Uneconomic growth

Growth is uneconomic when it increases environmental and social costs by more than it increases production benefits. The cost associated with economic growth arises as a result of  the social and environmental sacrifices made necessary by that growing encroachment on the eco-system. David Suzuki argued that ecologies can sustain 1.5-3% of economic growth per year and any higher growth will necessarily cannibalize the natural capital of soil or forest. But when growth becomes uneconomic we must find new answers to these problems. 

• Historically economic growth was the answer given to the major problems raised by Malthus (overpopulation), Marx (unjust distribution), and Keynes (unemployment).
• Globalization is the current ideological commitment to global economic integration via free trade and free capital mobility. Consequently many tractable national problems like overpopulation, unjust distribution, and unemployment, are converted into one intractable global problem, in the name of “free trade,” and in the interests of transnational capital.
• Growth in GNP is so favored by economists that they call it economic growth. GNP is supposed to grow forever. There are costs incurred by GNP growth. These costs are depletion, pollution, ecological disruption, sacrifice of leisure time, disutility of some kinds of labor, destruction of community in the interests of capital mobility, takeover of habitat of other species, and running down a critical part of the inheritance of future generations.
• The law of diminishing marginal utility of income tells us that we satisfy our most pressing wants first, and that each additional unit of income is dedicated to the satisfaction of a less pressing want. So the marginal benefit of growth declines. 
• The law of increasing marginal costs tells us that we first make use of the most productive and accessible factors of production and only use the less productive factors as growth makes it necessary. Consequently, marginal costs increase with growth. 
• When rising marginal costs equal falling marginal benefits then we are at the optimal level of GNP, and further growth would be uneconomic.
• The only limit to economic growth is technology, and there is no limit to technology, ergo no limit to economic growth. Therefore the very notion of “uneconomic growth” makes no sense. Growth does not increase the scarcity of anything, rather it diminishes the scarcity of everything! How can one possibly oppose growth? 
• Growth that relies entirely on exploiting increased knowledge rather than exploiting increased resource consumption may not qualify as uneconomic growth.
• Economists agree that GNP was not designed to be a measure of welfare; it measures only activity. Nevertheless they assume that welfare is positively correlated with activity, so that increasing GNP will increase welfare. This is equivalent to believing that the marginal benefit of GNP growth is greater than the marginal cost. The empirical test results turn out not to support the belief.
• Measures of welfare are difficult and subject to many arbitrary judgments. The empirical evidence that GNP growth has increased welfare is weak. Impact on welfare via policies that increase GNP growth are weak and nonexistent. 
• Economists habitually argue that we need not worry about global warming because the only climate-sensitive sector of the economy is agriculture, and agriculture accounts for only 3% of GNP. These economists evidently don’t need to eat! 
• Overpopulation would be cured by the demographic transition. When GNP per capita reaches a certain level children become too expensive in terms of other goods forgone and the birth rate automatically falls. Is it necessary for Indian per capita consumption to rise to the Swedish level for Indian fertility to fall to the Swedish level, and if so what happens to the Indian ecosystem as a result of that level of total consumption?
• Unjust distribution of wealth between classes would be rendered tolerable by growth, the rising tide that lifts all boats, to recall another slogan. Yet growth has in fact increased inequality both within and among nations. To make matters worse, even the metaphor is wrong, since a rising tide in one part of the world implies an ebbing tide somewhere else.
• The assumption that growth is economic, that it is making us richer rather than poorer. But now growth is becoming uneconomic. Uneconomic growth will not sustain the demographic transition and cure overpopulation. Neither will it help redress unjust distribution, nor cure unemployment. Nor will it provide extra wealth to be devoted to environmental repair and clean-up. Indirect growth based solutions to the big problems no longer work.
• We now need more direct and radical solutions to the problems of Malthus, Marx, and Keynes: population control to deal with overpopulation; redistribution to deal with excessive inequality; and measures such as a public employer of last resort, and ecological tax reform to raise resource prices relative to labor. These must be national policies. Many nations have made progress in controlling their population growth, in limiting domestic income inequality, and in reducing unemployment. 
• Global economic integration by free trade and free capital mobility effectively erases the policy significance of national boundaries. Nations can no longer internalize environmental and social costs in the interests of resource efficiency and social justice, because capital is free to produce elsewhere and still sell its product in the market whose social controls it just escaped. Capital escapes higher wages and taxes of any kind, in particular taxes aimed at re-distributive policies that redress excessive inequality and poverty.
• Globalization refers to global economic integration of many formerly national economies into one global economy, mainly by free trade and free capital mobility, but also by easy or uncontrolled migration.
• Whether capital moves to overpopulated low-wage countries, or poor workers move to the high-wage country, the result is the same -- a competitive bidding down of wages to the detriment of countries that have followed a high-wage policy by limiting their numbers and by more equally distributing their wealth.
• The laboring class in the low-wage country gains in terms of number employed, though not usually in terms of increased wages because of the virtually unlimited supply of cheap labor resulting from past and present demographic growth. The capitalist class in the high-wage country gains from lower wage costs at home as well as abroad. 
• The big losers are workers in the high-wage countries. With low wages now a competitive advantage in attracting capital, we might expect policies aimed at increasing the supply of labor in previously high-wage countries.
• Globalization operates by standards-lowering competition to bid down wages, to externalize environmental costs, and reduce social overhead charges for welfare, education, and other public goods. It is far worse than an unrealistic global dream -- it actively undercuts the ability of nations to continue to deal with their own problems of overpopulation, unjust distribution, unemployment, and external costs. It converts many relatively tractable national problems into a single intractable global problem.

Globalization via export-led growth is the new philosopher’s stone of the IMF-IBRD-WTO alchemists. Nations can all turn their lead into gold by free trade. With the revival of alchemy comes a return to the logic of Mercantilism: wealth is gold, and the way for countries without mines to get gold is to export more goods than they import, and receive payment for the difference in gold -- the alchemy of trade. The way to export more than you import is to reduce wages, and to externalize social and environmental costs, because that keeps prices of your exports competitive. Low wages also prevent your laboring class majority from buying imported goods and thereby dissipating the trade surplus. The way to keep wages low is to have an oversupply of labor. An oversupply of labor can be attained by easy immigration and high birth rates among the working class. Globalization requires, therefore, that for a nation to be rich, the working-class majority of its citizens must be poor, increase in number, and live in a deteriorating environment! Behind these absurdities is the further contradiction that under globalization it no longer makes sense to speak of  “nations” (only corporations); nor of “citizens” (only employees).

Globalization is accelerating the shift to an era of uneconomic growth, a time when, as John Ruskin foresaw, “That which seems to be wealth may in verity be only the gilded index of far-reaching ruin.”

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