The nef blog

Originally posted at Comment is free.

Listen to the news today and you would think that economic growth was the only answer to all our problems. But 40 years ago The Limits to Growth, written by a group of scientists at the Massachusetts Institute of Technology and published by The Club of Rome, broke a modern taboo: it suggested that growth itself might be the problem.

It wasn't the first time someone had suggested that an economy endlessly expanding in scale was neither possible nor necessarily desirable. As long ago as 1821, David Ricardo wrote of the ultimate equilibrium to which economic development led. And, in his Principles of Political Economy, 1848, John Stuart Mill raised and answered the question like this:

"Towards what ultimate point is society tending by its industrial progress? When the progress ceases, in what condition are we to expect that it will leave mankind? It must always have been seen, more or less distinctly, by political economists, that the increase of wealth is not boundless: that at the end of what they term the progressive state lies the stationary state, that all progress in wealth is but a postponement of this." 

Why, then, did The Limits to Growth shock in 1972, and why does questioning growth today still provoke incredulity and anger? The report itself became something of an albatross for the green movement. The view entered folklore that it contained predictions about resource use that were alarmist and plain wrong. But, as New Scientist magazine reported recently, it was the critics of the book who turned out to be mistaken.

For one thing, the model used by the MIT scientists didn't make precise "predictions", but projected what was likely to happen if certain trends continued, allowing for "adjustable assumptions" of resource use. Their real finding was not that collapse was likely to occur by a particular year, but that population and the global economy would contract rapidly after peaking. The only circumstances under which some kind of stabilisation, rather than collapse, was achieved, was constraining population and the scale of the economy.

Models and reality are not the same thing. But – strikingly given the relatively crude computer modelling available at the time – the MIT projections have proved remarkably accurate. Today they can be checked against decades of actual data. Population, industrial output, pollution and food consumption all track the lines in the model.

There is a popular view that economic growth can be saved by efficiency measures, recycling and technological substitution, such as nuclear and renewable energy replacing fossil fuels. Yet the model allowed even for these variables, and crashed under the pressure of growth just the same.

I took part in a debate last week with Michael Jacobs who was an environmental adviser to Gordon Brown's Treasury. My job was to respond to a lecture he gave at University College London called The Green Moment? The Crises of Capitalism and the Response of Progressive Politics. Jacobs's critique, which several on the left share, is that pointing out the non-viability of economic growth (at least at the global aggregate level and where rich countries are concerned) is a mistaken article of faith in the green movement.

His argument is that, firstly, opposing growth is bad politics, it's bad spin for the green movement that "puts people off". Secondly he argues that low growth is compatible, even in rich countries, with environmental constraints. The first point is immaterial if the limits are scientifically real. It is an inconvenient reality that cannot be spun away. The second point is a claim that must be backed with evidence, it cannot simply be asserted.

And while I have yet to see any figures to illustrate how growth in rich countries can, in perpetuity, be compatible with environmental limits, several assessments point to the opposite conclusion. The Tyndall Centre for Climate Change Research at Manchester University found that to prevent dangerous global warming, economic growth in rich countries would not be possible. With colleagues at nef, I came to a similar conclusion.

Jacobs quotes, admiringly, the work of Tim Jackson on "prosperity without growth" with the former government advisory body the Sustainable Development Commission. Yet Jackson's work too, as the name suggests, foresees a future without growth.

Work by the Stockholm Resilience Centre on environmental "planetary boundaries" shows several have already been transgressed, requiring large absolute reductions of consumption in rich countries.

One thing is sure: advocates of growth need to be able to show not only that environmental impact can be cancelled out by efficiency and resource substitution, but that deep, absolute reductions in resource use can be achieved simultaneously, and that such gains can be made year, after year, after year, ad infinitum.

A key insight by the original MIT group was the problem of time lag. Environmental problems became obvious and were acted on too late. Damage became locked in. This is the moment we are now living through. Nasa climate scientist James Hansen recently pointed out that if the rich world had started reducing emissions as recently as 2007, the annual reductions necessary would have been 3%. Wait until next year and the figure rises to 6%, wait further until 2020 and the annual target leaps to a staggering 15% reduction per year.

Bear in mind that the Stern Review on the economics of climate changefound that annual emissions reductions greater than 1% have "been associated only with economic recession or upheaval".

There are many problematic issues to do with growth that can't be covered here. Clinging to growth, however, suffocates the imagination needed to devise more convivial ways to share a finite planet. At the very least, and with so much evidence to the contrary, the burden of proof now lies heavily on those who reject the original message of the Limits report, for them to demonstrate how, and under what circumstances, we could possibly enjoy "growth forever" in a finite world. Kenneth Boulding, the founder of general systems theory, thought this to be a view held only by "madmen and economists".

