Growth, no growth, degrowth

I just read the 2nd edition of Tim Jackson’s now-classic Prosperity Without Growth, which has been out for a few months, and it’s a book I’d recommend to anyone but especially economics students. Although most students do now learn about environmental constraints and trade-offs, we do socialize them quickly into thinking about economic growth as the objective of policy. It is all too clear that the failure to take account of externalities and the depletion of natural capital assets means we’ve paid a high price for past growth. Measuring these better to ensure they’re incorporated in the choices society makes is part of my own research.

Havings said this, and commending the book, I have one central problem with its argument, as with some others making similar arguments. And that turns on the understanding of what (GDP) growth consists in. Even those who acknowledge the importance of services in the economy – as Tim Jackson does – then consistently talk about growth as consumer demand for material products, for stuff: “How is it that with so much stuff already we still hunger for more? Would it not be better to halt the relentless pursuit of growth in the advanced economies and concentrate instead on sharing out the available resources more equitably?” So stuff and growth are conflated.

As I’ve been pointing out for 20 years, growth in the advanced economies is increasingly non-material – accepting that we import stuff embodied in goods, which must be accounted for. The archetype of modern growth is a new idea – that an aspirin can avert cardio-vascular problems as well as cure headaches; that apps on one device can replace multiple material objects.

This is why indicators like the Genuine Progress Indicator, that flatline from the 1970s on while GDP rises, are so unpersuasive. I disagree with Tim when he writes: “[T]he continued pursuit of economic growth doesn’t appear to advance and may impede human happiness.” So although I agree completely that the usefulness of GDP as a welfare measure is declining, I don’t think we know how to weigh against each other the environmental minuses and innovation pluses. This is why I’m obsessed with how we conceptualise and measure society’s economic welfare, including measuring assets to give us a handle on sustainability; but many of the innovations do advance human well-being. I remember the 1970s, and though the music was better, many aspects of life were far less satisfying. Patti Smith and Siouxsie & the Banshees aren’t enough to make me want to turn the clock back.

This is an important, possibly existential debate, so I hope the book is being widely read. I also appreciate its (only slightly lukewarm) defence of economics: contrary to the impression some environmetalists seem to give, many economists care passionately about our environment and sustainability, & we think our intellectual tools can make a useful contribution.

Share

True wealth

I’ve been meaning to write about National Wealth: What is Missing, Why it Matters edited by Cameron Hepburn and Kirk Hamilton. This volume (in which I have a chapter, The Political Economy of National Statistics) looks at different types of wealth from a number of perspectives. The opening set of chapters look at the link between wealth and sustainability (measurement of assets being essential to take the future into account) and the link between wealth and well-being, as well as my paper looking at how one might move from a GDP/income flow to a wealth measurement standard. Part two covers the historical perspective on wealth. Part 3 looks in more detail at the measurement of specific components of wealth, and part 4 at sustainability.

As the editors write, “Policies that create wealth go beyond increasing output; they involve investments today for returns in the future … A focus on wealth generation … shifts policy away from supporting immediate consumption.” There are plenty of ideas and an increasing amount of data making it possible to start accounting for wealth, and specifically the change in real wealth. The challenge is the policy challenge of getting consensus about the need to change the focus.

With my co-author Benjamin Mitra-Kahn, we suggested how to go about this as our entry for the inaugural Indigo Prize, which we were honoured to win jointly with Jonathan Haskel and his colleagues. Their ideas for improving GDP are excellent; but Ben and I still think priority needs to be given to the sustainability-enhancing potential of a wealth focus rather than an amended GDP focus. Wealth and sustainability are “joined at the hip,” as National Wealth puts it.

Share

Things and Beyond

I’ve been reading Frank Trentmann’s Empire of Things: How We Became a World of Consumers, from the 15th century to the 21st, which has taken a while as it’s 600+ pages. It has been an enjoyable read but with two flaws – more on these later.

