by Jason Hickel
Kevin Anderson and Alice Bows, two of Britain’s leading climate scientists, have been devising potential scenarios for how to make this work. If we want to have a 50 per cent chance of staying under 2°C, there’s basically only one feasible way to do it – assuming, of course, that BECCS is not a real option. In this scenario, poor countries can continue to grow their economies at the present rate until 2025, using up a disproportionate share of the global carbon budget. That’s not a very long time, so this strategy will only work to eradicate poverty if the gains from growth are distributed with a heavy bias towards the poor. Meanwhile, the only way for rich countries to keep within what’s left of the carbon budget is to cut emissions aggressively, by about 10 per cent per year. Efficiency improvements and clean energy technologies will contribute to reducing emissions by at most 4 per cent per year, which gets them part of the way there. But to bridge the rest of the gap, rich countries are going to have to downscale production and consumption by around 6 per cent each year. And poor countries are going to have to follow suit after 2025, downscaling economic activity by about 3 per cent per year.
This might sound scary, but it’s really not. We already have plenty of data showing that it’s possible to reduce production and consumption at the same time as increasing human development indicators like happiness, education, health and longevity. For example, Europe has higher human development indicators than the United States in virtually every category, with 40 per cent less GDP per capita and 60 per cent fewer emissions per capita. The excess of the United States wins them nothing when it comes to what really matters.
How much do we really need to live long and happy lives? We can approach this as an empirical question. In the US, life expectancy is seventy-nine years and GDP per capita is $53,000. But many countries have achieved similar life expectancy with a mere fraction of this income. Costa Rica has a higher life expectancy than the US with GDP per capita of only $10,000. Of course, we might expect that some of the excess income and consumption we see in the rich world yields improvements in quality of life that are not captured by life expectancy. But even if we look at measures of overall happiness and well-being, a number of low- and middle-income countries rank highly. According to the UN’s World Happiness Report, Costa Rica matches the United States. Brazil beats Britain, and with only a quarter of the income. This fits with findings from the growing field of ‘happiness economics’, which tells us that happiness only increases with income up to a certain point – a point that rich countries have long since surpassed. In the United States, for example, happiness rates peaked in the 1950s, with a GDP per capita of only about $15,000 (in 2010 dollars), and have plateaued since then. After that, what makes us happier isn’t more income, but greater equality, good relationships and strong social guarantees.
In light of this, perhaps we should regard countries like Costa Rica not as underdeveloped, but rather as appropriately developed. We should look at societies where people live long and happy lives at low levels of income and consumption not as backwaters that need to be developed according to Western models, but as exemplars of efficient living – and begin to call on rich countries to cut their excess consumption.
This would likely prove to be a strong rallying cry in the global South, but it might be tricky to convince Westerners. Tricky, but not impossible. According to recent consumer research, 70 per cent of people in middle- and high-income countries believe overconsumption is putting our planet and society at risk. A similar majority also believe we should strive to buy and own less, and that doing so would not compromise our happiness. In other words, this consciousness is already building. People are ready for a different world.
Inventing the Future
If scientists are correct in saying that our model of exponential GDP growth lies at the very core of our crisis, then that’s where we need to start when it comes to imagining an alternative future. One crucial first step would be to get rid of GDP as a measure of economic progress and well-being and replace it with something different. There are many alternative measures of success on offer. The Genuine Progress Indicator (GPI), for example, starts with GDP but then adds positive factors such as household and volunteer work, subtracts negatives such as pollution, resource depletion and crime, and adjusts for inequality. A number of US states, like Maryland and Vermont, have already begun to use GPI as a measure of progress, albeit secondary to GDP. Costa Rica is about to become the first country to do so, and Scotland and Sweden may soon follow.
Measuring GPI gives us a completely different picture of society than GDP. If we plot global GPI and GDP together, just for comparison, we see that GPI increased together with GDP up through the mid-1970s and then levelled off – and even began to decrease – while GDP continued to rise.
This illustrates how growing GDP no longer translates into a better society. The consequences of shifting to something like GPI are profound. If our governments were driven to maximise GPI, they would be incentivised to create policies that would facilitate good economic outcomes while diminishing bad ones. It doesn’t have to be GPI, though. It could be anything: the Happy Planet Index designed by the New Economics Foundation, which balances life expectancy, happiness and ecological footprint; or the OECD’s Better Life Index, which focuses on eleven dimensions of social and environmental well-being; or any number of indicators that haven’t yet been imagined. As soon as we shake ourselves free from the tyranny of GDP, we can have an open discussion about what we really value, and how we want to measure progress. In some ways, this is the ultimate democratic act. And what is certain is that the result will look very different from GDP. In fact, it probably won’t involve perpetual growth at all, because growing anything in perpetuity – even good things – is philosophically absurd.
