The Center for the Advancement of the Steady State Economy has a different take on the push for ‘economic growth’.
Myths are interesting stories, and sometimes they even have a basis in fact. But when it comes to the economy, we can’t afford to make decisions based on ‘truthiness’ and unexplored assumptions. Myths often contribute heavily to our perceptions of how the world works, so it’s necessary to debunk the myths swirling around economic growth and the steady-state economy.
Myth: Economic growth is always desirable.
Reality: To determine whether economic growth is desirable requires us to examine its value objectively, without blindly assuming that all growth is worth pursuing. Growth comes with both benefits and costs. The goal is to grow the economy when the benefits are higher than the costs, and to have the wisdom to stop growing when the costs catch up. The economic laws of diminishing marginal utility and increasing marginal costs tell us that, over time, costs do catch up with benefits.
Myth: A steady-state economy is the same thing as a depression or recession (the result of a failed growth economy).
Reality: A steady-state economy is not a failed growth economy. An aeroplane is designed for forward motion. If it tries to hover, it crashes. It is not fruitful to conceive of a helicopter as an airplane that fails to move forward. It is a different thing designed to hover. Likewise a steady-state economy is not designed to grow. Stability in a steady-state economy is a healthy condition, a condition that allows people to meet their needs without undermining the life-support systems of the planet.
Myth: Technology and progress will grind to a halt in a steady-state economy.
Reality: A strong incentive for technological progress exists in a steady-state economy because of the drive for better goods and services. With stabilised material and energy inputs (as would occur in a steady-state economy), technological progress becomes the main source of higher-quality outputs.
Myth: Failure to grow causes economic turmoil and unemployment.
Reality: This myth is true for an economy structured for growth. When consumption slows in a growth economy, recession ensues. But a steady-state economy is precisely and intentionally structured for stability. It’s the stability that provides a good life for citizens and eliminates turbulent boom and bust cycles.
Myth: A steady-state economy means government by a harsh communist regime.
Reality: A steady-state economy can exist in a constitutional democracy with a commonsense mixture of markets and market regulations. Market structures are employed to allocate resources efficiently, but some vital decisions (eg how big to grow) are kept outside the market. A steady-state economy features a mix of private and public ownership of economic resources.
Myth: A steady-state economy means widespread poverty.
Reality: Economic growth has not eradicated poverty. The condition of having a stable and sustainable population in a steady-state economy allows more resources per person. The design of institutions to ensure fair distribution of wealth also provides an income/wealth floor below which no-one can fall.
Myth: A steady-state economy means fewer choices and less freedom.
Reality: In a steady-state economy, citizens exercise as much freedom as possible without impinging on the freedom of others. Stable numbers of people consuming sustainable levels of resources means that each person has more freedom to pursue desired activities. Economic institutions are designed to respect ecological limits, but personal choice is maximised within that institutional framework.
Myth: We can grow the economy continuously because we can decouple growth from resource use and waste production.
Reality: We can achieve relative decoupling by reducing the ecological intensity per unit of economic output. But to have a sustainable economy, we would need to achieve absolute decoupling, a situation in which resource impacts decline overall. Even if we make great gains in relative decoupling, which we have over the last several decades, these gains can be entirely swamped by economic growth. For example, carbon dioxide emissions per unit of economic output have decreased. But growth in economic output has led to higher absolute emissions of carbon dioxide, despite increasing efficiency.
Myth: Technological progress will allow unlimited economic growth.
Reality: The laws of thermodynamics rule the economic production process, and they tell us that, regardless of technology, all production requires high-quality inputs and generates lower-quality outputs. Thermodynamic laws also tell us that we cannot achieve 100 per cent efficiency. When the limits to efficiency have been reached, the only remaining way to grow the economy is by using more natural capital (including energy), which is limited in quantity. The application (or misapplication) of technology also plays a role – if technology isn’t aimed specifically at reducing the overall use of materials and energy, it won’t make any headway on that front.
The evidence is all around us – the global human economy has grown too large. Continued economic growth (especially in high-consuming nations) is at best irresponsible, and at worst risks ecological collapse and resource deprivation for future generations. The logical way forward for nations of the world is to take a different path to achieve sustainable, healthy, and equitable lifestyles for citizens. The alternative to continued economic growth is a non-growing or steady-state economy. Modern societies have not undertaken efforts to establish steady-state economies – the goal has consistently been growth, especially since the dawn of the industrial revolution.