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February 2, 2010

They can’t both be right

There seem to be two completely contradictory narratives being played out at the moment. One says our economy is coming out of recession, will soon be back in growth, and the more growth we have the better. The other says that continuous growth is unsustainable, that the world’s resources are limited and that the economic model must fundamentally change or we face environmental catastrophe. Tim Jackson, from Sustainable Development Commission, lays out a compelling argument for prosperity without growth

Tim Jackson


Prosperity Without Growth: Economics for a Finite Planet

Prosperity is understood as a successful, flourishing or thriving condition: simply, a state in which things are going well for us. Every day the system in which we live tries to persuade us – via TV news, politicians’ speeches, corporate pronouncements, inducements to consume and so on – that our prosperity is intimately linked to whether or not gross national product is growing and whether stock markets are riding high. These are the two main measuring sticks for the version of capitalism on which most countries base their economies today.

Other ways of measuring prosperity, such as employment and savings, follow these two. If GNP – the total national output of goods and services – is in recession, then unemployment will rise, and that means growing numbers of unprosperous people without salaries. If stock markets are falling, that means falling pension values, and rising numbers of unprosperous people in retirement. So what’s not to like about growth?

Tim Jackson states the challenge starkly: “Questioning growth is deemed to be the act of lunatics, idealists and revolutionaries. But question it we must.” And that is the core mission of this perfectly timed book. Had he published it before the financial crisis, he would probably have been dismissed as another green idealist, at best. But in the wake of the crisis, more people are questioning the primacy of growth at all costs. President Sarkozy, the Nobel-prizewinning economist Joseph Stiglitz and elements of the Financial Times’s commentariat are among those now arguing that prosperity is possible without GNP growth, and indeed that prosperity will soon become impossible because of GNP growth. A new movement seems to be emerging, and this superbly written book should be the first stop for anyone wanting a manifesto.

Jackson, who is economics commissioner on the UK government’s Sustainable Development Commission, skilfully makes the relevant economic arguments understandable to the lay reader. He is not slow to simplify where that is warranted: “The idea of a non-growing economy may be an anathema to an economist. But the idea of a continually growing economy is an anathema to an ecologist.”

This is the core of the debate. Endless growth is a ridiculous notion to the typical ecologist because we live on a planet with finite resources, the mining and use of some of which is undermining our planet’s life-support systems. But the typical economist believes we can “decouple” GNP growth from resource use through the increased efficiency that tends to be intrinsic to capitalism: that we can grow our economies and reverse environmental degradation too. Tesco, as it were, can keep building more stores for ever, provided they are increasingly resource-efficient.

Jackson argues compellingly that such “decoupling” is a myth. A key area of argument, as with so much else in the current world, involves climate change. If we keep growing GNP, Jackson explains, then we fail to cut greenhouse gases deeply. This means we stoke destruction of prosperity beyond the short-term horizons – “next quarter’s growth figures” and all the rest – on which we routinely put such emphasis today.

In terms of a worldview for the new decade and beyond, this could well be the most important book you will read. Who to believe if you don’t have time? Well, I invite you not to believe the profession that so thoroughly disgraced itself with its systemic acceptance of the case for complex derivatives as a prime example of increasing economic efficiency in the financial services industry. The economists, and their friends the bonus cultists, have taken us to the brink of a collapsed global economy with that little oversight.

The last chapter of the book looks at opportunities for achieving “a lasting prosperity”. They are many and varied, and most of them – unsurprisingly – start from the grassroots. High on the list is the need for us all to consume less “stuff” and to seek a type of prosperity outside the conventional trappings of affluence: within relationships, family, community and the meaning of our lives and vocations in a functional society that places value on the future.

Is that still capitalism? “Does it really matter?” Jackson asks. “Perhaps we could just paraphrase Star Trek’s Spock and agree that it’s capitalism, Jim. But not as we know it.” And for what it’s worth, as a creature of capitalism – a venture-capital-backed energy ¬industry boss, a private equity investor, and an Institute of Directors director of the month – I am convinced that capitalism as we know it is torpedoing our prosperity, killing our economies and threatening our children with an unlivable world. Tim Jackson has written the best book yet making this case, and showing the generalities of the escape route. The specifics, post-Copenhagen, are all down to us