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Nothing Grows Forever

Why do we keep thinking the economy will?

The results were bleak. If society didn't change tack, the scientists determined, global prosperity would rise until some time during this century, as growth made the good life cheaper and more widely available. But then the cycle would start to shift disastrously into reverse. Resources would become so scarce that they would skyrocket in price, driving the cost of almost everything upward. Global living standards would collapse.

Meadows and his team published their conclusions in a book titled The Limits to Growth, and it quickly became a global best-seller, with 12 million copies sold. Soon, governments and NGOs were organizing nervous conferences wondering if growth would kill us all.

Traditional economists went berserk. In the months following the book's publication, they counterattacked: One labeled Limits "alarmist." Another called it "less than pseudoscience and little more than polemical fiction." An influential essay in Foreign Affairs derided it as "The Computer That Printed Out Wolf." A big problem, according to the critics, was that the model didn't include a pricing mechanism that mimicked Adam Smith's invisible hand; if basic resources ever became seriously scarce, they insisted, companies would simply switch materials—or make themselves more efficient, using fewer materials to deliver the same prosperity payload.

As economies mature, the economists noted, technology "decouples" economic prosperity from physical stuff: Jobs become more about providing services, which use fewer raw materials. This, they argued, was precisely what kept America's GDP growing during the 1980s and 1990s, even as our industrial base eroded.

The Limits dispute wasn't merely scholarly squabbling; it was an ideological battle, too. Economists had based entire disciplines and careers on the primacy of growth—not to mention that, in the Cold War era, suggestions that capitalism was seeding its own ecological collapse seemed sulfurously Marxist. Some critics distorted the book's message­—saying the authors had predicted that oil would run out by 1992. (The book had made the more nuanced point that we only had enough known reserves to last that long, given how fast we were using it.) A more valid criticism lay in the fact that the team's model—like many economic models—was simplistic, and based on some pretty big assumptions. (In a 2008 blog post, Paul Krugman derided the approach as "garbage-in-garbage-out.") The counterattacks worked. No-growth economics returned to the fringes.

The idea didn't die, though. Herman Daly, who served for six years as a senior economist at the World Bank beginning in the late '80s, was among the researchers inspired by Silent Spring. He remembers the Carter administration having "some openness" to no-growth thinking. "But then come the Reagan years, and oh man, forget it," he recalls. Only a few key thinkers—Daly being the most prominent—continued to beaver away at no-growth theory, coming to new and powerful conclusions.

Daly thought the idea of a "decoupled" economy—one that continued to grow while using relatively fewer raw materials—was a chimera. From his vantage point, it seemed obvious that when nations virtualized, shifting to service economies, they didn't stop gobbling natural resources or even, really, curb their appetites. They merely outsourced the problem to Asia, Africa, and South America or found cheap new sources at home. As Daly points out, the Internet economy, supposedly a great leap into the dematerialization of consumption, depends on energy and computer components. And making those components requires exotic metals, some of which are now in such short supply that they're fueling blood-diamond-style conflicts.

In 1982, Dutch business and labor leaders struck a deal encouraging people to work fewer hours. What followed came to be known as the "Dutch miracle."

The growth of greenhouse gas emissions likewise demonstrates that the free market alone cannot deal with planet-threatening pollution. Indeed, the low price of coal-fired electricity encourages companies to keep spewing excessive amounts of carbon dioxide rather than pursue cleaner energy sources. "This whole idea that we could have a constantly growing economy that doesn't use natural resources is just crazy, and the last couple of decades have basically proven it," Daly says.

