Economic growth and wellbeing – any connections?
“Growth of industrial and agricultural production is the battering ram with which we shall smash the capitalist system” said Soviet Premier Nikita Kruschchev in 1958. The capitalist system, on the other hand, was determined to use economic growth to smash communism, so in 1961 OECD countries set their own growth targets: 50 per cent by 1971, to match the Soviets.
This utterly ridiculous (and ecologically and socially murderous) state of affairs is described by Giorgos Kallis in the section on the history of the idea and practice of economic growth (The invention of growth and the construction of its hegemony) on pages 68-74 of his book De-Growth (2018). Kallis is but the most recent in a long line of critics who have been debunking growth ever since the 1960s.1 It has to be said (regretfully) that this has had no effect whatsoever on the ideology of growth, which reigns supreme as the only form of measuring stick acceptable to those who rule contemporary polities and economies, regardless of their political labels.
For an illustration of this fact look no further than New Zealand’s so called Wellbeing Budget, delivered on May 30, 2019. Although the Budget’s definition of wellbeing (p 5) says that it is necessary to look “beyond economic growth on its own” it nevertheless considers “sustainable economic growth” to be an important contributor to wellbeing. Therefore a major focus of the Budget is “to give more New Zealanders the ability to share in the benefits of a strong and growing economy”. (Ability – not right? Benefits – are these self-evident? Are there no costs to growth? How then to interpret facts such as 95% of lowland waterways becoming unfit for swimming after a decade of industrial dairy farming growth?)
So how will this wellbeing be delivered? The Budget uses the economistic language of ‘capitals’, which is strange enough in itself – as though human beings and non-human entities exist merely or primarily to invest and/or be invested in. This is especially evident in the section on the first capital ‘Financial and physical capital: our built and financial assets’. On the first page (p. 12) the term or concept of economic growth occurs seven times. The next most common term or concept – wellbeing – occurs four times.) The two are usually linked, as in “it is the quality of economic growth that is important for raising New Zealanders wellbeing and living standards.” (Sorry to be such a nitpicker, but quality of growth? That requires a whole footnote on this seemingly oxymoronic concept – see below.).2
The Budget goes on to say (p. 13) that wages are growing but incomes are “lower than many of our OECD peers and New Zealand’s labour productivity has been below the OECD average for over three decades.” The 2019 Budget thinks this is a problem, saying: “Productivity growth is a key driver of incomes, both at a household and a country level.” Really? That’s not what the European Trade Union Institute says happened in EU countries between 2000 and 2016, where “productivity (as GDP/worker worked) in 2016 was 10.5 per cent higher in real terms than in 2000, while real compensation in the same period increased by a mere 2.45 per cent. Real productivity increase was thus more than four times the increase in real wages, which means that three quarters of the achieved labour productivity growth was not paid out in the form of wages. In Hungary, Romania, Portugal and Greece, real wages went down in the last 16 years, while productivity increased. Productivity increased three times more than wages in Germany, Ireland and Croatia, and two times more than wages in Poland, Belgium and Austria.”
It’s also not what has been happening in the USA since the 1970s. The Economic Policy Institute reports “From 1973 to 2017, net productivity rose 77.0 percent, while the hourly pay of typical workers essentially stagnated—increasing only 12.4 percent over 44 years (after adjusting for inflation). This means that although Americans are working more productively than ever, the fruits of their labors have primarily accrued to those at the top and to corporate profits, especially in recent years.” Feel free to find other sources which are not so critical of the wage-productivity linkage assumption, and have ‘alternative facts’ to back up their views – and if at the same time if you can find me a skilled tradesperson employed in industry in New Zealand whose real wages went up as their level of skill also rose in the past three decades – I might believe you.
But wouldn’t we all want to believe that our wellbeing would improve if our incomes improved, and that the key to improving our incomes was being more productive? Indeed, but the inconvenient truth is that the research on the wellbeing/income connection shows that beyond a certain level (which covers all the necessities and a few extras) the connection between self-reported wellbeing and income breaks down, and indeed that the gap between the excess wealth of the few and widespread poverty causes damage to personal wellbeing above and beyond ‘just’ living with material deprivation on a daily basis.
In any case, the contradictions behind the concept of productivity and its supposed relationship with work were well-exposed by Raoul Vaneigem over fifty years ago, when he wrote “In an industrial society which confuses work and productivity, the necessity of producing has always been an enemy of the desire to create.” He then traces the history of this false elision of the two concepts from antiquity to feudalism to capitalism, and asks “Why has nobody seen that the principle of productivity simply replaced the principle of feudal authority? Why has nobody wanted to understand this?” 3
Vaneigem’s question is rhetorical – and as relevant now as it was then. If not more relevant, for in the Human Capital section of the Budget I find that the main things which seem to be growing are mental illness, suicide rates and youth unemployment, while in ‘Natural Capital: our environment’ the news gets even worse. Figure 11 (p. 16) shows that New Zealand’s greenhouse gas emissions from all sources grew steadily from 1990 to 2007, then took a dive (as did world emissions, due to the Great Financial Crisis which cut production and trade dramatically), then grew again until they were above 2007 levels by 2013. Also growing during that time were freshwater pollution in farmed areas, soil erosion and biodiversity loss.
