News this month from two seemingly unrelated crises—one environmental and the other employment-related—are working in tandem to make a powerful point: our Holy Grail obsession with economic growth at any cost endangers the planet, widens both racial and income inequality, and increases human suffering.
Our growth-centrism is animated by misguided assumptions. Left unaltered, they will make life on this planet, particularly for the marginalized and less well off, ever more unbearable and unsustainable. That’s why we must transform them.
The core problem is that the very formula used to determine prosperity, gross domestic product, or GDP, embeds dangerous misconceptions into every facet of economic life.
GDP is measured by totaling up the value of all goods and services produced in one year. The forecast for GDP, alongside inflation, is the single most influential economic number out there. It’s used by almost every organization, from the White House to corporations to non-profits, as the basis for allocating resources.
GDP assumes that natural resources—energy, water, land—will always be available in unending quantities at small costs. But we know this is totally false. The amount of clean water, fossil fuels, and land that humans can use productively is limited. There’s no more of these things today than when our ancestors began to walk upright 2 million years ago.
As with natural resources, GDP also assumes labor is available for a marginal cost at endless supply. This means that when labor becomes too expensive in one place, employers immediately begin to seek out newer, less expensive employees in another.
The false designation of these environmental and human resources as cheap leads the economic system to misuse them, with horrific consequences.
We only have to look to history, both recent and distant, for evidence.
The growth-centric vision of prosperity has always wreaked enormous damage for people of color and society as a whole. Slavery and the genocide of indigenous people in the Americas are among the starkest examples. Currently, 19 of the 20 poorest countries are in sub-Saharan Africa.
Worldwide, people of color are now bearing the brunt of climate change. The Center for American Progress states “that over the next two or three decades, vulnerable regions (particularly sub-Saharan Africa, the Middle East, South and Southeast Asia) will face the prospect of food shortages, water crises, and catastrophic flooding driven by climate change.”
As is so often the case, racial inequities both preview and underscore a broader crisis. The way that climate change and economic injustice work together promises a future that works for no one.
All of this is why it’s crucial that we have a new way to determine economic health, or “growth” as we now label it. And we need it fast.
If we can fully account for the costs and benefits of economic activity, and as a result make better choices, then a bright future is likely.
But right now, as the result of the way we’re doing business, both the economy as a whole and the environment appear to be headed toward the breaking point.
The Environment and Economy Point the Same Way
This year is one of the warmest on Earth since record-keeping began.
With its worst drought in 50 years, the U.S. is experiencing the accelerating pace of climate change firsthand. Over 1,700 individual heat records were shattered in the opening days of July alone. These added to the 40,000 separate temperature highs that have been set since January.
From coast to coast, forest fires raged out of control across more than 2 million acres. Leading climate scientist Gerald Meehl told the AP, “This is what global warming is like, and we’ll see more of this as we go into the future.” Adding to the gloom, 97 percent of the Greenland ice sheet melted in just four days.
As real fires have charred America west of the Mississippi, a metaphorical one has continued to singe the whole economy.
On Friday, the government announced that GDP grew 1.5 percent. Even in its flawed form, this number reflects an economy that’s not doing well. Factoring in inflation, economic activity either barely grew or isn’t growing at all.
Black unemployment is 15 percent, twice as high as whites. Latino unemployment remained in the double digits, and Asian Americans continue to suffer disproportionately from long-term unemployment.
The fact that these dramatic events are occurring at the same time may not be coincidental. Both climate change and the severe recession were created by the growth-at-any-cost approach at the heart of our economic system.
Growth centrism has led us to consume resources 1.5 times faster than the Earth can replace them, according to the Global Footprint Network. Meanwhile, the need of the super rich to find ever more exotic ways to grow their investments at an ever increasing pace caused the economic crash; the worst in almost a hundred years.
Our obsession with economic growth above all else is also leading to a historic gap between rich and poor. In and of itself, inequality is undermining support for our current economic values.
According to the business-friendly World Economic Forum these “wealth and income disparities, both within and between countries, threatens political stability” and is causing a “divergence in opinion … on how to promote … growth.”
That’s because a GDP-tinted vision of prosperity distorts the reality of what’s happening. Over the longterm, it actually exacerbates environmental damage and wealth inequality. Instead of facilitating sustainable economic health, it endangers real economic well-being. Our very survival hangs in the balance as a result.
