The imperative of growth
My first post not about parliamentarism
So goes the old joke: “How’s the water?” asks a fish to the other. “What on Earth is water???” is the answer. As jokes often do, this one captures a deeper truth. When we are very familiar with something, we might not even conceive of what it means not to have it. This seems to be happening with economic growth. For centuries, sustained growth was virtually nonexistent. Empires would rise and fall, languages and cultures change, populations migrate, but aggregate economic activity in the world would stay basically the same. Notably, even when there were spurts of economic growth, standards of living would still only fluctuate around the same baseline, because increases in populations would ensure that most people would only have access to the bare minimum to survive. The long term history of humankind is Malthusian.
A few centuries ago, however, things drastically changed. What seemed impossible – a sustained improvement in standards of living – began to happen in ever more countries. England was famously first. While its GDP per capita barely increased from the 13th to the 17th century, in the subsequent years it went up around 1500%. Remarkably, other European countries and some offshoots experienced a similar process. The process spread to more and more countries and the world is now vastly richer than it has ever been. Today, very few countries have income per capita lower than England in 1700. Of course, it is a sad fact that even one country would have a lower GDP per capita in 2024 than England in 1700. But the reason this is particularly sad is exactly because we know growth can happen. A thousand years ago, this would be a fact of life.
The main quality of the GDP per capita statistic, however, can be a shortcoming as well: its simplicity. Thrown around like that, it can seem like a mere number. It is anything but. They reflect true revolutions in the lives of billions of people. More people today feel safe they will have enough to feed their children on any given day. More people have a roof to protect them. More people have access to education. More people live longer and overall healthier lives. They travel to meet their parents who live in a different city, or they do it just to know new places. They play musical instruments. They throw a large wedding party. They bury their dead according to their customs. All of those things are possible because of the world’s much greater productive capacity today.
There is a major caveat, however. Billions of people still do not enjoy standards of living that allow them to achieve anything close to their potential flourishing. The overwhelming majority of those people are poor people living in low and medium income countries. If growth were to stop, those people would never have the chance fully live the marvels of the escape from poverty.
This is important context when we talk about degrowth. The degrowth movement, concentrated mainly in the richest countries in the world, argues that we should try to reduce the amount of production and consumption in the world today. They argue that there is no other way to save the planet. The paragraphs above certainly do not refute their thesis, but it makes one thing clear: if they are right, it would be extremely sad.
Fortunately, though, they are wrong. There are many flavors of degrowth, but the one unifying aspect of the movement is expressed by the following syllogism: “The natural resources of the planet are limited. If the resources are limited, there cannot be infinite economic growth. If there cannot be infinite economic growth, we must limit our use of resources immediately, lest we have to face some collapse which would be much worse than an orderly limitation”.
The conclusion, however, does not follow from the premises. Many readers will suspect that I will dispute the assertion that it is impossible to have infinite growth with finite resources. Indeed, this is what most economists object to about the degrowther case. Their argument is that it is perfectly possible to have infinite growth with finite resources, because growth derives not from the resources themselves but from the ideas used to apply the same resources in much more efficient ways. Degrowthers respond that, by necessity, there must be some limit to ideas as well, particularly a limit to useful ones.
I plead ignorance on that debate. It does not matter for my case. The reason the conclusion does not follow from the premises is that, even if it were true that finite resources precludes infinite growth, this does not say anything on whether some growth is still possible, and that it might be desirable.
If it is true that infinite growth is impossible with finite resources, this is not only true now. It has been true forever. It was true when the first person used fire to cook a meal, increasing productivity. Should they have eaten their food raw? It was true when the wheel was invented, increasing production. Should it not have been? It was true at the time of the invention of the steam engine, the spinning jenny, Gutenberg’s printing press, the telephone and the bicycle.
We see that the alleged impossibility of infinite growth in a finite planet is far from the decisive argument degrowthers make it to be. By itself, it is actually irrelevant for any decision regarding the sustainability of any mode of production. We have to know if a given level of GDP is incompatible with the capacity of the planet.
Degrowthers may protest that the current mode of production in the world is unsustainable. They would be right. Still, this does not show in any way that it is not possible to have much more growth in a sustainable manner. Total Natural Resources Rents (that is, the difference between the price of a commodity and the average cost of producing it) comprised only 1.64% of world GDP. This means that almost the totality of what makes GDP does not come from natural resources, but from how those resources are organized. There are numerous innovation possibilities – solar energy costs, to give an example, declined 89% in just one decade, and they keep falling. It may be possible that someday there will be no more ideas to improve the state of the economy, but for all practical purposes, right now we might just as well behave as if there was an infinite stock of discoverable innovations.
Having established that degrowth premises would be terrible if true, but that they are thankfully not, we should turn to the dangers of promoting such views. The first and most obvious one is – they might win. There is a real, even if not large, possibility that governments do reject growth and act to prevent it. Sadly, governments are perfectly able to stop growth if they so want. This would condemn huge swathes of the world population to a much worse life than they might have under growth. And – I regret to say – redistribution alone would not solve this. Even if we could perfectly distribute world income today without having the economy suffer – something we have no reason to believe is possible – world GDP per capita is currently 12 thousand dollars, below the poverty line in advanced economies.
But there is a second danger, which I believe is much greater: the risk that efforts for building a sustainable economy get discredited altogether. Human tenacity is a powerful force. There’s little one can say to convince a person in poverty that they should not strive to improve their and their families’ lives. Degrowthers, by framing the discussion regarding protecting the resources of the planet in ways which will be wholly unacceptable to the people – and the governments which represent them – in the poorest areas of the world, will prevent innovative solutions which allow for growth while protecting those resources.
Sustainable Development must be the objective we insist on pursuing. It was agreed upon in Rio de Janeiro, in 1992, by more than 100 heads of states and representatives of 178 governments. It was correct then, and is correct now. Further, despite legitimate concerns with the rate of progress (and a few alarmist cries), the world is advancing, on both fronts. There has never been a period of greater decline in poverty than the one since the Rio Declaration. There has also been significant progress in renewables and environmental protection. Perhaps many would like to have seen much greater progress for the environment. I would too. I would also would like to have seen much greater progress in poverty reduction than we had. If we work harder, keep focus, and concentrate on actually worthy goals, we very well might.