Is Economic Expansion Essential for Achieving Prosperity?

Ed Holmes reviews 'Prosperity Without Growth’ by Tim Jackson. 

‘Prosperity without Growth’ by Tim Jackson fundamentally argues against the conventional wisdom that economic growth is necessary for prosperity. Traditional economic thinking implies that to achieve prosperity and welfare in a sustainable and equitable society, economic growth must be achieved, and by increasing people's incomes and allowing people to consume more, their economic welfare can be improved. Furthermore, through achieving economic growth traditional economic thinkers such as Simon Kuznets argue that both inequality and environmental concerns can be solved leading to greater societal welfare. Although there is little evidence to support his claim which begs the question. Is economic growth actually the solution to improve welfare and provide societal prosperity? This question is the focus of ‘Prosperity without Growth’ with the author also exploring alternative solutions to improve economic welfare in a sustainable manner which does not cause long-term irreversible damage to our environment.

Economic growth has created vast inequality globally with just a fifth of the world's population earning only 2% of global income with income and wealth inequality increasing in the OECD (Organisation for Economic Co-operation and Development) as well. With wealth and income stagnating in lower and middle classes it is evident that economic growth has benefitted those with existing wealth rather than evening up inequality as economists such as Simon Kuznets initially thought. Jackson uses his example of rising inequality to challenge the status quo that economic growth is the answer to achieving prosperity. Where economic growth creates prosperity for the richest in society, it does so by reaching into the pockets of the poorest.

Jackson, an ecological economist and professor of sustainable development at the University of Surrey, also considers the environmental impacts of our society's pursuit of endless growth. This following section closely relates to the main subject of a book by Kate Raworth ‘Doughnut Economics’ which also looks into the limitations of endless economic growth and provides an alternate solution where both peoples social necessities are provided and people can prosper in an environment where the upper environmental limits of our planet are not exceeded but respected. Jackson states that as our economy expands, so do the resource implications associated with it. This is a fact that I believe has been neglected in traditional economic thinking. In ‘Doughnut Economics’ Raworth states that traditional economic models fail to consider the importance of the environment when considering economic growth, such as the continuously rising trend GDP curve on the economic cycle diagram. How can GDP continue to rise beyond the point where all of our planet's resources have been depleted? This model as well as others are fundamentally flawed as they neglect the importance of the environment.

The implications of this have been experienced recently, in ‘Prosperity without Growth’ Jackson states that in the last 25 years (from when the book was written) the global economy has doubled in size which has lead to an estimated 60% of the world's ecosystems being degraded with a huge 40% increase in global carbon emissions since 1990. However it is no surprise that this is the case. As industries grow and nations expand there is increased demand which has led to the exploitation of natural resources such that significant scarcity in resources such as oil may arise sooner than expected. In a world where people are comfortable to proceed as usual, continuing overconsumption of natural resources without sufficient investment in improving infrastructure for renewable energy may bring the world to its knees with devastating shortages in energy leaving people vulnerable. As always, with shortages such as these the high prices will hit the poorest in society hardest, further contributing to rising inequality.

Jackson gives credit to governments in saying that there has been an increased emphasis on sustainability and the prevention of an impending ecological crisis yet affirms that whilst poorer countries require economic development, we must crack down on climate change. In order to achieve prosperity without growth, Jackson sets out the following requirements. It requires development in macroeconomic capacity through investment in public assets and infrastructures and a move towards a services based economy to reduce the extent to which debt-driven consumption and mass consumerism is the basis for our economy.

There must also be policies that push people away from materialistic consumption which is detrimental to our economy and society. In order to do this Jackson stresses that an improved work-life balance is essential, as well as tackling systemic inequality and strengthening human and social capital. These policies can reverse the consumerism culture that exists and lead to more environmental consciousness with regards to resource exploitation. The implementation of policies that place emphasis upon the ecological limits such as emissions caps and sustainability fiscal reform are vital in creating a culture away from mass consumerism towards environmental consciousness.

However the theories mentioned in ‘Prosperity Without Growth’ have their limitations. First of all many critics, as well as myself, question the idea that improved standards of living can be achieved without economic growth as the key to improving standards of living is through increasing people's incomes which is achieved through economic growth. However a more equitable distribution of income can achieve improved standards of living without having a significant impact on growth. Furthermore the move to a services based economy, where there is less reliance on manufacturing industries, is problematic. In the short run, structural unemployment is produced through the decline of manufacturing industries with many unable to find new jobs due to a lack of geographical and occupational mobility meaning it is difficult for people to relocate or retrain in order to find new jobs. It is essential that these limitations are considered when taking into account the potential implementation of the aforementioned policies by governments because, whilst new theories with emphasis on environmental concerns are important to introduce to protect the planet, the real life implications of such policies on society are as important.

Overall ‘Prosperity Without Growth’ is incredibly thought provoking as it challenges many economic ways of thinking that are so embedded in society as the conventional wisdom that it seems foreign to challenge them. However it is important to consider the flaws of such economic theories and consider the modern-day issues that are associated with them. After all these models were created decades ago when ecological concerns were far less of a priority and they need to be adapted to suit our modern day society. Compared to other books on environmental economics ‘Prosperity Without Growth’ is far more critical and less theoretical, giving real life policies that can be implemented into government policy to change our societies culture and make real change moving forward.