Monday, 14 May 2007

The Myth of Sustainable Economic Growth

The three big political parties talk about the huge problem of climate change, but they keep talking about the need for economic growth. Unfortunately if the economy keeps growing we will use scarce resources at ever increasing rates until we run out, but as that is several elections away its not in the interests of our current political system to act now for a sustainable future.

Kenneth Boulding said “Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.” (See for more.)

As growth has been around 3% ( for the last few years in the UK, lets see what happens to the economy after a few years. Say we start in 1990 with an economy at 100 units, in 1991 it will be at 103, 1992 at 106.1, 1993 at 109.27, 1994 at 112.55, '95 at 115.93, '96 at 119.41, '97 at 122.99, '98 at 126.68 and 1999 at 130.48. If the growth had merely been an addition of 3 units every year, 1999 would have been 127, so this is more like an acceleration of resource depletion.

Another factor to consider is what is measured by economic growth. War counts as growth as do ecological disasters. If the government spends 5 times as much as it should on building new hospitals by using public private partnership, that also adds to growth, as well as adding to our taxes. So inefficiency and waste is good by this measure. Nuclear weapons, Olympic stadiums, the Dome, all add to how well we are doing, yet in reality are examples of waste.

At the website
the Gross National Product (GNP) is examined. In 1995, the Wall Street Journal added up the contribution to the GNP of the O.J. Simpson trial; $3 million for his legal team, $7 million for LA taxpayers (“including $8,000 to soundproof a prisoner-lawyer conference room,”) $5.1 million spent on bronze O.J. statuettes, $45 million in ad revenues for Turner Broadcasting alone. The article placed the GNP of the O.J. Trial at around $200 million; approaching that of the nation of Micronesia.

If a CEO gets a £100 million raise and fires 3,000 employees who make £30,000 a year, the economy grows by £10 million. If Indonesia cuts down all its forests, burns them and then cleans up the environmental degradation, the forest helps the economy grow three times.

Perhaps its time to use a different measure of our economy, before its too late.

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