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Can we manage without growth?

Can we manage without growth? An interview with Peter Victor.

Article by Rob Hopkins:
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I had the privilege recently of speaking with Peter Victor, Professor in Environmental Studies at York University and author of ‘Managing without growth’ (you can see his full bio here). At a time when the obsession with making our economies grow again is close to hysteria, Peter’s work asks the question as to whether economic growth is the best way to achieve what we want from a society; employment, happiness, good public services, increased equality and so on, and concludes we could have an economy that isn’t growing, but which is actually better at those things. Having read his fascinating book, it felt like a good time to give him a call (I will break this into 2 posts, one today and one tomorrow).

One of the ideas that I found really surprising from the book was that the whole idea of growth and that economies should grow on a continuous basis is actually a relatively new idea. I wonder if you could give us a quick potted history of where the idea of economic growth came from?

The idea of economic growth per se could probably be dated back at least as far as Adam Smith who was interested in the wealth of nations. What I think is new, and I think what you’re referring to, is the idea that governments should take responsibility for trying to ensure that economies achieve a certain rate of economic growth. That is relatively new, and only really came to be around about the 1950s / 1960s.

It happened more or less along these lines. The work of John Maynard Keynes in the 1930s convinced most in the economics profession that full employment was not a natural outcome in capitalist economies and that the government could play a useful role in stimulating demand to generate employment when the economy was not capable of doing that itself. This was adopted as a policy by many western governments after the Second World War, but then it was pretty quickly realised, in the space of a decade or so, that when you encourage expenditure to stimulate employment, some of that expenditure is likely to be on new equipment and infrastructure which expands the capacity of the economy, and therefore you have to keep increasing the amount of expenditure simply to keep your growing capacity employed.

This of course is just another way of saying what economic growth is. So economic growth was first adopted by governments in about the 1950s as a measure, as an approach to achieving full employment. In other words, not for its own sake, but as an employment measure. However, within about a decade or so things got switched around, and you can see by looking at some of the older literature, that governments started to put the pursuit of growth as their number one priority and employment was reduced to a second level consideration.

Can you give us, in a nutshell, the argument you set out in Managing Without Growth as to why that is something that we should be thinking of doing?

What’s happened in the last half century in particular is that we’ve become very aware that our ever-expanding economies require more and more energy and materials to support that expansion. Now I’m not saying that economic growth as measured by changes in Gross Domestic Product (GDP) is automatically and inextricably related to increases in materials and energy because of gains in efficiency over time, but the historical record is such that clearly there’s been a positive link between the two.

What we’re seeing is mounting evidence that the planet can’t cope with all this extraction of materials and disposal of waste and occupancy of land by humans that we’re imposing on it. And so the question I decided to address was whether we could manage without growth, at least in advanced economies, which are pretty rich certainly by historical standards.

Could we achieve full employment? Could we eliminate poverty? Could we significantly reduce our greenhouse gas emissions? And could we do all that without the government going bankrupt and in the context of an economy that isn’t growing? That’s really what I tried to look into and concluded that it is possible at least from an analytical point of view to show that you can have an economy that can do all that and doesn’t have to grow.

Is your argument that growth is undesirable or that it’s no longer feasible?

I’m interested in both of those lines of argument. I did cover in the book some of the fairly modern literature on the disconnect between economic growth and happiness. If that’s true, if really getting richer doesn’t make us happier then you really have to wonder why we put so much effort into doing it. But then there’s also the question of feasibility. It doesn’t look like it’s feasible to continue to have economies that just keep growing and keep growing.

It’s good to know, I think, that if growth is not the secret to a happy life, certainly after you’ve achieved a certain level of material well-being, that not having something that’s not particularly desirable is not such a bad outcome! I think both lines of argument are really important, that there are likely to be ways of leading more fulfilling lives if we pay much less attention to the pursuit of growth and that in doing so we’ll lighten the load that we’re placing on the biosphere.

At the moment here in the UK the government is obsessed with growth at all costs. Everything else seems to be being thrown out of the door in terms of this obsession with trying to get the economy to grow again. What do you see as the dangers that are inherent in trying to do that at a time when all the other pressures are becoming so clear upon us?

Well of course they’re not on their own in that! I think that’s true of many governments. The problem I see is that it’s an approach that’s entirely focussed on the short term. Now of course the long term is made up of a series of short terms, so the problem I see is that if we keep focussing on the short term we will lose sight, I think we’ve lost sight, of the sort of broader priorities which call upon us to change our direction. So I have a lot of sympathy for governments that see the immediate problems and strive to deal with them, but I have much less sympathy if they don’t have a longer term vision that makes sense of where we’re heading. That’s what I think is lacking.