The book does what it says in the subtitle, drawing on a major research programme, and is truly impressive in its scope and detail. It traces global (and genuinely so although with a strong tilt to the West) trends in consumption through the long sweep of history. It links these trends in behaviour to trends in thought about personal and social ethics, and the individual in the family and in society. It addresses the entire chain of production and consumption from resources to waste. It draws on a wide array of disciplinary knowledge, including philosophy, history, sociology and even some economics.

The book sets up a tension through all of this material: “The view that being and having are opposites … has a very long history. But so has an alternative trajectory that sees people as only becoming human through the use of things.” Among other forces, technology keeps this tension alive over time, as new things keep on appearing. And it’s interesting to see that certain things are particularly compelling – stockings for one. The 17th century knitting framemade better, cheaper stockings possible, and the early national accountant Gregory King estimated in 1688 that 10 million pairs a year were purchased. This reminded me of the tidal wave of nylon stockings sold by Dupont – 800,000 pairs on 15 May 1940, the first day of sale, alone.

Consumption clearly depended on rising incomes, and the book traces a switch to “the creation of value through consumption, not just production” from the 19th century – it argues that consumer society has its roots in the Industrial Revolution rather than as is often argued the post-war boom. There’s an interesting couple of sections – in the light of the way technology is currently blurring the previously sharp consumption/production divide – on the role of consumer durables. I disagree with Trentmann’s suggestion that, “The appeal of goods such as the automatic washing machine was far from self-evident.” He notes that the aggregate time spent on household work was not reduced significantly by such consumer durables – and then observes in passing and ignores the class distinctions. Middle class women were decreasingly likely to have servants and did more of their own housework. Working class women – like my mother and Hans Rosling’s – were truly given hours of time by automatic washing machines. John Kenneth Galbraith (I’m sure he never did an iota of laundry in his life) said consumer durables enslaved women; but even if – as he argued – easier washing meant more washing to have cleaner clothes, why is this not a better outcome?

Turning back to that original tension – does our relationship with things dehumanize us or the opposite? Is consumerism basically bad or good? – I’m with Hume. As Trentmann describes the Humean view: “An encounter with a new object was one way in which intelligence and feeling were inspired and strengthened.” (And isn’t this one of the big questions about AI and consciousness – can intelligences without sense perceptions become conscious?)

The modern no-growther’s disdain for consumption seems to me to be of a piece with the instinct in the past that gave us sumptuary laws. Rich folk thought poor folk should stay in their place, dressing up the restrictions on the purchases the masses were allowed to make in moralising garb. But as Adam Smith put it, it was, “[T]he highest impertinence and presumption for kings and ministers to watch over the economy of private people, and to restrain their expense, either by sumptuary laws, or by prohibiting the importation of foreign luxuries. They are themselves always, and without any exceptions, the greatest spendthrifts in society.” Of course we need to pay far greater attention to resource use and to waste, but it is the affluent who are cavalier about the importance of growing real incomes and consumption – Janan Ganesh in his column today describes them as ‘too-rich-to-care bohemians’.

There is lots to enjoy in Empire of Things, therefore; I’m exactly the kind of reader who likes detail of the sort its pages are packed with.

I would have liked more economics, and more figures. There is a nice section on the mutual interaction of prices and tastes, as with the switch in British taste from coffee to tea in the later 1700s: a chart of tea and coffee prices would have been nice. But I have two bigger criticisms. One is that the book seriously needed an edit. The argument gets swamped in detail and it should have been 25% shorter. Some sections, especially those on non-western trends, fall between two stools – insufficiently detailed in themselves but enough to distract from the flow.