One of the many long-running gags in popular US cartoon series The Simpsons is the hopelessly depressing life led by Abe Simpson, unfortunate father of the less than attentive Homer. Now in his twilight years, Abe is left alone in an old folks home where visitors are few and far between and the “inmates” are expected to wind down their lives in quiet indignity.  And yet, whilst the Simpson family’s disregard for poor Abe may seem extreme to the point of farcical, it tells us much about larger collective attitudes towards the care of our elders, and where we may be going wrong.

It is, perhaps, not too unfair to suggest that we no longer see the care of older people as being our familial or communal responsibility; instead, we rely on public and private services to look after our parents and grandparents. This has meant that in the UK, and across much of Western society, the care of our elders has become professionalised – a service we pay someone else to do directly, or indirectly through our taxes. More and more the invisible and informal economy of family, the home, the neighbourhood and community – the core economy – has taken a back seat to the formal professionalism of the public and private economies, where increasingly you get what you pay for.

However, findings from a new report by Age UK, “Care in Crisis”, suggests that a rebalancing is needed between the core, public and private economy in elderly care provision.

In summary, Age UK paints a bleak picture of the future for elderly people’s services. Currently, they estimate that there will be a £500 million shortfall in funding for 2012. Meaning that, because of a mixture of spending cuts and rising demands, we will spend half a billion pounds less than we need if we want to keep service provision at its 2010 levels – which, for the record, were actually considered inadequate. In other words, in the coming years, it is almost certain that the ability of the public economy to provide adequate support for those who cannot afford to pay for care will be compromised, both in terms of quantity and quality. Of course, this will affect some more than others. Unsurprisingly, those most adversely affected will be the people without the means to procure care privately; those who rely extensively on public support and care.

That we need a radical reshaping of elderly social care is beyond dispute. The question now is how this can be achieved. Disappointingly, official responses to this question – which should soon be formalised in a promised spring time white paper – look likely to eschew transformational change in favour of bureaucratic and fiscal incrementalism (the Dilnot Commission) and further marketization/privatisation (the Open Public Services White paper). In both instances the public and private economies take primacy – the public economy needs streamlining; the private economy needs developing. Or so we are told. Meanwhile the core economy barely even gets a mention, and is certainly not seen as key to reform. 

But, socially just reform will not be achieved by focusing on public and private care economies alone because a) we have much less money now, and that which we do have needs to be pushed upstream towards prevention, and b) anyone in the care professions will tell you that market mechanisms need to be approached with extreme caution. A model of elderly, and adult, care that we can be proud of – which enables people to live and age well, with dignity – must recognise and seek to nurture the core economy.  

Fortunately, we don’t have to look too far, or too hard, to find examples of how the core economy can be given renewed centrality in how we design and deliver services with and for the elderly, and other groups besides. The following cases of co-produced elderly care are testament to what we could be doing on a much larger scale;

• Elderplan member to member scheme: run by health insurance companies in New York, this Member to Member scheme encourages members to look after people who are slightly more infirm, so that they can stay in their own homes for longer. People earn ‘time dollars’ for the hours of effort they put in, which gives them the right to draw down time from somebody else in the system when they need it. It is an outline of a mutual support system which measures and rewards the effort everyone puts in, and utilises key assets in the community. Many of the services provided by Member to Member are beyond anything that could normally be offered by a health insurance company. Many are also services which money can’t buy anyway. “Often you can’t buy what you really need,” says Mashi Blech, then Elderplan’s director of community services. “You can’t hire a new best friend. You can’t buy somebody you can talk to over the phone when you’re worried about surgery.” (Public services inside out)

• Fureai Kippu: Fureai Kippu is a Japanese model of coproduced care that translates to ‘caring relationship tickets’, and provides a system for valuing the hours that a volunteer spends supporting older people with their daily routines by crediting it to that volunteer’s ‘time account’. This is managed exactly like a savings account, except that the unit of account is hours of service instead of yen. The time account credits are available to complement normal health insurance programmes. Different values apply to different kinds of tasks – for instance a meal served between 9am and 5pm has a lower credit value than those served outside of that time slot.
  
  Household chores and shopping have a lower credit value than personal care.These health care credits are guaranteed to be available to the volunteers themselves, or to someone of their choice, within or outside of the family whenever they need similar help. Some private services make sure that if someone can provide help in Tokyo, the time credits become available to his or her parents anywhere else in the country. (Public services inside out)

Alone these two examples won’t radically reshape services for elderly people in the UK. But within them they contain some of the core ideas for how a fundamental shift in thinking could be achieved. We need to start working with elderly people, their friends, families and communities, and not simply for them. We need to find ways of recognising the collective capabilities of people and help support these. And we need to design services which bring people together and support collaborative relationships; to help people help one another in ways that people do best – informally and formally.     

