GDP, the yardstick of economic success, is choking us and the planet

Written by David Pilling via the LA Times on 2/25/18

Some years ago, the Onion ran a satirical piece about a Chinese worker churning out plastic tat for American consumers. Chen Hsien is unimpressed with the useless items Americans seem to crave, from salad shooters and microwave omelet cookers to animal-shaped contact lens cases. "I also hear that, when they no longer want an item, they simply throw it away," he snorts.

Like much in the Onion, Chen's rant is borderline offensive. Yet it rings true about the tendency to seek meaning in endless consumption. All of Chen's production adds to the goal of growth, but not much of it ends up in our possession for very long. Since the 1950s, according to a recent study, 8.3 billion metric tons of plastic have been produced, with around half of that made since 2004. At this rate, the weight of plastic in the world's oceans will soon surpass the weight of fish.

There are 7.6 billion people alive today annually churning out goods and services worth around $75 trillion. By the end of the century there will be roughly 11 billion people. If each of them achieved a U.S. standard of living and if the U.S. economy keeps growing at about 3%, the global economy would need to expand nearly 100 times. Chen would have to work overtime. And the world would choke in trash, its air becoming more toxic and its forests more depleted.

It's not Malthusian to wonder how much more the planet can take. Walter Berglund, the quirky hero of Jonathan Franzen's novel "Freedom," says that only economists believe endless growth is optimal. In biology, it is called cancer.

Part of the problem is how we measure growth. Gross domestic product, our principal measure of economic well being, is a child of the manufacturing age. It conflates progress with production and consumption. It is out of date. Invented in the U.S. in the 1930s, it struggles to make sense of modern economies in which the quality of services and the pace of technological change are paramount.

In terms of GDP, there is no "bad" production, not even Chen's disposable junk. If a factory produces chemicals, steel, plastics or electronics, everything it makes contributes to GDP. And any pollution that it pours into the rivers or spews into the air is — from a statistical standpoint — invisible. But the negative side of production is not, as we might imagine, somehow subtracted. Quite the reverse: Money subsequently spent on cleaning up the mess, or on treating cancers associated with toxins, also counts towards GDP.

Economists call nature's absorptive capacity a factor of production. We value it at zero. That makes it rational, from an economic standpoint, to exploit it as rapaciously as possible.

It might be helpful to think of a Starbucks coffee cup. It's disposable and free, right? In reality, such cups are neither. Laminated with plastic, they are almost impossible to recycle, meaning they don't degrade for up to 500 years. In Britain alone, an astonishing 2.5 billion cups are discarded each year. Early this year, British parliamentarians proposed forcing coffee chains to charge consumers about 34 cents per cup, a policy that would make visible the cup's cost to the planet. The likely outcome would be a reduction in cups produced as people brought in reusable cups for their lattes. All but the most ardent plastics lobbyist would concede this would mark an improvement. Yet GDP, our yardstick of success, would shrink.

Can we not simply factor the hidden cost to nature into all our products and then call a halt to growth, as some environmentalists advocate? My view is that those who advocate an end to growth on environmental grounds are deluding themselves.

First, people in wealthy countries have no moral authority to tell people in poor ones that, because rich nations have messed up the world, poor ones must pay the cost by staying poor. That simply doesn't wash.

Second, if countries want to catch up, so do individuals. Everywhere, the less-well-off want to close the gap with the wealthy. The rich, for their part, want to preserve their privilege by becoming richer still. Government policies may temper this rat race. But human nature is a powerful force that is likely to keep the perpetual-growth wheel spinning.

Doomsayers may claim that this condemns humans to lunge blindly over the precipice, destroying nature and themselves in the process. They may be right. Yet there is just a chance we can have it both ways: keep growing and preserve the resources that make growth possible. But only if we redefine what growth means.

That redefinition can be summed up in two words: quality and innovation. Take quality. If you ask a GDP-minded engineer how to improve the London-Paris Eurostar rail service, he might suggest an $8-billion investment in new track to cut the journey by 40 minutes. But ask Rory Sutherland, an advertising executive with Ogilvy and Mather, and he'll tell you to staff your train with supermodels who walk the aisles dispensing free Chateau Petrus. It would cost a fraction of the engineering upgrade. And passengers would ask that the train slow down, not speed up. Sutherland's joke reveals how we could improve quality — let's call it growth — without putting more strain on the planet.

The other factor is innovation. GDP tries to account for this, but it does a terrible job. Antibiotics, which cost pennies, are everyday miracles that because of their low cost contribute virtually nothing to GDP. Yet wind back the clock 100 years, and a billionaire of yesteryear would have paid half his fortune for a life-saving course of penicillin. Wikipedia, which provides much of human knowledge to much of humanity, contributes not a dime to our measured economy. Technology, comfort, health and quality of life can all improve without it registering as growth as we currently define it.

Altering how we think about growth is not a silver bullet. We need policies and technologies that advance well-being without destroying the planet. But thinking about growth differently can nudge us in the right direction.

Several decades ago, an American economist, Kenneth Boulding, dreamed up the concept of a "cowboy economy" and a "spaceman economy." In the cowboy economy, resources are abundant and the population sparse. The goal is to maximize production. The spaceman economy is different. The population is bigger and resources, including Earth's capacity to absorb waste, are scarce. The ideal in the spaceman economy is not to produce more and more, but better and better. We are already living in the spaceman economy. But we are measuring it with a lasso.