The Great Disruption (26 page)

So how about at the personal level? In the West, we have had spectacular success in growing our economies since the middle of the last century. As we discussed in chapter 1, we have lives our grandparents would look at in awe. The life of the average middle-class family in the West would seem to them like the lives of emperors and kings of yesterday. So despite being uneconomic at the macro level, it
has
delivered at the personal level. But is it still doing so?

Surprisingly, the answer is also no.

For readers who want the theory, Professor Herman Daly argues the point as follows:

The logic of the SSE (steady-state economy) is reinforced by the recent finding of economists and psychologists that the correlation between absolute income and happiness extends only up to some threshold of “sufficiency,” and beyond that point only relative income influences self-evaluated happiness. This result seems to hold both for cross-section data (comparing rich to poor countries at a given date), and for time series (comparing a single country before and after significant growth in income).
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What that means is we get richer, but once out of poverty, we don't get any happier. We can observe what Daly argues in our personal lives. Sure, on the surface we love our gadgets, our houses, our cars, and our holidays. We certainly wouldn't give them up lightly if we were asked to. But we also know that the fleeting satisfaction these things bring doesn't last. That's why we keep buying more of them. Every study into relative life satisfaction and happiness suggests we don't gain any significant advance in collective quality of life through further economic growth after our basic needs have been met. The data is consistent across cultures, countries, and time.

The only source of gain is that when one person does better than a peer, that person feels better. So getting more money and stuff than whomever you compare yourself to does bring a level of satisfaction because it increases your self-worth. But the net gain for society remains at zero, with all of us just switching places around inside the system in a pointless game. All this happens while the planetary credit card gets maxed out.

Surely we can do better than that.

One of the arguments most used in favor of continued economic growth is something along the lines of, “Yes, but the poor of the world aspire to our standard of living and they're entitled to it. How dare you apply your middle-class Western concern for the planet to deny them that right?”

My initial reaction when I heard this was irritation, because the argument is usually made by right-leaning, free market businesspeople or commentators. My experience is that these people have rarely showed any great concern for the poor previously. In fact they usually blame the poor for their poverty, arguing it's their lack of personal effort to succeed in a free market world. Of course now that concern for the poor serves their self-interest of defending growth, they've changed their view. It reminds me of a quote favored by my late father-in-law, Max Grosvenor: “Hell hath no fury like a vested interest masquerading as a moral principle.”
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That aside, though, my more considered response is to go back to the core argument as to what's wrong with our current economic system. Quantitative economic growth is, let's be clear, very effective at improving the quality of life and life satisfaction of the poor. Countless studies have shown that, using a measure of purchasing power parity, going from an income per annum of $0 per capita up to around $10,000 to $15,000 per capita delivers a dramatic and sustained improvement in quality of life. This means it works up to a family income of around $60,000, then any further average improvement stops.

So I am not arguing that quantitative economic growth doesn't work for the poor; it most certainly does. The problem is that the system that currently delivers this assumes, and in fact depends on, the rich getting richer in order for the poor to be less poor. The math of economic growth means the rich getting richer also increases inequity—this is both the logical result and the evidence of the past forty years. This means the system design requires increasing inequity for the poor to be less poor.

So morality aside, what's wrong with inequity and the rich getting richer? The problem is the research now shows that increasing inequity within nations
degrades
the quality of life for
all
its citizens, including the rich ones. We'll return to this later. So the net result of all this is that using economic growth to address poverty means the rich getting richer with the resulting inequity ultimately degrading the quality of life of all in that society. Okay, so the rich don't get any happier, but the poor do; so can't the rich suffer a little for the poor's benefit?

This leads me to my second considered argument as to why alleviating poverty is not an argument for economic growth. If economic growth is uneconomic—that is, it destroys our capital base, thus destroying wealth—then it is not generating net wealth for anyone, including the poor. Yes, for a short time, a fleeting moment in the history of humanity, some of the poor will see an improvement in their quality of life. This will work until the whole economic system collapses once the capital stock is depleted (the point we are now approaching rapidly), after which everyone will become poor. That will certainly deal with the problem of inequity, but it doesn't seem like an intelligent way to run a society.

