MINDING NATURE 5.2

Living Well: Explorations into the End of Growth By PETER A. VICTOR

mans. Toward the end of the twentieth century, at- tempts to gain a quantitative picture of these envi- ronmental changes yielded new indicators such as the

INTRODUCTION ecological footprint, the human appropriation of the net products of photosynthesis (HANPP), and various ooking back over the twenty-first century, fu- measures of direct and total material throughput— ture historians may well see it as even more all of which, with some local exceptions, point in the tumultuous than the century that preceded it. same threatening direction. In the second decade of 1 In the twentieth century the human popu- the twenty-first century, humanity’s impact on the rest Llation more than tripled, average life expectancy at of nature is on the rise and shows little sign of revers- birth more than doubled, and real gross domestic ing. In the language of , we are product increased nearly forty times. Huge numbers exceeding the safe operating capacity of the planet to of people experienced very real improvements in liv- sustain us.2 ing standards as spread around the At the same time as we are being constrained by world, yet huge numbers were living in extreme pov- what earth systems can tolerate, incomes and wealth erty when the century ended. Political systems from are becoming more unequally distributed, the global Nazism to Communism rose and fell, while democracy financial system is faltering, economies are struggling, in its various forms survived. Well over 200 million and confidence in political systems to address these people died in wars and conflicts, and nuclear energy problems is in decline. These trends are more than was unleashed with the specific purpose of annihilat- disturbing; they portend catastrophe. But their con- ing many tens of thousands in a flash. Seemingly mag- tinuation is not given. A brighter and genuinely more ical technologies in transportation, communication, prosperous future may still be possible: one in which entertainment, and computation proliferated, as did everyone lives well without depleting and degrading enormous cities and corporations with global reach. natural systems and where all humans and all nature Societies were transformed for better and worse, as flourish. However, such a future will only come to pass was the planet itself. if we think hard about our predicament, examine a Despite claims to the contrary, nature was not wide range of possibilities, and strive for what we want conquered. Instead, human societies and economies rather than just accepting what comes our way. became ever more dependent on increasing quanti- Among these possibilities, there needs to be a re- ties of materials, energy, and wastes (i.e., increasing consideration of the priority given to the pursuit of “throughput”), as well as transformation of land as economic growth, especially in developed countries, more and more was brought into direct use by hu- where, arguably, the costs of economic growth have

PETER A. VICTOR LIVING WELL: EXPLORATIONS INTO THE END OF GROWTH 24 MINDING NATURE 5.2 begun to outweigh the benefits.3 Biophysical con- tigate how achieving the ecological benefits of lower straints to continued growth are becoming more ap- growth is compatible with social justice and social wel- parent. There is mounting evidence indicating that fare/equality objectives. higher incomes do not make people happier beyond a level of per capita incomes far surpassed by many in EXPLORING ALTERNATIVES TO ECONOMIC GROWTH developed countries, and, despite decades of substan- There are many ways of thinking about alternative tial economic growth, many social and environmental futures. One that I have found fruitful is to develop problems remain. If adopted, a thoughtful strategy in empirically based simulations of national economies so that we can examine key trends and identify ways Despite claims to the contrary, nature was of strengthening desirable ones and of turning unde- not conquered. Instead, human societies and sirable ones around. My work has been focused on national economies because most of the necessary economies became ever more dependent on data for analyzing economies is most readily available increasing quantities of materials, energy, at that level. Having said that, it is clear that we also and wastes… need to understand likely and possible futures at the sub- and super-national levels, a demanding agenda indeed. which economic growth became merely a by-product The purpose of scenario analysis is not to develop of other, more focused objectives would set a very dif- a specific prescription for the future. Rather it isto ferent example for other countries to follow. see if the future—which will be very different from the Not that economic growth itself is directly and in- past whether we decide to make it that way or not— extricably related to increased throughput—although could be attractive even in the absence of continued historically, the connection has been strong.4 But as economic growth. Not that zero economic growth long as economic growth remains, it will be the most should replace continuous economic growth as the important measure of economic success, either for its overarching objective of economic policy. But the own sake or for the benefits it is presumed to bring, prospect of reduced, zero, or even negative economic and efforts to reverse the rising impacts of humans growth should not stand in the way of the increasingly on the biosphere will always take second place. This urgent measures required to reduce the burden of our raises the question whether it is possible for people economies on nature. If we fail to reduce this burden, to live well in a society in which economic stability then the possibility of a good life for all will disappear. rather than economic growth is the norm, where all its members flourish, and social justice is served. Such a THE LOWGROW MODEL circumstance should not be confused with economic When I was a Ph.D. student at the University stagnation and societal decline, but should stand in of British Columbia in the 1960s, I was most fortu- sharp contrast to that dismal scenario so often touted nate to be supervised by the distinguished progressive as the only alternative to endless economic growth. economist Gideon Rosenbluth. Under his guidance, In Prosperity without Growth, ar- I developed and applied a methodology for estimat- gues that developed economies require economic ing the material “throughput” of an economy, based growth if they are to avoid the downward spiral of on the law of conservation of matter. The fundamental deflation, recession, and depression.5 He also argues principle, which applies to all monetized economies, that such growth cannot be sustained because of its is that associated with each expenditure in the econ- resource requirements and the unacceptably high bur- omy, there is a direct and indirect flow of material in- den it places on the environment. He refers to this as puts, and ultimately, a disposal of an equal amount of the dilemma of growth. We can’t live with it and we wastes.6 This is true for all expenditures, whether they can’t live without it, or so it appears, unless we open be on goods or services or for current consumption or our minds to a broader range of alternative futures investment, though the difference between throughput than is normally contemplated. The essence of my re- for equal expenditures varies tremendously according cent work and the main theme of both this paper and to what is purchased. For example, energy-intensive my collaborative work with Tim Jackson is to inves- products such as transportation result in much greater

