Rethinking how our societies and politics are driven, Economic Growth is a wrong target for mankind.
For decades, economic growth has been considered the holy grail of modern societies. Governments, businesses, and individuals alike have striven to achieve higher levels of economic growth, in the belief that it will lead to greater prosperity and well-being for all.
The idea of economic growth as a target for societies can be traced back to the aftermath of the Great Depression. Gross Domestic Product (GDP) soon became the go-to measure of economic activity, and a target for governments around the world. As economies grew, so did living standards, and the promise of a better future for all seemed within reach.
However, Economic Growth has come at a cost. The finite nature of resources on Earth, combined with the ecological impact of economic activity, has led to environmental degradation and resource depletion. Moreover, GDP does not always reflect the true well-being of a society, as it can mask negative effects on human health and happiness.
Economic growth — The North Pole of economic policy making — is a wrong target for mankind.
Economic growth Vs. a planet with limited resources
Let me guide you through two stories illustrating the contradiction between economic growth and a planet with limited resources.
Imagine a car driving on a accross the Death Valley at full speed, with no regard for the fuel gauge. As the car continues to accelerate, the driver may feel a sense of exhilaration and progress. However, at some point, the car will run out of gas, and the driver will be left stranded in the middle of noware. Similarly, our planet is like a car with limited fuel. As we continue to pursue economic growth without regard for the finite resources available to us, we risk running out of fuel and facing dire consequences.
A farmer is planting seeds in a field. He may be eager to maximize his harvest and plant as many crops as possible, but if he does not rotate his crops or allow the soil to rest, he risks depleting the nutrients in the soil and damaging the land. Similarly, our planet is like a farmer’s field, with finite resources that must be managed carefully to ensure their continued availability. If we continue to pursue economic growth at the expense of the environment, we risk depleting the resources that sustain us and damaging the planet irreparably.
To build a sustainable future, we must rethink our priorities and find ways to achieve well-being without sacrificing the planet’s natural resources.
Economic Growth does not always measure population wellness
The initial assuption of Economic Growth leading to greater prosperity and well-being for all is partly false. The pursuit of constant Economic Growth does not necessarily reflect the true well-being of a society. A simple argument for this is that GDP does not always capture important factors that contribute to human well-being, such as health, education, and social connections. even worse, Economic Growth can come at a cost to human health and happiness.
Studies have compared the relationship between GDP per capita and life satisfaction in the USA. While GDP per capita has increased steadily over the past few decades, life satisfaction has remained relatively flat. There is considerable evidence from a variety of sources to suggest that well-being is a function of relative income. These findings have been used to explain the Easterlin Paradox, whereby a rise in income for all does not lead to a rise in average happiness in a country.
Abstract of the article from 2017: https://link.springer.com/article/10.1007/s12232-017-0274-7
Other studies show that life satisfaction increases with GDP per capita until a certain value and then decreases.
Detailed article at https://cepr.org/voxeu/columns/gdp-and-life-satisfaction-new-evidence
Another issue with relying solely on economic growth as a measure of well-being is that it can mask negative effects on human health and happiness. For example, economic growth may lead to increased industrial production and higher GDP, but it can also result in pollution, which negatively impacts human health and well-being.
Chinese cities are a good case study. While economic growth has led to increased industrial production and higher GDP, it has also resulted in severe air pollution that negatively impacts human health and well-being. This illustrates the trade-off between economic growth and environmental well-being.
Detailed article; https://www.nature.com/articles/s41562-018-0521-2
Furthermore, economic growth does not always benefit all members of society equally. While some individuals may see their incomes rise and enjoy greater access to goods and services, others may be left behind. Economic growth may lead to the displacement of workers in certain industries or regions, causing economic and social disruption. Similarly, it may exacerbate income inequality, leaving some individuals worse off despite overall increases in economic output.
As we see the limitations of this target, it is important to consider alternative measures of well-being that capture a more comprehensive understanding of human health and happiness. These measures may include factors such as access to healthcare, education, and social support, as well as environmental quality and income inequality. By broadening our understanding of well-being, we can work towards building societies that support the flourishing of all individuals, rather than simply pursuing economic growth at all costs.
GDP is an Outdated KPI
GDP was invented in haste during the New Deal era, as a tool to measure the postive impact of the New Deal policy. While GDP has been useful in tracking economic growth, it has also become an outdated Key Performance Indicator (KPI) that fails to capture important aspects of human well-being. One of the main criticisms of GDP as a KPI is that it measures economic activity without taking into account whether that activity is actually beneficial to society.
For example, GDP can increase as a result of increased spending on healthcare, but it may not reflect improvements in the actual health of the population. Similarly, GDP can increase due to increased spending on military equipment or rebuilding after natural disasters, but these activities may not contribute to the long-term well-being of a society.
Furthermore, GDP does not take into account factors such as income inequality, which can have significant impacts on the well-being of a society. A country with high GDP may still have significant income inequality, resulting in some individuals being left behind while others benefit from economic growth. In this sense, GDP can be a poor measure of a society’s overall well-being.
Moreover, GDP does not capture the value of non-monetary activities such as volunteer work, parenting, or caring for the elderly or disabled. These activities are often performed by women and are essential to the functioning of society, yet they are not captured by GDP. This can lead to a distorted view of the value of these activities and can perpetuate gender inequalities.
In addition, GDP does not account for the depletion of natural resources or damage to the environment caused by economic activity. As a result, GDP can encourage unsustainable growth that damages the environment and depletes natural resources. This creates a situation where economic growth may be seen as positive in the short term, but ultimately leads to negative consequences for society and the environment in the long term.
In light of these limitations, it is important to consider alternative measures of economic and social progress. Alternative measures such as the Genuine Progress Indicator (GPI) take into account factors such as income distribution, the value of non-market activities, and the depletion of natural resources. By using more comprehensive measures of progress, we can better understand the true well-being of societies and work towards sustainable, equitable, and prosperous futures.
So what ?
Economic growth may have been the main goal of societies for decades, but it is becoming increasingly clear that this narrow focus on GDP as a KPI is not sustainable. Constant economic growth on a planet with limited resources is not only unsustainable, but it also fails to account for the well-being of all members of society. We need to move beyond the outdated measure of GDP and focus on more comprehensive measures of progress that take into account the impact of economic activity on society and the environment.
It is time for us to ask ourselves: what kind of future do we want for ourselves and for generations to come? Do we want to continue down the path of short-term economic growth at the expense of long-term sustainability and human well-being? Or do we want to embrace a new paradigm of progress that values equity, sustainability, and human well-being over narrow measures of economic growth?
The choice is ours, and it is time for us to start making it. It is time to challenge the status quo and work towards a more just, equitable, and sustainable world. It is time to recognize that economic growth is a wrong target for mankind, and start pursuing more comprehensive measures of progress that account for the well-being of all members of society, both now and in the future. Let us embrace this challenge and work towards a better world for all.
“… is a lie” is a series of scientifically rooted provocative thoughts on our civilisation.
