December 7, 2016 Environmental Issues Written by Greentumble
Does economic growth equal environmental degradation
Economic growth is considered a good

thing for our society: it helps increase wages, it reduces unemployment and overall it provides us with a better standard of living. This is why one of the key metrics to identify whether a country is performing well is its Gross Domestic Product, commonly known as GDP. The higher the GDP, the more affluent the country is considered. But is economic growth alone a panacea?

Well, not really. And there are many reasons for this. Economic growth is at first instance a good thing but we need to qualify this with additional factors. For example, how is this growth and its benefits distributed? It is contributing to closing the wage gap between sexes? To help the less well-off people of our society reach a decent standard of living? Or is it accentuating existing inequalities? The same argument holds for our environment: is economic growth contributing to environmental degradation? Looking at our economic growth since the industrial revolution, it would be understandable to think that economic growth is tantamount to environmental degradation. Today, we extract and use around 50% more natural resources than only 30 years ago, this is about 60 billion tonnes of raw materials a year[sc:1].

In other words, economic growth measured as a performance of GDP is just not good enough of a metric. Yes, GDP measures how active or busy our economy is – but it tells us absolutely nothing about the kind of economic activities we are pursuing. And we would all agree that growing because there is an increase in the renewables market is very different to growing because of fossil fuels and other polluting industries.

So economic growth is good as long as it delivers a sustainable and low carbon economy.


Limits to economic growth

To deliver on this, our pursuit of economic growth needs to bear in mind that our planet’s resources are finite. In this respect, the impacts of growth on our planet were most eloquently captured by the Club of Rome which back in the 1970’s coined the concept of “limits to growth”. This was based on a realisation that if we kept on consumer our planet’s resources at the same pace, we would not be able to grow our economics for much longer as we would have depleted all our natural resources[sc:2].

So knowing that our planet’s resources are limited and that they should be used carefully as inputs for economic growth, economists are realising that we need to learn to grow within the carrying capacity of our planet. In other words, to grow in a way that our planet can afford. This line of thinking has led to the birth of different “alternative” models for economic growth which in recent years have become more and more popular. A very popular one is that of the circular economy which is based on maximising the reuse of resource inputs and delivering a “zero waste economy”.  This should achieve a real cut in our resource use while at the same time generating “green jobs” and sustainable growth.

Does economic growth equal happiness?

But others have ventured beyond that, questioning the reason we pursue growth and whether growth is an end in itself or a means to something? The premise here is that people want to lead happy and content lives. So is growing our economies in perpetuity at a great environmental and often social cost, going to make us happy? Happiness normally requires a minimum good standard of living, but beyond that people are realising that there are other things to life except economic affluence. So there is a space at which our economics can operate which delivers on the required level of growth while enhancing other aspects of our daily life that we hold dear. It is in this spirit that organisations such as Oxfam have developed tools such as the Humankind Index. Originally developed to support policy-making in Scotland, the Humankind Index proposes a number of indicators such as good homes, satisfying work, access to green space and physical and mental health as criteria against which our policies need to deliver[sc:3]. This discussion is very similar to that initiated at EU level on “Beyond GDP” [sc:4], an initiative which is about developing indicators that are more inclusive of environmental and social aspects of progress.

So the picture here is not black and white. Not all growth is bad, but pursuing only growth can be highly damaging to our society as a whole, not just the environment. And in the end, a growth oriented society is not what will make us happiest. A useful experiment bringing this message home is cross-checking GDP figure with ratings of the happiest countries; you may be surprised at how countries compare!