Recovery…. of what?

So today’s news is that GDP growth returned last year.  As we noted before, this is a decidedly skewed ‘recovery’ based on London house prices and consumer spending, both fuelled as before the crash by household debt – the feedstock to the superprofits of finance capital.

As the New Statesman notes, this 1.9% GDP growth in 2013 still means the GDP is 1.3% smaller than before the crash.  Generally 3% is deemed a healthy level of GDP growth by orthodox economists.   And that’s the crux – this is orthodox thinking and GDP is a very poor measure of an economy’s health, let alone of social or ecological well-being!  It isn’t just us saying this, but also in addition to the various experts and authorities we cited in IPOG, Robert Costanza and colleagues in the leading scientific journal Nature, have recently published a very clear analysis of the problems with this measure.  They say,

Cartoon that says it all from the Nature article

“GDP measures mainly market transactions. It ignores social costs, environmental impacts and income inequality. If a business used GDP-style accounting, it would aim to maximize gross revenue — even at the expense of profitability, efficiency, sustainability or flexibility. That is hardly smart or sustainable (think Enron). Yet since the end of the Second World War, promoting GDP growth has remained the primary national policy goal in almost every country.
“Meanwhile, researchers have become much better at measuring what actually does make life worthwhile. The environmental and social effects of GDP growth can be estimated, as can the effects of income inequality. The psychology of human well-being can now be surveyed comprehensively and quantitatively.”

23 years ago, our friend Victor Anderson, who in what was then ground-breaking work with nef, published a helpful primer(1) on the subject.  That book has just been re-released (at a very silly price – you might be able to get an old one via Alibris or another second hand source).  As he notes, it is frustrating that these arguments still have to be repeated and repeated.

The argument has been won many times.  Nobody has yet put up a coherent argument as to how you could have GDP growth without harming the very basis for human life.  But unfortunately, winning the argument doesn’t mean we’ve won the prize – saving the ecosystem for our children and designing an economy that actually supports genuine, frugal prosperity (1) for all.

It is this that we are continuing to work on in Manchester, engaging in constructive dialogue on what makes for an economy that serves society, nurtures nature, and thereby enhances well-being in the broadest sense.

(1) Anderson, V. (1991). Alternative economic indicators. London ; New York: Routledge.
(2) the term comes from Serge Latouche, who coined the term decroissance, or degrowth to highlight the need to change the subject and de-centre our economic debates from a focus on economic growth. Latouche, S. (2012). La sociedad de la abundancia frugal: Contrasentidos y controversias del decrecimiento. Barcelona: Icaria.

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