Take for example the latest archetypes of GDP growth success: China, India and Brazil. Extreme poverty as measured by GDP has fallen across the globe, largely because it’s been rolled back in these three countries. Other indicators—infant mortality and life expectancy—reflect the same. But the type of economic growth engineered to bring their climb to the top has come at enormous cost to the planet.
China has become the world’s second largest economy in a generation, but environmental degradation extracts a greater share of that country’s national wealth than almost any other.
The bottom line is that too many people live in poverty, and the way that they are going about getting rich is totally unsustainable, especially if want to have a viable future on this planet. If China develops as the U.S. has, humans will consume resources three times faster than the planet can put back.
The Tipping Points
The starting point for understanding what’s gong is climate change.
Our economy extracts fossil fuels—oil, coal and gas—at such a rate that we’ve put more carbon dioxide in the atmosphere than at any point in 15 million years. Consequently, the temperature is rising and the Earth is starting to the show the results.
Human action has already warmed the planet 1.8 degrees. Once we pass 2 degrees celsius, global warming will become a runaway train. More heat will unlock other greenhouse gasses long frozen in the Earth’s coldest regions. The increase in greenhouse gasses, combined with less ice to reflect the sun’s warmth, could raise the temperature by 2 to 3 times what’s habitable for human beings.
The way we add up GDP acts as a steroid for this process by encouraging “growth” rather than sustainability, and it is undermining our long-term survival.
The other dramatic GDP failure is the way it treats the labor force (i.e. people) as a commodity—or, rather, as an easily swappable productive unit; one is as good as the other.
This is exactly what we saw during the 1980s, when millions of U.S. manufacturing jobs were shipped overseas to lower-cost countries in Asia and Latin America. And it’s happening now with service sector jobs, such as in finance and technology, that are moving to countries such as India and the Philippines.
Labor is often an organization’s single greatest cost. In order to wring out more profits over the long term, companies are always on the lookout for a cheaper labor pool. Once one labor market becomes too expensive, firms move on to the next. This is already underway in China, where manufacturers are shifting jobs from the world’s most populous country to places like Vietnam.
These shifts underscore the point that the dominant economic growth model thrives on income inequality. Inequity in one place is essential to making money in another.
This disincentive to shrink income disparities is a key animating force to our economic system. And like our daft pillage of natural resources, the result is unsustainable.
A Sustainable Future
The fundamental flaw in the way that GDP is calculated has led many economists to conclude that environmental degradation and poverty are not by-products of a functioning market economy, but actually represent the failures of it. That’s why we need a total rethink for how we produce and consume products, while still providing health and wealth for the world’s people.
As Jeffrey Sachs, the leader of Columbia University’s Earth Institute told Britain’s Guardian newspaper, “The point of the move to better metrics is the realization that not only does gross national product not measure properly what makes us well-off and satisfied, it is leading us now in a very dangerous direction. If we continue to follow that indicator we will follow a path right over the cliff.”
Luckily, there is a way for us to save ourselves, both environmentally and economically. It involves transforming our economy into one that uses 50 percent less resources but which continues to produce a higher, more equitable standard of living for everyone.
Building a new economy with environmental sustainability at its core may sound like science fiction, but there are existing, credible plans to get us there using technology and smart approaches that are already in practice.
For instance, the blueprint for environmentally sustainable capitalism was the focus of June’s Earth Summit, which brought together 172 of the world’s governments in Rio de Janiero, Brazil. Their framework, entitled “The Future We Want”, declared that equitable economic growth and environmentally sustainable development must go hand-in-hand.
The Rocky Mountain Institute’s “Reinventing Fire” report lays out a way in which we can actually expand the economy by almost 60 percent, save $5 trillion, and use no more fossil fuel energy 40 years from now than at present.
President Obama’s 2009 American Clean Energy and Security Act would have been an important step in getting us closer to this goal.
But to make this economy of the future viable, we must modify the way economic growth is calculated to highlight the devastating costs of our current system and underscore the full benefits of change.
A rethink of growth will require more than smart economists arranged around a giant chalkboard. It will actually require us to change our values. In the end, that may be the most difficult shift of all.