Why economic growth is important for sustainability?

My brother visited South Korea some years ago. He brought me a plastic toy diver (below) that worked with a pair of AA-batteries. The toy made some awkward jerking kicking motions I assume had something to do with underwater propulsion. I thought human dignity had reached rock bottom. We seriously couldn’t come up with anything better to do than build diving action figures? I admit though, that it was funny to imagine (in a self-loathing way) what the people working in the toy-diver-factory thought of the world around them and about the people buying the pointless things in the first place.

Pointless toy diver

The silly toy came to symbolise to me the sometimes questionable aspects of human development. I kept talking about the toy in the context of excesses of economic growth but never really thought what I meant with the term ‘economic growth’.

Recently I have been looking into this issue more deeply and I have made few observations.  Some of them are self-evident (at least to economists) others perhaps less so.

These points are very important in order to understand how I see decoupling of growth from the use of natural resources occurs.

1. Economic growth = improving productivity

According to some estimates the world could support around 100 million hunter gatherers. The reason the planet currently sustains 70 times that number is the fact that we can get more out from the system with less input. In other words, our productivity (or efficiency) has grown much faster than the planet’s population.

The impacts of rising productivity have been especially clear in the past two centuries. The main driver explaining the unprecedented rise in productivity and thus economic growth has been technological progress. There are of course other contributing elements but technology can be singled out as the most important factor in explaining today’s affluence.

While the technologies we have adopted have distanced the boundaries of environmental carrying capacity it is important to understand that the technologies currently in use aren’t “designed” to sustain 7 billion middle class lifestyles. Technology has to develop and transform to accommodate the needs and wants of the whole planet.

Some are suggesting that we should opt out for a more ‘simple life’ and do away with growth altogether, yet this view ignores the fact that we would then have to give up the (productivity) advances that have enabled us to flourish so far. If this societal downshifting would mean giving up the productivity/efficiency engines that currently uphold our societies it would eventually lead to very ugly Hobbesian zero sum games where anyone’s gain would be everyone else’s loss. Just ask the Greeks how the degrowth they have experienced is treating them.

It seems to me that economic growth is often viewed with a degree of contempt as it has (erroneously) become synonymous with mindless consumption. However, as Colin McInness points out in his eloquent essay, growth is about complexity not just consumption. A tree or a rock looks very different to modern society in terms what it can provide, compared to the hunter gatherer that probably saw only fuel or weapons.

2.  Economic growth = time and effort can be directed at upholding human and environmental welfare

As Matt Ridley puts it, economic growth and prosperity can be viewed as time saved. Compared to our Neolithic ancestors, we spend only a fraction of our time working for our bare necessities (e.g. food and shelter). Thus we can dedicate more of our time pursuing other things of interest such as art and science (or we can decide to play with our toy-diver action figures). This “saved time” concept is especially important on a societal level as it has enabled societies to commit more and more resources on less important issues in our need hierarchy.

With this spare time we have been able to educate whole generations (instead of privileged elites) and develop advanced healthcare and sanitation systems. This surplus of time and resources will be essential in order for us to commit enough capital (human and otherwise) in solving any future threats to our wellbeing. In fact, it has been argued that economic growth and wealth are prerequisites for societies to start addressing “second-tier issues”, such as environmental degradation.

The law of diminishing returns also applies to income – when a “certain” threshold level of average wealth is acquired societies start prioritising other aspects that affect people’s quality of life. It is called environmental Kuznet’s curve.

I believe we are currently seeing this transition starting to take place in parts of China as the industrial centres have become wealthy but grapple with tremendous air quality issues (among other things).

3. We cannot put the genie of productivity back in the bottle

What I have been trying to argue above is that today’s wealth is due to economic growth that has resulted from an explosion of productivity. The surplus of this efficient revolution has enabled us to enjoy a quality of life that would have been unimaginable to our ancestors. In order to ensure that the rest of the planet can enjoy similar living standards, we need to push the productivity boom even further.

The problem is that development of productivity has slowed down in some areas because we have been able to afford that. We have actually had a luxury of choosing not to choose many technologies that would be far more productive and efficient than existing ones. For example, organic farming is known to produce far smaller yields than conventional farming, especially if genetically enhanced crops could be used, yet today the least productive practice is considered the most ethical one (at least in Europe).

There are plenty of similar examples from other sectors yet economic growth has continued (albeit more slowly) as our choices have been offset by productivity increases in other fields. However if the list of technologies that we “choose” not to adopt grows too long, the productivity pyramid will lose its foundations under the weight of increasingly affluent global population, and will eventually collapse.

 

While I have come to appreciate the well being engine that economic growth is, I still consider the toy-diver utterly useless.

6 comments

  1. Good post! Thank you. It is very strange how many intelligent people choose to ignore the role of productivity when it comes to food production and energy while being concerned about it when discussing, for example, public sector productivity or software screw ups… I have a suspicion that productivity in agriculture and energy production (well agriculture is also energy production) is actually more important for wellbeing that productivity elsewhere.

    1. I agree with this post. Just think of microwave oven and how it has increased productivity not only when it comes to time spared but also when it comes to efficient use of energy. This only application of green energy that I know is of some use to humanity and helps developing countries is solar energy, but not from the perspective the environmentalist would agree. It is so inefficient that you cannot use it for cooking or heating space. However in Bangladesh it has given light in the evenings so that poor people can work an additional shift and can thus increase productivity.

Convince me I am wrong and I will promise to change my mind!

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s