I’m very concerned that trying to pull out all the stops to re-stimulate economies, to use the cliché, “to get back on track”, is actually a formula for far worse things to happen, probably in the not too distant future.

You wrote the book in 2008. In terms of economics, rather a lot’s happened since then! If you were updating the book or re-writing it now, how would the crash and the implications of the last three years strengthen or weaken or change what you would have put in the book?

The book was published in 2008 by an academic publisher, Edward Elgar, a very good publisher, but they took about a year to produce the book. I completed it in 2007 and I wrote most of it in 2006, so it’s actually a longer period of time than the three years that we’re talking about here. Anyway, when I wrote the book, Canada was in a particularly healthy economic position as is currently understood. In particular, our governments were running substantial budget surpluses, (of course it’s changed now, they’re running deficits) so that alone makes the problem of a transition to an economy which isn’t madly pursuing economic growth somewhat more problematic, but I don’t think it brings the whole pursuit to an end, if I can put it that way.

What I think of course has happened is that we know a lot more about the fragility of the financial system than was apparent when I was doing my research and I didn’t pay much attention in the book to that aspect. I simply assumed that the central bank in Canada, the Bank of Canada, would continue to try to keep the level of inflation in the standard range, something like 2% plus or minus a little bit, and adopt a monetary policy that would do that. That wasn’t an unreasonable assumption, and I think it’s the same sort of assumption that I would make going forward if I was doing the work again, but they’d be starting from a more difficult position because of the other problems the economy’s having.

I should say though that Canada has been patting itself on the back during these last three years because our banking system turned out not to be as vulnerable as those of many other countries, because they didn’t get involved in some of the more suspect and precarious investments. That was as much by luck as it was by judgement I think, but that’s another story.

In fact, that’s some of the work that I’m doing right now with my good friend and colleague in Britain, Tim Jackson. We are building a better macroeconomic model of national economies in which the financial sector is much more front and centre so that we can better understand the links between the financial sector, the real economy and the biosphere – trying to track all those three systems at one go. But, you know, I think on the one hand the financial system and its situation has to be better understood, but on the other the fact that we’ve gone through these very difficult economic times has led a lot of people, who used to think that everything was moving along pretty nicely, to question just how robust our economic and environmental systems are.

That’s been good. I think it’s generated much more interest in this kind of work than was there when the book first came out. I think this is positive. On the negative side I think that the information we have about the state of the world’s eco-systems just tells us things are going from bad to worse. So the urgency has actually increased over the last three to five years to say we’ve really got to look at alternatives and take them on board. I think one of the encouraging things of the Occupy movement which sort of started from nothing and went around the world very fast, indicates an appetite for change that wasn’t there three years ago.

One of the points that I found very interesting from a Transition Network perspective was that you look at localization as a part of the response, and say that actually without appropriate policies from government it’ll be insufficient, but then you also say that you don’t see a national government response coming unless it’s led by the grass roots and by communities. I wonder where you see the, how you see that log jam might be broken?

I don’t have a good answer to that question! What I try to do is to put before people an alternative economic future that I hope they find credible. Up until now, and I would say even right now, the pursuit of growth is really a showstopper for many other alternatives. If you propose some policy or measure to reduce environmental damage inevitably someone says, “Well what would that do for economic growth, for competitiveness or productivity?”, and many many good ideas along those lines get shot down because growth is used as the test for these other initiatives.

What I’m trying to suggest is that it’s not a reasonable test. We can just, to re-state the title of the book, “manage without growth”. Whilst it’s true that I do think there’s a very important role for policy to establish the framework within which we all operate, I’m also very focussed on the idea that these ideas and initiatives have to come from the grassroots. No government of the sort I’m interested in can be expected to take what we would call leadership unless there’s a lot of people out there who want to go in this direction. It’s as much a push from the bottom as it is a sort of a pressure from above, and I think what’s happening right now is we’re seeing more push from the bottom, through movements such as yours, and very little take-up from the top, although there are glimmers of hope in some places.

In Canada we have three levels of government, all quite significant: the federal, provincial and municipal. Municipal governments seem far more aware of the limits within which they have to operate than the more senior levels of government. Go up to the provincial level of government and there’s a fair bit of understanding of these issues. At the federal level it seems to evaporate entirely.

