Can we create Healthy Economies without growth?

One writer on this portal recently wrote an article on GDP and its role in society from an economic perspective. While nothing said in the article is false, the framing is misleading and leaves out significant criticisms of GDP growth as a policy goal, and uncomfortable questions about the theoretical foundations of neoclassical economics more generally. These include considering the Earth’s living systems as an ‘externality’, i.e. something external to the economy, and ignoring non-monetised activities that take place in socialised contexts (such as care work).

In neoclassical economics, the entirety of Earth’s living systems and non-monetised activities are literally assigned a value of zero – a significant and notorious omission in the context of climate and ecological breakdown.

Yasin Akgul/AFP via Getty Images

There are also significant questions about whether GDP growth is good and desirable in the long-term. Infinite growth is impossible on a finite planet. Recent research has backed this up by showing that growth in GDP simply cannot be decoupled from material and energy use. Likewise, it cannot be decoupled from greenhouse gas emissions at anything close to the rate necessary to avoid climate catastrophe.

There is thus an urgent need to start thinking about how an economy can run without growth. As Dr Mike Ryan, the director of the WHO’s Health Emergency Programme, put it, the only thing in nature that grows infinitely is a cancer.

Dr Mike Ryan’s address during the Trócaire Romero Award

Fortunately, designing an economy that can run without growth is not a bad thing. Studies repeatedly show that economic growth in rich countries does not lead to a meaningful increase in wellbeing. According to one study, it is high-quality public services, democracy, low levels of wealth inequality, and the minimisation of extractive industries that contribute to high levels of well-being, rather than economic growth.

This is because GDP is an aggregate measure that counts all economic activity regardless of whether that activity is good or bad. Investment in education contributes to GDP but so does cutting down a forest and turning it into furniture. Or, more appropriately in the case of Malta, rampant property speculation destroying our remaining countryside. If we are looking to GDP growth as a measurement of our wellbeing, then we are simply looking in the wrong place.

In many respects, we already know how to run an economy without growth. It simply means moving away from GDP growth as a main policy objective and focusing on pursuing wellbeing indicators directly. These may include indicators that measure: wealth inequality, gender inequality, education, access to basic services, access to healthcare (including mental health services), employment and employment satisfaction, and overall happiness.

There are also economic frameworks for this. The economist Kate Raworth put forward an economic model she calls the ‘doughnut model’ that is now being adopted by cities such as Amsterdam, Brussels and Barcelona. This concept places human needs in the centre with the planetary boundaries on the outside. The goal is to meet people’s needs within these boundaries.

The Doughnut of social and planetary boundaries

In Amsterdam, this has meant aiming to cut the amount of food waste produced by half by 2030, establishing thrift shops, and making construction companies use sustainable materials. Similarly, Scotland had created a new National Performance Framework in 2018 that also takes a more holistic approach to measuring wellbeing. Both of these put communities back into the heart of policymaking.

This is an important point. Communities are the ones directly affected by decisions taken at a national level, yet they are often rarely consulted in these decisions. Empowering citizens and local governments should thus be the first step to any deliberate pursuit of collective wellbeing. No one knows their local community better than those living in them, and it is no coincidence that many such initiatives started at a local, rather than a national, level.

These are simple, yet elegant, solutions to how we should think about meeting human needs within planetary boundaries. But it is only the tip of the iceberg of economic alternatives. Concepts such as circular economy, wellbeing economy, buen vivir, post-growth, and degrowth present a range of alternatives that are rarely given the attention they deserve.

The economics discipline as a whole has generally focused far too much on models and calculations and not enough on thinking about what a healthy economy should actually look like. In focusing too much on the wrong details, we have lost sight of the things that truly make life meaningful and the prerequisites for the conditions of life itself.

Written by: Miguel Azzopardi

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