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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Morality in a free market

Are the markets moral? Should we expect them to be? Moral according to whom? 
If they’re not moral, are they immoral? Amoral? Or value-neutral?

• Morality describes the codes of conduct put forward by a society. It can refer to a system of conduct to which all rational persons, regardless of culture, would subscribe. Morality deals with our sense of fairness and our sense of responsibility to others. Implicit in morality is the idea that there are right ways and wrong ways to act.
• A market is any structure under which commerce takes place: the purchase of land, stocks, airline tickets, vegetables, sporting events, whatever it may be. These structures begin as neither moral nor immoral. They are indifferent as water. Markets are meant simply to be vehicles for finding the most efficient way to balance supply and demand. The freer the market, the less encumbered by regulation, and the more efficient it should be. 
• From a social standpoint, unfettered markets can lead to situations most of us would consider immoral: vast populations of have-nots, a ruined environment, plutocracies and other dystopian scenarios.
• How can we influence markets so that they can help us build the kind of world we believe we should have?The misalignment between markets and morality -- public good versus individual rights. How markets should be governed is a discussion about capitalism itself. Capitalism has brought so much to so many in so short a time. Is it perfect? No. 
• Even as our free-market system has raised living standards to levels once unimaginable, the backlash against the markets has gotten louder. The Occupy Wall Street movement is the most visible example. Most of the protesters say they aren’t against the markets. They’re against injustice and inequality and that the system is rigged against them. They say it’s criminal for a CEO to make several hundred times the earnings of an average employee. 
• It’s disgusting for a company to shut down a plant, throw workers out on the street, and, destroy a town’s economy for no reason other than that a cheaper source of production has been found elsewhere. Only government can make the markets work in the public interest and not in their own interest.
• Something in our society is out of whack. The stock market is up but people don’t have jobs. The gap between the rich and everyone else is growing. There’s an international super-class traveling the world in private jets, living in a series of penthouse apartments, while the rest of us can only shake our heads, grow embittered, and soothe ourselves with reality programs that exploit some of society’s most pathetic individuals so that we can feel superior to somebody, thereby mitigating our doubts about our own positions in the socio-economic hierarchy. 
• All systems tend to perpetuate themselves, to act in their own self-interest until curbed by some other force. John Ruskin believed that honesty wasn’t just the best policy; it was the only policy that would allow an economy to steer clear of chaos. Many corporations have learned that corporate social responsibility isn’t just charity. It fosters long-term value. Business is the most powerful force in the world, and when approached in a certain way, it promotes both economic and social good.
• Honesty fosters trust, and trust allows markets to function. When trust fails and when no bank would lend money because it didn’t trust the credit-worthiness of any potential counterparty -- markets crash.
• Those with great power and wealth have a responsibility to use it for good. Having accumulated more wealth than several men could use in several lifetimes, Mr. Bill Gates has devoted his fortune to initiatives aimed at eradicating disease and poverty in some of the world’s most backward geographies. 
• In the liberal democracies of the West, the free-enterprise system is not designed to enrich the few at the expense of the many. And the markets, in the purest sense, aren’t listening. They tend to follow mathematics, not morals.You can be as ambitious as you want; you can achieve as much as your abilities allow; but you have to play by the rules. And the rules make the markets more open, more transparent and more fair.
• In the context of larger issues: the individual versus the group; equality of opportunity versus equality of outcome; and the difference between legal and moral, which ones do we place at the top? Ayn Rand would tell that the individual is all. By contrast, a honeybee would tell you that group welfare trumps everything.
• We’re individuals, but we’re part of and we have the ability to affect the group. We do it at the ballot box and we can do it in the markets. In investing we can choose to restrict our investments to companies that exhibit behavior consistent with our own morality.
• Rule breaking is an example of personal wrongdoing, not evidence of a corrupt institution. Can we blame markets for thieves like Bernie Madoff? Do markets create greed, along with motivation?
• Look at Madoff’s sixty-billion-dollar swindle. He caused tremendous damage. He bankrupted successful businesses and charitable organizations. He reduced families to penury. His own son committed suicide. But anyone who considers Madoff a representative money manager is mistaken. He is simply a criminal.
• There are situations in which entire industries have acted immorally.The sub-prime lending crisis of 2007-08. Banks pushed people to borrow more than they needed, more than could really afford, because the banks made the most money that way. Some of the biggest culprits were deemed “too big to fail,” and were granted immunity for their mistakes. 
• A moral society seeks the best opportunity for all its members. It protects the weak while allowing ambition to express itself fully. A corporation seeks to maximize its profits while staying within the law and doing right by its customers, workers and the community in which it undertakes its activities. Some corporations take it as a point of pride to create excellent working conditions, encourage social commitment, and to act as a moral society in miniature.
• Whether markets seek to be moral or not is irrelevant, because they have proved an effective tool for improving lives. As Deng Xiaoping once put it, “It doesn’t matter if the cat is black or white as long as it catches mice.”
• The idea that everything in life can be reduced to supply and demand may not be the most valid way to look at all human interaction. At what point does that premise begin to corrupt the social fabric?
• In New York, Washington DC etc a cottage industry of line-standers has now grown up and you can hire people to stand in line for you in case you have more money than time. It creates a positive good for two people -- the line-stander and the playgoer.
• In Washington DC -- line-standing companies employ homeless people to stand in line for clients who want the limited seats available for Congressional committee hearings and Supreme Court sessions open to the public. Lobbyists and others are often happy to pay for access. From a market standpoint: supply and demand. Socially? It kind of doesn’t smell right.
• At Disney World, people in wheelchairs and their families don’t have to wait in long lines for rides. They’re placed at the front of the queue. That seems morally correct. So some people of means have paid disabled strangers to pose as their family members. This is immoral and dishonest.

As long as we would prefer to pay more for a good that is produced in accordance with our values than pay a lower price for an article that is made by taking advantage of those without the means to redress unfair conditions, we will be moving the markets towards a more just, more moral position. The fact is we aren’t always willing to do that. Regulation can fix some of the problem, but personal responsibility -- knowing what you are investing in and buying -- can play a bigger role.

Principles aren’t principles until they cost you money.

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