by Peter Victor (Edward Elgar Publishing 2008)
260pp. including bibliography and index
Review by Derek Paul
Hundreds if not thousands of intellectuals across the world have by now come to their own conclusion that continued economic growth on this planet no longer makes sense, since the present rates of consumption in developed countries are unsustainable. Nevertheless, any mention of an economy without growth brings derision in business and government circles, to the point that it cannot seriously be mentioned. It is a non-starter. But the facts are that in the developed countries our economies have grown too much along with our populations, and these countries have mostly allowed their ecological footprints to become much larger than the biological capacity of their land and fisheries to sustain them. For instance, the ecological footprint of the Netherlands exceeds the biological capacity of its lands by a factor greater than four! A plot of the world’s ecological footprint from 1961 to 2005 is to be found in Peter Victor’s fig. 6.1. This most enlightening graph is key to the necessity for change in the way we run our economy. For more than 20 years, we have been living off the bounty that should belong to future generations.
It requires a great deal of temerity to embark upon a serious work on an economy without growth, and it needs skilled presentation to bring it off. Peter Victor has managed this well, beginning with much of the history of growth, excellently referenced, and providing a fine list of earlier authors who have warned of the impossibility of growth continuing indefinitely. By citing key works in economics at every stage, the author builds up a case no economist could lightly dismiss. It is essential that economists and people in business read this book, because it plots possible first stages toward a future economy that will eventually have to be sustainable. It behooves others to read this book too, as it contains the elements with which one can defend oneself against the nonsense protagonists of growth can hurl at anyone proposing new economic thinking.
The centerpiece of this volume is chapter 10, which describes an aggregated economic model capable of projecting economic futures that would follow from diverse policies or scenarios. The model is called LowGrow, and had already been published in an academic paper. LowGrow tells us very candidly that one could pursue a no-growth policy that would be disastrous, but it also reveals alternative slow-growth paths leading to no-growth that are beneficial in all respects. None of the graphs in chapter 10 shows a sufficient reduction in greenhouse gas emissions, but then all the scenarios plotted were based upon market forces being the only ones operating. Considerably more progress in reduction of ghg emissions could be achieved by adding further regulations or incentives beyond the basic no-growth policy. LowGrow has the great merit of looking at poverty and poverty reduction. The author’s final graph, fig. 10.6, shows a LowGrow result in which the GDP grows slowly, leveling off in 2035, while ghg emissions are slightly reduced; unemployment is reduced relatively more; poverty is reduced yet more; and the debt-to-GDP ratio becomes very low, almost negligible. Chapter 10 also makes us consider the length of the working week, since the trend of weekly working hours has been downward since 1870, and likely will have to drop further in a no-growth economy — to maintain high employment. The major success of LowGrow is that it demonstrates objectively the possibility of a no-growth economy at a higher per capita GDP than we have now and with much less poverty. In the end it is people who make decisions. Since an economy without growth is unavoidable in the long term, the question is how best to steer society in that direction. Peter Victor has demonstrated disastrous routes as well as very beneficial ones. We have been warned.
Critics of the discipline of economics, disparagingly called the dismal science, will be disappointed to see the GDP used as the measure of economic output. This much-discussed topic has been treated many times, but still financial gurus across the world continue to use GDP, knowing full well that it is an inaccurate measure of the health of the economy. Any alternative to GDP is fraught with complications, and would be harder to sell to conventional or conservative readers, so the author has retained the GDP, while making its limitations very clear. In this way he will at least be using language familiar to his readers — who ought to be very many, as this is a timely and important book.
Managing Without Growth has few errors and they are unimportant. The most complex and difficult part is chapter eight, which deals with economic growth and happiness, the general progress indicator, consumption, useful goods, status goods and public goods. The same chapter introduces another model, called HappyGrow, and also the concepts of utility and marginal utility in economics. One could well write a whole book on these topics, wisely kept to a single chapter by the author. He would have done well to explain better the usefulness of the economic concept of utility, which is somewhat obscure in chapter eight. He failed to define marginal utility, though its definition can be deduced from fig. 8.7 and the definition of utility in 8A Annex. Somewhere in the annals of economic history, there must be a rationale for the definition of utility being a logarithmic function of consumption but, in chapter eight, the reader is left to make an educated guess.
People who believe they have souls may be disheartened (dispirited?) to find that they are but robots or consumers in economic theory, but they are allowed happiness and happiness indices, so this should be some compensation. But note, they don’t get their happiness by loving someone and constantly giving of their best or praising God; happiness comes from being employed, consuming just the right amount, and gaining status on a relative scale that is different for each person. Wow!