Guest post: To Save The Economy, We Have To Break Its One Sacred Rule

Written by Jason Hickel, originally appeared on FastCo on 15/03/16.

Scholars are still trying to figure out why the society on Easter Island collapsed, ending the people famed for their construction of towering stone heads. One interesting theory holds that it had to do with the heads themselves. Somehow, the islanders decided that the giant heads represented power and success, so different groups competed to build as many heads as possible. But because there was only one quarry, to move the stones around the island required felling trees to use as rollers. To feed their lust for heads, they felled the trees so eagerly that, over just a few generations, what was once a tropical forest was reduced to barren scrubland.

The islanders must have realized that their obsession with heads would quickly spell their doom. As the project wore on, they no longer had sufficient wood to build fishing boats or houses, nor trees from which to gather fruits and nuts. They must have seen this disaster unfolding—slowly starving to death and forced to live in caves for shelter—right up until they felled the last palm. It was all because of a myth, but a myth so powerful that, despite knowing its madness, they could not resist it.

Humans are strange creatures. We create our own myths and then we live by them almost as though we didn’t create them at all, as if they were handed down to us by the gods. And this is not just a characteristic of small societies. Our global civilization has its fair share of powerful myths, one of which is remarkably similar to that which destroyed Easter Island. Just as multiplying heads became the sacred rule of Easter Island economics, so there is one sacred rule that underpins our global economic system: namely, that GDP must grow, and must grow at all costs. Why must GDP grow? Because GDP growth is equivalent to human progress.

We tend to take the GDP measure for granted as though it has always existed. Most people don’t know that it was invented only recently. It has a history. During the 1930s, the economists Simon Kuznets and John Maynard Keynes set out to design an economic aggregate that would help policymakers figure out how to escape the Great Depression. Kuznets argued for a measure that would help us maximize human well-being and track the progress of human welfare. But when World War II struck, Keynes argued that we should count all money-based activities—even negative ones—so we would know what was available for the war effort.

In the end Keynes won, and his version of GDP came into use. GDP was intended to be a war-time measure, which is why it’s so single-minded—almost violent. It counts money-based activity, but it doesn’t care whether that activity is useful or destructive. If you cut down a forest and sell the timber, GDP goes up; GDP does not count the cost of losing the forest as a habitat, or as a future resource, or as a sinkhole for carbon. What is more, GDP doesn’t count useful activities that are not monetized. If you grow your own food, clean your own house, or take care of your aging parents, GDP says nothing. But if you buy food from Tesco, hire a cleaner, and send your parents to a nursing home, GDP goes up.

Of course, there’s nothing inherently wrong with measuring some things and not others. GDP itself doesn’t have any impact in the real world. GDPgrowth, however, does. As soon as we start focusing on GDP growth, we’re not only promoting the things that GDP measures, we’re promoting the indefinite increase of those things. And that’s exactly what we started to do in the 1960s. GDP was adopted during the Cold War for the sake of adjudicating the grand pissing match between the West and the USSR. Suddenly, politicians on both sides became feverish about promoting GDP growth. GDP growth became a sacred rule. And we remain in thrall to it today.

The imperative for growth is incredibly powerful; probably the most powerful force in our world. When the entire global political establishment puts its force behind this goal, human and natural systems come under enormous, overwhelming pressure.

What does this pressure look like in the real world? In India, it looks like corporate land grabs, which leave peasant farmers dispossessed. In the U.K., it looks like privatization of public services—with corporations eager to exploit untapped markets. In Brazil it looks like deforestation, which is eating the Amazon at a rapid clip. In the U.S. it looks like fracking, backed by a government desperate for cheap energy. Around the world it looks like trade agreements that strip away regulations that protect workers and the environment. And for all of us it looks like longer working hours, expensive housing, depleted soils, polluted cities, wasted oceans, and—above all—climate change.

We normally think of these as separate crises. But they are not: they are all connected. They all proceed from the same deep logic of GDP growth, the collective madness at the heart of our economic system. To fight them as separate issues is to mistake the symptoms for the disease.

People who spend their lives pushing against these destructive trends will tell you how futile it feels. It is futile because our governments don’t care. They don’t care because according to their most important measure of progress, destruction counts as good. Indeed, under the tyranny of GDP growth, the destruction must continue at all costs. The problem here is not that humans are inherently destructive. The problem is that we have created a myth that encourages us to behave in destructive ways, and have given that myth the power of a sacred rule. As Joseph Stiglitz has put it, “What we measure informs what we do. And if we’re measuring the wrong thing, we’re going to do the wrong thing.”

Why does GDP growth retain such a hold on our imagination? Because we assume that when GDP goes up, it makes our lives better: it raises our incomes, it creates more jobs, it means better schools and hospitals and so on. This may have been true in the past. But unfortunately it no longer holds. In the United States GDP has risen steadily over the past half century, yet median incomes have stagnated, the poverty rate has increased, and inequality has grown. The same is true on a global scale: since 1980, global GDP has grown by 380%, but the number of people living in poverty has, according to World Bank numbers of people living on $5 a day, increased by more than 1.1 billion. Why is this? Because past a certain point, GDP growth begins to produce more negative outcomes than positive ones—more “illth” than wealth, as the economist Herman Daly has put it (if “ill” is the opposite of “well,” “illth” is the opposite of “wealth”).