If you find yourself in an argument with someone on this issue and the logic offered here isn't working, try this fact from the New Economics Foundation. For every $100 of economic growth between 1990 and 2001, only $0.60 went toward poverty reduction for those on less than $1 a day. So the vested interests are defending their $99.40 of gain on the grounds of the $0.60 going to the poor.
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Sounds like heartfelt concern indeed!

So as an approach for dealing with poverty, our current model of economic growth is certainly not going to work. We will return later to what will.

Of course, all the data is just reinforcing what common sense and instinct are telling us anyway. I have conversations with people all around the world who aren't experts but are questioning the current model at a personal and observational level. They look at their own lives, and despite being told their increased material wealth over recent decades has made them and their society better off, they aren't sure their quality of life has improved. They are working hard yet find themselves deeper in debt. They look around and see communities that are less connected and less safe. They see their children growing up in a world that is fearful and uncertain of its future. They read the science about the emerging crisis in the global ecosystem, and they are starting to wonder whether we are on the right track. Some are downshifting their lifestyles and finding that less money, more time, and less stuff are actually making them feel better and their lives happier.

Of course, here I am focusing on the big picture of humanity's progress—how are we going and where do we need to go next. I am certainly not simply dismissing the past fifty years of human progress, and I recognize the many significant gains made in medicine, technology, and our understanding of how the global ecosystem operates. My key argument is a simple one. Whatever its past successes, the system is no longer delivering the outcomes we designed it for, and if we don't respond to the signals around us, we face serious risk that those advances we have made in the past fifty years will be squandered and we will take a great leap backward.

So it is time for a change, pure and simple.

CHAPTER 15

The Happiness Economy

We now have two reasons to change.

First, we have no choice, and that's always a good reason! The impossibility of continued quantitative economic growth means we'll be forced to shift to a new model of human development to avoid collapse.

Second, the old model has passed its use-by date anyway; it
has
delivered, but it can't any longer. It's not enhancing the quality of life for those whose basic needs have been met, it's globally uneconomic because it is destroying our capital base, and it can't even deliver for the billions of poor because doing so will bring down the whole system, hitting the poor the hardest.

But what will we change to? What is the radical new way to organize society and the economy? How could it work, and how can we transition to it?

The really interesting thing you discover when you look into these questions is that the way forward is neither radical nor new. This moment in time, the end of growth, was in fact foreseen by the founding fathers of economic theory and market capitalism as a natural point we would
inevitably
reach. As expressed by John Maynard Keynes, arguably the most influential economist of the twentieth century:

The day is not far off when the economic problem will take the back seat where it belongs, and the arena of the heart and the head will be occupied or reoccupied, by our real problems—the problems of life and of human relations, of creation and behavior and religion.

Even further back, in 1848, one of the pioneers of economics, John Stuart Mill, anticipated the transition from economic growth to a “stationary state.” In his
Principles of Political Economy
, he wrote:

The increase of wealth is not boundless. The end of growth leads to a stationary state. The stationary state of capital and wealth … would be a very considerable improvement on our present condition.

And preempting critics over 150 years later, who today argue that economic growth is essential for human progress, he wrote:

It is scarcely necessary to remark that a stationary condition of capital and population implies no stationary state of human improvement. There would be as much scope as ever for all kinds of mental culture, and moral and social progress; as much room for improving the Art of Living and much more likelihood of its being improved, when minds cease to be engrossed by the art of getting on.

