Be Agnostic about Growth

In most textbooks the acknowledged goal of economic policy is growth, thus implicitly assuming growth to infinity. Given that the planet is not infinite, why not considering growth as relative to different situations in different countries?

This post is part of a reading series of Doughnut Economics by Kate Raworth. For quick access to all chapters, click here.

As in any book club, you are kindly invited to let the rest of us know what you think!

Disclaimer: Being the result of personal work, this chapter summary cannot and does not pretend to offer a detailed and accurate transcription of all the author’s ideas.

[Growth vs Economic Value]

One way or another, earlier economists believed that the end of economic growth was inevitable. Adam Smith envisioned a “stationary state” with its “full complement of riches” ultimately being determined by “the nature of its soil, climate and situation.” 1 David Ricardo, by contrast, believed that “the stationary state would be brought about by the cost of rising rent and wages squeezing capitalists to the point of near-zero profits, and he feared it would happen soon (in the early nineteenth century) if technical progress and foreign trade could not keep it at bay.” 2 (Kate Raworth, Doughnut Economics, p. 212, Kindle Edition) John Stuart Mill could hardly wait for what would be called now a post-growth society, saying “A stationary condition of capital and population implies no stationary state of human improvement. There would be as much scope as ever for all kinds of mental culture, and moral and social progress; as much room for improving the art of living, and much more likelihood of it being improved, when minds ceased to be engrossed by the art of getting on.” 3 John Maynard Keynes, a full century later, concurred by saying: “(…) the day is not far off when the economic problem will take the back seat where it belongs, and the arena of the heart and the head will be occupied or reoccupied by our real problems—the problems of life and of human relations, of creation and behaviour and religion.” 4

Be Agnostic about Growth
John Maynard Keynes (1883 – 1946)

However valid these considerations may be in the grand scheme of things, they must be distinguished from the day-to-day workings of finance, business, and government, which are structured “to expect and depend upon a growing monetary income.” (Kate Raworth, Doughnut Economics, p. 225, Kindle Edition) Indeed, “Financier only make a return—by extracting interest, rent or dividends—on economic value that has a market value. Business can only capture value as revenue and profit when that value has been monetized in sales. And governments find it far easier to levy taxes for public revenue on economic value that is exchanged through the market.” (Id.)

This seems to make sense, but there is a difference between monetary value and the economy at large. In regard to the environmental and social boundaries that form the outer and inner limits of the economic “Doughnut”, growth for the sake of growth can very well undermine prosperity. If, therefore, “GDP is no longer set to grow even though total economic value may well continue to do so, then those expectations [of continuous growth] need to change profoundly.” (Id.) Facing the all too common confusion among policymakers between growth and prosperity, the question is: where do these expectations come from?

Financially Addicted: What’s to Gain?

Be Agnostic about Growth
John Fullerton

“The search for gains—which drives shareholder returns, speculative trading and interest-bearing loans—lodges dependency upon continual GDP growth deep within the financial system. For John Fullerton, the banker who walked away from Wall Street, here lies the source of the problem. ‘We’ve reached the logical conclusion of this expansionist economic paradigm,’ he says. ‘Unless we can achieve magical decoupling, we have an exponential function on a closed system planet… yet the finance system has no in-built plateau, it can’t “mature”—and none of the experts in finance are even thinking about this.’ 5 (…)

Be Agnostic about Growth
Tim MacDonald

That is why Fullerton and his colleague Tim MacDonald started thinking about ways for regenerative enterprises to escape the pressure from shareholders to constantly grow. They came up with the concept of Evergreen Direct Investing (EDI), which delivers acceptable and resilient financial returns from mature low-or no-growth enterprises. Instead of paying profit-based dividends to shareholders, the enterprise pays out a share of its income stream to investors in perpetuity.6 This setup enables a profitable but non-growing business to attract stable investment from wealth stewards with a long-term view, such as pension funds.” (Id. pp. 231-232)

Aside from evergreen type investments, another possible working angle to enact the difference between growth and prosperity is to change how money itself is used. Contrary to physical assets bound to deteriorate in time, money accumulates forever, thus becoming a major condition of the expectation of constant gain. What kind of currency could be aligned with the living world and promote regenerative investment rather than the pursuit of endless accumulation?

Be Agnostic about Growth
Johann Silvio Gesell (1862 – 1930)

“One kind of possibility is a currency bearing demurrage, a small fee incurred for holding money, so that it tends to lose rather than gain in value the longer it is held.” (Id. p. 232) The idea was first laid out by Silvio Gessel, a German-Argentinian businessman, in his 1906 book titled The Natural Economic Order. According to him, only money that “goes out of date like a newspaper, rots like potatoes, rusts like iron” would be willingly handed over for objects that similarly decay. In other words, “(…) we must make money worse as a commodity if we wish to make it better as a medium of exchange.” 7 Historically, adds Kate Raworth, “Paper-based demurrage was successfully used in city-scale complementary currencies in 1930s Germany and Austria to reinvigorate the local economy, and it was almost introduced across the United States in 1933. But in each case, the national government shut the initiative down, evidently threatened by its bottom-up success and the loss of state control over the power to create money.” (Id. p. 233)

A demurrage money could be used to boost regenerative investments, replacing the search for gain by the search to maintain value. Long-term regenerative goals such as reforestation could easily enter into that scheme.8 “Banks would consider lending to enterprises promising a near-zero return on investment if it were preferable to the cost of holding money: that would bode well for regenerative and distributive enterprises delivering social and natural wealth along with a modest financial return. And it would, crucially, help to release the economy from the expectation of endless accumulation and, hence, the financial addiction to growth.” (Id. p. 234)

Demurrage is not that alien to today’s financial culture, as negative interest rates used for emergency measures by different countries show. Even though technically challenging on many fronts—such as its implications for inflation and exchange rates, or for capital flows and pension funds—designing demurrage into currency is worth exploring for a financial world that would be in the service of thriving economies rather than supposedly ever-growing ones.

