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The Progressive Policy Think Tank

The Growth Delusion

In 1966, the American economist Kenneth Boulding came up with the concept of the “cowboy economy” and the “spaceman economy”. The cowboy economy, suited to an era of sparse population and abundant nature, was essentially exploitative and extractive. Success was measured in output and consumption, which Boulding called “throughput”. Pollution was an acceptable byproduct that could be absorbed by limitless reservoirs of land and air.

The spaceman economy, on the other hand, did not have such unlimited resources or reservoirs of absorptive capacity. Success was about quality and minimizing production and its associated pollution. 

We are living, at least in rich countries, in the spaceman economy. But our chosen measure of how well we are doing – gross domestic product – was invented in, and for, the cowboy age. Growth is a measure of output of both services and physical objects. But GDP has always been much better at measuring things you can drop on your foot, like steel, or things you can wear on your feet, like shoes.

We treat economic growth as though it were something that just happens and that we should blindly celebrate. Yet we only learnt to measure growth 70 years ago, and it has only become a fetish in the past four or five decades. As Walter Berglund, the heroic crank of Jonathan Franzen’s novel Freedom, says, only economists think that something that grows forever is optimal. In biology, they call it cancer.

My book, The Growth Delusion, actually isn’t anti-growth. It argues that growth – and fast growth at that – is the way for poor countries in Africa, Asia and Latin America to warp-speed themselves out of poverty in the manner that Japan, Taiwan and South Korea have already achieved and that China is in the process of doing. It doesn’t even object to growth in the rich world, although it does note the grotesque overconsumption and keeping-up-with the Joneses (or the Jones-Whittingham-Smithses) that prevails.

But my book does argue that we should think about the type of growth we want and how we might measure it. It also asks that we think about what we value as societies. What we end up wanting my well be “better” - and not simply “more”.

First let’s deal with the rat-race element of growth. There is a now famous experiment in which two capuchin monkeys were set side by side and prompted to perform simple tasks. When they achieved them they were rewarded with snacks of cucumber. Both were perfectly happy. After a while, one of the monkeys was rewarded not with cucumber, but with much sweeter grapes. At this point, the cucumber-receiving capuchin became visibly angry and distressed, flinging the now- despised vegetable at his handler. The experiment was called “Monkeys Reject Unequal Pay”.

If you doubt that human happiness is so susceptible to jealousy – or to what might be called relativity – similar experiments have been conducted on us. (For the record, I too, prefer grapes.) In one, employees of the University of California were asked questions about how content they were at work.  Then they were directed to a website where they could check on the pay of colleagues. Those employees who discovered they were paid less than their peers were suddenly found to be miserable. Some sought new jobs.

Surveys consistently find that, after a certain income, happiness is relative, not absolute. Much of what drives us forward as individuals and societies is the need to catch up with our neighbours or to stay ahead. A restaurant is no fun if the staff earn as much as you do and have no interest in cooking or bringing you food. (If they earn the same you can’t afford it.) It is not satisfying to bargain in a market in Mexico if each of the trinkets costs $1,000 and the locals live like kings. 

Our wealth depends on someone else’s relative poverty. That is a fact of human psychology that may condemn us to an eternal quest for more. However, Richard Layard, an economist who has done much work on measuring what is called "subjective wellbeing", argues that we can be nudged to be better versions of ourselves by tax, incentives and common-sense policies that encourage more inclusive societies.

There is a more fundamental point still. You don’t have to be Thomas Malthus to believe that human growth cannot continue along its essentially extractive path forever. There are currently around 7.6bn people on earth. By the end of this century there will be 11bn, with all but 1bn of the additions living in Africa.

If we aspire, as I do, to everyone having the same chance in life, then we would hope that all 11bn could live like the top 1bn do today, most of whom do so by accident of birth. Yet that might need our economy, as currently measured, to be 30, 40 or 50 times bigger than it is today. One can only imagine the impact on already depleted forests, on shrinking biodiversity and on polluted oceans, not to mention on carbon concentrations that science tells us are already approaching dangerous levels. Even the liking for sushi of a few hundred million middle class Chinese people is already having a devastating effect on wild tuna stocks.

There is hope. In wealthy countries, growth has already changed in nature. Growth is not about more computers, but faster ones with better graphics. It is not about bigger houses and more cars, but more comfortable, energy-saving houses and possibly fewer cars – courtesy of Uber and better public transport. It is not about psychoanalysts speaking at twice the speed – which would improve their productivity – or orchestras ramping up the pace of Beethoven’s Fifth. It is about higher quality experiences, from train travel to personalised medicine.

Growth is now about things like Wikipedia, which unlike the multi-volume Encyclopaedia Britannica, doesn’t have to be printed on dead trees and lugged door-to-door by weary salesman. Yet Wikipedia, which brings most of human knowledge to almost everyone’s fingertips, contributes not one iota to GDP.

GDP contains valuable information. But it should no longer be the nonpareil of numbers. We need better ways of measuring sustainability and better ways of capturing our technological innovations. We need to put more emphasis on measures of good jobs, clean air, work-life balance – and then use those measures to create the sort of societies we want, not the sort of societies dictated by our old-fashioned measurements of "more". In short, we need to think spaceman. But we are stuck with a ten-gallon hat. 

David Pilling is the Africa editor of the Financial Times. He was previously Asia editor and also formerly Tokyo Bureau Chief for the FT from January 2002 to August 2008. His column ranges over business, investment, politics and economics.