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Are We Defining Economic Success All Wrong? - Pacific Standard

Are We Defining Economic Success All Wrong?

A new study asks: Can countries meet citizens' needs without over-consuming resources?
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Assembly line workers inside the Ford Motor Company factory in Dearborn, Michigan.

Assembly line workers inside the Ford Motor Company factory in Dearborn, Michigan.

"Growth for the sake of growth is the ideology of the cancer cell," wrote Edward Abbey, the famously misanthropic environmental activist, in 1968. To call Abbey—who celebrated eco-sabotage and advocated banning cars in National Parks—a pessimist would be understating the matter. Today, though, his words seem prescient.

Twentieth-century economics was built on the mantra that growth is good—and more growth is even better. The famous Kuznets curve, which appeared in 1955, purported to show that, as a country went from poor to rich, its level of inequality would rise and then fall, like the climb and drop of a rollercoaster. Capitalism might not be a perfect system, we were told, but it was better than the alternatives.

But something has gone awry. Global wealth is soaring, but so are global carbon emissions. Deforestation, mass extinction, and the collapse of fisheries vie for headlines with who said what at Davos. The economy and the environment turn out to be two sides of the same coin. The notion of the former as a kind of magic perpetual-motion machine that defies the limitations and physics of the latter has been revealed for what it is: a ruse. Increasingly, our neat economic models—with their "rational actors" and "trickle down" flows of capital—seem not just dated but useless.

In recent years, Oxford University's Kate Raworth has stepped into the academic fray with a new model: doughnut economics. (Each generation, it seems, gets the economic model it deserves. Her "doughnut" refers to the "safe and just" zone between privation and overconsumption where humans ought to live.) Raworth's argument goes something like this: Economics has long treated growth as a way for poor people to become less poor. In that sense, growth is a proxy for equality. More growth equals more equality.

But what if economists have been addressing inequality equation by solving for the wrong variable? What if, instead of fixating on growth and hoping equality followed, they fixated on equality and allowed growth to follow?

Today, Raworth argues, "we have economies that need to grow, whether or not they make us thrive. What we need are economies that make us thrive, whether or not they grow." The aim of a new economic model ought to be "meeting the needs of all within the means of the planet."

THE FALLACY OF ENDLESS ECONOMIC GROWTH: What economists around the world get wrong about the future.

Inspired by Raworth's work, a team of economists at the University of Leeds decided to quantify precisely how well individual countries are doing at living "inside the doughnut"—meeting the needs of their citizens while consuming less than their share of natural resources. The results, which appear this week in Nature Sustainability, are about as hopeful as you might expect, which is to say, not very.

Of the 151 countries surveyed, the authors write, "We find no country meets basic needs for its citizens at a globally sustainable level of resource use."

First, researchers used environmental footprints to determine whether countries remained within the planetary boundaries of seven "critical Earth-system processes," including carbon dioxide emissions, phosphorus and nitrogen consumption, and freshwater usage. Together, these planetary boundaries define the "safe operating space" of human life.

Next, the researchers evaluated the countries' success at meeting 11 social objectives, from the basic (life expectancy, nutrition, sanitation) to the higher-order (life satisfaction, equality, democracy).

"We went into it with a sense that we would probably see that the richest, most industrialized countries would be doing OK on the social indicators, but exceeding their planetary boundaries," co-author Julia Steinberger tells Pacific Standard. "But we were open to finding exceptions."

Sadly, there were few. The researchers discovered that, on a per-capita basis, most countries already exceed their planetary resource boundaries. Just 34 percent of countries are within the planetary boundary for carbon dioxide emissions, and 45 percent within the boundaries for phosphorus and nitrogen consumption.

Overall, just 16 of the 151 countries remain within all seven of the planetary boundaries, while 48 countries transgress six or more boundaries.

When it comes to social indicators, the researchers write, the results are mixed. Nearly 60 percent of countries meet their citizens' basic needs, such as nutrition and access to energy, and 70 percent have succeeded in eliminating extreme poverty. At the same time, while 10 (mostly European) countries achieve nearly every social indicator, 35 countries fail to achieve even a single one.

"No country performs well on both the biophysical and social indicators," the authors conclude. "In general, the more social thresholds a country achieves, the more biophysical boundaries it transgresses, and vice versa."

The United States, for example, achieves nine of the social indicators, but transgresses all seven resource boundaries. Nepal and Bangladesh live fully within their resource boundaries, but achieve just one social threshold. On a scatterplot, Vietnam is the lone rogue data point, achieving six of the 11 social indicators while transgressing just one resource boundary.

Given that the United Nations predicts a global population of 9.7 billion by 2050 and 11.2 billion by 2100, the authors write, "It is possible that the doughnut-shaped space envisaged by Raworth could be a vanishingly thin ring." Physical needs such as nutrition and sanitation could likely be met for a population of seven billion within global resource boundaries, they conclude, but the achievement of universal higher-order needs, such as life satisfaction and secondary education, will require a fundamentally new—and far more efficient—way of provisioning them.

Which brings us back to economics itself. The authors suggest that "sufficiency"—not "growth"—ought to be the dogma going forward, in part because, when it comes to social indicators, resource consumption actually has diminishing returns.

"A focus on sufficiency would involve recognizing that overconsumption burdens societies with a variety of social and environmental problems," the authors write, "and moving beyond the pursuit of GDP growth to embrace new measures of progress. It could also involve the pursuit of 'degrowth' in wealthy nations, and the shift towards alternative economic models such as a steady-state economy."

Ideas like "degrowth," abandoning GDP, and embracing a steady-state economy will, for now, be met with howls of derision. From the halls of Washington to the pages of the Wall Street Journal, "Growth for the sake of growth" remains our inviolable national credo. But all revolutions seem impossible until they are suddenly inevitable. A revolution in economics would be no different.

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