The new economics of enough

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October 21, 2013 // By: Dan O’Neill & Rob Dietz, Authors of Enough Is Enough: Building a Sustainable Economy in a World of Finite Resources

It has been over five years since the global financial crisis shook the economic world. Since then we’ve seen spiralling debt, savage austerity, a crisis in the Eurozone, quantitative easing, and a variety of attempts to get the economy growing again. But despite all of this, little has changed. GDP in the UK remains 2 percent lower than when the financial crisis began, and austerity continues on unabated.

Everyone seems to agree that getting the economy growing again is the number one priority. But if growth is really the cure to all of our ills, then why are we in such a malaise after sixty years of it? Although the UK economy has more than tripled in size since 1950, surveys indicate that people have not become any happier. Inequality has risen sharply in recent years, and jobs are far from secure. At the same time, increased economic activity has led to greater resource use, dangerous levels of CO2 in the atmosphere, and declining biodiversity. There is now strong evidence that economic growth has become uneconomic, in the sense that it is costing us more than it’s worth.

In our new book, Enough Is Enough: Building a Sustainable Economy in a World of Finite Resources, Rob Dietz and I argue that it is time to abandon the pursuit of growth and consider a new strategy—an economy of enough. Suppose that instead of chasing after more stuff, more jobs, more consumption, and more income, we aimed for enough stuff, enough jobs, enough consumption and enough income.

The economic blueprint that we describe in our book is based on the contributions of over 250 economists, scientists, NGO members, business leaders, politicians, and members of the general public. Some call this blueprint the “new economics”, some call it “degrowth”, and some call it a “steady-state economy”. While there are differences among all of these approaches, the key ideas have much in common. They include policies to reduce resource use, limit inequality, fix the financial system, create meaningful jobs, reorganise business, and change the way we measure progress. We don’t have space to describe all of these reforms here, but let’s look at two more closely:  limits on inequality and new measures of progress.

Some amount of inequality is probably helpful. It directs people to the sectors of the economy where they are needed, and rewards people for their contribution to society. However, as detailed studies show, a large gap between the rich and the poor results in a variety of health and social problems across society, including increased crime, more mental illness, and decreased trust. Moreover, inequality also has negative environmental consequences. Higher inequality leads to greater status competition (as everyone tries to “keep up with the Joneses”) and thus to higher levels of resource use than are necessary to meet people’s needs.

There are several strategies we could use to reduce inequality. One of the simplest would be to introduce a minimum and maximum income. A recent survey found that 74 percent of Britons support the idea of a decent minimum income for all people. The idea of a maximum income might be a bit more controversial, but surely less controversial than top CEOs earning 262 times what their lowest paid employees earn. After all, does anyone really need to make more money than the prime minister? (He earns £145,000 a year by the way.)

Britain has become a less equal society over the past forty years in part because we don’t factor equality into our measures of progress. Our main economic indicator, the GDP, is a good measure of economic activity—of money changing hands—but a poor measure of social welfare. It lumps together desirable expenditures (food, entertainment, and investment in education) with expenditures that we’d rather avoid (war, pollution, and family breakdown).  In the language of economics, GDP does not distinguish between costs and benefits, but counts all economic activity as “progress”.

Instead of GDP, we need indicators that measure the things that really matter to people, such as health, happiness, equality, and meaningful employment. We also need indicators that measure what matters to the planet, such as material use and CO2 emissions. In fact, we already have these indicators—the problem is that we largely ignore them, because we are so fixated on GDP. If the goal of society were to change from increasing GDP to improving human well-being and preventing long-term environmental damage, then many proposals currently seen as “impossible” would suddenly become possible.

The real impossibility is achieving never-ending economic growth. No amount of austerity or stimulus spending is going to change the reality that we live on a single blue-green planet with limited resources that we all must share. If we’re serious about achieving a better life for the vast majority of people in Britain then we need a new approach—an economic model that prioritises people and planet over short-term profits. It’s time to embrace the new economics and say “Enough Is Enough!”

Dan O’Neill will be giving a public lecture at LSE today, Monday 21 October, from 1800 to 2000. Full details: http://www.lsesu.com/ents/event/2301/

Issues

Macroeconomics

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