Through co-production we can find a much better balance between the core, public and private economies, where all three work together in constant dialogue for a desired outcome; better lives for all elderly people. Whether or not the government will recognise this, or whether we will move towards a market based solution, remains to be seen. 

On Tuesday the All-Party Parliamentary Group on Wellbeing Economics (to which nef provides the secretariat) held an event in the House of Commons: Is economic growth essential for wellbeing? In an interesting discussion, Professor Tim Jackson, nef’s Anna Coote, and David Skelton from Policy Exchange talked about the historical, current and future relationship between well-being and economic growth. The complexity of this debate was obvious from the speakers’ presentations; however questions from the audience revealed a desire for some concrete ideas about how change might happen.

Tim Jackson argued that we must not return to the growth-based economy of previous times because we cannot move fast enough in technological terms to deliver ourselves from financial catastrophe, from resource catastrophe and from environmental catastrophe, simply by keeping our existing institutions. He highlighted what he saw as the three main tasks necessary to create a well-being economy: to establish the limits of our economy (particularly the resource limits); fix the economics (so well-being is delivered by the economy, so institutions do not rely on relentless consumption growth, and so the macroeconomy does not collapse as soon as people stop spending money on the high street; and change the social logic (the assumption that we are just selfish, materialistic, individualistic consumers).

Anna Coote focused her talk on four key changes that would help the economy become focused on well-being: growing the core economy, transforming public services, redistributing time and investing in the prevention of harm. By focusing on these areas we can we can move from a system that is strangled by a scarcity of economic resources, to one that thrives on an abundance of human resources.

David Skelton was more cautious about the transition – he emphasised that in a lot of cases economic growth was a good proxy for well-being, that enhanced well-being could not happen without economic growth and that a focus on well-being should not replace GDP. But he also agreed that there was much more to well-being than economic growth.

The questions ranged from debt, to labour market issues, to population growth. But what became increasingly apparent was the appetite from the audience for real, tangible and concrete ways that this transition could be realised. This desire is really encouraging: as Tim Jackson said, we have come a long way from even five years ago, when the topic was taboo. Above all it showed that nef ’s Great Transition programme is attempting to answer the most important question that is now increasingly being asked; how can we design an economy that delivers equitable, sustainable well-being?

Last week was a tragic one in the prison system. The apparent suicide of two teenagers in separate incidents has thrown the spotlight back on the youth prison system. These incidents call into question the ability of young offenders institutions to provide proper care for the children in their care. There were many warning signs. HMYOI Cookham Wood, where one of the boys was held, has a chequered history and was described in its last inspection as ‘not sufficiently safe’.  Both boys had previously been identified as being at risk of suicide or self-harm. Parents are demanding to know how two young men who should have been under extra supervision for their own safety were able to commit suicide.

These two cases represent an extremity of the harm that imprisonment can do to young people. Beyond these tragedies, those who leave youth custody often experience damage which lasts for many years. Research by nef has shown that young people leaving custody often face unstable accomodation, unemployment and difficulties in rebuilding their relationships with friends and family. And as well as failing young people, prison also fails to protect the communities they come from. Nearly 70% of youth released from custody re-offend within a year. Our estimate is that the damage done by putting a young person in prison for a year can add up to as much as £40,000 in social harms.

While we are still far too ready to send young people to custody, this is one of the few areas where real progress is being made. The adult prison population creeps implacably up – this week’s 87,668 is another new record – but the number of young people in custody has fallen significantly. In 2010/11 the average number of young people in custody was only 2,040, down 16% on the previous year and 27% fall from a decade ago.

Awkwardly, though the reduction in the number of young people going to prison is broadly welcomed, there is less agreement on its causes. An investigation by noted expert in Youth Justice, Rob Allen, argues that the success in reducing the number of young people in prison has its roots not only in changes to guidelines for sentencing but also in changes which impact on young people before they ever enter the court room. From the abolition of the targets which encouraged police officers to hand out formal warnings and prosecutions for the most minor of crimes, to new approaches which aim to constructively resolve issues underlying crime, to co-ordinated work by youth offending teams and courts to ensure that custody is used only as a last resort, reducing the number of young people in prison has taken the concerted and varied efforts of a range of groups. Allen also notes that this has been made much easier by a climate of public opinion which has been more forgiving of efforts to reduce the number of young people in prison than similar efforts in regard to adult offenders.

There are lessons here for those who seek to halt or even reverse the rises in the number of adults in prison. Looking at the whole chain which leads people to prison – not just the decisions of sentencers – and creating space by challenging the wholly fictitious perception that sentences are getting ever softer are key tasks.

