Posted by: davenlu | September 20, 2011

Is Economic Growth Always a Good Thing?

Is Economic Growth Always a Good Thing?

by Marianne Comfort, Sisters of Mercy of the Americas

Many economic forecasters are lamenting the nation’s minimal economic growth, as measured by the oft-cited Gross National Product (GNP) and Gross Domestic Product (GDP)[1]. But some economists argue that GNP and GDP are not the right yardsticks, particularly when unemployment is the primary concern. They rightly point out that creation of decent jobs often fails to accompany economic growth, while job creation can happen in the absence of economic growth.

Indeed, many economists have called the past two years, following the official end of the most recent recession, a “jobless and wage-less recovery.” During the first seven quarters of recovery, corporate profits rose by $491 billion or 41%, while civilian employment remained at 734,000 below the recession low in 2009[2]. Both hourly and salaried workers experienced a weekly wage decline of 1 to 2 percent over the “recovery” period. The federal Department of Labor recently announced that there was no job growth at all in August.

What is perhaps a more fundamental argument against economics-as-usual, though, is the unsustainability of our ever-increasing production and consumption of goods and services. The earth could sustain 1.2 billion humans at the current rate of North American consumption. Yet the global population is now 7 billion and is expected to increase to 9 billion by mid-century. Clearly something needs to change.

Envisioning a “New Economy”

A new breed of Ecological economists is calling for a restructuring of the economic system that puts the well-being of people and the Earth ahead of financial markets and profits for the few. Motivated by the realization that continued economic growth isn’t sustainable, and spurred on by the current economic dislocation, these economists have articulated what they call a “new economy” or a “steady state economy.”

Herman Daly, emeritus professor at the University of Maryland’s School of Public Policy, is one of the founders of this new field of ecological economics. He points out that continuing to grow the economy when the costs are higher than the benefits is actually uneconomic growth. He says that the United Nations has classified five types of uneconomic growth:

  • jobless growth, where the economy grows, but does not expand opportunities for employment;
  • ruthless growth, where the proceeds of economic growth mostly benefit the rich;
  • voiceless growth, where economic growth is not accompanied by extension of democracy or empowerment;
  • rootless growth, where economic growth squashes people’s cultural identity; and
  • futureless growth, where the present generation squanders resources needed by future generations.

Does this sound familiar?

A steady state economy, by contrast, is one that is stable or mildly fluctuating in size and that lives within ecological limits. Features of a steady state economy include a stabilized population, where there’s not the constant need to create more jobs for increasing numbers of young people entering the workforce; efficient and sustainable use of materials and energy; and replacing labor with automated processes only if it is sustainable to do so.

Proponents of a steady state economy argue that in an economy obsessed with growth, corporations continually seek higher and higher profits, which can lead to decisions detrimental to local communities, such as moving facilities to where wages are lower and environmental standards weaker. They cite economists throughout history who envisioned a day when “society could focus on ends (happiness and well-being, for example) rather than means (economic growth and individual pursuit of profit).” And they cite evidence that that day is coming, pointing to the growth of cooperatives and locally controlled businesses and financial systems.

“With a backbone of sustainable local businesses, this economy will be less susceptible to outside disturbances, such as falling stock prices, dwindling oil supplies, or ageing power grids,” according to the website of the Center for the Advancement of the Steady State Economy. “By developing and supporting local cooperative business ventures, citizens keep wealth circulating in their communities, which are marked by an enhanced sense of place and vitality. All of this means a solid supply of local jobs, and most of all, an enhanced sense of connectivity that comes from participating in the local economic scene.”

Rethinking the Growth Paradigm

The new economy movement similarly “seeks an economy that is increasingly green and socially responsible, and one that is based on rethinking the nature of ownership and the growth paradigm that guides conventional policies,” Gar Alperovitz, Lionel R. Bauman Professor of Political Economy at the University of Maryland, wrote in a May 2011 article for The Nation.

The New Economics Institute (NEI), a new collaboration among economists and environmentalists, is joining with other organizations to develop detailed indicators of sustainable economic activity. “As many scholars have demonstrated,” Alperovitz writes, “the gross national product indicator is profoundly misleading: for instance, both work that generates pollution and work that cleans it up are registered as positive in the GNP, although the net real-world economic gain is zero, and there is a huge waste of labor on both sides of the effort.” One of NEI’s priorities is to develop indicators that measure genuine economic gain, environmental destruction and even human happiness. Another NEI priority is a detailed econometric model of how a very large economic system can move away from growth as its central objective.

The New Economy Working Group, meanwhile, is helping to develop and promote sustainable local economies and sustainable job initiatives through joint partners the Institute for Policy Studies and Yes! magazine.

