Can growth be equated to progress? Data show that it is not GDP growth by itself that improves people’s lives but how money is distributed, notably through investing in public infrastructures.
|This post belongs to a reading series of Less is More by Jason Hickel. For quick access to all chapters, please click here.|
Disclaimer: This chapter summary is personal work and an invitation to read the book itself for a detailed view of all the author’s ideas.
It is generally assumed that “We need to keep growing in order to keep improving people’s lives. To abandon growth would be to abandon human progress itself.” Jason Hickel adds, “It’s a powerful narrative, and it seems so obviously correct. People’s lives are clearly better now than they were in the past, and it seems reasonable to believe that we have growth to thank for that.” But empirical evidence shows that “It’s not growth itself that matters – what matters is how income is distributed, and the extent to which it is invested in public services.”
Where does progress come from?
Until recently, the fact that life expectancy dramatically rose after the 1870s in England, along with the fact that today populations in countries with higher GDP live on average longer than in poorer ones, were taken as proof that GDP growth equates to progress. At a closer look, the extension of life expectancy was primarily due to the progress in medicine regarding the importance of hygiene and, notably, the implementation of public sanitation separating sewage from drinking water. That public necessity was opposed for decades by the upper class, unwilling to pay for public plumbing on private property.
Progress in living conditions, consequently, is not just about money but how it is distributed. Though nations with higher income indeed tend to have better life expectancies, it appears that there is no causal relationship between these two variables. Historical records show, on the contrary, that without progressive policies, growth has regularly worked against social progress, not for it.
The resistance of elites in England was broken by movements like the Chartists and the Municipal Socialists. They eventually leveraged the state’s power to obtain public healthcare, vaccination coverage, public education, housing, better wages, and safer working conditions. “And once you have these basic interventions in place, says Jason Hickel, the biggest single driver of continued improvements in life expectancy happens to be education – and particularly women’s education. The more you learn, the longer you live.”1
Reclaiming the commons
Of course, economic growth is needed initially to finance universal healthcare, sanitation, education, and decent wages. But, by the same token, “after a certain point, which high-income nations have long surpassed, more GDP adds little if anything to human flourishing.”2 This explains how the United States, with a GDP per capita of $59,500, making it one of the world’s richest countries, is beaten down in life expectancy and education level by countries with far less income per capita.3 Other countries have, quite simply, invested more in building high-quality universal healthcare and education systems.
And the good news is that it does not have to be expensive. Universal public services are run for the public, not shareholders, insurance companies, and CEOs’ bank accounts. Spain, for example, spends only $2,300 per person to deliver high-quality healthcare to everyone as a fundamental right and achieves a life expectancy of 83.5 years. By contrast, the private, for-profit system in the U.S. sucks up $9,500 with far worse health outcomes and a life expectancy of 78.7 years.
“According to data from the U.N., nations can reach the very highest category on the life expectancy index with as little as $8,000 per capita (in terms of purchasing power parity, or PPP), and very high levels on the education index with as little as $8,700. In fact, nations can succeed on a wide range of key social indicators – not just health and education, but also employment, nutrition, social support, democracy and life satisfaction – with less than $10,000 per capita, while staying within or near planetary boundaries.4 What’s remarkable about these figures is that they are well below the world average GDP per capita ($17,600 PPP). In other words, in theory we could achieve all of our social goals, for every person in the world, with less GDP than we presently have, simply by investing in public goods, and distributing income and opportunity more fairly.”
Another interesting aspect of the relationship between GDP and human welfare is that past a certain threshold, more growth actually begins to have a negative impact. When comparing personal consumption expenditure with income inequality as well as with social and environmental costs of economic activity—this is called the Genuine Progress Indicator (GPI)—data show that global GPI grew along with GDP until the mid-1970s. Since then, “[it] has flattened out and even declined, as the social and environmental costs of growth have become significant enough to cancel out consumption-related gains.”5 As the economist and ecologist Herman Daly pointed out, growth, after a certain point, begins to become “uneconomic.”
