Beth Stratford - Grown-Up Economics

Grown-Up Economics Beth Stratford It is hard to find an elected leader anywhere in the capitalist world not utterly preoccupied with maximizing growth. Relentless increases in production and consumption year after year: this is the holy grail, even if it means encouraging people to buy things they don’t need with money they don’t have. Even if it means pushing us all closer to ecological disaster.

The widespread conflation of economic growth with social progress is frustrating for anyone familiar with the research on wellbeing. Yes, booms and busts affect happiness in the short term, but in the long run, there is no evidence that economic growth at a national level delivers greater happiness.

This shouldn’t be such a puzzle. After all, wellbeing is underpinned by a range of conditions: economic security is one – hence the drop in life satisfaction during the uncertainty of economic crisis – but we also need social cohesion and solidarity, a sense of agency, mental and physical health, time for family and friends, access to nature, a benign climate and so on. Paradoxically, many of these conditions of wellbeing are threatened by the blinkered pursuit of economic growth.

The global economy is currently growing at 3% per year. If that trend continues, within 25 years the global economy will have doubled in size. Before the end of the century global production and consumption will have increased ten-fold. If economic growth continues to go hand in hand with growth in the volume of natural resources that we convert into finished products and wastes, this won’t be a pretty future. Clearly, a parasite that doubles its use of resources every quarter century is going to eventually kill its host.

Some believe that breakthroughs in efficiency can solve this predicament.

The trouble is that efficiency savings which reduce the need for energy and material inputs tend to lead to lower prices and therefore stimulate even more consumption. This is a pattern observed for the last 300 years, nicknamed the ‘rebound effect’ or the ‘Jevons Paradox’ after the English economist William Stanley Jevons who observed in 1865, in relation to coal, ‘it is wholly a confusion of ideas to suppose that the economic use of fuel is equivalent to a diminished consumption. The very opposite is the truth’.

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Alternative currencies: The Brixton pound, launched in 2009

by Transition Town Brixton, to boost the local economy. B£1, B£5, B£10 and B£20 notes are available and in 2011, an electronic version of the currency was launched Photo by Jonathan Goldberg for Transition Free Press

If it were possible to enforce a hard cap on resource use in rich countries, which descended until we were back down to our fair share of global resource use, the rebound effect would be irrelevant. Overall resource use would be constrained, efficiency gains would be a life-line and any growth in consumption would be ‘green’ almost by definition.

Sectors most likely to thrive under such a cap would be resource-light but labour-intensive. It will be a challenge to shift cultural preference away from material goods toward the consumption of experiences, and to re-skill the workforce accordingly, but success here could boost employment and wellbeing: research suggests that active consumption – which involves participation – provides more lasting satisfaction than passive consumption.

Unfortunately campaigns for hard resource caps have gained little traction, not least because of fears that investment in efficiency and re-skilling would not move fast enough, that prices would rise, choking off demand and putting an end to economic growth.

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You might be wondering why an end to economic growth is such a terrible prospect. Why should it not be acceptable for those in the already-rich world to simply consume the same amount as they did last year?’

The answer is that we have an economic system which – as currently configured – is dependent for its very stability upon economic growth. If growth drops below a critical rate – like a bicycle that drops below a critical speed – the system begins to spiral into crisis; debtors default, people lose their jobs and many experience real hardship. This leaves us in something of a dilemma: we’re damned if we grow and damned if we don’t.

The good news is that what matters for wellbeing (at least in rich countries) is avoiding inequality, unemployment and the uncertainty of economic crisis, rather than increasing consumption itself. This suggests that if we can find a way to reduce our systemic dependence on growth, then we can afford to distinguish more carefully between growth that is socially beneficial, and growth that is exploitative and destructive. We can give ourselves the freedom to pursue growth when it suits us, rather than being coerced into the pursuit of growthat-any-cost.

In order to make this shift we need to address three key dynamics relating to inequality, labour productivity, and debt.

INEQUALITY AND THE NEED FOR GROWTH Firstly, our current economic system has lots of built-in mechanisms for ensuring that wealth flows upwards, and concentrates in the hands of those at the top of the pyramid. The more capital you amass, the more rent, interest, dividends and windfalls come your way; the larger the share of the market you control, the greater your bargaining power; the more expensive your schooling, the more likely it is that you will have friends in government and industry from whom to extract favours.

Now if the whole economy increases in size, this means the overall pie to be shared also increases in size, and that – in theory – means that the slice of pie going to the poorest can be maintained, or even increased, even while inequality worsens. But if the economy stops growing nobody can enrich themselves without impoverishing someone else, in absolute not just relative terms. Thus, under conditions of low or zero growth, the case for tackling the systemic drivers of inequality, and for aggressively redistributing wealth, becomes even more urgent and critical.

But rising to this challenge would bring a whole host of positive side-effects.

As Wilkinson and Pickett’s research shows, in The Spirit Level, societies with smaller income differences between rich and poor have higher levels of trust, lower levels of violence, and stronger community life.

