The Sweet Spot
As Western economies continue to languish, some economists and environmentalists have asked whether a return to the high growth rates of the past is possible, sustainable, or even desirable. Among the slew of books published in the aftermath of the crash, perhaps the most influential -- especially in the euro zone, which is now fighting for survival -- has been Prosperity Without Growth, by the British economist Tim Jackson. Jackson is something of a Renaissance man: adviser to governments, corporations, and asset management companies; award-winning dramatist; and, since 2006, director of the Research Group on Lifestyles, Values, and Environment (RESOLVE) at the University of Surrey, England. Prosperity Without Growth began life as a report for the British government’s Sustainable Development Commission, which, in a sign of the times, was abolished in March 2011, a casualty of Prime Minister David Cameron’s austerity program.
Jackson fundamentally questions the idea that increases in gross domestic product are a meaningful measure of a nation’s economic health. He describes GDP as "nothing more and nothing less than a measure of 'busy-ness' in the economy" -- regardless of whether all that economic activity has any redeeming social value. Prosperity Without Growth presents an unusual marriage of ideas, combining Jackson’s skepticism about growth with proposals by the likes of Deutsche Bank, the second biggest bank in the world, for a "Green New Deal" that would channel economic stimulus funds preferentially into low-carbon energy development, energy-efficient buildings, fuel-efficient vehicles, transportation infrastructure, and an upgraded electricity grid, all of which would create jobs. OnEarth executive editor George Black visited Jackson at his office in Guildford, just outside London, to ask how this vision has fared over the past three years.
You say in your book that "questioning growth is deemed to be the act of lunatics, idealists, and revolutionaries." Is that more true or less true now than when you wrote it in 2009?
Both. It’s more true in the sense that there’s a ferocious backlash against those who question the quasi-religious fervor about getting growth back. But at another level there’s this really interesting thing going on, with a whole spectrum of people beginning to question the assumption that it’s desirable, from ordinary people who have always been uncertain about why things must expand indefinitely to groups that have previously been obsessed with the idea of growth, like the World Economic Forum in Davos. It continues to surprise me that my book has had such resonance among business leaders. I was trying to say that it’s a real dilemma to structurally reorganize your economy. This isn’t an easy thing, and there are no off-the-shelf solutions. But we have to go into that place, no matter how dark and counterintuitive it seems. And I think that’s something the more visionary CEOs respond to, actually enjoy to some extent.
Other than just relishing a challenge, what’s driving these people to embrace such radical ideas?
I think they have real concerns in the wake of this economic crisis, looking at commodity prices, the fragility of supply chains, environmental constraints, the potential for resource scarcity. These issues now really scare many enterprises. This is a recession unlike any other. In a normal recession, you find your input costs falling, you find that economic conditions get slightly easier in terms of your supply chains. But that isn’t happening. It’s a very different climate.
The cynic might say that you can’t get away from the word sustainability in the corporate world these days.
Yeah, I tend to use it as little as I can, to be honest, partly because it can just be a meaningless tagline, but also because it provokes antagonism from mainstream sectors. In the U.K. we took sustainability more seriously than many other countries. We were the first to produce an action plan for sustainable development, in the 1990s. But there’s been quite a frightened retreat from that language. That’s partly because of the financial crisis -- sustainability is seen as an unnecessary luxury. But there are also people who see it as an act of ideological warfare, a plot to undermine capitalism. So I try to avoid the word.
When the crisis hit, Deutsche Bank identified a "sweet spot" for investment in sectors that would create green jobs. But the results have been mixed, to say the least.
Worldwide, the commitment to green stimulus has varied a lot. The greenest recovery package was in South Korea, which targeted more than 80 percent of its stimulus funds toward environmental goals. Here in the U.K. it was less than 7 percent, and in the United States it was about 12 percent. In dollar terms, that amounted to about $94 billion. But the sweet spot wasn’t quite so sweet as Deutsche Bank hoped. It was sweet in the sense of opportunity, but not in the sense of execution. Enormous amounts of money were thrown into structures and institutions that weren’t ready to deal with them.
With Solyndra [the solar panel manufacturer accused of squandering half a billion dollars in U.S. government subsidies] being the poster child, of course.
Well, in the context of a $787 billion stimulus package, there was always a danger that some of the money would go astray, would be misallocated or undermanaged, and inevitably therefore you get a backlash. Solyndra is an easy target. But that doesn’t mean the sweet spot isn’t still sweet in terms of opportunity. It does mean that we don’t yet have the institutions to manage the money in a way that maximizes those opportunities.
To play devil’s advocate, many of the people who are driving the best innovations in green technology are also passionately committed to economic growth. In other words, they seem to believe you can have it both ways.
It depends on what you mean by "best." I know people like Jeremy Leggett at Solar Century, who has built up a very impressive company here in the U.K. with a very good understanding of the limits of natural resources. He would certainly argue that you can do a lot within the existing economic model by developing better technologies. And his company is successful; it keeps its investors happy. But at the same time, he absolutely understands that if you extend the growth-based model at scale for nine billion people, all aspiring to this kind of lifestyle, by 2050 you just have a "does not compute" sign leaping out at you at every turn.
Which takes us to China. You’re okay with very high growth rates there because of the need to raise millions of people out of poverty. But doesn’t their model depend on feeding Western consumption habits, which in turn lock us into a growth-based model too?
To an extent, yes, but I think that’s been decoupled a bit by the financial crisis. China has a very canny, sophisticated leadership, and its strategy increasingly is to feed its own domestic demand and demand from the middle- and low-income countries in Asia, Africa, and Latin America. It’s the West that has suffered most from the economic crisis, so the Chinese model will depend less and less on Western consumption. China has also made enormous strides over the past 20 years in bringing down the energy intensity of its economy. We have no moral right to make judgments about China’s lifestyle aspirations. The frontier for thinking about alternatives to a growth-based economy has to be in our high-consuming, high-emitting nations, not in the developing world.