Can we have capitalism without economic growth?

I’m going to give two answers to that question. First and foremost, although I talk about managing without growth for pragmatic reasons and because I want to take part in the current dialogue I focus on GDP, the growth that we really have to stop, and in fact turn back, is growth in the use of materials and energy and land use. Clearly water is also one other material, but I don’t otherwise mention water separately. Those are the points at which we as a species really interact with the biosphere, and that’s where we’ve gone too far.

We have to, I believe, find ways to discipline ourselves so that we are much gentler on the planet. What our economies will then be capable of doing within that set of constraints is hard to say. I personally don’t think that the pursuit of growth as measured in conventional terms is a good way to deal with those biosphysical limits because they get sacrificed in the pursuit of growth. Can capitalism survive if it has to operate within limits? You see when it’s put that way it sounds like a very ordinary question because the standard definition of economics is about making the best use of scarce resources.

Economics and economists have understood for a long time that economies are always constrained by available resources, so that in itself has never been a threat to capitalism, the efficient use of limted resources has always been seen as one of its virtues. So I don’t think that a stricter limit on the extent to which we draw resources from nature and put waste materials back is necessarily a threat to capitalism.

If I have to look for support for this idea, there was a quote that I refer to many times by Robert Solow, a great economist particularly known for his work on economic growth, who says very much the same thing, that he sees no reason why capitalism can’t survive with low, or even no-growth. Now that doesn’t mean that there aren’t many questions to be answered, such as what sort of institutions could work if the economy was not pursuing growth or wasn’t growing? To what extent and in what ways do our institutions have to change?

These are questions that I and some others are investigating right now and whether we end up with a view of an economy that we’d say doesn’t look anything like capitalism, we don’t really know yet. My own sense at the moment is that if we do effectively come to terms with these limits on how we interact with the biosphere, we’ll be looking back maybe half a century or a century from now and saying well, there was no one time when the economic system was transformed but it has evolved into something which we may or may not chose to call capitalism at that time.

So the end of economic growth doesn’t necessarily mean an economic collapse?

It could mean that, if you have an economic system that relies on growth. That’s the dilemma we’ve got now. It seems to be that unless the economy is growing it flirts with collapse or it does collapse. The challenge to us is to try to configure an economy that doesn’t grow and doesn’t collapse. I think that’s really what I try to do in my book. As some of the simulation work suggests, and it’s no more than a suggestion because the work is somewhat preliminary, that yes, of course you can have a steady state economic system, just like you can have a steady state eco-system.

Think of a forest that is in what might be called a mature state. It doesn’t mean it stays that way forever, but for a good length of time its total biomass is roughly constant. Now within that, trees are being born and are growing and dying all the time. And I think that’s quite a good parallel to make with a steady state economy. In some overall sense it’s in a steady state. Perhaps that’s because the material and energy flows through the economy are being maintained at a more or less constant level, but what’s going on in the economy can be very vibrant and exciting, just that the whole system’s not growing.

Surely in our present and unfolding predicament, to recalibrate our economy as a Steady State economy requires an enormous amount of infrastructure, investment and maybe we don’t have that kind of resource any more. Might the kind of more localised world that Transition is talking about be what we get by default rather than by design?

There are many possible futures out there. I think that what I see is a huge amount of resources in our economy, both in terms of capital equipment, intellectual effort, finance, being directed towards the growth agenda. A different agenda, a different ambition for our society and our economy away from the pursuit of growth, would automatically free up, at least in principle, a lot of these resources.

I see it much more as a question of re-allocating the resources that we have towards an economic structure that isn’t based upon the pursuit of growth rather than thinking well somehow we’ve got to keep all those expenditures that we’re currently maintaining in the pursuit of growth and then worry about where all extra money and resources are going to come from to pay for and effect a transition in the economy? The dilemma to me is a little bit different. It’s that the institutions that control all of these resources, both in the public and private sector, themselves are busily pursuing growth and so they’re not freeing up resources to lead into a different direction. I think it is possible, but it’s not happening as a result of the normal functioning of our current system.

I think the idea that we’ll default to more local economies whether we do it deliberately and maybe reasonably pleasantly, or whether we’ll be forced into it, is a very good question. The subtitle of my book is “Slower by design, not disaster.” If you have an economy predicated on growth that slows and maybe growth goes negative, that’s a disaster formula. That’s mass unemployment, deep poverty. Greenhouse gas emissions would go down but the social consequences of would be horrendous. That’s surely something we want to avoid.