In purely financial terms, this means that since Portugal, for instance, “has higher levels of human welfare than the United States with $38,000 less GDP per capita, then we can conclude that $38,000 of America’s per capita income is effectively ‘wasted’. That adds up to $13 trillion per year for the U.S. economy as a whole. That’s $13 trillion worth of extraction and production and consumption each year, and $13 trillion worth of ecological pressure, that adds nothing, in and of itself, to the fundamentals of human welfare. It is damage without gain. This means that the U.S. economy could in theory be scaled down by a staggering 65% from its present size while at the same time improving the lives of ordinary Americans, if income was distributed more fairly and invested in public goods.”
Flourishing without growth
Since 1990, the richest 10% of the world’s population has been responsible for more than half of the world’s total carbon emissions. Due to their consumption of more energy-intensive stuff (big cars, frequent flights, luxury imports…) and their investments in often ecologically destructive industries, the wealthiest 1% emits one hundred times more greenhouse gases than the poorest half of the human population.6
On the other hand, there are also ecological benefits to be reaped from investing in public services since they are almost always less intensive than their private equivalents. “Britain’s National Health Service, for instance, emits only one-third as much CO2 as the American health system, and delivers better health outcomes in the process.” Public transportation, tap water, public parks, and swimming pools are, obviously, less intensive than everyone buying bigger yards, private pools, and personal gym equipment. As for private health insurance or education in the U.S., their outrageous prices have nothing to do with the real cost of healthcare and education: they are an artifact of a system organized around profit.
The lesson, again, is clear: “When it comes to human welfare, it’s not income as such that matters. It’s what that income can buy, in terms of access to the things we need to live well.” Trying to run a household on $30,000 in the U.S. is a struggle, and the same income feels luxurious in Finland, where people enjoy universal healthcare and education and rent controls. “Justice, says the author, is the antidote to the growth imperative – and key to solving the climate crisis.”
Justice in the South
This, however, requires a new frame of thinking: improving people’s lives first and foremost, and if that requires economic growth, so be it. In the global South, where economic growth is necessary for many countries, anti-colonial leaders have championed this approach, including Mahatma Gandhi, Patrice Lumumba, Salvador Allende, Julius Nyerere, and Thomas Sankara, and dozens of others.7 A few countries managed to escape the structural adjustment programs imposed by the global North from the 1980s onward. Costa Rica is a shining example (though with still high-income inequality), while South Korea and Taiwan (although their ecological policies have fallen short) “stand as beacons of what the South could have been, had it been left alone.”
Contrary to the common image, poor countries do not live at the edge of the economic world but are deeply integrated into the circuits of global capital. Their populations “work in sweatshops for multinational companies like Nike and Primark. They risk their lives mining the rare-earth minerals that we depend on for our smartphones and computers. They harvest the tea leaves and coffee beans and sugar cane that most people consume every day. They pick the berries and bananas that Europeans and North Americans eat every morning for breakfast. And in many cases theirs is the land from which the oil and coal and gas that power the global economy is extracted – or at least it used to be, before it was taken from them. All told, they contribute the vast majority of the labour and resources that go into the global economy.”8 By contrast, no less than 46% of global economic growth has gone to the richest 5% in the four decades since 1980. And, at present, the richest 1% captures $19 trillion in income per year—nearly a quarter of global GDP —and has accumulated wealth worth $158 trillion, almost half of the world’s total.9
Despite the aid from rich countries to poor ones (around $130 billion per year) and the flow of private investment, which adds up to $500 billion a year, there is a net drain from poor to rich countries. For example, “researchers estimate that people who work in export industries in the South lose around $2.8 trillion in underpaid wages each year, because they lack bargaining power in international trade.”10 Another issue is that “companies might generate profits in Guatemala or South Africa, but then shift that money into tax havens like Luxembourg or the British Virgin Islands. This starves global South countries of the revenues they need to invest in public services.” All this can happen because the global economy’s international institutions are heavily tilted in favor of rich nations. The U.N. estimates that fairer trade rules at the World Trade Organization could allow poor countries to earn over $1.5 trillion in additional export revenues each year.11
Breaking free of ideology
“Henry Wallich, a former member of the U.S. Federal Reserve Board, once famously pointed out that ‘growth is a substitute for equality of income’. And it’s true: it is politically easier to rev up GDP and hope some of it trickles down to the poor than it is to distribute existing income more fairly. But we can flip Wallich’s logic around: if growth is a substitute for equality, then equality can be a substitute for growth.”