Not to worry – the Budget goes on to say (p. 17) that there is “increasing evidence that low-carbon, climate-resilient growth can be progressed alongside other … goals.” So naturally I looked for the initiatives in the Budget that would achieve this. I found plenty of growth-oriented initiatives, but so far not a lot of evidence that this Budget (or the so-called Zero Carbon Bill) will do anything more to reduce greenhouse gas emissions and mitigate against climate crises than any of the previous budgets, which were also firmly within the growth paradigm and its fatal obsession with producing and consuming life on Earth to death. Science, technology and innovation in renewable energy sources are supposed to a big part of the solution, but….. just how impossible that all is when compared to biophysical reality, and hence why de-growing the economy and reducing energy use is the only possible and realistic path, is explained by Brian Davey in Propaganda for renewables: a critique of a report by Oil Change International
According to the French economist Thomas Piketty, in his monumental work Capitalism in the Twenty-first Century, rapid and spectacular economic growth of the sort which was seen in the middle years of the twentieth century was a once-only event which relied on unique circumstances which are extremely unlikely to ever be repeated. The world is reverting to rentier capitalism, with its attendant gross inequalities. There were and always are social limits to growth (as explained by Fred Hirsch in his book of the same name in 1977) and the ecological limits were passed some time ago. There has never been any connection between economic growth and personal or social wellbeing, and there never will be. Wellbeing depends on free, equal, loving and caring relationships with human and non-human beings at every level. Such relationships are not economic values or goals, and can be achieved regardless of what the economy is doing. That’s why some ‘poor’ countries (e.g. Bhutan) are doing a lot better on achieving them than some ‘rich’ countries (e.g. the USA). Ensuring that they are valued and prioritised by those in power, and that all steps (some of which will indeed be economic) are taken to realise them in practice – now that would be a political programme worth developing as a real and realistic alternative to the economic growth delusion.
1 Critiques of and alternatives to the economic growth paradigm
Some of the key texts that discuss growth as a problem, not the solution, and what the problems with it are, are listed in chronological order below. There are many other books critical of economic orthodoxy which also cover the applications of growth as ideology as part of the necessary critique.
Mishan, Edward (1967) The Costs of Economic Growth
Daly, Herman (1971) Toward a Steady State Economy
Georgescu-Roegen, Nicholas (1971) The entropy law and the economic process
Meadows, Dennis & Donella Meadows (with Jorgen Randers, William Behrens) (1972) The Limits to Growth. A Report for the Club of Rome’s Project on the Predicament of Mankind
Schumacher, E.F. (1973) Small is beautiful. A study in economics as if people mattered
Hirsch, Fred (1977) Social Limits to Growth
Mishan, Edward (1977) The Economic Growth Debate An Assessment
Douthwaite, Richard (1992) The Growth Illusion
Daly, Herman (1996) Beyond Growth: The Economics of Sustainable Development
Latouche, Serge (2004) Why Less Should Be So Much More Degrowth Economics
Jackson, Tim (2009) Prosperity Without Growth. Economics for a finite planet
Heinberg, Richard (2011) The End of Growth: Adapting to Our New Economic Reality
D’Alisa, G., Demaria, F., Kallis, G. (eds) (2014) Degrowth A vocabulary for a new era
Jackson, Tim (2017) Prosperity Without Growth: Foundations for the Economy of Tomorrow
Kallis, Giorgis (2017) In defense of degrowth Opinions and minifestos
Kallis, Giorgis (2018) Degrowth
2 Quality growth?
On the kitchen wall in my house there are marks for the heights of twin girls, the daughters of friends of ours. When the girls were small, S1 (the first-born) and S2 (the second-born) were much the same height. But by the time they were teenagers, S1 was at least 2 centimetres taller than S2. I fantasized about S2 saying to her sister: “Yes, you may have grown taller than me – but my growth has all been quality growth!”
Then there is the old salesman’s joke: “Never mind the quality, feel the width!” which also points to the incommensurability of size and quality. But maybe – just maybe – I thought, quality growth really is a thing, and I should know about it. So I went looking. Near the top of the results pile came:“When Will [name of country] Achieve Quality Growth? Jan 29, 2019, Andrew Sheng & Xiao Geng. The first paragraph read:
“[name of country] has not yet realized [top politician’s] vision of an inclusive, green, innovation-driven economy. But if policymakers continue to strengthen property rights and work to improve market confidence and foster fair competition, a breakthrough should not be far off.”
You may have guessed that the name of the country in question is China, and the top politician’s name is Xi Jinping. But what difference, if any, is there between his “vision of an inclusive, green, innovation- driven economy” and the vision of New Zealand Prime Minister Jacinda Ardern? The 2019 Wellbeing Budget is big on innovation, both rhetorically and financially, with $552 million allocated in the category ‘Bridging the venture capital gap and supporting innovation’, while ‘green’ and ‘inclusive’ are certainly part of the current New Zealand government’s rhetoric.
If growth is ‘green’ and ‘inclusive’ does that make it ‘quality’ as well? I found a little industry of institutional economists and business boosters out there producing papers and articles on quality growth. They are all very earnest and serious about describing what it is and what is required to produce it – and their definitions are all completely tautological. I found that having a participatory democracy, a well-resourced public sector, political stability, and well-run institutions were all both prerequisites for and definitions of success at achieving ‘high quality growth’. This is such nonsense I don’t know why people are paid to produce it – but I guess it all contributes to economic growth. Never mind the quality – feel the width.
3 Vaneigem, Raoul (1967/1994) The Revolution of Everyday Life, London: Rebel Press, pp 52, 53