The biggest issue I have, however, is that the book never addresses the distinction between material and non-material consumption. It puts really a great deal of emphasis on the physical nature of consumer goods – and then skips to a discussion of some non-material aspect of consumption such as public health measures or public education, or leisure activities like the cinema. The issue of increased expenditure on services and intangibles is dismissed in just over two separate pages (out of 690), by saying that spending on housing, transport and food combined accounts for the same proportion of the household budget in 2007 as in 1958; and that in the OECD as a whole material consumption rhas continued to rise. Yet people are spending a growing proportion of their incomes on warmth, space, travel, variety, quality, entertainment as they grow richer. The immaterial is embedded in the material, and there is absolutely no reason to be complacent about the environmental footpring of the global economy; but (even knowing I may be biased about this) it is surely a significant development in the history of consumption (albeit a transition of affluence) that value is being created largely by the non-material now? (The forthcoming Capitalism without Capital by Jonathan Haskel and Stian Westlake addresses this.)

Still, it’s probably a good sign when a huge book leaves you more inclined to ask for more rather than wishing there had been less, and the balance tips that way for me despite it being in need of a blue pencil in parts.

41EibbfMxcL

 

 

 

Share

The Wealth Project

On Monday & Tuesday I attended an absolutely terrific conference, The Wealth Project, which is about “changing how we measure economic progress,” to quote the conference strapline. The aim is to develop concepts and measures of different kinds of wealth so that policies and decisions take due account of the future potential for consumption and well-being, as well as the short term. This has been a preoccupation of mine since at least writing as well as my . The Wealth Project will produce a book around the end of 2016 or start of next year.

Meanwhile, it’s always interesting to see what books people cite at conferences. This week I noted: C.A.Bayly, ; David Hume, ; Karl Polanyi, ; Dieter Helm, . I referred back to the recent crop of GDP books and the Inspector Chen novel featuring GDP growth as villain.

[amazon_image id=”0631236163″ link=”true” target=”_blank” size=”medium” ]The Birth of the Modern World, 1780-1914: Global Connections and Comparisons (Blackwell History of the World)[/amazon_image]  [amazon_image id=”0140432442″ link=”true” target=”_blank” size=”medium” ]A Treatise of Human Nature: Being an Attempt to Introduce the Experimental Method of Reasoning into Moral Subjects (Penguin Classics)[/amazon_image]  [amazon_image id=”B017LCJ8XE” link=”true” target=”_blank” size=”medium” ]Natural Capital: Valuing the Planet by Dieter Helm (2015-05-01)[/amazon_image]

Share

China and GDP

I’ve been a bit unwell this week so have been relaxing with not one, not two, but three detective novels – Chief Inspector Chen in the series by Qiu Xiaolong set in Shanghai. They’re hardly action packed but they have a lot about Chinese politics and also the fabric of everyday life, including food. Fascinating.

One of this week’s has a plot about environmental activism against industrial pollution. Whatever China’s GDP growth has been – much disputed – it has been fast enough to have exacted a serious environmental cost. Inspector Chen reports back to his Party patron: “I focused my research on issues of the environment. … Pollution is so widespread that it’s a problem all over China. To some extent, it’s affecting the core of China’s development with GDP-centred growth coming at the expense of the environment. It can’t carry on like this, Comrade Secretary Zhao. Our economy should have sustainable development.”

I’ve been working on a paper on the political economy of economic statistics, for a conference in 10 days. Many, many people would agree with Chief Inspector Chen, and not just about China, but it’s hard to move from GDP-centred to something else centred without a consensus about what the something else should be. Perhaps China could assist the political economy of such a transition given its need for a measure that can show increasing economic welfare without costing the earth.

[amazon_image id=”1473616786″ link=”true” target=”_blank” size=”medium” ]Don’t Cry, Tai Lake: Inspector Chen 7 (Inspector Chen Cao)[/amazon_image] [amazon_image id=”1473616808″ link=”true” target=”_blank” size=”medium” ]Enigma of China: Inspector Chen 8 (Inspector Chen Cao)[/amazon_image] [amazon_image id=”1473616824″ link=”true” target=”_blank” size=”medium” ]Shanghai Redemption: Inspector Chen 9 (Inspector Chen Cao)[/amazon_image]

Share