The end of growth is not the end of the world

In this Guardian interview with the Nobel economic laureate and New York Times columnnst Paul Krugman, he points out that the Japanese economy has not grown at all since 1992.

[Will Hutton, interviwer, to Krugman] Japan’s GDP at the end of this year will be no higher than it was in 1992 – 17 lost years. You are saying that this is an ongoing risk, certainly for the North Atlantic economy – maybe the world economy.

Wow. No growth for 17 years? Surely the country should have collapsed?

But apparently not.

Previously on this blog, we’ve mentioned the notion, outlandish to many, that economic growth, or increases in Gross Domestic Product, might actually be a very bad measure of national success or failure for any particular country.

Yet it is precisely the measure most used by journalists, economist and politicians. Though in fact,

“…the welfare of a nation [can] scarcely be inferred from a measure of national income…” – Simon Kuznels, originator of the concept of GDP

So the guy who formulated the GDP concept didn’t recommend it for use as a measure of how we’re doing … yet we’ve somehow twisted it to that purpose.

Indeed, growth in GDP comes with significant costs, which are not measured in the reckoning of GDP: air, water and noise pollution, loss of farmlands and wetlands, mineral and biological resource depletion, increased crime (in some instances), damage to biodiversity,

So concentrating on large GDP as a measure of a nation’s well-being is a bit like judging a family’s prosperity on the basis of a large house and big screen TV … while ignoring its mountain of debt.

Which is why GDP can increase year after year after year – even as human well-being declines.

So what has happened to Japan in the last 17 years of non-growth? Though it has dropped several places in the UN’s Human Development Index, from topmost in 1990 to eight in 2006, and unemployment has increased, it arguably remains one of the world’s most developed and successful countries.

There are alternatives to GDP of course, such as the Genuine Progress Indicator. Real measures of national well-being need to take into account not just income, but also psychological well-being and the state of the environment, which will determine the well-being of future generations.

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About David

I am an environmental writer, journalist and speaker living in Cape Town, South Africa.
This entry was posted in Economic crisis, General sustainability, The bigger picture. Bookmark the permalink.

3 Responses to The end of growth is not the end of the world

  1. Fergal O'Brien says:

    “We will find neither national purpose nor personal satisfaction in a mere continuation of economic progress, in an endless amassing of worldly goods. We cannot measure national spirit by the Dow Jones Average, nor national achievement by the Gross National Product. For the Gross National Product includes air pollution, and ambulances to clear our highways from carnage. It counts special locks for our doors and jails for the people who break them. The Gross National Product includes the destruction of the redwoods and the death of Lake Superior. It grows with the production of napalm and missles and nuclear warheads…. It includes… the broadcasting of television programs which glorify violence to sell goods to our children. “And if the Gross National Product includes all this, there is much that it does not comprehend. It does not allow for the health of our families, the quality of their education, or the joy of their play. It is indifferent to the decency of our factories and the safety of our streets alike. It does not include the beauty of our poetry, or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials… the Gross National Product measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country. It measures everything, in short, except that which makes life worthwhile, and it can tell us everything about America — except whether we are proud to be Americans.” Robert F Kennedy, 1968

  2. Wow, great quote, Fergal, thanks for adding this to the discussion!

  3. jeanne loubser says:

    http://www.nytimes.com/2009/08/10/opinion/10zencey.html?_r=1

    “Creative destruction can apply to economic concepts as well. And this downturn offers an excellent opportunity to get rid of one that has long outlived its usefulness: gross domestic product. G.D.P. is one measure of national income, of how much wealth Americans make, and it’s a deeply foolish indicator of how the economy is doing. It ought to join buggy whips and VCRs on the dust-heap of history.”

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