GDP growth might make sense on a planet with endless room and endless resources. But we don’t live on such a planet. In fact, we’re already overshooting our planet’s biocapacity by more than 50% each year. There are no longer any frontiers where accumulation doesn’t directly harm someone else, by, say, degrading the soils, polluting the water, poisoning the air, and exploiting human beings. At this point in our history, GDP growth is creating more misery than it eliminates. And the problem is not just that the growth is inequitably shared, although that it is a major issue; the problem, rather, is aggregate growth itself. In our era of climate change, even sober scientists are pointing out that growth is leading us down a path that that has widespread famine and mass displacement just around the corner.

Yes, some try to reassure us that our economy is gradually “decoupling” from material throughput, and that soon we will have growth without destruction. Butstudy after study has proven that it’s not true. In fact, global consumption of materials has nearly doubled over the past 30 years, and accelerated since 2000.

The rule of GDP growth may seem sacred, but it is not. As quickly as we created it, we can pull it apart. And pull it apart we must—it’s time for the giant stone heads to roll. There are already movements in this direction. A number of states and countries have adopted much more sensible alternatives, like the Genuine Progress Indicator, which seek to promote human and environmental well-being. There are many others we might consider, and it doesn’t much matter which we choose—indeed, each city or country could pick a different measure, or no measure at all. The important thing is that we shake off the tyranny of GDP growth and open up a creative, democratic conversation about what kind of world we want to live in.

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The MOST important research on global poverty eradication I’ve ever seen…

Are you ready for it?

It will take 100 years for the world’s poorest people to earn $1.25 a day

I’ll just repeat that.

It will take 100 years for the world’s poorest people to earn $1.25 a day

In the bath last week I decided that, somehow, without any of the right skills or training, I would set about to work out what the world would look like, in the current global economic system, if there was more financial equality… and actually to ascertain if it’s even possible (working on the assumption that the ‘rich’ are only rich because the ‘poor’ are poor). Governments and corporations the world over talk about ‘poverty eradication’, but what does that actually look like, and, when the powerful 1% are only so because they’re being propped up by the 99%, is it ever going to happen under capitalism? I didn’t think so. Luckily for me, I don’t have to: in a Guardian article today Jason Hickel, an anthropologist at the London School of Economics, highlighted a piece of research by economist David Woodward published in the World Economic Review that demonstrates that our current economic model, built on GDP, “will never be inclusive or sustainable”. Hickel claims that the headlines and statistics announcing that “world leaders have succeeded in cutting global poverty in half over the past couple of decades” are untrue and that “the numbers have been furtively manipulated to make it seem as though our economic system is working for the majority of humanity when in fact it is not.” Is it possible to end poverty under our current economic system? NO.

Let’s assume that we can maintain the fastest rate of income growth that the poorest 10% of the world’s population have ever enjoyed over the past few decades. That was between 1993 and 2008 – after the debt crisis of the 1980s that crippled much of the developing world and before the banking collapse of 2008. During that period, their incomes increased at a rate of 1.29% each year. So how long will it take to eradicate poverty if we extrapolate this trend? 100 years.

And that’s just to get the world’s poorest over the standard $1.25 benchmark poverty line, which, increasingly, scholars are pointing out isn’t adequate for people to live on. Hickel points out that to eradicate poverty global GDP would “have to increase to 175 times its present size if we go with $5/day” (as a ‘fairer’ minimum living benchmark). If this were even possible, not only would it drive commodity extraction, production and consumption, and therefore climate change, to “unimaginable” levels, it would mean that global per capita income would have to be:

no less than $1.3 million. In other words, the average income would have to be $1.3 million per year simply so that the poorest two-thirds of humanity could earn $5 per day. It’s completely absurd, but shows just how deeply inequality is hardwired into our economic system.

Hickel argues that poverty eradication is possible in fewer than 207 years without destroying the planet, but it will require huge changes. He suggests that the abolition of debts owed by developing countries; the closing down of tax havens; the installation of a global minimum wage; a moratorium on land grabs and an end to structural adjustment programmes that “allow rich countries to control the fates of poor countries”, will help, alongside a ‘dethroning’ of the GDP measure and replacing it with “something more rational – like the Genuine Progress Indicator or the Happy Planet Index.” It’s a powerful piece of research and an important article that are desperately needed to question the seemingly futile Sustainable Development Goals and the global elite. Like me Hickel is sceptical that the hegemony will adopt any of the changes needed to truly eradicate global poverty, as to do so would “threaten the interests” of the1%. But, also like me, he believes that we need to be pointing these huge disparities and falsehoods at every chance we get. Please do read the full article on the Guardian Development Professionals Network here. I’d also really urge you to share his important work far and wide. You can follow Jason Hickel on Twitter @jasonhickel (and me at @devtruths). What do you think about this research? How does it make you feel? Do you agree or disagree with Hickel and Woodward’s conclusions?