venerdì, Settembre 25

Growth Broke It, Let Degrowth Fix It field_506ffbaa4a8d4

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Paris – With the end of each year, a plethora of economic reports is published. These reports include predictions regarding economic performance in countries. From the IMF’s country reports to the Economist’s yearly special edition “The World in…”, the GDP –  Gross Domestic Product – of countries is the key indicator used in such documents. Governments and banks alike attach to it an importance worthy of the center of the world. Leaders make to their citizens promises of economic growth – which means GDP increase. And when they fail, they take to explaining why they have failed, with reasons varying from unexpected economic shocks to political resistance to their reforms. Often times, the word “economic” falls out of the term, which then simply becomes “growth”, an indication to its popularization.

Usually, GDP growth is the first figure given on an economic report. The focus, then,  shifts to other elements; the most important of which, according to conventional wisdom on economic matters, are the inflation rate, unemployment rates, and the budget situation of the government  in question –  deficit or, rather rarely, surplus. Then, the reader finds, deep in the middle of a typical report, the poverty rate, which is perhaps the most significant of all.

Simply put, the GDP measures no more than the sum of personal consumption, private investment, government spending, and net exports (exports minus imports) within a given economy over a certain period. Hence, it measures only the degree of economic activity in a specific country. According to conventional wisdom on economic matters, that amount should always grow exponentially, perhaps in a rather controlled fashion, but it should never drop. Most conventional economists, postulate that a reduction of economic activity leads to an economic crisis. And there are degrees as to the severity of crises based on what happens to the GDP, from stagnation to recession or worse, depression. But conventional wisdom has so often been proven wrong that a clever mind shouldn’t be held captive to its peremptory affirmations. Numerous are the examples of previously held beliefs that turned out to be completely unfounded.

Economic growth is considered the key economic target for most countries, no matter where, why, when, or how. But all the evidence points to another direction: GDP growth is a meaningless figure and a counterproductive lethal objective for most countries. It does tell us about the change in the size of economic activity in a country. And that is all we learn from it. It is like the weight and the height of a patient, which may give a certain indication to a doctor but which remain utterly irrelevant as to a patient’s health situation. They are, generally a superficial matter.

Setting economic growth as a target means for a government to pursue a very material and quantifiable objective. It is a much less worthy target than the enhancement of social cohesion or the improvement of the citizens’ quality of life. Such a focus on a money-based indicator is quite indicative as to the trend of the materialization of human life.

China has generated jaw-dropping figures of economic growth. While that trend has resulted in alarming pollution, it has not led to a decrease in inequality. In reality, China’s Gini figure – a measure of income inequality in countries – is well above 0.4, which is the threshold beyond which the inequality situation in a country bears the potential of causing social unrest. Furthermore, it has recently become crystal clear that increased economic activity leads to pollution, in particular in countries where the state does not focus on environmental protection, as in the United States or in China, for the chase after GDP growth. To generate its monumental economic growth, China has allowed the destruction of its own environment; and it has resorted to nearly feudal labor laws and regulations. Both the suffering of workers and the dilapidation of natural resources have been outcomes of the frenetic pursuit of exponential economic growth and the frantic economic activity which it entails.

The relation between oil consumption, which leads to pollution, and economic activity is a reality. When global economic activity slows down, oil prices become more likely to drop, as a result of falling demand for fuel. Falling demand for oil is the product of reduced economic activity. In addition, economic activity depends on the use of innumerable natural resources. Smartphones, jeans, brand new cars, and other mass consumption goods are made out of raw materials which include renewable and non-renewable natural resources that are increasingly becoming scarce. The concept of increased economic activity goes against that of rationalization, which Man needs to apply in order to remedy or, at least, palliate the problem of increasingly scarce natural resources.

Part of the problem related to exponential economic growth is that it is unsustainable and disconnected from the wellbeing of Man. There are two types of countries that are pursuing exponential economic growth today: rich countries and emerging countries.

The first group is trying to perpetuate and maintain its wealth based on economic growth, which is a factor that is completely distinct from the real preservation of wealth. The second does need to revolutionize its entire societies and modernize its states. But here economic growth, when achieved, is a consequence of general progress, not an end in itself.

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