GDP growth is not the only imperative that pushes constant economic expansion, however. It might be the primary public imperative, but there is also a private one: the imperative for corporations to maximise shareholder returns. Like GDP, this imperative has not been around for ever. We can trace it back to 1919, with the landmark US Supreme Court case Dodge v. Ford Motor Company. At the time, the Ford Motor Company had a sizeable capital surplus, and Henry Ford had decided to devote some of it to raising his workers’ wages, which were already considered to be quite high. The Dodge brothers, two of the company’s biggest shareholders, sued Ford for this move, claiming that Ford’s capital actually belonged to his shareholders, and that unnecessarily raising wages was effectively stealing from them. The court ruled in their favour, and a precedent was set. Business decisions would have to be made in the interests of shareholder returns first. If CEOs want to spend money to increase wages or protect the environment in a manner that results in decreased shareholder returns, they can’t, for it is effectively illegal to do so. Today, corporations are largely ruled by this imperative, which makes them much more rapacious than they otherwise might be. Abolishing it will be an important step towards giving them the space to consider other priorities.
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Ditching the GDP measure and shareholder-value laws is a crucial first step, but it is not enough in and of itself. It might help us refocus our attention, but it doesn’t address the main underlying driver of growth, which is a little bit deeper and more difficult to see, and that is debt. Right now, one of the reasons our economies have to grow is because of debt. Debt comes with interest, and interest means that debt grows exponentially. For a country to pay down its debt over the long term, it has to grow its economy enough to match the growth of its debt. The same is true of a business. If you want to start a business, you’ll probably have to take out a loan. Then, because you have that debt, you can’t just be satisfied with earning enough to pay your employees and feed your family – you also have to turn enough profit to pay off your loan with compound interest. Regardless of whether you’re a country or a business – or even an individual – you’ll find that, without growth, debt piles up and eventually causes a financial crisis. If you don
’t grow, you collapse.
One way to relieve this pressure is simply to cancel some of the debt. Cancelling the debt of sovereign nations, which we looked at in the previous chapter, would liberate them from the pressure to plunder their own resources and exploit their citizens in the hunt for income to repay debt. Cancelling the debt of individuals would allow them to work less. Here again, debt cancellation would mean that creditors would lose out – like the Wall Street banks that own so much of the debt. Still, we might decide that this is a reasonable sacrifice to make.
But even debt cancellation would only provide a short-term fix; it wouldn’t really address the root problem, which is the fact that the global economic system runs on money that is itself debt. When you walk into a bank to take out a loan, you assume that the bank is lending you money it has in its reserve – real money that it stores in a basement vault, for example, collected from other people’s deposits. But that’s not how it works. Banks are only required to hold reserves worth about 10 per cent of the money they lend out. This is known as ‘fractional reserve banking’. In other words, banks lend out about ten times more money than they actually have. So where does that extra money come from, if it doesn’t actually exist? The banks create it out of thin air. They loan it into existence. About 90 per cent of the money that is presently circulating in our economy is created in this manner. In other words, almost every single dollar that passes through your hands represents somebody’s debt. And every dollar of debt has to be paid back with interest – with more work, more production or more extraction.
The fact that our economy runs on debt-based currency is one big reason that it needs constant growth. Restricting the fractional reserve banking system would go a long way to diminishing the amount of debt sloshing around in our economies, and therefore to diminishing the pressure for growth. One easy way to do this would be to require banks to keep a bigger fraction of reserves behind the loans they make. But there’s an even more interesting approach we might try: we could abolish debt-based currency altogether. Instead of letting commercial banks create our money, we could have the state create it – free of debt – and then spend it into the economy instead of lending it into the economy. The responsibility for money creation could be placed with an independent agency that is democratic, accountable and transparent. Banks would still be able to lend money, of course, but they would have to back it with 100 per cent reserves, dollar for dollar.
This is not a fringe proposal. It made headlines in 2012 when it was proposed by a couple of progressive IMF economists, who pointed out that such a system would dramatically reduce both public and private debt and therefore make the global economy more stable. In the United Kingdom, a campaigning group called Positive Money has generated quite a bit of popular excitement around the idea.
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Changes like these would do a lot to liberate us from the tyranny of growth. But remember: the goal is not just to stop the unnecessary expansion of our economies, it is also to figure out how to actively downsize aggregate consumption – especially in rich countries – to get it back within sustainable levels. And this requires some rather creative thinking.
