss, soil quality, greenhouse gas emissions, resource depletion), and a set of social indicators (family wellbeing, volunteering, crime, travel costs etc). It answers the problems of GDP directly, building in both sustainability and social equality goals.
The Global Social Progress Index
This is a measure of wellbeing developed and run by a US-based not-for-profit, the Social Progress Imperative. This index brings together a series of indicators that analyses data at three levels. At the highest level are three headline indicators - Basic Needs, Foundations of Wellbeing and Opportunity. Each of these brings together data from four areas of wellbeing, and each of these are built on between four and six specific pieces of data. Like the Sustainable Development Goals it encompasses questions of health, housing, nutrition and safety, education and access to information, environmental quality, political and individual freedom and inclusivity. This data has been collected each year since 2011 for 170 countries so you can look at trends in the overall score or in individual indicators, by nation or globally. The data is rich and rewards a deep dive - it shows some countries progressing while others (including rich and powerful ones) stagnate or go backwards, and it shows the world doing well in some areas and poorly in others.
The Living Standards Framework
Many nations and states have developed their own alternative frameworks, which are used to a greater or lesser degree to guide national policy. Some of these are largely lip-service, like the UK's Measuring National Wellbeing Program. On the other hand New Zealand's Living Standards Framework, developed and managed the the New Zealand Treasury, is central to decisions about government resource allocation. It includes a range of measures related to individual wellbeing, institutions and governance, and wealth (including the natural environment, physical assets, social cohesion and human capability). This data is published on a dashboard where you can drill down into individual issues or see the overview.
None of these measures is perfect, but all of them provide a fuller and more useful picture than the GDP, and therefore have the potential to guide us to better policy and a better set of social and economic priorities. To make the best use of them, we need to stop giving top priority to rich people's yacht money, and start to get serious about the long-term wellbeing of people and planet.
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