One of the most obvious differences is that the conventional vision of social progress as a paradise of endless growth has come under increasing scrutiny: not just from those who doubt its sustainability or question its desirability, but also from those wondering where on earth economic growth is going to come from in the wake of the worst financial crisis in 80 years. The question that once could not be asked now regularly haunts the media: is it conceivable that economic growth will not after all deliver lasting prosperity?
Four years ago, then prime minister Gordon Brown invited the G20 leaders to London to talk about “kickstarting growth” – a firm kick in the backside and things would soon be back to normal.
However, that rush of enthusiasm for short-term stimulus spending looks more like an adolescent crush than a meaningful love affair; and the fault lines in conventional economics have perceptibly widened to become deep chasms threatening to engulf entire nations. The collapse of Lehman Brothers on 15 September 2008 signalled more than the onset of a cyclical liquidity crisis but cracks in the shiny surface of capitalism that run right to the heart of our economic model.
The assumed insatiability of human need
Modern capitalism relies inherently on the assumed insatiability of human needs: confident expectations of a relentless growth in consumer spending. Across the world, capitalism advances by seeking out new markets for new consumer products; the continual throwing over of the old in favour of the new. The intrusion of the market into more personal areas of our lives. At the start of this process, it can be immensely productive, leading to dramatic improvements in our real standard of living. But keeping the process going in perpetuity, as the system requires, we need people resolutely hooked on stuff, prepared to borrow and spend – even to mortgage their own financial future if necessary – so that they can carry on buying.
Novelty matters to all of us. Through novelty we tell each other stories about how important we are. Novelty signals progress and hope. If we’re ever inclined to forget or forgo our lust for the new, a host of canny advertisers, marketers, investors and politicians is on hand to remind and persuade us to spend money we don’t have, on things we don’t need, to create impressions that won’t last, on people we don’t care about.
However, on a closer analysis, this vision of humanity as a voracious horde of self-serving novelty-seekers turns out to be at best incomplete and at worst wildly inaccurate. A more sophisticated psychology recognises a richer palette of motivation involving other-regarding as well as self-regarding behaviours; and a taste for tradition as well as a thirst for the frontier. We have selfish side to us, but only economists really believe that’s all there is to it. The good news is that we don’t need a radical change in human nature to achieve lasting prosperity. The bad news is, the economic model is profoundly out of whack.
Nowhere is this more evident than in the lessons from recession. The financial crisis was not the result of rogue behaviour or unfortunate circumstance. It was an accident waiting to happen. An economy reliant for its stability on an endless stimulation of consumer demand resorts inevitably to monetary expansion to keep growth going. The burgeoning of credit creates fragile balance sheets. Complex financial instruments are used to disguise unsavoury debt. But when the debts eventually become toxic, the system crashes.
Growth at all costs?
Perhaps predictably, the official response clings to ‘growth at all costs’. At times this call betrays the desperation of the addict. “The cabinet I chair is now a growth cabinet,” boasted British prime minister David Cameron in a speech to the Confederation of British Industries last year. “We’ve got to throw everything we’ve got at winning in this global race,” he declared.
Such jingoism betrays an astonishing lack of vision. It also signals a frightening ignorance of macro-economic realities. As the Eurozone has discovered to its cost, it is the asymmetries between nations that threaten to undermine the vision of European unity. Competitive striving for national advantage in a zero-sum game can only exacerbate the problem.
Not everyone ascribes to the winner takes all philosophy. Germany, for example, has taken a much more circumspect approach. Over the last 25 years, the social market economy has offered a genuine alternative to the Anglo-centric infatuation with liberalisation. Reunification provided Germany with a real-life experiment in the balancing of social and economic goals; and Enquete Commission’s study on growth, prosperity and quality of life (to be published later this year) betrays a genuine desire to engage in alternative visions of social progress.
It is perhaps ironic that a nation prepared to sacrifice economic orthodoxy for social vision should perform better (even in conventional terms) than its more self-serving rivals. More to the point, this was achievable only through the emergence of a vigorous trade sector happier to sell German goods to foreign consumers than to import. But, not only does this export success contribute to Eurozone imbalance, it is achievable only for as long as someone, somewhere, continues borrowing the money they need to carry on consuming.
In other words, the German macroeconomic success offers no more comforting or sustainable vision for a stable Europe – or for a sustainable world. Something more is needed: a more ecological macroeconomics; more radical transformation of financial markets; a more equitable vision of the good life.
This was always the task of Prosperity without Growth – not just to diagnose problems or bemoan catastrophe, but to set out clearly the dimensions for a different economics built around a coherent vision of prosperity.
Living well on a finite planet cannot simply be about consuming more and more stuff. Nor can it be about accumulating more and more debt. Prosperity, in any meaningful sense of the term, is about the quality of our lives and relationships, about the resilience of our communities, and about our sense of individual and collective meaning.