Still, as the last week reminds us, we have a long way to go in ensuring that prisons are properly used and run. Reducing numbers to a manageable level is only the first step. The next is to channel the savings from reducing prison populations into both crime prevention and ensuring that our prisons are humane and prepare inmates for life outside. Perhaps then we can see an end to these kinds of tragedies.

The theme of this year's Davos meeting was the 'Great Transformation'. Over the last three years nef has argued a similar line, promoting the need for what we call a Great Transition. 

Our unique strength as an organisation is that we have a very clear analysis of the systemic and international problems advanced economies are currenly facing. We understand how sustainability challenges link with inequality, with increasing instability of economies, and how all of these affect human well-being.

We have a similarly clear view that the goal of a good economy must be to improve human well-being, providing enough good jobs and driving down inequality. We firmly believe that such a goal is achievable.

However, it is only achievable if there is a Great Transition, one which shifts values and incentives, measurement systems and institional structures.

nef has solutions to the major dilemma of our time - if we carry on with economic business as usual, we do severe harm to our planetary support systems; if we slam on the brakes we cause unemployment and inequality. Only a Great Transition can overcome this seemingly impossible dilemma, and nef will continue to make its case for one throughout 2012.

In a single month last year, October, an estimated 650,000 people in the United States closed their bank accounts and moved their money to a credit union. They are part of a growing movement of people who are voting with their savings against the mainstream banks. What is driving it? A lack of meaningful reform, failure of the big banks to support the useful economy, an unshakable financial culture of massively disproportionately pay that puts bankers on another economic planet - there are many, many reasons why. 

Strikingly, a better banking system is being born not as a result of an intelligent response to the financial crash from governments and regulators who still seem not to understand the scale of necessary change. No, the new financial system is growing beneath their feet because people want something better.

Now the UK has its own version of the United States’ campaign. Move Your Money UK launched last night at a citizens assembly organised by nef, Compass and the South Bank Centre called In The Public Interest. The campaign invites people to move their money from the big banks, all of whom to some degree were implicated in the financial crisis, to more ethical providers like the mutuals, co-ops, green saving schemes, credit unions and others.

The event heard from Editor of the Guardian newspaper, Alan Rusbridger, who recently championed the public interest in disclosure campaigns targeted at the media, government and police, and the leading thinker on the role and importance of the public sphere, Richard Sennett.

From nef’s work with Compass setting up the Good Banking Forum, and our lobbying around the Independent Commission on Banking, it was clear to us that systemic faults with the financial system were being met only with minimal reforms.

Several things might explain why. There’s a strange sense of denial in the financial sector itself about how flawed their operations have been. And, an equally strong resistance to understanding the full implications of their only having been saved by massive public intervention – and the continuing quid pro quo for still being businesses that, almost uniquely, are explicitly publicly underwritten.

When the RBS chief executive Stephen Hester was forced by public pressure to decline a bonus of nearly £1 million, the response of the financial sector was telling. In tones that implied the end of civilisation, City voices decried the 'political interference' in the running of RBS. The same voices were, of course, much quieter when 'interference' saved them from themselves.

Oddly, of course, political interference in terms of elected representatives defending the public interest in state owned and publicly underwritten banks has been remarkable by its absence.

Over half of the Conservative Party’s funding comes from the financial sector, and while the government comfortably promoted a cap on welfare benefits for those made unemployed and who are to a greater or lesser extent victims of economic circumstance, but baulked at the idea of capping the bonuses of those who caused the recession.

The long shadow of the failure of finance is still with us. On the day that Stephen Hester was forced to forego his bonus, it was announced that home repossessions had hit a two year high, and that the share of income of the UK’s poorest 20% was today 43% lower than it was in 1978. In our finance driven economy, much less of the benefit of economic activity has been reaching those on low pay.

In an interesting logical twist, the president of the Confederation of British Industry argued that the public interest activism that forced Hester to decline his bonus was, in fact, against the public interest

The Prime Minister and Chancellor both uphold shareholder activism as the best check on City excess. But, as ultimate overseers of the public interest in state-owned RBS, when it came to act on the bank’s unreformed bonus culture, did nothing. In this way they merely reinforced the view of many that, while a nice idea, in reality shareholder activism is a paper tiger.

Things have been equally bad on continental Europe where Germany proposed that Greece abandon its fiscal sovereignty which is, in effect, its democracy, to serve the interests of a financial sector wanting a return to business as usual.

It’s hardly surprising then, that dismayed at the inaction of their elected representatives, people have started organising their own alternatives.

For these reasons, and the fact that the UK stands to benefit hugely from having a more diverse, safer and socially and environmentally focused banking system, nef is delighted to welcome Move Your Money UK onto the scene. Please tell your friends and colleagues about it. This is a chance to make some difference. I strongly suspect that moving your money will also make you feel good. As the campaign says, its time to ‘Bank On Something Better.’

www.moveyourmoney.org.uk