Positive Money – The Tragedy of Growth

This is the introduction to a new report by Positive Money entitled !The Tragedy of Growth, To protect wellbeing and avoid ecological disaster we must abandon GDP growth and transform our economic system”, which outlines how Britain can achieve a post-growth economy that prioritises human well-being and ecological stability. You can read the full report here

Positive Money is a not-for-profit advocacy group based in London and Brussels. It mission relates to the operation of national monetary systems.

Critiques of Gross Domestic Product (GDP)2 as a measure of economic progress have become increasingly common in recent years. The World Economic Forum (WEF, 2020), the OECD (Ramos and Hynes, 2019), and the European Commission (EC, 2019a), among other mainstream institutions and economic thinkers (Stiglitz et al., 2009), support ‘beyond GDP’ programmes. Their proposed response to GDP’s deficiencies is to complement its use with other measures that better reflect human and sometimes environmental wellbeing.

In this report we show that such an approach is insufficient, as it does not acknowledge the full extent of the failures and consequences of GDP growth, which remains a top priority among policymakers, economists, and the media. Growth retains its privilege in policy and public discourse through its promises of enhanced life satisfaction, alleviation of poverty, and protection of the environment. We show that in reality, growth consistently fails to deliver on these promises.

To protect human wellbeing and avoid environmental disaster, we must escape the growth paradigm once and for all. As a first step in this process, we recommend that in the UK the Office for National Statistics (ONS) stop publishing GDP figures and the Treasury stop targeting GDP growth. This would undermine the negative influence of the GDP indicator, and allow for a determined shift to alternative indicators.

The shift away from the GDP indicator must be accompanied by an agenda to overcome growth dependency. In other words, we must transform the structures of our economy such that they no longer require GDP growth to temporarily fend off financial, economic, and social crises. If growth is low or negative, these structures – referred to as ‘growth imperatives’ – generate multiple undesirable crises. Rising unemployment, deepening inequality and debt crises are just a few of the common consequences of insufficient growth in our current economic system.

Focusing on the monetary and financial system as a source of growth imperatives, we highlight a tension between financialisation and growth. Our financialised banking system, which lends disproportionately to finance, real estate and insurance sectors, requires growth in order to fend off financial crises. Yet proposals to shift away from financialisation are often aimed at achieving a high-growth economy, which is also not a viable option. We need a non-financialised and non-growing economy, yet we have never witnessed this scenario in an advanced economy. This raises the question of whether a capitalist economy can deliver a stable and socially desirable non-growing economy.

We argue that without growth, the basic features of capitalist economies generate strong tendencies toward mass unemployment and deepening inequality, and monetary systems based on interest-bearing debt are central to these growth imperatives. Therefore, transformative monetary policies are needed to reduce our dependence on interest-bearing debt and foster balanced creditor-debtor relationships in line with the objectives of a post-growth economy.

We bring together a collection of proposals that can all contribute to the post-growth money and finance agenda, categorised according to three functions: (i) guaranteeing access to public means of payment; (ii) guaranteeing access to credit; and (iii) immediately redistributing power in the system. The first two consist of longer-term measures that will take time to implement, while the latter is focused on ways of more rapidly addressing power imbalances between creditors and debtors. A universal basic income issued via central bank digital currency, a direct clearing facility, public banks and modern debt jubilees are among the policies that feature on this agenda for a post-growth money and finance system.

If structural growth imperatives are eliminated, a lack of growth will no longer generate multiple crises. This will allow for a comprehensive shift away from the GDP indicator towards alternative measures of progress that reflect the social and environmental goals of a post-growth economy. A dashboard of indicators provides the best option to guide new economic policy making. Selected indicators can include factors like life expectancy, health, education, carbon emissions, and material use. The process of creating and incorporating the dashboard into the policy process will be most fruitful if grounded in a coherent wellbeing framework that defines wellbeing as the satisfaction of fundamental human needs.

To support this deep reorientation of policy goals, decision-making guidance must also be reviewed for high uncertainty and high stakes projects and should incorporate post-normal tools, such as participatory processes.

The report is structured as follows. Chapter 1 shows that the focus on growth in policy, academia, and the media is excessive and misplaced, as growth consistently fails to enhance life satisfaction, alleviate poverty, or protect the environment. Chapter 2, outlines how, despite growth’s shortcomings, ‘growth imperatives’ in the economic system mean that low or negative growth generates tendencies toward multiple crises. Chapter 3 charts a path to the elimination of these growth imperatives via a transformation of our monetary and financial systems. Finally, Chapter 4 explores new measurements, wellbeing frameworks, and decision-making processes that could guide a new policymaking paradigm for a post-growth economy.

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