The world is driven by a deeply entrenched metric that is leading us to literal disaster. Chasing this metric is not sustainable and it’s one of the main reasons why we can’t combat climate change, income inequality or dwindling resources. It’s growth. Gross domestic product (GDP). Your company’s ever-shifting bottom line. The relentless pursuit of more.
Our planet is bursting at the seams. We lie beyond the “safe operating space” in four of nine critical boundaries defined by the Stockholm Resilience Centre: species loss, ocean acidification, climate change and nutrient loading. No mincing words — breaching any one of these boundaries causes the eventual end of life as we know it. Yet, humans haven’t slowed down. Our carbon emissions “budget” in order to limit global warming to 1.5 degrees will, at the current pace, be exhausted within a decade or less.
So why have we not collectively changed our behaviour to solve this? Why aren’t individuals, governments and organisations acting in the best interests of our future? Why are our retirement funds, the very embodiment of our future safety, so ironically reliant on an unsustainable path? Because growth is such a deeply entrenched economic system and mindset; a system that relies on continuous expansion, disproportionately to the benefit of a small minority of rich people — a system doing the exact opposite of what it was designed for.
GDP and growth have humble and well-intentioned roots, à la Economics 101: Humans evolved in an environment of scarcity, which continued well into the 1900s, and still continues today in the developing world. Economists like Smith, Mill and Keynes theorised that a free market, which incentivised companies to maximise profit, and people to invest in these companies, created a positive feedback loop producing novel products and services. The innovation produced by these companies would lead to better health, longevity and happiness for humans, because people buy the things that make them healthy, safe and happy. And as they can buy more of these things, they’re healthier, safer, and happier. So, by recording the amount of things that we make and sell, voila! We have a metric for human progress. The more GDP, the better. Full-scale capitalism ensued and pushing GDP led to prosperity and social progress in many countries.
But capitalism is pretty sticky. It has set in so hard — in our governments, our culture, our very egos — that we can’t get rid of it. Our economic stability depends on growth. Our individual futures — our retirement funds — rely on it. We’ve over-capitalismed the world, to a point where our pursuit of short-term growth is more important than humanity’s survival.
So, besides the obvious lack of infinite resources, what’s actually wrong with growth? Let’s briefly explore some of the less obvious systematic issues:
1. GDP is no longer a reflection of human progress, especially in the developed world. We can now create GDP without even touching people’s happiness. Complex financial instruments, needless b2b products and excess production of goods and food are examples of this. Moreover, GDP now doesn’t reflect happiness at all in rich countries. In the past few decades, average income has increased remarkably in the US, Japan and UK, but happiness has stagnated. This is for a simple reason — your first warm coat is not worth nearly as much to you as your fifth one, yet GDP assigns them the same value. Shopping, which used to be just buying that which you needed to survive, has become a hobby.
2. GDP is too selective. It records all the short-term positives but not the long-term negatives (environmental and scarce resource debt). Serge Latouche, a professor of economics, showed that if you take growth in GDP, and subtract damages caused to the environment from that, you get zero or even negative growth. To make an accounting analogy, it’s as if a company is recording all its profits but not recording most of its debts.
3. Growth as a whole isn’t actually solving inequality. In Capital in the Twenty-First Century, Thomas Piketty points out that growth ends up extremely disproportionately in the wrong hands. If you think about it, this is intuitive — the more you invest, the more money you make.
4. Even if growth somehow ended up disproportionately in the hands of the poor, it would be a very short-lived victory in the human timeline. To bring all ±10 billion people in the world in 2050 a “Western lifestyle”, in terms of goods and services, we would produce 200 times the carbon footprint we currently have.
5. The world of investment has become disconnected from real value. Companies need not only net profit but need more net profit than the previous year. For instance, Netflix, having made $4.4 billion net profit, had its shares tank and laid off thousands of employees because this was 12% less net profit than the year before. Shell doubled its net profit each of the previous two years, up to $40 billion — profit and value that should have gone to sustainable energy sources. Miro, just a simple online whiteboard, was valued at $17.5 billion.
6. Faced with a new source of growth slowdown and endangered retirement funds, a slowdown in population growth, we want to encourage humans to keep making an unsustainable amount of new humans. Even publications such as The New York Times claim that “the shrinking Chinese population is a global-scale problem”. Elon Musk has said that the biggest threat to civilisation is population collapse. With the world bursting at the seams, our priorities are flabbergastingly upside down.
So ends a long list of things wrong with growth. But there’s no use in a wall of text which doesn’t suggest solutions to the problem. The solution starts (but is not solved completely by) a replacement for GDP. Instead of measuring GDP, we take a step back, to the original historical intention of GDP — measuring what actually makes people prosperous, content and happy. Instead, we measure growth of actual prosperity — quality of our health, lives and relationships, and feelings of meaning and belonging. But, very importantly, this needs to be adjusted for sustainability, aka long-term happiness.
This would very much change the way the world grows or shrinks. Imagine we could switch overall GDP measurements to that right now. Renewable energy would suddenly be the most economically profitable energy. Charitable donations and aid to the poor (within a country) would be valued in a country’s growth. Recycled goods would have more economic value than new goods. Such a metric would work for companies and their respective growth, too. We would see enterprises as services to maximise contribution human and sustainability needs, rather than to maximise their own profit. It’s a subtle but powerful difference.
Obviously, this would be hard to measure. It would be gamed by countries. It wouldn’t account for much-needed wealth distribution to poorer countries. But it’s a terrible argument that something should not be done simply because it’s hard to do. Even a small institutional movement towards a better measurement of long-term prosperity would be a massive improvement from GDP. And such a metric already exists — the “genuine progress indicator”, a metric already being used in places like Maryland in the US. The University of Johannesburg tracks a slightly simpler growth happiness index for South Africa.
This all leads to a final bout of cynicism and sadness, which you no doubt shared while reading the above. Such a systematic overhaul is not going to happen, at least until environmental disaster forces it upon us.
We have too much of a prisoner’s dilemma between people and between countries. One rich person isn’t going to permanently redistribute their wealth to the poor unless all do. One country isn’t going to take a short-term hit to its economy by making (very necessary) outrageous changes to its environmental impact, when it is locked in competition with other countries.
It’s a massive undertaking to change the system everything runs on, especially when the damage we’re doing might impact future generations and not us. But, again, let’s give it a shot because it’s a terrible argument that something should not be done just because it’s hard to do.
This piece borrows multiple ideas from the book Prosperity Without Growth by Tim Jackson.
Ryan Anderson is a data scientist. This is an edited version of an article first published on ryanandersonds.com.