PETER A. VICTOR LIVING WELL: EXPLORATIONS INTO THE END OF GROWTH 25 MINDING NATURE 5.2 emissions of greenhouse gases than the services pro- a real plane or something that flies. Building simula- vided by hairdressers. tion models of an economy is not that different. Over the years, I kept in touch with Gideon. Still, The overview of LowGrow that follows may appear I was pleasantly surprised when, about ten years ago, tedious, but it is necessary to give some idea of what he suggested that we collaborate on the “growth ques- lies behind the scenarios that it generates.7 Figure 1 tion.” I had just completed my term as dean of the shows the simplified structure of LowGrow. Macro Faculty of Environmental Studies at York University, demand is determined in the normal way as the sum having resumed my academic career in the mid-1990s, of consumption expenditure, investment expenditure, and I was ready to embark on a substantive research government expenditure, and the difference between project. It was an opportunity and a privilege to work exports and imports. Their sum total is GDP (gross do- with Gideon again. Even in his eighties he was an in- mestic product) measured as expenditure. There are tellectual force to be reckoned with. separate equations for each of these components in Although it was not our original intention to build the model, estimated with Canadian data from about a macroeconomic simulation model, we found a com- 1981 to 2005, depending on the variable. Production mon interest in doing in the economy depends so. We were skeptical on employed labor and A brighter and genuinely more prosperous of the mainstream view employed capital (i.e., that endless economic future may still be possible: one in which ev- buildings, equipment, growth was feasible, de- eryone lives well without depleting and de- software, and infra- sirable, and essential for grading natural systems and where all humans structure). Changes in full employment, eradi- productivity from im- cation of poverty, and and all nature flourish. provements in technol- significantly reduced im- ogy, labor skills, and pacts on the environment. We were also unsatisfied by organization are captured depending on time. Macro critiques of such a view that did not also provide an ac- supply is shown at the bottom of figure 1, and it deter- count of how an economy might function in a radically mines and is determined by employment and capacity different way. So we set ourselves the task of answer- utilization shown in the center of figure 1. ing the following question: is it possible to have full There is a second important link between macro employment, no poverty, fiscal balance, and reduced demand and production. Investment expenditures greenhouse gas emissions without relying on eco- (net of depreciation), which are part of macro de- nomic growth? We developed LowGrow, a simulation mand, add to the economy’s stock of capital, increas- model of the Canadian economy specifically designed ing its productive capacity. Also, capital and labor tend to answer this question. Our results suggested the pos- to become more productive over time. It follows that, sibility that an attractive set of social, economic, and other things equal, without an increase in macro de- environmental objectives could be met in the absence mand, these increases in capital and productivity re- of economic growth. This led us to the conclusion that duce employment: as labor becomes more productive economic growth could and should be relegated to its over time, less is required to produce any given level of proper secondary place as a policy objective. output. On this basis, economic growth (i.e., increases All models are simplifications of whatever they in GDP) is needed to prevent unemployment rising as represent. This is as true of computer models as it is capacity and productivity increase. of model aeroplanes and model villages. Whether they Population is determined exogenously in Low- are satisfactory simplifications depends on their in- Grow, which offers a choice of three projections from tended uses. A model plane may be designed to closely Statistics Canada. Population is also one of the vari- resemble a particular commercial or military jet but ables that determines consumption expenditures in rest on a stand, unable to fly. Another model might be the economy. The labor force is estimated in LowGrow designed to fly powered by hand, an elastic band, or as a function of GDP and population. an onboard engine. Yet it may only vaguely resemble a full-size aircraft. Which of these two model planes is better depends on whether you want a visual replica of