A “three-part plan for building prosperity in an age of limits” laid out in a recent issue of Yes!  includes (1) local economies and ecosystems, (2) redefining the middle class as people working fewer hours for less pay but having more time for family and community, and (3) shifting public resources away from the military and returning to Clinton-era tax rates to allow for investments (and jobs) in infrastructure repairs, health care and education.

“The corporate economy has failed to offer economic security to most Americans and has undermined the environment and the living standards of people around the world,” according to a fall 2011 article by Yes! Editors Sarah van Gelder and Doug Pibel. “Strong local and regional economies are the way to a sustainable and resilient recovery.”

Building up Local Economies

They suggest buying locally in order to keep money circulating in the local economy and generating local jobs. For every $1 spent on a local business, 45 cents is reinvested locally, according to a 2007 Yes! magazine report; for every $1 spent in a corporate chain store, only 15 cents is reinvested locally.

Buying local involves not only foods and other goods but also locally generated energy, investing in weatherization, forming worker cooperatives and banking with local financial institutions. It also includes finding ways to turn local assets — such as a vibrant arts scene, a hospital, a university, forests or farmland — into sustainable livelihoods. And it includes turning wasted resources into jobs.

Among the examples cited in the Yes! magazine’s fall issue on “new livelihoods” are:

  • local entrepreneurs creating jobs by disassembling obsolete buildings and selling components
  • businesses developed around used clothing, books and repairable appliances
  • church kitchens certified for food processing start-ups
  •  Southwest Creations Collaborative in Albuquerque, N.M., that offers living-wage jobs to immigrant women doing handwork, contract sewing, packing and labeling and offers them benefits such as on-site child care, English-language classes, and paid time-off for parent-teacher meetings at their children’s schools
  • A business in Portland, Ore., that makes soups and delivers them to neighborhoods throughout the city by bicycle

Cleveland’s Evergreen Cooperatives — which grew out of a collaboration that includes the Cleveland Foundation, the City of Cleveland and local universities and hospitals — is the most ambitious project the magazine describes. Organizers discovered that three of the city’s institutions were spending more than $3 billion a year on goods and services, mostly out of their surrounding community, where unemployment exceeds 25 percent. They began launching worker-owned cooperative businesses – including a laundry, solar panel installation, a neighborhood magazine, and a hydroponic greenhouse – that serve area grocers and ‘anchor-institutions’: a hospital and a local university..

Despite such innovative ideas, obstacles to a broad new economy abound. Among them, Alperovitz says, is skepticism among progressives and labor groups about slowing or even reversing conventionally defined economic growth. “In theory an economic model that redistributes employment, consumption and investment in a zero- or reduced-growth system is feasible, but it is a very hard sell in times of unemployment, and it is a direct challenge to the central operating principle of the economic system,” Alperovitz writes. “It is also a challenge to the priorities of most elements of the progressive coalition that has long based its economic hopes on Keynesian strategies aimed at increasing growth.”

He sees some hope in efforts to support “green jobs,” such as the Apollo Alliance (which aims to create 5 million “high-quality, green-collar jobs” over the next 10 years) and the BlueGreen Alliance, a partnership of major labor and environmental groups dedicated to expanding the quality and availability of green jobs. And he finds hope in the interest of the United Steelworkers in alternative forms of economic enterprise, such as unionized cooperatives based on the Mondragon model in the Basque region of Spain.

Perhaps the current economic hardship will serve as a catalyst for the emergence of these alternatives, which put enterprises in the hands of workers and small entrepreneurs. And if we can stay focused on where real happiness lies – in the deeper values of our faith and community connectedness – we may just find a way to reinvigorate our democracy at the same time.


[1] The GNP measures the market value in a given time period of all final goods and services produced by businesses owned by U.S. citizens, regardless of where those businesses are located. GDP measures the market value of goods and services produced within the U.S., regardless of who owns the companies.

[2] “Who Has Benefitted from the Post-Great Recession Recovery? A New Look at the Growth Performance of Jobs, Wages, Corporate Profits, and Stock Price Indices During the First Two Years of Recovery,” Prepared by: Andrew Sum Joseph McLaughlin; Center for Labor Market Studies Northeastern University Boston, Massachusetts, July 2011

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Responses

  1. Good post. This organisation here in Britain publish a lot which might be worth a read http://www.neweconomics.org/programmes

  2. Ms. Comfort – great article! I love the work BlueGreen Alliance and New Economy Working Group are doing. I’m working on a related effort – creating the antidote to GDP, a new index to measure human progress, that explicitly addresses our multigenerational and psychospiritual natures. I’d love to hear your thoughts. http://cdi-hp.org
    Best,
    Brandon

  3. Thank you for this article. Great food for thought and action!


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