Growth's losing steam, govts must steer better

Time of India

3 days ago

Infinite growth won't end poverty, better distribution will
A motorcar is made of steel, aluminium, copper, glass, rubber, and numerous other things. All of these are finite resources. Steel is also needed for buildings and machinery. Glass for bottles and watch dials. Aluminium for pressure cookers and soda cans. When finite resources have competing uses, it's a miracle that the production of cars, etc, keeps increasing year after year, and the world becomes a wealthier place with it. It wasn't always so, though.
Two centuries ago, economists were a grim lot, and Robert Malthus was more pessimistic than most. He worried that there wasn't enough land on Earth to feed the increasing population, which was nudging 1bn then. But we're 8bn-plus now, and growing, without exhausting Earth's carrying capacity. In fact, we've become so used to the idea of growth that a 6.5% increase in GDP seems lacklustre, 5% dismal.
In his new book, The Invention of Infinite Growth: How Economists Came to Believe a Dangerous Delusion, Christopher F Jones, associate professor of history at Arizona State University, examines how growth became a modern 'ideal', and its impact on the planet.
GDP may be an abstruse idea for most, but it's become the default measure of growth – up is good, down bad, and the faster it rises the better. Some say it's the most powerful number in the world. But as Jones points out, GDP is a relatively recent concept, developed in 1934, and applied only after WW2. The real big change that came with it was that growth – through its proxy GDP – came to be seen as key to jobs, peace and prosperity. Hence, for the first time in history, it became govt's responsibility. Using different policy tools, govts were expected to make national economies run faster. Those that couldn't were booted out in democracies.
The idea of infinite growth, however, didn't form for almost 20 years after. It happened in the 1960s when US and USSR were pursuing growth intensely during the Cold War, and oil production in West Asia doubled in a decade, even as the known oil reserves trebled. These developments gave rise to irrational exuberance among economists and policymakers. In 1992, when he was World Bank's chief economist, Larry Summers declared: 'There are no limits to the carrying capacity of the Earth.'
But ask scientists if infinite growth is possible, and they'll say no. They're also deeply concerned about the ecological impacts of unbridled growth. So, why are economists divorced from observed reality? Jones says it's because they trust technology to overcome natural limits, and don't concern themselves with the natural world. As long as the 'delusion' of infinite growth shapes policy, clearing forests for highways and mines will be seen as 'progress'. But Jones says it's time economists started taking the environment – and its limits – seriously. The 'false confidence' about 'managing' the consequences of climate change and biodiversity loss should be abandoned.
It's known that economic growth and well-being don't increase in tandem beyond the mid-income level. Billionaires are not happier than millionaires – at least not because of their wealth. Since infinite growth is not sustainable, govts should now focus on income distribution rather than maximisation, Jones says. Growth can't be an end anymore – it has to be targeted at those who need it most, and away from those who don't.
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