A first step in tackling this issue would be to take a serious look at the advertising industry, which is a major driver of unnecessary consumption. This hasn’t always been a problem. As late as the early 20th century, consumption was a more or less perfunctory act: you basically bought what you needed. Advertisements did little more than inform you of the useful qualities of an object. But retail companies realised they couldn’t expand indefinitely if everyone was buying only what was necessary. Limited needs mean limited profits. Companies needed a ‘fix’ for this obstacle – a way to surmount the limit of market saturation – and they found it in the new theories of advertising being developed at the time by Edward Bernays. Bernays, the nephew of psychoanalyst Sigmund Freud, taught retailers that they could get people to buy things they didn’t need by manipulating their emotions. For example, you could seed anxiety in people’s minds, and then present your product as a solution to that anxiety. Or you could sell things on the promise that they would provide social acceptance or class distinction. This kind of advertising quickly became indispensable to American retailers desperate to keep demand perpetually high.
Today, advertising is an enormous part of our economy. According to a recent report, the United States spent a total of $321 billion (2015 dollars) in advertising in 2007 alone, and this figure has been rising at about 5 per cent each year since then – much faster than the rate of economic growth. This frenzy of advertising has driven consumption to dizzying heights, to the point where the average American now consumes twice as much as they did in the 1950s.
In light of this, one easy solution to overconsumption would be to ban advertising – at least in public spaces, where people don’t have a choice about what they see. This may sound impossible, but São Paolo, a city of 20 million people, has already done it. The result? Happier people: people who feel more secure about themselves and more content with their lives, in addition to consuming less. Paris recently made moves in this direction, too, curbing outdoor ads and even banning them outright in the vicinity of schools. Another, more aggressive option is to replace advertising with public messaging that encourages reduced consumption. China is pioneering this approach in its new campaign to cut the country’s meat consumption in half by 2030 – a widely celebrated strategy for reducing greenhouse gas emissions. Or you could outright ban particularly unnecessary and destructive products, like bottled water, as some cities in Australia and the United States have done. Other simple ways to curb consumption might include regulating credit cards, raising taxes on luxury products and outlawing the use of ‘planned obsolescence’ by manufacturers who seek to increase turnover by building shoddy, throwaway products.
But what about jobs? If we scale back production and consumption, won’t that trigger a crisis of unemployment? It’s a good question, and one we must take seriously. After all, our politicians are always calling for more economic growth because they want to get the employment figures up – that’s what gets them votes. But there are creative ways to scale back our economic activity and make sure everyone has meaningful work at the same time. The key proposal out there is to reduce the length of the working week, from forty-seven hours (the average in the United States) down to thirty or even twenty hours. We can do this by eliminating unnecessary or harmful industries (the kinds of industries that would atrophy anyway if we measured our economic progress by something like GPI instead of GDP) and distributing the remaining work by promoting job-sharing. Research by the New Economics Foundation in London suggests that a shorter working week not only reduces the physical and psychological ills associated with overwork, but also helps reduce consumption and greenhouse gas emissions. Working less means having more time to do things like caring for young or elderly relatives, growing your own food and doing your own cooking, cleaning, gardening and other activities that we often end up outsourcing to companies. It allows you to get to know your neighbours, which creates possibilities for sharing skills and possessions.
Another idea – and one that has really captured the public imagination over the past few years – is to introduce a basic minimum income. People have been proposing a basic income for a wide variety of reasons – most commonly as a strategy for poverty reduction. Over the past decade or so we’ve amassed an extraordinary amount of data showing that direct cash transfers to poor people in the global South is the single most effective way to reduce poverty. Unlike microfinance, which has had zero aggregate impact on poverty rates and tends to increase personal debt burdens, direct cash transfers are a form of positive money that stimulates local economies and creates sustainable livelihoods. Such schemes have been tried in South Africa, India, Indonesia, Mexico and many other countries, all with outstanding results. This approach is going to be increasingly necessary in the global South as automation eats rapidly into two of the region’s
biggest employment sectors: textiles and small consumer electronics. As these industries go to the robots, there could be a significant collapse in (already meagre) living standards unless alternative livelihoods are created.
In the United States and Europe, a basic income makes sense for a whole different set of reasons. Yes, it would reduce poverty. It would also improve working conditions and wages, as employers would have to offer a better deal in order to attract workers. But perhaps more importantly, it would smooth out what have become gross levels of inequality. This is important not just for moral reasons, but also because greater equality reduces the pressure for economic growth. This might seem a bit counterintuitive at first, but keep in mind that one of the reasons growth is so appealing to politicians is that it allows them to sidestep the thorny problem of distribution. As long as the pie is growing there’s less pressure to redistribute existing resources. Even the promise of growth acts as a kind of damper on redistributive politics. Henry Wallich, a former member of the US Federal Reserve Board, once put it like this: ‘Growth is a substitute for equality of income. So long as there is growth, there is hope, and that makes large income differentials tolerable.’ There is a secret that lies within this formula. If growth is a substitute for equality, then equality is a substitute for growth. A basic income would help immensely towards this end. And that’s on top of the fact that a basic income would in and of itself help slow our overheated production down a bit by releasing people from the pressure of having to work for forty or even sixty hours a week simply in order to stay alive.