Response: growth must go on

Yesterday, as part of chinadialogue’s series on well-being economics, Viki Johnson of the new economics foundation argued that endless economic growth is neither possible nor necessary. Here Andrew Pendleton, associate director of the Institute for Public Policy Research (ippr), responds.

There are plenty of profound analyses of growth and enough soul- and brain-searching among economists concerned that growth alone is an inadequate measure of a nation’s prosperity. But Viki Johnson is wrong to argue that growth "is not only impossible, it is also neither desirable nor necessary." Indeed, as we seek to deal with climate change, growth is possible, necessary and desirable.  

Natural resources are finite in the absolute sense, but we must unpick the relationship between each of these and economic growth one-by-one rather than rely on a blanket assumption that we can no longer grow economies because certain resources are in short supply. Climate change, however, is not caused by resource constraint but rather by shifting carbon from one natural sink to another. There is still enough fossilised carbon in in the ground to cause major climatic shifts if burned, regardless of when oil, gas and coal reserves will be exhausted.   

Similarly the sun – which is either primarily or secondarily the source of all renewable energy – is limitless in terms of our ability to exploit it. The challenge of tackling climate change, though fraught with complex politics and systemic and technological challenges, is at heart simply a matter of decarbonising energy systems. Energy is of course material to economic growth, but there is no reason why growth can’t be decoupled from emissions by a shift to apparently limitless clean energy.  

And herein lies the most important and significant reason why the de-growth prescription is precisely the opposite of what is needed for a successful climate change cure. The recent global recession — a primary example of what happens when economies stop growing — illuminates this.  

In order to make the transition from incumbent dirty technologies to new, clean technologies, we need high levels of investment. And yet during the 2008 recession, investment in many countries collapsed. In the United States, for instance, by the beginning of 2009 private sector investment in new plant and equipment was below 2005 levels. So while recession no doubt also produced an interruption in the growth of greenhouse-gas emissions, the economics of recession meant that less was done to mitigate future emissions. Unless you believe that climate change can be tackled without new technologies, this is clearly a bad thing.  

In the political economy, the need for growth is just as keenly felt. The US recession produced levels of unemployment in excess of 10% and the Democrat government has struggled to reduce this quickly enough to avoid heavy losses in mid-term elections; if climate legislation was difficult in Obama’s first few months in power, it is nigh-on impossible now and recession is no doubt in part to blame for this.   

In other words, recession in our existing economies equates strongly with human misery and entrenched, outmoded industrial practices. Growth shouldn’t be the only game in town; it’s a measure of success and not — as Johnson says — an end in itself. Inequality and how the proceeds of growth are better shared is an important debate too. But without it, our chances of investing in a cleaner, more sustainable future, avoiding dangerous climate change and raising living standards are scant indeed.  

Perhaps there is another, growth-free way, but it is not at all clear from the emerging cabal of de-growthers what this would look like and how we would get from where we are now to wherever that is.