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Harry Giles performing Everything I Bought and How It Made Me Feel at I, Consume with the New Theatre Institute of Latvia in Riga, 2014. For a full year, Harry logged every transaction he made online in painstaking detail, writing about how each purchase made him feel – his hopes, dreams, fears, and utter failure to come to a liveable compromise with consumerism.

He shares what he learnt in a ‘show-and-tell’ performance lecture that dissects shopping until it all falls apart. ‘Framed as a presentation of pie charts and bell curves and statistics about consumption, it’s really about being miserable, being afraid, and trying to find a way out.’

Photo by Andrejs Strokins

MACHINES vs HUMANS A second major challenge is to address the destabilizing effect of labour-saving technologies. Mechanization and automation can allow firms to save money on wages, and boost profits: they can make more stuff with less labour. But at a whole economy level, this trend leads to unemployment, unless we can be convinced to buy more stuff. High unemployment leads to a fall in household G r o w n - U p E c o n o m i c s ❙ 37

Oil City, site-specific theatre by Platform for Two Degrees Festival, Artsadmin, 2013 Photo by Amy Scaife

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income, triggering a fall in consumption, and profits, and from there an easy slide into crisis.

A potential way to break the inverse relationship between productivity improvements and employment, is to gradually reduce average working hours. If technological innovation reduces the need for human work hours, the remaining work hours could, in theory, be distributed more evenly so that we all work less – which is surely what our predecessors hoped technology would do for us.

This might seem difficult to achieve given the existing model of ownership and control in capitalist firms that gives workers little power in negotiation on hours and pay, which is why democratising our workplaces is likely to be a vital part of the transition to a green economy.

Greater democracy in the workplace might also help us to discern which labour productivity improvements have genuine social and environmental benefits, and which do not. Sometimes being able to produce more ‘stuff ’ without any increase in human labour is an unequivocal step forward. But sometimes the negative repercussions for the environment, for our enjoyment of work, or for the quality of service provided, outweigh the benefits of labour-saving; just think about what modern agricultural innovations did for hedgerows and biodiversity; what assembly lines did for the crafts person or what labour productivity means in the context of a care home. If employees and customers were able to elect company bosses, proposals to boost profits at the expense of wildlife, job satisfaction, and quality of care, could be vetoed.

DEBT, BOOM AND BUST The third key challenge is to redesign our monetary and banking system.

Contrary to widespread belief, when a bank makes a loan, it does not transfer existing savings to the debtor, it actually creates brand new money. Conversely, when the debtor repays that loan, the money disappears from circulation (and the bank pockets the interest). In the UK, over 97% of the money in circulation is now created and destroyed in this way.

This system poses three key problems for the ‘green economy’ agenda. Most obviously, the current system means that a handful of private profit-driven companies control how much money is created, for whom and for what, thereby wielding enormous power over the health and direction of the economy. Despite explicit and implicit state guarantees banks are under little obligation to use this privilege in the public interest – and they must be.

Most of the time banks have an incentive to encourage households to get into debt – the more loans they make, the more they can earn in interest and fees. More debt means more money swashing around in the system – enabling the dynamism and expansion that we associate with capitalism. But debt is a G r o w n - U p E c o n o m i c s ❙ 39

claim by the lender on future resources and the future labour of the borrower.

Put simply, the greater the build-up of debt, the greater the imperative upon the borrower to work, to mine, to fell forests, to produce, to earn. From this point of view debt is an enslaver. So much for capitalism’s covenant of freedom and technology’s promise of reduced working hours.

Finally, when banks lose confidence in the prospects for growth, as they did in 2008, their enthusiasm for extending loans can evaporate overnight. Under the current system, this has the effect of choking off the money supply. Inevitably profits and incomes fall. And when households and firms lose confidence in their income streams they tend to try and pay down their debt as quickly as possible, shrinking the pool of money in circulation even further. This elasticity in the money supply is one of the key reasons that our economic system lurches between boom and bust and seems incapable of trundling along calmly in the middle. The choice for politicians, who don’t fully understand how to control the feedback loops that turn a small downturn into a crisis, appears to be: grow the economy or get kicked out of office.

The good news is that our monetary and banking system is the product of historical circumstance, and can be changed if we so choose. The same goes for cultural factors and institutions that encourage us to acquiesce in widening inequality and relentless mechanisation. There are alternatives, which deserve careful deliberation and debate. Building support for their realisation will require imagination, creativity and the courage to experiment and fail. This is where artists come in.

WHAT ELSE? What I have identified above are just some of the key dynamics that make our economy reliant on growth just to stay upright. To fully liberate ourselves from the growth fetish we’d need to address the psychological drivers that make us desire more things. This might turn out to be the biggest challenge of all. But some obvious first steps present themselves: reduce the inequality which fuels status competition and social anxiety; provide some respite from the onslaught of advertising; offer alternative forums through which people can express individuality and participate in community life, that don’t depend on the consumption of material goods. Artists can help create such forums and to subvert and counter the messages of advertising.

We are unlikely to entirely eradicate our attachment to material goods – after all, goods have played an important role in communicating identity and value in cultures throughout history – but we may succeed in transforming this relationship into one with less disastrous consequences for the planet. This would be grown-up economics.

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