Irmi Seidl

Hooked on conomic

growth: how to get rid of?

2

Content

1. Terminology

2. Short History of economic growth

3. Growth – no (more) increase in well-being

4. Reasons for being hooked on growth

5. Starting points for a post growth society

22/24 maggio 2014 - Quale Economia, per quale Benessere

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Terminology

Growth

= GDP-growth

= market value of all final goods and services produced in

a country in a given period and traded on markets

Presentation will concern highly developed countries

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0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

18

00

18

10

18

20

18

30

18

40

18

50

18

60

18

70

18

80

18

90

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00

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10

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30

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40

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50

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60

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70

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80

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90

20

00

20

10

GD

P-l

evel

/ c

ap.

USA

Switzerland

Netherlands

England/GB/UK

France

Germany

(Northern)Italy

*In 1990 International Geary-Khamis dollars, Quelle: www.ggdc.net/maddison

2. Short history of economic growth

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Declining growth rates since 1960s; decades / per head

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CHEU 15*

DE*FR

ITAT

SWUK

USAJP

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

*until 1989 only West Germany; Data: AMECO (http://ec.europa.eu/economy_finance/ameco/user)

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Short history of economic growth

„It is not by any means necessary that

economics should be growth-minded. I

can indeed myself remember a time it

was not growth-minded at all.”

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Growth and Anti-Growth, 1966

J.R. Hicks

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Short history of economic growth

„One day we will surely question

whether it is still reasonable and

appropriate to create more goods and

material welfare or whether it is not

more reasonable to waive this progress

and gain more leisure time,

contemplation and recreation.“

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Wohlstand für Alle, 1957

L. Erhard

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3. Growth – no (more) increase in well-being

Welfare: does not increase any more

Environmental problems increase

Public debt increases

Unemployment increases

Social inequality increases

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Happiness/well-being and GDP

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3. Growth – no (more) increase in well-being

Welfare: does not increase any more

Environmental problems increase

Public debt increases

Unemployment increases

Social inequality increases

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High environmental costs of growth (Germany: 20%,

China: >100%)

No decoupling of growth and resource use (Rebound

effects > 50%)

Growth argument used against market-based

environmental policies

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Wiedmann et al. 2013

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3. Growth – no (more) increase in well-being

Welfare: does not increase any more

Environmental problems increase

Public debt increases

Unemployment increases

Social inequality increases

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Expansive public policies to stimulate economy

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Stimulus packets

2009-2010

in mrd. €

Stimulus packet I 70

Stimulus packet II 50

SUM 120

Sources: German Government, own calculations

GDP

2009-2011

in mrd. € Difference

in mrd. €

GDP 2008 2.489

GDP 2009 2.397

GDP 2010 2.497 (+4.2%) +100

GDP 2011 2.542 (+1,8%) + 45

SUM +145

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3. Growth – no (more) increase in well-being

Welfare: does not increase any more

Environmental problems increase

Public debt increases

Unemployment increases

Social inequality increases

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Employment threshold: 1.8% CH, 1.2 - 2.4% GER

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Unemployment of young adults

7.2

8.7

8.8

9.3

9.7

13.8

14.2

16.7

18.6

19.1

20.3

22.3

22.4

22.5

23.7

25.2

27.9

32.9

41.6

0 5 10 15 20 25 30 35 40 45

Switzerland

Netherlands

Austria

Norway

Germany

Denmark

Luxembourg

OECD-Total

Chile

United Kingdom

Finland

Portugal

Belgium

France

Poland

Sweden

Italy

Greece

Spain

Unemployment (15-24 yrs.) 2010, in %

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3. Growth – no (more) increase in well-being

Welfare: does not increase any more

Environmental problems increase

Public debt increases

Unemployment increases

Social inequality increases

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Gini coefficient – (un)equality of distribution

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0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

middle 1970s middle 1980s middle 1990s middle 2000s 2010/12

Canada

Denmark

France

Germany

Greece

Italy

Netherlands

Sweden

Switzerland

United States

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20

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3. Growth – no (more) increase in well-being

Welfare: does not increase any more

Environmental problems increase

Public debt increases

Unemployment increases

Social inequality increases

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Why do society, politics and the economy pursue

growth so ardently -

although hardly any current problem can be

solved, and new problems are created?

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4. Reasons for being hooked on growth

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Major sectors of society, politics and economy are

existentially dependent on economic growth

No growth means structural crises of these sectors,

and hence political and societal turnmoil

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Old age assurance

Health assurance

Employment market

Consumption sector

Income equality/social justice

Enterprises

Finance markets, banks

Public finances, taxation

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4. Reasons for being hooked on growth

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Main sectors of society, politics and economy are

existentially dependent on economic growth

No growth involves structural crises of these sectors,

and hence political and societal turnmoil

Only when these sectors are growth independent,

politics and society will give up their fixation to growth

Politicians und society will do everything to avoid such

crises

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J.W. Kingdon (2003)

1) Problem has political attention

2) Topic is on agenda of upcoming decisions

3) Existence of political decision possibilities, ideas,

concepts, supported by politically acting persons

5. Starting points for a post growth society

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Identify major growth dependent sectors

Identify, collect, develop approaches, proposition, examples, good-practice-cases on how totransform sectors to become growth-independent

Transforme these sectors

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Growth of health expenditures ≥ Growth GDP

Economically important sector

17% of health expenditures by public households (GER)

Dependence on GDP-growth:

To pay increasing premiums

New employments in health sector

Growth in health industry

Health sector

5. Starting points for a post growth society

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Introduce new systems of premium payments (part may be reimbursed if little use of health care)

Increase individual responsibilities – also with financial incentives

Introduce new health care systems (managed care systems)

Support non-invasive treatments & palliative medicine

Limit influence of lobbying

Improve fraud control

….

5. Starting points in health sector

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5. Overall starting points for a post growth society

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- Getting growth-dependent sectors growth-

independent

- Ecological tax and finance reform

- Public participation (direct democracy) -> good

governance & healthy public finances

- Limitation of public debt

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5. Overall Starting points for a post growth society -2-

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- Restrictions to stock corporations (liability,

repurchase of stocks, limitations of acquisitions)

strengthen cooperatives and foundations

- Regulation of banks and financial markets; money

creation by central bank

- Provision of public goods to replace part of private

goods

- Setting strict ecological objectives

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A world without growth, … without change, is ashard … to imagine as a world of everlastinggrowth and change. Somewhere in the dim future, … there may lie a world in which physical changewill be minimal. It will be a world of much greaterequality …, hopefully a much more humane andless materialistic world. We shall not live to see it. Meanwhile, let us give a boost to the old tax baseto get government revenues going again.

H.C. Wallich, Newsweek, 24 Jan. 1972