PETER A. VICTOR LIVING WELL: EXPLORATIONS INTO THE END OF GROWTH 26 MINDING NATURE 5.2

Figure 1 tax, a forestry sub-model, and provision for redistrib- The High-Level Structure of LowGrow uting incomes. It measures poverty using the United Nations’ Human Poverty Index (i.e., HPI-2 for se- lected Organisation for Economic Co-operation and Development, or OECD, countries).8 LowGrow allows additional funds to be spent on health care and on programs for reducing adult illiteracy (both included in HPI-2) and estimates their impacts on longevity and adult literacy with equations from the literature. Expenditures on anti-poverty and environmen- tal programs are automatically added to government expenditures in LowGrow. …an attractive set of social, Other changes economic, and environmen- in the level of tal objectives could be met government ex- penditures can in the absence of economic also be simulat- growth. This led us to the Source: P.A. Victor, Managing without Growth: Slower by ed in LowGrow Design, Not Disaster (Cheltenham, U.K.: Edward Elgar, 2008). conclusion that economic through a vari- growth could and should be ety of fiscal pol- There is no monetary sector in LowGrow. For sim- icies, such as relegated to its proper sec- plicity, we assumed that the Bank of Canada, Canada’s an annual per- ondary place as a policy ob- central bank, regulates the money supply to keep in- centage change jective. flation at or near the target level of 2 percent per year. in government LowGrow includes an exogenously set rate of interest expenditure that remains unchanged throughout each run of the that can vary over time and a balanced budget. Low- model. A higher cost of Grow keeps track of the overall fiscal position of all borrowing discourages …it is possible for three levels of government combined (federal, provin- investment, which re- people to live well in a cial, and municipal) by calculating total revenues and duces macro demand. society in which eco- expenditures and by estimating debt repayment based It also raises the cost on the historical record. As the level of government to the government of nomic stability rather indebtedness declines, the rates of taxes on personal servicing its debt. The than economic growth incomes and profits in LowGrow are reduced endog- price level is not in- is the norm, where enously, which is broadly consistent with government cluded as a variable in policy in Canada. LowGrow, although all its members flour- In LowGrow, as in the economy that it represents, the model warns of ish, and social justice economic growth is driven by: net investment, which inflationary pressures is served. Such a cir- adds to productive assets, growth in the labor force, when the rate of unem- cumstance should not increases in productivity, growth in the net trade bal- ployment falls below 4 ance, growth in government expenditures, and growth percent (effectively full be confused with eco- in population. Low- and no-growth scenarios can be employment in Cana- nomic stagnation and examined by reducing the rates of increase in each of da). these factors singly or in combination. LowGrow includes societal decline… features that are par- A BUSINESS-AS-USUAL SCENARIO ticularly relevant for exploring possibilities for an It is convenient to start analyzing low- and no- economy that is not growing. It includes emissions of growth scenarios by establishing a base case with no carbon dioxide and other greenhouse gases, a carbon new policy interventions. This is the “business-as-

PETER A. VICTOR LIVING WELL: EXPLORATIONS INTO THE END OF GROWTH 27 MINDING NATURE 5.2 usual” case illustrated in figure 2 and describes what Figure 3 would happen in the Canadian economy if the trends A Low- or No-Growth Scenario in the years before 2005 were to continue for another thirty years. It is not a prediction of the future, but rather a benchmark against which to compare alterna- tive scenarios.

