We need rapid economic growth for a thriving humanity on a thriving planet. Proposals for degrowth are understandable but dangerous. The best solutions for human well-being and ecological health all require and create economic growth.
Welcome to Cornucopia, the podcast where we examine what it means to live abundantly. My name is Karim Benammar. In this episode, I'd like to look at economic growth.
Only growth can save the world. Well, that's a bit of a hyperbolic statement - saving the world. But it's not ironic. I believe that we need high or rapid economic growth for thriving humanity on a thriving planet. Why would this statement be controversial? Well, 40 years ago, it wasn't. We believed in the idea of progress, and economic growth was a key part of that progress. Our main worry was that we didn't have enough economic growth.
But now of course, we are making a link between economic growth and ecological destruction, widespread pollution, species loss, climate change. And so, the idea has started to take hold that perhaps we need less economic growth, or we need no economic growth. Or we actually need negative economic growth: degrowth. And so, it's interesting to see how economic growth has gone from being the obvious solution to humanity's problem to actually being a major problem in itself. And this in the space of a few decades.
I believe that the people who argue for less, or no, or negative economic growth, do so with the best of intentions. They believe that a healthy planet is the most important thing for our future. And they really see economic growth as the driver of destruction. But I believe that this idea is fundamentally mistaken. It's confused, but it's also dangerous. We might end up exactly where we don't want to end up, namely, that with less economic growth, we are going to create a less thriving humanity on a planet which is much worse off.
Let's examine what we mean by growth and by economic growth. And let's see if I can convince you that we need high, rapid economic growth for a thriving humanity on a thriving planet.
So first of all, we should ask: growth of what? Good things can grow, bad things can grow. Growth in itself is just a tendency to increase. But of course, we're talking about economic growth, the way the wealth of a society increases. And when we talk about economic growth, we tend to talk about GDP or GNP, Gross Domestic Product, Gross National Product.
The GDP is the sum total of products and services produced in a country in a year. It's almost a century old. It was started in the 1930s by an American economist named Simon Kuznets. It was used during the New Deal to see how the policies of the New Deal could lead to a higher economic standard for Americans. Now, Kuznets himself has been quite ambivalent about GDP. He said you can't really use one number to determine the economic health of a country. And he also said that you shouldn't really use it to compare countries with one another. And that's, of course, exactly what we've ended up doing with it.
And right from the beginning, there were arguments about what you should include and what you shouldn't include in GDP. Initially, government wasn't included. Government doesn't produce anything: it just organizes the production of things and of life. For a long time, the financial sector wasn't included, because again, Finance finances things, it shifts money around, but it doesn't really produce anything. And fairly recently, about five years ago, the European Union decided to count the shadow economy as part of GDP: drug dealing and prostitution were calculated as part of GDP in certain countries and not in others. And to standardize this, the decision was made to just include it in GDP. That meant that some country's debt to GDP ratios suddenly got a lot better. Because when you included the shadow economy, their economy was actually a lot larger.
There's also been a lot of suggestions to calculate the well-being of a population differently. Why count economic growth? Why not count a General Happiness Index? Countries like Bhutan and New Zealand have made efforts in that direction? Why not use a number of metrics to calculate the well-being of a population? Now, I believe these are worthwhile efforts. But they do face the same problem. What should you include? And how should you measure what contributes to well-being? When these things are no longer just quantitative, but also qualitative - the quality of life - they become a lot more subjective.
And there are actually a couple of reasons why we can take GDP as an indicator of global well-being. The first is that there is a strong correlation between GDP per capita, and human well-being. The countries which have high GDP per capita are also the countries where people have high levels of well-being in terms of health, in terms of economic possibilities, and so on. There are a couple of exceptions, of course, countries which are rich in natural resources, but haven't spread the wealth around. And countries which have a very inflated financial sector because they're tax havens.
And if we think about it a bit further, it's easy to see why. Because all the things that contribute to well-being are all things which cost money. They are all things which represent economic growth: building hospitals, and schools, and universities, and housing. All of that is economic activity, and results in economic growth.
So we can disagree about the kind of economic growth that we want, what kind of economic activity do we want to stimulate? What are the needs of a population in terms of well-being, but I don't think we're disagreeing about the need for economic growth. If you want to increase the well-being of a population, this is going to cause economic growth.
And if we think about it some more, we realize that growth itself is actually quite natural. The natural world grows. All plant life, animal life grows all the time. We tend to think of the earth and plant and animal life as an ecosystem as a system in balance. But really, it is a chaotic abundance of growth systems: all animals seek to reproduce endlessly. We walk through the forests here in Northern Europe, and think this is nature. But if you're in the middle of the Amazon, with so much plant and animal life, it's a constant feast of eating and being eaten.
