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Growth – The past present and future

Session 2 - Dr Daniel Susskind 2024

by Sam Leith @ OffGrid Sessions 2024

“Three facts,” said Daniel Susskind as he introduced his talk on Growth: A Reckoning, “have defined the economic history of the entire human race.” The first is that for most of our 300,000 years on the planet every human being has existed in a state of stagnant economic growth; an unrelenting struggle for subsistence. The second is that this state only very recently came to an end: modern economic growth only began 200 years ago. The third is that growth is now, for the first time, “both significant and sustained – as if some pent-up productive power has been unleashed”.

  That means that, much as we talk about growth, we still don’t understand it very well. Before the 1950s, almost no politicians even talked about the idea of growth; and it wasn’t until the 1940s that we even started to have any reliable tools for measuring the size of economies.

  What we do know is that growth has been responsible for some transformatively positive things. It has lifted billions of people out of poverty and the struggle for subsistence. It has improved the health and longevity of humans around the world. And it has generated the technical advances we see about us. 

  But has also come at a great cost. It has caused widespread environmental destruction; it has damaged or obliterated cultures and communities; it has been a driver of drastic inequality as the benefits of growth are shared unequally. And it has generated the technical advances – not all of them positive – that we see around us. 

  So growth presents us with a dilemma: it is “associated with every measure of human flourishing; but it also comes at a huge price.” So what do we do? Over the last three decades or so, the so-called “degrowth movement” — which holds that we should stop or even reverse economic growth worldwide — has filtered from being a concern of “a handful of ecologically minded academics” into the mainstream. It is embraced by the likes of the Green Party politician Caroline Lucas, David Attenborough and Greta Thunberg.

  It’s Daniel’s view that the degrowth movement makes a dangerous mistake — “I believe that what we really need is more growth, through the discovery of new ideas and technological progress, but we also need a new type of growth” — but he proposes to address their case fair-mindedly. 

  It falls into two parts: one is to do with the diagnosis, the other with the solution. The former is exemplified by Greta Thunberg’s blistering address to the UN in 2019. “We’ll be watching you. You have stolen my dreams and my childhood with your empty words. People are suffering. People are dying. Entire ecosystems are collapsing. We are in the beginning of a mass extinction, and all you can talk about is money and fairy tales of eternal economic growth. How dare you!”

  Daniel was prepared to endorse that view wholeheartedly. He said that if anything, Thunberg underestimates the “ecosystem-damaging, work-threatening, poilitics-diminishing” effect of growth as it is now.

  But in the solution space, he takes issue. The popular claim that “Infinite growth is not possible on a finite planet”, he says, is wrong. Infinite growth is possible on a finite planet because growth is no longer what it once was. When the 18th-and 19th-century fathers of economics (Smith, Marx, Ricardo et al) were formulating the discipline, the economies around them consisted of factories and farms. These enterprises were material. 

  But growth is now about ideas rather than objects. The planet of tangible resources is finite; the universe of ideas is unimaginably vast, effectively infinite. An example: a well-stocked larder containing 300 ingredients is a finite resource. But it’s possible to devise more recipes combining the ingredients from that same larder than there are atoms in the universe. 

  There’s a moral case against degrowth, too. If it means freezing global GDP, you’ll consign very many millions of people to poverty. Growth has been a revolution – but it’s an unfinished revolution. So Daniel’s starting point, he says, is: how do we get more growth?

  Again, that’s not easily answered. Growth remains “one of the great mysteries of economic thought”. But what we do know is that “more growth requires technological progress – which means more ideas about how we manage our finite resources”. 

To make that possible there are some key steps to take. We will need to reshape our intellectual property regimes. We will need to invest more in research and development (fun fact: Israel currently leads the world in per capita R & D investment). And we’ll need to use tech itself to generate more ideas: in the 20th century new ideas came from the “meat machines inside our heads”; now they will, increasingly, come from the “silicon machines” on our desks. 

  There is reason to be optimistic. Example one: in 2007 the Stern Review into the economics of climate change predicted that to reduce emissions by 80 per cent would require a one per cent reduction in growth. The following year Stern himself made a still gloomier correction, saying he thought it would cost 2 per cent of GDP per year to hit that target.

  Yet when the subject was revisited in 2020 experts estimated that eliminating emissions entirely would cost only half a percentage point of GDP per year. Why? Because of technological progress in combination with a transformation in incentives and social norms for renewable energy. Solar power, for instance, started in the 1970s as a “tool of last resort; now it’s commonplace”. Over half a century the cost of a kilowatt hour of solar electricity has gone from $100 to 50c.

The pandemic supplied another instance of how fast change can come about. As lockdown meant that in academic economic terms wages for in-person work effectively went to infinity, new technologies and new arrangements for remote working flourished. A change that would ordinarily have taken decades was managed in months. Paid full days of working from home saw a twelvefold increase at the height of the pandemic – and settled back to a permanent sixfold increase. 

We shouldn’t underestimate the power of incentives.

But at the same time, we should be prepared to accept that we cannot always make it work. There will be trade-offs, and what Daniel called “the final and hardest task” is to consider how willing we are to “sacrifice growth to protect outcomes we care about”. Some argue that to do this we need to change the way we measure GDP to reflect these concerns – to bake in environmental externalities, for instance. Daniel argues passionately that this is the wrong way to go.

“No; these are not technical questions about measurement but moral questions about what matters.” As such they belong to the domain of politics, and the task at hand is to create a politics adequate to them: “We need new institutions” to bring citizens into the decision-making process. Citizens’s panels – focused not on small local issues but the biggest questions — have already proved a success in various domains: in Ireland they have been used to address abortion law, in France to look at euthanasia, in South Korea to discuss energy policy. They can supply a model. 

He ended on a note of optimism: despite our “age of anxiety”, we have “an existential opportunity in front of us; a chance for moral renewal – and we begin from a position of strength.”

  As the late philosopher Derek Parfitt put it: “We have the power not only to make life good in decades to come, but to make it better in ways we cannot possible yet imagine.”

Three key takeaways:

  1. Economic growth is a huge blessing to the species; but it’s a gift horse we do have to look in the mouth.

  1. The material world is finite, but the world of ideas is infinite. We can use that.

  1. The key to the right type of growth is the right type of technology: and we need a new politics to make that happen.