Restoring the balance

Tan Copsey: Why does Europe need to move away from existing growth-focused economies in your opinion?

Tim Jackson: The way in which we organise society and the social logic that we encourage in order to keep people consuming goods is taking us in the wrong direction. The basic dynamics of growing economic throughput [the rate at which products and services are generated] is pulling through a growth in materials and we’re pushing up against base resource limits in environmental systems.

The prevailing way of thinking is that you can somehow keep a kind of qualitative economic growth. The trouble is that it just doesn’t work out when you start to look at the underlying dynamics of the growth-based economy.

The system has also generated, or at least failed to alleviate, acute inequalities. In developed countries, it has become unstable in its own terms. So I see the [financial] crisis of a couple of years ago as a crisis of growth in the sense that it was motivated by the desire to continue growth.

TC: In your book, Prosperity without Growth: Economics for a Finite Planet, a translation of which is about to be published in China, you suggest that it’s possible to achieve prosperity without growth. But what is prosperity then? How do you define it?

TJ: I go back to making a distinction between income and well-being. It draws on a very long philosophical literature that separates out material wealth from happiness, material wealth from flourishing, from doing well.

TC: How would you then begin to apply those ideas to a country like China, where lots of people are still in poverty? And what should China be doing, if not focusing on that form of economic growth?

TJ: The primary target audience of my message is the developed economies, because it is in the developed economies that the returns from the increase of material throughput and from increasing income are actually diminishing much faster.

If you look at the poorest economies, you see much more powerful growth. There is a powerful case for income growth in the poorest nations because it’s much more closely correlated with an increase in well-being. It isn’t an argument for saying categorically that poor countries shouldn’t grow. China is a middle-income country. So I’m absolutely not saying “China you can’t grow”.

But China and other emerging economies, BRIC economies [Brazil, Russia, India, China] are pursuing what is actually a very similar model to what was used in western nations over the last hundred years. They’re locking themselves into exactly the same dynamic the rich nations are already locked into. At some point in the future, it’s going to bring them down, as it is bringing down the developed nations.

[Growth] in China has been very intensive and environmentally damaging and sometimes it has also been divisive. There needs to be a balance between the delivery of a sustainable long-term vision in China and the improvement in the quality of life that is important now. That’s about looking at the structure of the economic institutions. It’s looking at the social logic that is driving society. It’s about creating a measurements framework that doesn’t simply include conventional economic indicators, but that also tracks the social well-being outcomes that actually matter in the short term and the long term.

TC: You mention the examples within China. More generally, do you see any real world examples of countries or institutions moving towards these kinds of alternative forms of measurement?

TJ: The Sarkozy Commission Report [a report on national accounting methods, commissioned by French president Nicolas Sarkozy and written by a panel of economists including Joseph Stiglitz] was the most high-profile attempt to do that. It’s led by a G7 government and achieved lots of publicity. What’s extraordinary about this Sarkozy Report is that it didn’t say anything that hadn’t been known for 40 years or so. It’s like, if you look at this kind of [global economic] architecture, the architect is the national accounting system dating back to the Second World War. You find acknowledgement of the limitations of this accounting system then. Yet somehow we’ve ignored this critique for a long period of time.

There’s also an interesting, slightly marginal case study – Bhutan, which has a system of well-being indicators around which it builds policies. Then in several western countries, there are sets of sustainability indicators that attempt to bring into policy different measurements sets and frameworks.

What’s been lacking is a way of bringing those measurement frameworks more into mainstream policy. That’s partly because the dominant indicator of GDP rise has huge political importance. A growth-based economy is our best bet of getting a stable economy – we know that when GDP falls, or even when one goes through decline, you introduce structural problems into the economy. So there’s a reason why it has become so important to policy. But there’s also a very good reason to question it as a measure of well-being.

TC: The kind of change you’re talking about would require a completely different development pathway. It would require change not only in the public sector, but also within the private sector. How do we get from here to there, given the scale of the task?

TJ: The first step is to establish an understanding of the nature of the problem and the dynamics that lead to it. The second step is really a strategic one, which requires at least a little bit of political will to respond to challenges.

We can do exactly what we’ve been doing, but if we do that in the recognition that there’s a structural problem, it’s actually quite a pathological response. We need to de-pathologise the response of government.

The next point really is about freeing government to offer solutions spaces. I distinguish three solution spaces: one is establishing where the limits are. Even though we know where some of those limits are, say, with climate change, we’re not integrating them into policies in the way we need to. The establishment of limits is actually a really important step in being able to look forward to the way the economy is going to develop outside of this pathological dynamic.

The second kind of solution space is about fixing the economics. It is about beginning to design economics itself and economic institutions that reinforce long-term interests. It has some very clear policy implications, for example how you strategise investments, how you measure performance of investments, how you change the balance between spending and saving in your household sector and how you shift the balance of investment towards long-term goals in your production sector.

The third one, and of course they’re interlinked, is changing social logic. It is, to some extent, about social values and norms. People as consumers are locked into specific patterns of behaviour. If you need growth, you need people to go on buying more, past the point at which they need it. So you have to persuade them that there are social or psychological benefits [to consuming more]. What we’re living in is a system designed to kick start and stimulate consumption. Recognising that, we have to systematically shift back to balance.

TC: Current policies, say in the UK and China, are very much based on the notion that we can decouple growth in greenhouse-gas emissions from economic growth, do you believe this is possible?

TJ: At the moment, all we’ve seen is relative decoupling – decoupling per unit of GDP. You would predict that because carbon is a product of burning fuels and fuels are an input of production cost. So the motivation to reduce production cost actually motivates a relative decarbonisation and the search for less energy-intensive alternatives. Relative decoupling has not led to absolute decoupling, which is much harder to achieve without changes in the structure of the system.

TC: Instead of abandoning growth, wouldn’t it be better to foster new forms of growth? Say economic growth partially based on rebuilding natural ecosystems – like  markets based on reforestation and avoided deforestation?

TJ: There’s no recommendation anywhere in the book that says abandon growth. There are many specific recommendations to do different things with the economy. For example, investing in those ecosystem services or moving towards service-based, material-light enterprises.

But do you actually get growth back by doing that? My sense is that you don’t for a couple of reasons. One is that the service-based economy tends to fly in the face of the later productivity gains, which traditionally have given you growth in the economy. The investments have much longer periods of return and considerably lower productivity, so they don’t give you back conventional growth. My concern is, if you’re hooked on getting a growth-based economy at all costs, you won’t move to a structural change as all your institutional incentives are pointing in the wrong direction.

So it’s not saying let’s stop growth and turn it backwards. It’s saying, let’s be clear what our outcome variables are and focus on those – and they’re human well-being, stable levels of employment and environmental constraints.

Tim Jackson is professor of sustainable development at the University of Surrey and director of its Research Group on Lifestyles, Values and Environment (RESOLVE). He is also economics commissioner on the UK Sustainable Development Commission. A translation of his book, Prosperity without Growth: Economics for a Finite Planet, will be published by China Commercial Press in March.

Tan Copsey is development manager at chinadialogue. 

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