Why Do We Choose to Bet on GDP Growth?
Examining How the “Safe” Economic-Policy Wager Is a Sure Bet on Destruction
Mark Cramer (author of Old Man on a Green Bike: Chronicles of a Self-Serving Environmentalist)
When considering choices for our economy, Gross Domestic Product (GDP) growth is equivalent to the betting favorite in horse racing. It represents the least short-term risk but the surest path to destruction.
Economists meekly hedge their bet on GDP strength by paying lip service to the reality that GDP is a flawed indicator. Because GDP is calculated by giving equal value to constructive and destructive monetary exchanges, growth projections (and all assumptions based on them) are distorted. (See “The Kid and the Modern American Growth Scam for a classic Hollywood dramatization of this phenomenon.)
Yes, economists acknowledge their god is imperfect, but they decide not to risk his wrath.
Getting economists to try alternatives to GDP is like convincing a horseplayer to bet against a false favorite. My partner Roger LeBlanc has a numerical horse-betting method, explained in his book The Punter’s Tale, predicated on excluding the betting favorite when it’s a destructive choice — that is, when a significant flaw appearing in the horse’s abilities is overlooked by bettors. The equivalent in the field of economics is excluding fossil fuels from GDP calculations because they disrupt an optimistic narrative.
But economists and short-sighted bettors aren’t the only ones overlooking obvious flaws. With various Green New Deal plans, even environmentalists continue to bet on growth. They would phase out fossil fuels but then rely on substitute energies with the following flaws:
- They’re intermittent, so they still need to be connected to the grid.
- They depend on nonrenewable rare-earth minerals.
- They depend on the hyperexploitation of miners.
- They ignore the proven Rebound Effect, in which consumers who are aware that they’re using an energy-saving system will increase their use of that system, thereby diminishing its efficiency.
A bolder version, the REAL Green New Deal, refuses to be subservient to the unsustainable growth god and, in fact, makes a calculated wager on sustainable de-growth. The approach of this nonprofit think tank:
- Replace the fantasy narrative of a technological fix with a realistic narrative of “scale-back and transform.”
- Identify which renewable technologies are biophysically viable.
- And do all of this within the context of restoring thriving, biodiverse ecosystems for Earth’s non-human inhabitants and fair, egalitarian social structures for its people.
Only a few American economists have departed from the Temple of GDP. A distinguished example is the award-winning economist Herman Daly. Warning against “uneconomic growth,” Daly proposes a steady-state economy “that develops qualitatively (by improvement in science, technology, and ethics) without growing quantitatively in physical dimensions.”
Daly’s prestige landed him a job at the World Bank as Senior Economist in the Environment Department. With colleague John B. Cobb, Daly developed an alternative model, called the Index of Sustainable Economic Welfare (ISEW), which calculates destructive growth as a negative value. Negative indicators include private defense expenditures, costs of environmental degradation and depreciation of natural resources.
(Henry David Thoreau was disparaged as a “loafer” for walking in the woods half of each day. He lamented that people who cut down those woods were seen as industrious citizens.)
Predictably, Daly did not last at the World Bank, a bank tethered to GDP, though he remained for six years. Daly’s 1994 farewell address remains an inspiring message for critical economists.
Daly has won the Honorary Right Livelihood Award and was named Man of the Year by Adbusters magazine in 2008, among various awards. Successive American administrations should have knocked on his door, but the reality is even if Jesus Christ arrived with a non-GDP economic policy, he would not get a cabinet appointment. President-elect Biden would be wise to consult the Center for the Advancement of the Steady State Economy.
Because the word “growth” remains the mantra for cable news networks’ favored economists, it’s not easy to bet against GDP at a national level. In both Ecuador and Bolivia, attempts to embrace a “vivir bien” (sweet life) philosophy began in earnest but eroded when overwhelmed by the global economy.
One of the only nations insisting on alternatives to GDP is Bhutan, with its Gross National Happiness (GNH) philosophy, in which nonmonetized factors such as free time and leisure activity are positive economic indicators. Bhutan’s official policy statement on Gross National Happiness includes this vision:
“Environmental conservation is considered a key contribution to GNH because in addition to providing critical services such as water and energy, the environment is believed to contribute to aesthetic and other stimulus that can be directly healing to people who enjoy vivid colors and light, untainted breezes and silence in nature’s sound.”
Bhutan would seem to have an advantage in pursuing a humane way of life amidst its Himalayan isolation. However, the stresses of globalization know no borders, and never did. Ask the native Americans of Hispaniola at the end of the 1400s.
In a previous article I questioned John DeGraaf about the odds that Bhutan can hold firm with its philosophy. De Graaf, author of the best seller Affluenza and leading critic of the consumer society, responded that Bhutan is still a poor country and needs a bit of growth:
“The seductiveness of consumer goods is clear with the young because they are all hooked into social media, at least in Thimphu, the capital. So it’s still an open question. But at least they are asking the questions, and in that they are a model for the rest of us.”
Some of the rest of us are following the Bhutan model in our own ways. For example, Gross National Happiness USA engaged in a 10,000-mile happiness walk, led by GNHUSA cofounder Paula Francis. These active researchers criss-crossed the country with walking shoes and a recorder, getting around on human energy and engaging in dialogues with thousands of people. They discovered that what matters most in life for most Americans are the intangibles that are not included in Gross Domestic Product.
The Transition Network is a movement of communities coming together to reimagine and rebuild our world through consensus and respect for balance in nature.
More than 2,000 communities are embracing transition initiatives in over 50 countries. No two transition towns are alike, but all of them seek low-impact living in the spirit of rejecting the destructive aspects of GDP.
Major change is escalating at the local level. In the 2020 mayoral elections in France, every large city elected an environmentalist mayor. These cities are investing in nonmotorized commuting transportation. They’re escalating support for urban agriculture to drastically reduce the obscenely long supply distances.
By GDP standards, such measures degrow the economy. Fewer people would drive motorized vehicles, and fewer industries would be required to feed the population. But entering the Temple of Growth to convince the true believers to question their faith will not be easy. Perhaps the best start is the 2011 GrowthBusters film, “Hooked on Growth.”
Even if you’ve never been to a racetrack, when you dissect GDP you can understand why even the most studious horseplayers, victimized by herd mentality, often reject a risky but thoughtful wager and play the favorite, only to watch their longshot win the race with a substantial return.
The stakes are high and any approach that is less than bold will usher in the erosion of our species.
About the Author
Author Mark Cramer stopped owning an automobile 25 years ago, cut the size of his family living quarters in half, and has been commuting and vacationing with non-fossil-fuel alternatives, such as cycling, walking and traveling by train. His book Old Man on a Green Bike: Chronicles of a Self-Serving Environmentalist proves that legitimate self-interest and a de-growth economy thrive together. You can read the introduction by clicking on “Look Inside” at Amazon.