Politically Addicted: Hope, Fear and Power

The political world’s addiction to economic growth lies on three main psychological incentives: “hope for raising revenue without raising taxes; fear of the unemployment line; and the power that resides in the G20 family photo.” (Id. p. 234)

Hope for raising revenue without raising taxes

Reframing the purpose of taxes would help build social consensus for the kind of higher-tax, higher-returns in the public sector that has been proven successful in Scandinavian countries. Words matter. Instead of opposing “tax relief”, why not talking about “tax justice”? And instead of “spending”, why not say the real thing about the nature of taxes: “investment”?

Additionally, the injustice of tax loopholes, offshore havens, profit shifting, and special exemptions allowing the richest people and the largest corporations in the world to pay negligible tax in the countries they are effectively situated in must be ended. “At least $18.5 trillion is hidden by wealthy individuals in tax havens worldwide, representing an annual loss of more than $156 billion in tax revenue, a sum that could end income poverty twice over.9 At the same time, transnational corporations shift around $660 billion of their profits each year to near-zero tax jurisdictions such as the Netherlands, Ireland, Bermuda, and Luxembourg.” (Ibid.)

Third, “shifting both personal and corporate taxation from taxing income streams and towards taxing accumulated wealth—such as real estate and financial assets—will diminish the role played by a growing GDP in ensuring sufficient tax revenue.” (Ibid.)

Fear of the unemployment line

When the economy’s demand does not keep up with productivity growth, the result is widespread unemployment. “It was the Great Depression’s endless unemployment lines that convinced John Maynard Keynes to focus on full employment as the economy’s goal in the 1930s, and the answer, he believed, was continual GDP growth.” (Id. p. 235) One of the main differences today with the 1930s, however, is that robots play an ever-increasing role in productivity, with the consequence that full employment cannot be considered an absolute goal anymore.

This constant shift upward in productivity ratio certainly reinforces the case of a basic universal income, but other solutions could also be worked out in a growth-agnostic economy, such as shortening the working week. The latter would imply to get rid of the current incentives in tax and insurance systems, so that employers are encouraged rather than penalized for taking on more workers. The adaptation to fluctuating economic demand is even made easier when employers are the workers themselves, since reduced working hours are shared between all members in a cooperative. In traditional companies, the widely recommended shift from taxing labor to taxing resource use “would simultaneously draw human ingenuity away from making more stuff with fewer people towards repairing and remaking more things with less stuff, while employing more people too.” (Id. p. 237)

Power in the G20 family photo

Obviously, there is work to do on the international front, as the compulsion for GDP growth holds its grip by bringing both global market power and global military power. Besides, as Kate Raworth says, “(…) keep growing to hold on to your spot in the family picture, or you’ll be bumped out of the frame by the next emerging powerhouse.”

This is the conundrum for global action toward sustainability began to find its solution starting in 1990 with the UN’s Human Development Index, created specifically to start countering the sole use of GDP. Other strategic initiatives, such as the C40 Cities network against climate change, have sought to bypass national rivalry by championing city-to-city collaboration instead. Home together to hundreds of millions of people, these towns can influence the trend toward a growth-agnostic economy far beyond their own city limits.

Socially Addicted: Something to Aspire To

As Henry Wallich, governor of the US Federal Reserve in the 1970s, rightly pointed out, society as a whole is addicted to GDP growth because “Growth is a substitute for equality of income. So long as there is growth there is hope, and that makes large income differentials tolerable.” Yet, seeking contentment in material consumption easily hides among WEIRD people—from Western, Educated, Industrial, Rich, and Democratic countries— some inner poverty regarding our neglected relationships with each other and with nature. The New Economics Foundation, among many other initiatives to bring about a thriving economy that would be sustainable, has brought down what promotes well-being to five simple acts: connecting to the people around us, being active in our bodies, taking notice of the world, learning new skills, and giving to others.10

Book Club Discussion: Between the financial, political, and social aspects of becoming agnostic about growth, which one seems to you the most challenging?

Share your thoughts and build on what others say in the comment section below.


  1. Smith, A. (1776) An Inquiry in the Nature and Causes of the Wealth of Nations, Book I, Chapter 9, p. 14.
  2. Economy and Taxation, Chapter 4 (6.29).
  3. Mill, J.S. (1848) Principles of Political Economy, Book IV, Chapter VI, 6. http://www.
  4. Keynes, J.M. (1945) First Annual Report of the Arts Council (1945-46). London: Arts Council.
  5. Fullerton, J. (2012) Can financial reform fight climate change? Interview on The Laura Flanders Show, 8 July 2012, available at
  6. See Capital Institute (2015) Evergreen Direct Investing: co-creating the regenerative economy.
  7. Gessel, S. (1906) The Natural Economic Order, p. 121, available at
  8. See Lietaer, B. (2001) The Future of Money. London: Century, pp. 247-248.
  9. See Oxfam International Tax on the “private” billions now stashed away in havens enough to end extreme world poverty twice over
  10. Aked, J. et al. (2008) Five Ways to Wellbeing: the evidence. London: New Economics Foundation.
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