So we could say that growth is really the core principle of all life. And growth is also deeply natural to human beings. We create more than we need in our lives, we leave behind more than we take, we create a surplus. We've outsourced our work to animals, and then to machines and now to computers. We've created civilizations, with all the things that we've built, we've created the arts. Humans are a creative animal, and a creative animal grows. So let's look at why we need economic growth for human thriving, and for a thriving planet.
Well, first, our economic growth is still a massive work-in-progress. While billions of people live a life of affluence and well-being, there are still billions who do not. And we've made great strides in reducing extreme poverty, but it's still there. In 1970, half the world's population lived in extreme poverty, which is defined as having less than $2 a day to live on. Now that number is about 10%. Great progress, but we're still not there. And the next step up, which is living on less than $10 a day, is still a reality for half the world's population.
From a global point of view, we actually need rapid, massive economic growth to bring to the poor and the extreme poor part of our global population the opportunities and the benefits that the rest of the world has. And economic growth for the poorest people immediately leads to a much happier life. You can have access to clean water, to safe housing, you can send your kids to school.
In the poor countries of the world, we still have enormous amounts of unemployment and underemployment. The biggest problem is a lack of organized economic activity. If we provide financial opportunities for the poorest, we're going to increase their well-being dramatically. But we're also going to cause quite rapid economic growth. Poor people spend money on things that they need, and spend the money quickly. And even in well-off countries, giving money to the poor is a great way to have economic growth.
This also means that if you're arguing for degrowth on a global scale, you're actually arguing for the poor people to remain poor. It's almost a colonial attitude: we've managed to get to this level of wealth, you haven't. And let's just stop here. It's a bit as if you're having a game of Monopoly, where you decide to stop the game at some point, when some people are rich, and others poor.
People who worry about the environment also tend to worry about overpopulation. But here again, the global population is now stabilizing. People in middle income countries and in rich countries are not experiencing population growth. All the growth comes from the poorest countries on earth. We know that if we make those poorest countries richer, people will have fewer children. Families have a large number of children because they see children as an insurance for the future. And this is true when you're very poor. It's not true when you're middle class, or well off. Then children are an investment, they cost money, and you tend to have just two. So if you want to stabilize the global population, reducing poverty is the best way to do it. And that will lead to global economic growth.
And so rather than ask, how should we have less economic growth, we could also ask: how do we get very rapid economic growth? Why do we believe that an economy growing on a yearly basis with a few percent is such a good thing? Why not double digits? It is possible to have rapid economic growth. Countries in East Asia have shown that over the last few decades.
When you're in a time of war, you also have rapid economic growth, because everything is focused on the production of war material. We could ask: why not aim for much higher economic growth to solve global poverty? We can do this by spreading technological development, the use of smartphones in poor countries, solar panels, all these technologies we have which will leapfrog the stages of development that the rich countries have taken until now.
All the indicators of human well-being, such as access to health care, to food, to housing, to jobs, to education, all these are elements of growth. Improving these things on a global scale will lead to global economic growth. So perhaps you'll grant me that global economic growth, if it's the right economic growth, actually leads to a thriving humanity. But then the question still remains, can we do this on a thriving planet?
Now one of the statements you hear is “you cannot have endless growth on a finite planet”. You cannot have endless growth on a finite planet. And when you first hear it, you think: well, that makes sense. It's so obvious. Why haven't I thought of that before? But does it really make sense? When we talk about growth and economic growth, this is virtual growth. This is growth in well-being in experience in services. It's not necessarily growth in things which lead to ecological destruction. Things can grow virtually without having to grow physically - these things are not related.
The second point is that even though we live on a finite planet, all life on Earth is powered by the energy of the sun. All plant and animal life is in effect transmuted solar energy. And that energy is wildly abundant. So I believe it is quite possible to have an endless growth in human well-being on a planet with finite resources, which is powered by an abundant energy source.
The technical term for this is decoupling. We need to decouple economic growth from the use of natural resources. If we managed to decouple, we can have high economic growth without depleting the natural resources of the planet. Now, there's an argument whether this is possible, some people agree that we can have relative decoupling - meaning we can produce more things and better-quality things using fewer resources - but that we can't have absolute decoupling. And by that they mean that even though the use of resources is growing more slowly than economic growth, it is still growing.
They point to the fact that this hasn't happened historically. I wonder whether history should be our guide here. It should be our ambition to achieve a dramatic decoupling. The idea that economic growth automatically leads to ecological disaster may be a popular one. But fundamentally, I just don't believe it's true. It's not true empirically. And it's not true theoretically.
It's not true empirically, because the countries with the highest economic growth also tend to have the cleanest environments. When you're developing as a poor country, the needs of your population are so dramatic that you accept a certain amount of pollution and ecological destruction. When countries become wealthier, a clean environment and clean air become much more important. This is a transition that we've observed historically, for most countries over the last centuries.