Once we understand how inequality works, the choice is easy between, on the one hand, living in a more equitable society or, on the other, risking an ecological catastrophe fostered by aggregate growth whose financial profits are channeled by and for this world’s elites. The crux of the matter is to break free of their ideology—their alibi—of a putative relationship between growth and human progress.
An additional twist to the dominant narrative is that growth is necessary for both human and technological progress. Though the private sector indeed plays an indispensable role in triggering innovation, “If that is how the Allies had approached the need for tanks and aircraft during WWII, the Nazis would be in charge of Europe right now. This kind of mobilization requires government policy to guide and direct existing financial resources.” This is how all major infrastructures were made possible, from public health to national power grids to decent postal services to the internet. “Once we realize this, it becomes clear that we can fund the transition quite easily by directing existing public resources from, say, fossil fuel subsidies (which presently stand at $5.2 trillion, 6.5% of global GDP) and military expenditure ($1.8 trillion) into solar panels, batteries, and wind turbines.”12
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- Wolfgang Lutz and Endale Kebede, ‘Education and health: redrawing the Preston curve,’ Population and Development Review 44(2), 2018.
- Julia Steinberger and J. Timmons Roberts, ‘From constraint to sufficiency: The decoupling of energy and carbon from human needs, 1975–2005,’ Ecological Economics 70(2), 2010, pp. 425–433.
- Juliana Martínez Franzoni and Diego Sánchez-Ancochea, The Quest for Universal Social Policy in the South: Actors, Ideas and Architectures (Cambridge University Press, 2016).
- Jason Hickel, ‘Is it possible to achieve a good life for all within planetary boundaries?’ Third World Quarterly 40(1), 2019, pp. 18–35 (This research builds on Daniel O’Neill et al., ‘A good life for all within planetary boundaries,’ Nature Sustainability, 2018, p. 88–95); Jason Hickel, ‘The Sustainable Development Index: measuring the ecological efficiency of human development in the Anthropocene,’ Ecological Economics 167, 2020.
- Ida Kubiszewski et al., ‘Beyond GDP: Measuring and achieving global genuine progress,’ Ecological Economics 93, 2013, pp. 57–68; Manfred Max-Neef, ‘Economic growth and quality of life: a threshold hypothesis,’ Ecological Economics 15(2), 1995, pp. 115–118. See also William Lamb et al., ‘Transitions in pathways of human development and carbon emissions,’ Environmental Research Letters 9(1), 2014; Angus Deaton, ‘Income, health, and well-being around the world: Evidence from the Gallup World Poll,’ Journal of Economic Perspectives 22(2), 2008, pp. 53–72; Ronald Inglehart, Modernization and Postmodernization: Cultural, Economic, and Political Change in 43 Societies (Princeton University Press, 1997).
- Confronting Carbon Inequality, Oxfam, 2020.
- See Ashish Kothari et al., Pluriverse: A Post-Development Dictionary (Columbia University Press, 2019).
- Dorninger et al., ‘Global patterns of ecologically unequal exchange.’[/efn_ note] And yet, the poorest 60% of humanity receives only about 5% of total global income.[enf_note]David Woodward, ‘Incrementum ad absurdum: global growth, inequality and poverty eradication in a carbon-constrained world,’ World Economic Review 4, 2015, pp. 43–62.
- Credit Suisse Global Wealth Report, 2019.
- Zak Cope, The Wealth of (Some) Nations: Imperialism and the Mechanics of Value Transfer (Pluto Press, 2019).
- This figure is based on estimates in the 1999 UN Trade and Development Report. The report indicates that $700 billion in potential revenues is lost each year in the industrial export sector, and more than this amount in the agricultural export sector.
- Data on global fossil fuel subsidies is from the IMF, and data on global military expenditure is from the World Bank.