Figure 2 Business as Usual

Source: P.A. Victor, Managing without Growth: Slower by De- sign, Not Disaster (Cheltenham, U.K.: Edward Elgar, 2008).

POLICY DIRECTIONS FOR A LOW- OR NO-GROWTH SCENARIO What does it take to achieve the kind of outcomes illustrated in figure 3? One advantage of a simulation model like LowGrow is that it helps answer this ques- Source: P.A. Victor, Managing without Growth: Slower by tion. The scenario is based on a number of key changes Design, Not Disaster (Cheltenham, U.K.: Edward Elgar, 2008). in the model which could come about by the cumula- tive changes in autonomous behavior of individuals and organizations, by policy measures introduced by In the business-as-usual scenario, between the government, or, most likely, by some combination of start of 2005 and 2035, real GDP per capita more than the two. doubles; the unemployment rate rises, then falls, end- The scenario in figure 3 results from a variety of ing above its starting value; the ratio of government changes, some more controversial than others, that debt to GDP declines by nearly 40 percent as Cana- would be required to transform the business as usual dian governments continue to run budget surpluses; scenario in figure 2 into an attractive scenario in which the Human Poverty Index rises, largely due to the pro- economic growth is not required to meet economic, jected increase in the absolute number of unemployed social, and environmental objectives. These changes people; and greenhouse gas emissions increase by include: nearly 80 percent. CONSUMPTION A LOW- OR NO-GROWTH SCENARIO Consumption is one of the main driving forces of A wide range of low- and no-growth scenarios can the economy. In a successful economy not geared to be examined with LowGrow. One promising scenario growth, we would expect the pattern and level of con- is shown in figure 3. Compared with the business-as- sumption to be very different from a growing econo- usual scenario, GDP per capita grows more slowly, my. For example, well-being would be enhanced with leveling off around 2028, at which time the rate of un- a greater emphasis on public goods, which includes the employment is 5.7 percent. The unemployment rate environment; on shared provision of private goods, as continues to decline to 4.0 percent by 2035. By 2020 we are already seeing with cars and bicycles in many the poverty index declines from 10.7 to an internation- cities; and on services, rather than commodities. More ally unprecedented level of 4.9, where it remains, and controls on the content and placement of advertising the debt-to-GDP ratio declines to about 30 percent, to would be helpful. be maintained at that level to 2035. Greenhouse gas INVESTMENT emissions are 31 percent, lower at the start of 2035 than in 2005, and 41 percent lower than their high In economic terms, investment refers to the pur- point in 2010. chase of new infrastructure, buildings, and equip-

