Repeated crises, rising inequality and the urgent need to tackle climate change have led many to question the pursuit of economic growth at any costs. New agendas for making and measuring progress – such as degrowth, post-growth and human wellbeing – are being widely discussed.
The UK is facing a cost of living crisis, the highest recorded level of homelessness, growing inequality and the global threat of climate change. The country needs help, and ‘growth, growth and growth’, as former prime minister Liz Truss promised, isn’t going to cut it.
‘Economic growth makes things better and easier for everyone and will level up our country’, the ill-fated premier claimed. Historically, this has been true. If we look back at the UK in the post-war period, we see that our obsession with growth was warranted.
As the economy grew, the UK experienced better living standards, improved public infrastructure, higher pay and a reduction in income inequality. Economic growth was undoubtedly positively correlated with big improvements in living standards.
But gains like those seen in the 1950s have been limited in the 21st century. Our economy has continued to grow (at an average of 2% a year), but our rewards have dwindled.
We have reached a point where the social and environmental costs of GDP growth are clear, and the benefits of blindly pursuing economic growth are uncertain.
Focusing on economic growth incurs substantial environmental costs. In 2019, over 11,000 scientists published an article pleading that ‘we need to shift from pursuing GDP growth and affluence toward sustaining ecosystems and improving wellbeing’.
The UK has implemented so-called ‘green growth’ policies, hoping to focus on innovation to solve the problem of finite resources. But this isn’t happening fast enough. The warnings are coming through: we cannot make the transition to renewable energy sources fast enough and hit our carbon targets if we continue to grow. Leaving the climate crisis as an afterthought will have serious repercussions.
A widely held belief is that economic growth will promote a better standard of living. The last half a decade is proving that this connection is loose. Data reveal that welfare and living standards have declined (ignoring the impact of Covid-19) even with sustained GDP growth.
The UK has one of the most advanced economies globally, yet almost 11% of the population regularly rely on food banks to survive. The issue is not that we do not have enough money but that it isn’t distributed effectively enough.
An aggressive tax-cutting, trickle-down policy promoting economic growth would create benefits seen only by the wealthiest. Only direct policies will solve poverty and income inequality. Economic growth alone is not a good substitute.
An alternative economic objective is ‘degrowth’. This focuses on remedying the climate crisis and global inequality by shrinking the economy. The main idea is that we have finite resources and must decouple carbon emissions from economic growth.
Proponents of degrowth argue that green growth is not happening fast enough and that limiting the growth of larger economies and allowing developing ones to catch up is a way of redistributing wealth and reducing global inequality.
But degrowth is not necessarily the most realistic policy idea. Indeed, it is a confusing term and it has negative connotations because of how much the idea that ‘growth is good’ has been reinforced. Degrowth also requires a drastic change in attitudes, consumer patterns and lifestyles. For many, habits will be too hard to give up. It is likely to be too harsh a transition to expect from an economy addicted to growth.
A more compelling argument strives for an economy that is ‘post-growth’. Economic growth will no longer be a primary economic objective. Instead, it will in combined in a sweet spot with a social foundation and an environmental ceiling. Economist Kate Raworth conceptualises this in her 2017 book Doughnut Economics.
Many global leaders are adjusting their goals away from GDP growth. For example, as of 2019, the government of New Zealand has included other indicators to inform its policy and wellbeing budget, and economic growth is no longer seen as a primary economic objective.
In 2020, Amsterdam adopted a policy approach informed by Doughnut Economics. Politicians in Iceland have expressed interest in prioritising other objectives. The UK should jump on the bandwagon.
Economic growth is an outdated objective. It no longer benefits real incomes, public services or infrastructure, and it poses several substantial environmental and social costs. It is time to enter a post-growth economy that does not simply cross its fingers and hope that economic growth will deliver everything through market forces and optimism.
The vision espoused by Liz Truss during her brief period of office only prioritised the wealthiest, hoping that the effects would trickle down. Such an approach would have severe social and environmental repercussions.
We do not need ‘growth, growth and growth’. We must make the transition to a sustainable economy focused on wellbeing and living standards. If we don’t, any economic growth will be accompanied by increasing poverty, inequality, misery and environmental catastrophe.