But theoretically, it makes sense too. It's not just about the use of natural resources. A lot of the ecological problems that we've mentioned, such as pollution, and species loss, and degradation come from destruction. We destroy the planet by dragging nets on the ocean floors when we fish, by clear cutting forests. We often do this in order to achieve the cheapest price possible.
Technically, we talk about externalities, the environmental costs, the ecological costs of a product are not calculated as part of the price of the product. They're externalized, and the global community pays for them. If we really internalize the costs of production, we will take much better care of the environment, and products will become more expensive, which again, will lead to a form of economic growth.
Economic growth can make the planet much healthier. Think about climate change. The big issue with climate change is the cost. We were warned about this 30 years ago. If we'd acted, then it would have been cheaper than it is now. If we act now, it will be a lot cheaper than it will be a decade or two from now.
The biggest issue is to shift away from fossil fuels. Minimizing greenhouse gases is more expensive, but it will also lead to more economic growth. That's the thinking behind the green New Deal. Shifting our production methods away from fossil fuels - it's a massive investment programme, which is going to lead to a lot of economic activity, and hence to a lot of economic growth.
The key way in which we can achieve this decoupling is not to produce less, but to produce differently, radically differently. This is also a mental shift. If we look at our collective imagination, in the movies that we see, we are surrounded by dystopias, by movies in which the planet is already a wasteland with a few survivors battling it out. What about a more positive view of our future, a thriving humanity on a thriving planet? Where is the utopian thinking about a technological and ecological future?
Now, if you agree with me that we need rapid economic growth for a thriving humanity, and that we can do so on a thriving planet, then how are we going to make this rapid economic growth for the future? I think there are five key elements to human thriving: peace, health, well-being, freedom, and a healthy environment. How do we then achieve this on the global scale?
One element I think is stronger global governance. The total budget of the United Nations is about the same as the police department in New York City. If we want to stop illegal logging, illegal fishing, all these illegal activities that cause massive ecological destruction, we need to support and finance a global oversight system. And the same thing is true for dumping of pollution, for tax fraud and evasion, and so on. Governments define the playing field and companies and human creativity operate in this playing field. And if we are a global planet, we need a global playing field.
A second element is tax responsibility. Taxes are a way to fund our common welfare. And it's so much easier to create common wealth than to create private wealth. Think of public schools, public swimming pools versus private swimming pools, and so on. This tax responsibility occurs at all levels, from good corporate citizens to individuals. The economist Thomas Piketty has shown that in times of high taxes, we've also had high economic growth. In times of very low taxes, we have low economic growth.
Again, it is because the poorest part of the population will spend money on things that they really need, and they will spend it much more quickly. If we keep shifting money to the rich, we're actually slowing economic growth. And we're making everybody much poorer. The best way to achieve high economic growth, to give everybody a life of peace and health and well-being and freedom and ecological health is to shift money from the richest to the poorest. This will allow developing countries to leapfrog technological development. This is quite a challenge. And it's also a mental challenge for us, we're still struggling with it. See how we're dealing with the global distribution of vaccines during this pandemic.
Now, some people may argue that it's the capitalist system itself, or neo-liberalism, which is to blame for the current problems, and that we should replace the whole system. I think that such revolutionary thoughts can be seductive, but that we need the economic system to thrive. Money is actually a fantastic invention. It's a social technology. It allows us to travel through time by investing in our future: in our individual future, but also in our common future. Creating a currency is a way to organize economic activity. We can create more currencies and more economic activity with the goal of a thriving humanity on a thriving planet.
Finally, then, to the individual. We've talked a lot about global solutions, about things we can do in the structure of our society. What about individuals? Should they grow less economically? Well, perhaps. If you're part of the global economic elite, the richest people on this planet, and you have more money than you can have a use for, if you believe that you shouldn't engage in sometimes rather silly overconsumption of goods, then that's fine. Congratulations, you've made it, you are living a life of plenty.
By all means, consume less and work less, if that makes you happier. But if you're still creative, and productive, and enjoy activity, you can also give away your surplus, you can give away 1% of your income, or 5%, or 10%; there are even people who give away 50% of their income. Again, shifting the money from the richest to the absolute poorest will have the most effect. There's some fantastic work being done in a field called Effective Altruism, which shows that some donations are 100 times or even 500 times more effective than others. But be aware that if you start giving that money away, you are going to contribute to global economic growth.
Perhaps this is what it comes down to. We're still learning what it means to be rich. In a world of want and scarcity, being rich meant accumulating as many things as possible, at least more than your neighbour. But in a world in which we've created so much wealth, through technological and economical development, we have increased our surplus. We have gone from surviving to living. And when you have so much surplus, it's easy to give it away.