Saturday, March 1, 2014

The Folly of Continued "Growth"

"Economic forecasters exist to make astrologers look good. Still, the latest forecast from the Congressional Budget Office is sobering. Its economists anticipate a “new normal” average annual growth of only 2.1% (down from the average of 3 to 4% over the last half century), with job growth averaging only 70,000 a month (down from an average of 150,000 to 200,000 over the last half century). Some of this is be due to an aging American population, but some is surely the result of widening inequality. Since the start of the recovery, 95% of all economic gains have gone to the richest 1%, who spend only a fraction of what they’re accumulating. As a result, the rest of the nation doesn’t have the purchasing power to get the economy out of first gear. If this continues much longer, the “new normal” may be far worse than the CBO anticipates."

I do agree that the lack of job growth is due largely to increasing inequality. I also believe that addressing economic disparity is priority one and, properly done, will lead to other goods across many areas of public policy. However, we really need to understand the difference between external growth (how we have historically calculated GDP, as a measurement of the size of the economy), and internal growth (such as adding jobs to the economy by employing formerly unemployed people to repair, upgrade, or replace existing infrastructure, or making a full time work week fewer hours).

If we are going to create a sustainable society, we need to lower our total global resource consumption, which precludes our traditional ways of measuring economic success. Traditionally, we have measured the size of the overall economy (the 3-4% average growth Reich mentions above). But we are at a point now where if we hope to rescue enough of the planet to sustain ourselves and the other animals living on it, we must begin to slow and even reverse our resource consumption. Of course, there are lots of very easy ways we can start this process. There is a lot of low hanging fruit that has yet to be picked, such as smart homes where lights turn off when the room is empty, smart grids, electric cars and car sharing for short daily trips, reducing our meat consumption and eating fewer packaged foods.

These are all great things, and indeed things that must happen. However, I find it incredibly disappointing to see Reich, who is a smart and thoughtful economist and has great public policy ideas over all, continuing to legitimate the "grow or die" fallacy. We need people like him instead to begin working with environmental economists like Juliet Schor and others to create new ways of accounting and measuring economic success that include quality of life and environmental sustainability in addition to economic parity. These new ways of accounting will be critical in helping us formulate a sustainable direction for the country and the planet.

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