Daly's major contribution to the field is the concept of "uneconomic" growth—growth that actually drives living standards downward. He believes that America has already reached the point Mill and Keynes foresaw, where average living standards have grown as high as necessary to vouchsafe a generally prosperous population. He points out that the happiness of Americans, as reported by social scientists, rose steadily after World War II as GDP grew. But by the late '50s, that connection broke down: Although our median family incomes have nearly doubled since 1957, the proportion of people who say they are "very happy" has barely budged (pdf). Daly thinks we simply hit the point of diminishing returns. Our growth turned uneconomic: GDP now keeps growing mainly because we are producing gewgaws and services that don't significantly add to our happiness. Or worse: It grows because we are spending money to solve problems that growth itself created.

One of the big problems with using GDP as a yardstick for national well-being is that GDP rises when really bad things happen, too. If a company leaks PCBs into a reservoir and local cancer rates spike, the result is a flurry of economic stimuli: Doctors treat the cancers, crews clean the reservoir, lawyers busy themselves suing and defending the polluter. It's still growth—uneconomic growth. By the aughts, Daly had authored four books exploring these ideas and trying to figure out how a nongrowing economy might function.

He is no longer so isolated. As concern over climate change has migrated from the science community to the mainstream, the number of economists willing to question growth has slowly but surely increased. Recent books on the subject include Peter Victor's 2008 Managing Without Growth, and last December's Prosperity Without Growth (pdf) by Tim Jackson, economics commissioner for the UK's Sustainable Development Commission. (In 2004, the MIT team published a new edition of The Limits to Growth, complete with updated versions of their model.) Though each camp differs in the details, they broadly agree on a set of economic principles—a road map, as it were, to a world that doesn't grow, but doesn't collapse either.

SOME OF their conclusions are surprisingly pleasant. For example, to move away from growth, we'll all have to work a lot less. That's because no-growth economists agree with mainstream economists on one big point: Technological advances make workers more productive every year. In the mainstream view, these labor efficiencies make goods cheaper, which leaves consumers with more disposable income—which they invest or spend on more stuff, leading to more hiring to fulfill demand. By contrast, the no-growthers would do things differently; they would use those efficiencies to shorten the workweek, so that most people would stay employed and bring home a reasonable salary. If new technology continued to drive productivity gains, citizens in a nongrowing economy would actually work less and less over time as they divvied up the shrinking workload.

Handled correctly, this could bring about an explosion of free time that could utterly transform the way we live, no-growth economists say. It could lead to a renaissance in the arts and sciences, as well as a reconnection with the natural world. Parents with lighter workloads could home-school their children if they liked, or look after sick relatives—dramatically reshaping the landscape of education and elder care. (Some steady-state thinkers argue that these typically unpaid forms of domestic labor ought to be included in GDP calculations and even subsidized by the government, since they contribute so heavily to national well-being.)

Viewed this way, a nongrowing economy could have broad political appeal, ushering in the sort of togetherness and family values that social conservatives celebrate. Liberals might appreciate the concept of work sharing, which could help narrow the income gap between rich and poor. Indeed, some countries have already edged towards this vision. In 1982, labor unions in the Netherlands agreed to limit demands for higher pay in exchange for policies encouraging people to work less. Within a decade, the proportion of Dutch citizens working part-time soared from 19 percent to 27 percent, the average workweek fell from 30 to 27 hours, and unemployment had plummeted from 10 percent to 5 percent. (They called it "the Dutch miracle.") Work sharing also has a pedigree in times of crisis: In Austria and Germany, the Kurzarbeit laws let employers avoid layoffs by scaling back people's hours and pay—10 percent less money, say, for 10 percent less work. The government then steps in and covers the salary difference.

The types of work available (and your take-home pay) would change significantly in a no-growth scenario. To prevent global warming and resource depletion, no-growthers favor heavily taxing carbon and other pollutants. At the same time, they want the government to invest in clean energy as part of a "Green New Deal" that also encourages private-sector investment to move people into labor-intensive jobs—entertainer, preventive health worker, artisan manufacturer, organic farmer, nurse—that consume relatively few raw materials.

So working less is the fun (or at least the more doable) part. The hard part is that we would be consuming less—probably far less.

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