March 06, 2011

A sensible approach to economic growth policy

Collectivists are divided about economic growth. On one side, conventional socialists and conservatives believe that government should promote it. On the other, Ecological Economists and other greens want government to stop it. The idea that government can effectively facilitate economic growth applies mostly to fantasyland, while the opposite one of government hampering economic growth is put into practice everyday in every country with spectacular results.

Regarding the desirability or not of economic growth policies, an article in the latest issue of Ecological Economics (Environment versus growth — A criticism of “degrowth” and a plea for “a-growth”, by Jeroen C.J.M. van den Bergh) came as a pleasant surprise:
If one accepts that GDP (growth) is not a robust, reliable indicator of social welfare (progress) then the only solution is to ignore it and as a result be completely indifferent about GDP growth. GDP growth is good in some periods or for some countries, but unconditional growth is not a wise aim. GDP growth is not generally necessary or sufficient for progress. Neither is GDP degrowth necessary or sufficient for sustainability. Correlations between GDP and welfare or between GDP and environmental impact are not constant and fixed over time. One can therefore not exclude the possibility of “dirty GDP degrowth” or a degrowth which hardly reduces environmental impact.
Instead of a policy of shrinking the economy van der Bergh advocates changing the composition of production and consumption by taxing activities with negative environmental externalities. He also wants government to allow "a flexible labor market that allows for part-time work contracts", to limit advertising of luxury goods and to sponsor technological research. I doubt the usefulness of the latter two proposals, but overall van der Bergh's position is very sensible.

In defence of degrowth is Giorgos Kallis's response to van der Bergh. It hurts to read it.

1 comment:

  1. Reading through your blog and reading the original articles you comment on, I find that I am less and less convinced that you are reading the full text of the articles.

    Everyone is entitled to their own opinions. Enjoy yours.