That, though, I believe is the kind of scenario that we should be comparing to an alternative, which doesn’t pursue growth. Not a naïve notion of some kind of golden age where we were growing steadily and wondering why that can’t continue. I don’t think it can continue for the various reasons that have come up in this conversation. So, what are our alternatives? That’s really what we need to discuss. By the way, I hardly use the term, in fact I probably don’t use the term “Steady State economy” in my book at all. I’m quite interested in the Steady State but I just think the danger is that it conjures up in some people’s mind a rather stagnant image and they don’t warm to it. So whilst I’m actually on the board of the Centre for the Advancement of the Steady State Economy here in North America, it’s a term that, well, if more people would find it favourable I would be happy to use it, but I don’t think it’s one that communicates very well.

Could you, tell us or describe to us, what does a post growth economy look like to you? Can you describe it? What would it look like, smell like and sound like? How would we know we were living in one? What’s the kind of vision that that conjures up in your mind of what it would be like?

I can give you some dimensions of it. This is something that requires a much broader public discussion than we’ve had to date. But the sorts of things that I would see are first of all, when we look at how our economy uses resources, and produces waste and occupies land, those numbers would be going down instead of up. So, efficiency of course offers us some possibilities there. We can and we have become somewhat more efficient in how we use our resources and we’ve produced less waste of many kinds per unit of economic output. The trouble is the growth of our economic output has gone up faster than the gains in efficiency, so it’s sort of overwhelmed them.

If we’re not growing so fast but we’re still getting the gains in efficiency and I do believe that’s possible, then we would see a lightening of the burden we’re placing on the biosphere. In terms of how our lives would be lived, transportation is one aspect to look at. We’ve got a transportation system particularly in North America that’s built largely around the car. There is plenty of room, I believe, to move to much more use of public transit, so that’s a fairly simple thing to do.

I would see a shift to renewable energy, away from fossil fuels. Some of that’s happening, but it’s happening partly as an addition to our use of fossil fuels as opposed to a replacement of the fossil fuels which is what we have to accomplish. One of the things I discuss in my book quite extensively is the idea that if we continue to become more productive as workers and employees, but the overall output of the economy’s not growing, it could be a formula for massively increased unemployment.

One answer is to work less. That would free up our time, we’d have more discretionary time. To me that’s a great element of personal freedom that I highly value. So that would be important. Some people, like Juliet Schor have taken this a bit further to consider what people might do with that extra time. This comes back, I think, very much to the Transition idea and to the use of time for more self-provisioning and local provisioning, which could be outside of the market system. That would be interesting.

They’ve done better at this in continental Europe. Maybe Britain isn’t much better than Canada, but in continental Europe they have benefitted from shortening the amount of time spent at work as compared with Canadians. It’s even worse in the US where people work some 100 -150 hours a year more than other people. I think this is a real missed opportunity: that we should be benefiting from increased productivity by working less rather than by producing and consuming more.

I think we would likely see less physical travel and less physical movement of goods, partly because I do expect energy prices to rise anyway and that will discourage these activities. The electronics revolution is a partial compensation for that. We can all now, well those of us with access to the equipment at any rate, see other parts of the world without actually physically having to go there. I’m not sure that would be a perfect substitute, but maybe it’s the kind of sacrifice we have to make as we pass seven billion and head towards nine billion inhabitants of the planet. These are some of the things that I see, but as I say this is a subject that requires widespread public discussion and debate.

One of the things that’s put forward here is the idea of the Green New Deal, as a kind of Keynesian project of borrowing massive amounts of money in order to try and stimulate a green economy. What’s your sense of the degree to which we should go further into debt in order to create this?

Ah well, there’s so much in your question! First of all, if Keynes was writing now he’d be on side with those of us who understand that the economy is embedded in the biosphere and that that relationship has long been neglected and now can no longer be. If you read his 1931 paper on ‘Economic possibilities for our grandchildren’ you see that he was a man of great vision, not that his expectations for the future all came to pass, but just that he could conceive of a time when, as he put it, the economic problem would be solved. We’d be producing enough and we could divert our attention to, even in his own terms, much more important things, such as the arts.

I think Keynes would have been with us in this discussion. The ideas that he produced in the 1930s were for dealing with short-term unemployment. The question now is to what extent do those ideas have to be changed because of these additional considerations that we have. I’m still enough of a Keynesian to think that there’s no reason why governments have to balance their budget, except on average over a goodly length of time.