PETER A. VICTOR LIVING WELL: EXPLORATIONS INTO THE END OF GROWTH 28 MINDING NATURE 5.2 ment. Some of this investment replaces what has been yond some level of material well-being—different for worn out. The rest adds to the stock of built capital and each person, but likely within the range already sur- is a major source of economic growth since it increases passed on average in developed economies—more lei- the productive capacity of the economy. A viable low- sure makes a greater contribution to well-being than a or no-growth scenario requires major changes in the higher income. quantity and type of investment. These changes will transform the capital stock so that environmental im- POPULATION pacts are reduced, degraded ecosystems are restored, The scenario in figure 3 is based on an assump- renewable materials and energy are substituted for tion that the population and labor force will stabi- non-renewables, and people are better served in terms lize over the next twenty years or so. In Canada, as in of housing, transportation, education, health care, and many developed countries, the fertility rate (i.e., the other social services. average number of children born to a woman over a lifetime) is less than the replacement rate of about EMPLOYMENT 2.1. Under these circumstances, net immigration be- One aspect of the comes the source of population growth. Stabilization dilemma of growth is of the Canadian population would require a reduc- A comprehensive that with an expansion tion in net immigration to about 200,000 people per of the capital stock, la- approach will re- year. This would still allow Canada to maintain a level bor becomes more pro- quire …ecological fis- of about 100,000 immigrants in its family unification ductive. Unless there cal reform where, for and refugee categories and require a reduction only in is economic growth, an immigrants admitted to Canada to promote economic inevitable consequence example, taxes are growth. is unemployment, since shifted from labor to fewer and fewer people activities that causes POVERTY are required to produce The idea that poverty can be eradicated through environmental dam- any given level of output. the trickle-down effects of economic growth has been A complicating factor age and space is used shown wanting. Poverty is more than a matter of in- is that in most econo- less aggressively adequate income. It is also about social exclusion, mies, paid employment through better land- which is closely related to the distribution of income is the primary source of and wealth and not just their amount. Recent experi- income for most adults, use planning and ence in many developed countries has shown little or so higher rates of unem- habitat protection. no increase in real living standards for the majority of ployment threaten an in- people despite economic growth, the gains from which crease in poverty. This aspect of the dilemma can be have been enjoyed by a relatively small proportion of overcome by several changes. First, in a more socially the population. It is clear that more focused anti-pov- just economy—especially one with an aging popula- erty programs that address the social determinants of tion—there would be more jobs in human services illness and provide more direct income support are sector where increases in labor productivity are likely required to eliminate poverty. Such measures are in- to be less than in the production of goods. Second, by cluded in the scenario shown in figure 3. strengthening the social safety net and establishing a guaranteed minimum income, we would rely less on TECHNOLOGICAL CHANGE income from employment for distributing the output Technological change has been an important as- of the economy via wages. Any concern that this might pect of human progress ever since the Stone Age. To- reduce the incentive to work is less problematic in an day’s seemingly magical technologies in areas such economy in which growth is no longer regarded as an as communications, entertainment, medicine, and imperative. Third, a reduction in average hours spent transportation represent a rapid acceleration of trends in paid employment provides a means by which people that have been in play for millennia. To say that new can benefit from increases in labor productivity other technologies are often a double-edged sword is a cli- than through an expansion of economic output. Be- ché, itself a metaphor based on a technology that in

PETER A. VICTOR LIVING WELL: EXPLORATIONS INTO THE END OF GROWTH 29 MINDING NATURE 5.2 previous times had considerable military significance. of better measures of success than growth in GDP to Our contemporary environmental problems are evi- drive policy. There are several candidates, such as the dence of the second edge. The way forward will require UN’s Human Development Index and the Genuine novel technologies that reflect an approach to life in Progress Indicator, both of which show that prosperity which social and ecological as well as economic conse- and economic growth are only loosely related. Climate quences are considered in advance of their widespread change is only one of several environmental problems adoption. This can be achieved through technology as- facing humanity in the twenty-first century. A com- sessment, changes in the education of scientists and prehensive approach will require limits on through- engineers, and the adoption of a broader range of ob- put, comprehensive ecological fiscal reform where, jectives by those engaged in technology development for example, taxes are shifted from labor to activities than just financial gain. that causes environmental damage and space is used less aggressively through better land-use planning and GOVERNMENT EXPENDITURES habitat protection. The scenario in figure 3 allows for some increase LowGrow is a modest first step in the development in total government expenditures followed by an even- of tools grounded in economics for describing alterna- tual leveling off as the size of the economy stabilizes. tive futures in which economic growth is not given pri- The precise level at which this leveling should take ority. Numerous other models have been created with place will be determined by the respective roles deter- the clear intention of showing how economic growth mined for the public, private, and not-for-profit sec- can be sustained, even accelerated, while the burden tors. The scenario on figure 3 corresponds to a level on nature is reduced.9 And yet other models—such as quite similar to the traditional role of the public sector World 3, which was used to develop the famous sce- in Canada. narios in —provide interesting, even inspirational scenarios without economic growth, TRADE but they were not designed according to established International trade can be mutually beneficial, but principles of economics.10 Furthermore, LowGrow was it can become destabilizing if a country’s imports and built with data for Canada and, while the broad con- exports move significantly out of balance. The sce- clusions that emerge from it apply to other developed nario in figure 3 is based on a small but positive trade economies, national differences would no doubt yield balance in which Canada earns slightly more from its rather different numerical results. Since its publica- exports than it spends on imports. Eventually, if the tion a few years ago, there has been considerable inter- economy is not growing, we should expect imports est in LowGrow in many parts of the world, and a few and exports to balance. researchers in other countries (Sweden, New Zealand, Germany) have adapted LowGrow with mixed results. GREENHOUSE GASES During the past two years, Tim Jackson and I have The emission of greenhouse gases would very like- been collaborating on GEMMA, a new macroeconom- ly diminish as the rate of growth slows, and this effect ic model of a national economy designed to address is captured in figure 3. In addition, the scenario as- the following questions: sumes the imposition of a substantial revenue-neutral carbon tax in which there is a tax on energy use based 1. Is growth in real economic output still required on the carbon content of the energy. In the scenario, in advanced economies in order simultane- revenues from the carbon tax are exactly matched by ously to maintain high levels of employment, a reduction in personal and corporate income taxes, reduce poverty, and meet ambitious ecological so that there is no increase in overall government rev- and resource targets? enues from the carbon tax. The scenario in figure 3 is based on all of these 2. Does stability of the financial system require changes. In addition, there are other changes that growth in the “real” economy? would usefully complement those included in the 3. Will restraints on demand and supply—for LowGrow simulation but that are not directly pro- example, in anticipation of or in response to vided for in the model. Among these is the adoption

