The Common Good
February 2010

'Growth' That Kills

by Herman Daly | February 2010

Gross Domestic Product mislabels damage to the planet.

For which of you, intending to build a tower, does not first sit down and estimate the cost, to see whether you have enough to complete it? —Luke 14:28

Last fall, economists Joseph Stiglitz, Amartya Sen, and Jean-Paul Fitoussi, leading a commission created by the French government, issued a report re-examining a number that is too often treated as a central measure of economic health: Gross Domestic Product (GDP), or the total amount of money paid for final goods and services bought by households and produced in a country in a given year.
The topic is certainly vital: The greatest idol of our time is probably GDP. We “worship” it by trying to make it grow forever. Its growth is considered as the solution, or at least a necessary condition, for solving nearly all our problems. Yet GDP is also the best index we have of the combined effects of pollution, depletion, congestion, and loss of biodiversity. Economist Kenneth Boulding has suggested, with tongue only a little bit in cheek, that we relabel it Gross Domestic Cost. It is the measure of the damage we inflict on finite, non-growing creation in order to support more people at higher per capita levels of resource use.
In a world relatively empty of people, it was worth paying the cost of environmental degradation in exchange for the benefit of more people leading more abundant lives. The scale of environmental damage was within the regenerative and assimilative capacities of nature. In a relatively full world, the degradation of creation required to support still more people consuming still more resources per capita is no longer worth it. Why? Because the planet’s life-support capacity, its natural capital, is now being used up faster than it can be regenerated. The cost of present growth will be fewer and less comfortable lives in the future.
Growth that makes us poorer will not abolish poverty; we’ll have to seriously share. Does the Stiglitz-Sen-Fitoussi report identify the point at which growth becomes uneconomic? No, that would be asking too much.
But it would be good if it had at least discussed the concept of “uneconomic growth,” and considered the possibility of separating GDP into two accounts—a benefit and a cost account. Then we could compare them and stop physical expansion when extra costs begin to outweigh extra benefits. GDP as we currently know it conflates benefits and costs as “economic activity,” and that is what GDP measures—how fast the wheels are turning, not where the car is going.
Much of this wheel-spinning is “regrettably necessary defensive expenditure”: money spent to prevent erosion of your quality of life—for example, cleaning up oil spills, sitting in traffic jams burning gasoline, and soundproofing your house to keep out the noise. For many young couples, both partners have to work hard to earn enough to pay the person who looks after their children enough so that that person can in turn hire a nanny at sufficient wage, and so on.
The Stiglitz-Sen-Fitoussi commission did propose some accounting corrections that merit our enthusiastic gratitude and support. They suggested correcting GDP for defensive expenditures, for reductions or increases in leisure time, for the error of counting consumption of natural capital such as oil or rainforest as income, and for the increasing inequality in the distribution of income (which means that a nation’s GDP growth may have little relation to any rise in the typical citizen’s income).
Yet it is not as if no one ever advocated these things before. Some economists certainly have, and nothing has yet come of it. Maybe the fact that we now have two Nobel Prize winners (Stiglitz and Sen) and President Sarkozy of France behind such cost-counting reforms will make a difference; let us hope so. Christians who believe that we have a duty to be stewards of God’s creation should add our voices in support, and our encouragement to go further.

Herman Daly teaches at the University of Maryland and is the author, most recently, of Ecological Economics and Sustainable Development.
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