So the idea of a green Keynesianism, the idea that when governments see the need to stimulate the economy they should do so by either spending money or inducing the rest of us to spend money on activities that will help transform the economy in a green direction, I think that makes good sense. But, you know, Keynes did make it very clear in his writings that most of his interest was in the short term.

This discussion we’re having is not just about the short term. This discussion is about the medium and the long term. What’s the new direction we should be heading in? The sort of short term stimulus that he stressed shouldn’t just be expenditure on anything. It should be geared towards the transformation of the economy to something that’s more viable in the long term.

Do you think there is a case to argue that economic growth makes an economy less resilient? Can you kind of correlate it in that way? Would a more resilient economy by necessity be one that has moved beyond economic growth?

One of the main, if not the main arguments, for globalisation, by which I mean the deliberate dismantling of national restrictions on the flow of capital and trade in goods and services, has been that it’s good for economic growth. I think that that agenda has led to the decline in resilience of national and sub-national economies. We see this very much in what’s happening in Europe at the moment, where individual nations are very vulnerable to circumstances outside their borders, so it’s not so much growth itself I would say that threatens resiliency and undermines it, it’s the measures that we take in pursuit of growth that move us in one direction only.

That is, they continually weaken the capacity of communities at all levels, from local up to national and even a little bit beyond that to really have much control over what’s happening to them. That’s the problem. So it’s a little bit more complicated than saying growth it’s growth that threatens resilience, it’s what we’ve allowed our institutions to do or prevented them from doing that, as much as anything, has made our economies and our society less resilient.

Where do you see the seeds coming from for this? When you wrote this book the Occupy movement didn’t exist and that seems to have really created a space in which we can more freely question the very idea of economic growth much more freely than we could a couple of years ago. Where do you see the next steps as coming from?”

I have a passing interest in the history of ideas. To me, economic growth is an idea. It’s the modern incarnation of progress. It’s often regarded as synonymous with progress. What I discovered is that a lot has been written in the past, a lot of really interesting material that has largely been forgotten, and yet when there’s a sort of a growing awareness of an issue, such as the one we’ve been talking about, it’s really nice to know we’re not actually starting from scratch.

There’s a lot of ideas that we need to go back to and bring forward and make sure they’re in the public domain and are informing the public discussion. I’m just reading an essay written in the 1950s, it’s hard to tell from the publisher, entitled “Size of Nations and Living Standards” by Leopold Kohr. The author’s arguing that as an economy gets bigger, as a society gets bigger, living standards eventually decline, and he does some early quantitative estimates. He reckons that the US peaked in about 1950 and that living standards have been in decline since then.

Here’s another book, “The Social Costs of Private Enterprise” by K. W. Kapp, written in 1950, all about the increasing burden that the economy is placing on the environment. They’re just fresh in my mind. There’s lots of stuff there, and what I would like to be better at is to find ways of getting these ideas out to a wider audience so that movements such as the Occupy movement, and perhaps the Transition movement, realise that there’s a considerable body of work on which to draw.

We don’t all have to make it up over the next couple of weekends. I think that’s a big part of the4 next steps. How do I put this in more simple terms? It’s about changing the stories we tell ourselves about our economy, our society, and our own selves, in terms of what we think success looks like. The pursuit of economic growth for a long time has been based on the idea that economic growth is the mark of success that we should all strive for. We need more meaningful objectives for ourselves and our economy.

Fortunately a lot of this is now being picked up. For example, the Sen/Stiglitz report of a couple of years ago, written at the instigation of Sarkozy, was about defining and measuring quality of life and sustainability. This report has been quite influential. Statistics departments around the world are looking at how they measure progress and whether they should make changes. There hasn’t been a lot, as far as I can tell, a lot of real action at the national levels yet, but there’s there’s the OECD work and in Canada we’ve just had the release of the Canadian index of well being and so on.

So there are things happening, there’s local community work, there’s the sort of thing you’re doing, there’s interest from student populations, there’s academic research, there’s more, there’s stuff going on in officialdom to make changes. The problem is it hasn’t yet congealed into a new story, which says “you know what, we should be looking to rather different objectives and using different means of getting there than we’ve been accustomed to in the past.” I can’t tell you what’s going to trigger that, maybe nothing and then we’ll be in for it, but maybe it’ll all flip pretty quickly and we’ll be on our way.

original article: http://transitionculture.org/2011/12/20/can-we-manage-without-growth-an-...