A particular remark has been ringing in my ears for two weeks: “We have an economy where we steal from the future, sell it in the present, and call it GDP.” Those are the words of Paul Hawken, who, in my opinion, has come up with the most accurate definition of Gross Domestic Product (GDP) so far.
When I heard it at TEDxOxbridge, I thought: Bingo! We’re finally weaving growth into the debate, and acknowledging that our obsession with stellar GDP and economic growth is simply an “intergenerational Ponzi scheme” biding its time.
Not that the evidence to suggest so hasn’t been plentiful for decades, and becoming even more ubiquitous with each passing day. Most recently, the International Energy Agency made headlines with its announcement that greenhouse gas emissions increased by a record amount last year, to the highest carbon output in history. What’s more, according to the Global Footprint Network, we are on course to be running at 200% of planetary capacity by the early 2030s. Our only capital, planet Earth, is being depleted at a horrifyingly rapid pace.
Our Clouded Judgment
What is it that has clouded humanity’s judgment to such an extent? We as a species have, on balance, performed extraordinarily well. As we’ve evolved, we have created a quality of life for billions that was unimaginable at this scale even a few decades ago. Where we have failed, we have often (but not always) attempted to correct. So, why are we collectively failing to recognise that our current trajectory of development is not sustainable?
I believe that the core of our problem lies in humanity’s delusion that we can have infinite quantitative economic growth on a finite planet. This overarching belief is largely driven by our current model of consumer-driven economic growth, and is reflected in the mistaken notion that you can capture progress via one measurement alone: GDP.
As Paul Gilding documents in his recent book, The Great Disruption, our obsession with growth is not just a fleeting idea or a temporary policy. It is the idea that supports the global economy and society in general. It structures the political and economic strategy for nearly every government on the planet. And individually, it is for most the critical measure for progress both personally and professionally.
Only One Side of the Story
GDP presents just one side of the story though, illustrating only the output of an economy and not the true cost of the activities that have delivered that output. Hence, GDP growth statistics fail to warn us where economic prosperity comes at great social or environmental cost. Robert Kennedy said it best in 1965:
Our Gross National Product…counts air pollution and cigarette advertising and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the loss of the redwoods and the loss of our natural wonder in chaotic sprawl…
GDP is therefore delivering a distorted picture of our development. The metric doesn’t tell the difference between useful transactions and damaging ones. US GDP, for instance, increased in the wake of the Exxon Valdez disaster, as lawyers’ fees and clean-up costs were added to national accounts. So where is the progress?
GDP = Quality of Life?
The prosperity and stability promised by economic growth has not always delivered. Certainly in developing countries, impressive GDP growth figures can represent the crossing of the poverty line for millions of individuals. However, GDP growth does not always represent a magic formula for a better quality of life.
On an individual and local level, our endless obsession with imbuing material things with social and psychological meanings has not led to a better quality of life. According to Prosperity Without Growth, UK incomes have roughly doubled since the 1970s, yet the “loneliness index” increased in every single region measured. In fact, “even the weakest communities in 1971 were stronger than any community now.”
The limitations of GDP growth as a measure of progress therefore suggest that we face a deep systemic challenge that needs fixing from the ground up – not just tweaks here and there, but rather something along the lines of Shumpeter’s theory of “creative destruction.”
Breaking out of the GDP Mindset
How do we break ourselves out of this mindset? Society needs to develop a different, more sophisticated economic model. There has been admirable progress, led most outstandingly by the New Economics Foundation (NEF) in the UK, in addition to the Happy Planet (an NEF initiative) and OECD Better Life indices.
We need to find a way out of the institutional and social constraints that lock us into a failing, self-perpetuating system. We need an extensive change in values, lifestyles and social structure. We need to break the shackles that bind us to the failing logic of quantitative economic growth.
To assist with this, we need governments to broaden their focus, look beyond GDP growth as the primary measure of progress, and shape public policy with a broader set of objectives and more well-rounded means of measuring success.
And just as society as a whole needs to move away from viewing economic growth as the ultimate measure of progress, the business world must distance itself from a mindset that is primarily focused on creating growth in shareholder wealth.
We will achieve this not only by asking ourselves the following question, but being guided by it in all of our interactions: Will we be good ancestors?
Of course, it is always easier to insist on the need for systemic change than it is to identify and take practical steps toward it, and we are acutely aware of how difficult it is for managers or political leaders to even engage with these ideas amidst the day-to-day pressures of their jobs. And yet, it no longer takes a visionary to recognize that the paradigm of endless growth risks undermining every conceivable economic and social purpose at which business and policy are aimed.
This issue lies at the core of SustainAbility’s work. As part of a blog series on growth, I will be outlining the sort of change we need to see happen in this sphere, exploring the issue from both business and policy perspectives. Watch this space.