economics growth

The futility of uneconomic growth

In today’s post for Arrival week, Katherine Trebeck and I look how economic growth can become uneconomic and counter-productive.


“To furnish a barren room is one thing,” wrote John Kenneth Galbraith in 1958; “To continue to crowd in furniture until the foundation buckles is quite another.”

It’s an apt metaphor for how pointless growth can become in a mature economy.

This is a key theme in The Economics of Arrival. In over-developed countries such as Britain and Australia where we grew up, how much GDP growth is actually negative? GDP is a crude measure that aggregates all spending, and includes expenditure on all sorts of things that we’d want less of, such as car accidents, oil spills or floods. As the environmental crisis takes its toll, more and more negatives are going to be tallied up by GDP. A boom in housebuilding after a terrible wildfire? Business start-ups providing pollination services after the collapse of local bee populations? GDP will roll those all in and call them progress, but as Herman Daly says, it would be more accurately described as uneconomic growth.

When it comes to spending, ‘failure demand’ is a related term that we find useful. Failure demand was first identified by business consultant John Seddon. He observed that a rise in calls to a company helpline doesn’t mean that you have a great helpline. It means something is going wrong somewhere else in the business. That’s failure demand, and once you’ve heard the term, you can see it all over the place.

The rise in the number of people on income support in Britain doesn’t reflect Britain’s world-class welfare system, but the failure of the economy to provide a living wage. Rising expenditure on housing benefits is driven by a housing market out of control. The growth of food banks, debt counselling services, homeless shelters, or private security firms would all be examples of failure demand.

There have been efforts to map some of these downstream, reactive expenditures. A government review in Scotland found that 40% of the country’s public spending was “devoted annually to alleviating social problems and tackling ‘failure demand’ – demand which could have been avoided by earlier preventative measures.” Another study by The Joseph Rowntree Foundation found that poverty costs Britain £78 billion a year, with £1 in every £5 of government spending “making up for the way that poverty damages people’s lives.”

This works out at an individual level too. Perhaps it’s a carbon intensive tropical holiday to compensate for long months of overwork. Perhaps it’s a bottle of wine in the evening after a stressful day in the office. It could be the new clothes, gym memberships or expensive watches that purport to boost our self-esteem in a consumer culture that is constantly telling us that we are inadequate. ‘Consolation goods’, the French theorist Serge Latouche calls them – the little luxuries that console and compensate us for what we have lost in time, dignity, and peace of mind.

When a country has more than enough and still pursues growth, these symptoms of ‘overdevelopment’ risk coming to dominate. They are at best inefficient efforts to fix the hurt that the economic system has imposed and the address the inequalities it spawns, and at worst actively harmful to our wellbeing and to the environment.

Instead of risking existing prosperity in the rush for more, GDP-rich countries should look for qualitative improvement, rather than quantitative enlargement. It’s time to take the foot off the accelerator. They have Arrived. The task now is to share and enjoy what they already have.

4 comments

  1. Bill Bryson mentions this in one of his books – I think it’s “Notes from a Big Country”. I think he says something like based on GDP, the best person for the country is a man dying of cancer and going through a costly divorce.

    1. No doubt. I don’t know anyone who buys wine because they don’t like it. It’s probably both – because they like it, and because it relaxes them after a stressful day in the office.

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