Scarcely necessary indeed. We can go still further back, virtually to the beginning of economics as a field of study, to Adam Smith, whose famous 1776 book,
An Inquiry into the Nature and Causes of the Wealth of Nations
, was described as “the effective birth of economics as a separate discipline.” Adam Smith assumed and indeed forecast the end of economic growth and the transition to a stable-state economy, for various reasons—including what he saw as the obvious limits of natural resources. Smith reasoned that all economies would eventually reach a “stationary state” when they had “acquired that full complement of riches which the nature of its soil and climate, and its situation with respect to other societies allowed it to acquire; which could, therefore advance not further and which was not going backwards.”
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So over two hundred years ago, the founder of modern liberal economies recognized what we have since forgotten—that any economy remains constrained by its “soil and climate” or its natural resource base.

Thus it seems the arguments against growth are
not
the territory of radicals seeking to question the capitalist model but have in fact been long understood by capitalism's founding fathers as a logical point we would inevitably arrive at.

Now that we have arrived, our task is to define what this steady-state economy will look like and how to transition toward it. We have to transition to it rather more abruptly than was perhaps expected or risk undoing the hundreds of years of progress that got us to this point.

There is more good news in this history. Because the logic has always been so clear, a great deal of work has been done to define our task and many guidebooks have been written.

One of the organizations most active in this area is the New Economics Foundation. When I met with the NEF's executive director, Stewart Wallis, he raised an interesting issue that struck me as perhaps our most urgent task. The design of a steady-state economy is in fact not that difficult. The challenge, he argued, is this: There is a significant difference between a steady-state economy—one designed to operate that way—and a failed growth economy, which would be the absence of growth from our current economy. His concern is that a failed growth economy, with rising unemployment and many other social and economic challenges, poses a serious threat to social and political stability and could lead to considerable suffering. He pointed out that a steady-state economy can be designed to avoid this, but it must be just that—designed to do so, including the transition to it.

The challenge Wallis gives us is to act before this point is reached, so we can actively move to a new model rather than letting the old one fail, which would then make transition much harder. The NEF has focused on how the transition could work and what concrete policies could be put in place now, with immediate benefit. Many others have also proposed actions governments and individuals can take now that start to move us in the right direction.

Such transition measures also give us insights into what a steady-state economy would be like. These are not all new ideas. In fact, many of them are already in existence in mainstream policy. Others could easily be applied now within current economic structures.

One example is cap-and-trade systems on key resources. These are being applied to both resource supply (such as fisheries, water) and pollution amounts (CO
2
, SO
2
). Another major one already on the agenda and in progress in some countries is to start moving taxes from things we want more of (for instance, labor) to things we want less of (pollution/resources). This encourages employment (addressing one of the key risks of a failed growth economy) and discourages material use and waste (reducing the risks of economic shocks that a sudden change like peak oil pose). Such a shift in the tax approach would also reward those who choose to work less and consume less, an idea we'll explore further shortly.

Some proposals include setting limits on inequity, a major challenge we'll come to in the following chapters.

We can also put in place systems, in addition to tax changes, that actively encourage the workforce to choose to work and spend less, by providing more flexible working hours, including more part-time work. This starts to slow the economy without increasing unemployment as a result. It also generates a cultural understanding and live examples of people living happily in new ways—less work, less debt, less stuff, more fun, more community, and more security.

What the work of all these pioneers, from Adam Smith to Herman Daly, and the work of groups like Center for the Advancement of the Steady State Economy (CASSE)
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and NEF tell us is clear. The task before us, while not simple, is also far from impossible. Given such change is the only option we have before us, short of allowing society to collapse, this is a welcome relief!

Getting to work on this transition will bring a substantial upside. While, as covered earlier, our response to climate change will deliver many immediate improvements in our quality of life, it is in designing a steady-state economy that the benefits really flow. This is where we start to reinvent the way we organize our economy, society, and lives to unleash our full human potential and creativity. In doing so, we will get to steadily improve life satisfaction and eliminate many persistent problems that have long dogged us, some throughout our existence—problems like extreme poverty and inequity, like unsafe communities and unhealthy cities, like our overworked and time-poor lives and resulting strained families. We'll return to this, including what we can do now to start the process by acting at the personal level.