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ecological and resource constraints—cause in- NOTES stability in the real economy and or financial 1. Sections of this essay are adapted from P. A. Victor, Managing without Growth: Slower by Design, Not Disaster, (Cheltenham, U.K.: Edward Elgar, 2008). 11 system? 2. J. Rockstrom, “Planetary Boundaries: Exploring the Safe Operating Space for Human- ity,” Ecology and Society 14, no. 2 (2009): 32, http://www.ecologyandsociety.org/vol14/ These important questions require better answers iss2/art32/. 3. P.A. Victor, “Uneconomic Growth,” Canadian Dimension 46, no. 2 (2012): 25-30. than are currently available, but for which credible 4. F. Kraussman, S. Gingrich, N. Eisenmenger, et al., “Growth in Global Materials Use, answers are needed if we are to make the thoughtful, GDP and Population in the Twentieth Century,” 68 (2009): 2696- 2705. deliberate transformation of our economy that the 5. T. Jackson, Prosperity without Growth, (London: Earthscan, 2009). mounting evidence of environmental degradation, fi- 6. P.A. Victor, Pollution: Economy and Environment (Toronto, ON, Canada: University of nancial instability, and increasing social and economic Toronto, 1972). 7. Gideon and I collaborated on an early version of LowGrow (P.A. Victor, and G. Rosen- inequality indicates is necessary. We hope that GEM- bluth, “Managing without Growth,” Ecological Economics 61 (2007): 492-504. My book MA will provide insights into these problems and will Managing without Growth was an extensive elaboration of the modelling and arguments we had begun to develop together. Gideon passed away in 2011. produce more comprehensive and detailed scenarios 8. United Nations Development Programme, Human Development Report 2006. Beyond showing that we can live well in an economy that does Scarcity: Power, Poverty, and the Global Water Crisis (New York: United Nations Develop- not depend on economic growth. Most important of ment Programme, 2006), http://hdr.undp.org/hdr2006/pdfs/report/HDR06-complete. pdf. all, we will be able to free ourselves to think more 9. United Nations Development Programme, Modelling Global Green Investment Sce- broadly and more imaginatively as we contemplate the narios. Supporting the Transition to a Global Green Economy (New York: United Nations Development Programme, 2011), http://www.unep.org/greeneconomy/Portals/88/docu- end of growth. ments/ger/GER_13_Modelling.pdf. 10. D.H. Meadows, D.L. Meadows, J. Randers, and W.W. Behrens, III, The Limits to Growth (London: Earth Island, 1972). 11. P.A. Victor and T. Jackson, “Towards an Ecological Macroeconomics”, paper presented at the INET Annual Plenary Conference, Berlin, 2012. Peter Victor is a Professor in Environmental Studies at York Univer- sity. In 2011 his work on ecological economics and managing without growth was recognised through the award of the Molson Prize in the Social Sciences by the Canada Council for the Arts. He is currently serving as Senior Scholar with the Center for Humans and Nature.

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