While personal action will be important, especially at this early stage, urgency will require us to apply the enormous power of government to the task. We need policy that is designed around improving quality of life rather than economic growth for its own sake. It is frankly ridiculous that for many decades, the key measure by which we have judged governments' performance on social progress has been GDP, the total amount of economic activity in a nation. It is as though any economic activity is good, and therefore the more the better. This obsessive focus on economic growth as an end rather than a means has led to a very unhealthy system of measurement of progress. Despite the lack of evidence to support the current approach, it is a system that few mainstream political leaders have questioned in recent times. Consider though Robert Kennedy, who said in 1965:

Too much and for too long, we seem to have surrendered personal excellence and community value in the mere accumulation of material things. Our Gross National Product … counts air pollution and cigarette advertising and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwoods and the loss of our natural wonder in chaotic sprawl. It counts napalm and it counts nuclear warheads, and armored cars for the police to fight riots in our cities.

Yet the Gross National Product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile.

There was clearly some serious reflection going on at this time following a period of such prosperity. Republicans were on the job as well, as indicated by President Nixon's comments in his State of the Union address of 1970:

As we move into the decade of the seventies, we have the greatest opportunity for progress at home of any people in world history. Our gross national product will increase by $500 billion in the next 10 years. This increase alone is greater than the entire growth of the American economy from 1790 to 1950.… In the next 10 years we shall increase our wealth by 50 percent. The profound question is: Does this mean we will be 50 percent richer in a real sense, 50 percent better off, 50 percent happier?

As Robert Kennedy suggested forty-five years ago, we need to stop measuring our progress by
quantity
of activity and instead start to measure
quality
of life. This is the type of progress we should hold our governments accountable for.

There is a great deal of work under way to define the right way to do this, like the human development index devised by the UN Development Programme (UNDP), which adds life expectancy and quality of education to GDP. Another, and my favorite, is the happy planet index developed by the New Economics Foundation. The happy planet index adds life satisfaction levels to life expectancy levels and divides the result by the ecological footprint, thus measuring the length and genuine quality of life for present generations divided by the risk to future generations of any damage being done to our capital stocks.
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Am I off with the fairies or being gripped by naive idealism? Is such a radical transformation at all possible? Do I really think people would ever support such a profound change away from our current obsession with personal material wealth?

When we consider all this, it's important to remember the scale of the challenge we will face and what a great opportunity for radical shift a good crisis can create. We will be in a head space for change that is nothing like what we face now.

When you wonder if we can do this, consider the personal comparison of a conversation you're having with your doctor about the need for exercise when you're in good health vs. the conversation you have just after you've survived a heart attack. It goes from “Make an effort and you'll feel better and get benefits later” to “If you don't change, you'll die next time.” The motivation is quite different. This will be our context.

Nevertheless, when you look at the current reality of politics and social change, it's easy to lapse into negativity and cynicism about our potential. I often have conversations with people who think we will just slide into collapse. They understand the key issue is not the conceptual potential of a steady-state economy or our technical capacity to design and deliver it. The issue is choosing to do so, and they don't see how we are capable of such transformational change.

I understand how observing our politics and our daily consumerism can lead to such an attitude. After all, as we discussed earlier, the main response of world leaders to the so-called global financial crisis, a crisis caused by excessive debt and consumption, was to borrow more money and give it to us so we'd get out and shop more.

However, when I think back over the history of humanity and look at how much we've changed since we evolved from our chimpanzee tendencies and how much we've developed over even just the last few hundred years, I see our potential differently. The change we make is often driven by necessity and a crisis, but the change is generally positive. This transition will be particularly challenging and is more complex than, say, winning a war or inventing new technologies, but it's nevertheless within our capabilities as well as potentially exciting and uplifting.

Despite the evidence of our history, we forget that dramatic and fundamental change in our behavior, culture, and values is not just possible, but is what clearly defines humanity—our ability for conscious and deliberate evolution toward a higher organizational state. This is what we've actually done, and we're about to do some more.