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To Save The Economy, We Have To Break Its One Sacred Rule

We must stop worshiping the false god of GDP growth.

To Save The Economy, We Have To Break Its One Sacred Rule
[Photo: Anton_Ivanov via Shutterstock; App Photo: 20th Century Fox (Wall Street, 1987)]

Scholars are still trying to figure out why the society on Easter Island collapsed, ending the people famed for their construction of towering stone heads. One interesting theory holds that it had to do with the heads themselves. Somehow, the islanders decided that the giant heads represented power and success, so different groups competed to build as many heads as possible. But because there was only one quarry, to move the stones around the island required felling trees to use as rollers. To feed their lust for heads, they felled the trees so eagerly that, over just a few generations, what was once a tropical forest was reduced to barren scrubland.

The islanders must have realized that their obsession with heads would quickly spell their doom. As the project wore on, they no longer had sufficient wood to build fishing boats or houses, nor trees from which to gather fruits and nuts. They must have seen this disaster unfolding—slowly starving to death and forced to live in caves for shelter—right up until they felled the last palm. It was all because of a myth, but a myth so powerful that, despite knowing its madness, they could not resist it.

Humans are strange creatures. We create our own myths and then we live by them almost as though we didn’t create them at all, as if they were handed down to us by the gods. And this is not just a characteristic of small societies. Our global civilization has its fair share of powerful myths, one of which is remarkably similar to that which destroyed Easter Island. Just as multiplying heads became the sacred rule of Easter Island economics, so there is one sacred rule that underpins our global economic system: namely, that GDP must grow, and must grow at all costs. Why must GDP grow? Because GDP growth is equivalent to human progress.

We tend to take the GDP measure for granted as though it has always existed. Most people don’t know that it was invented only recently. It has a history. During the 1930s, the economists Simon Kuznets and John Maynard Keynes set out to design an economic aggregate that would help policymakers figure out how to escape the Great Depression. Kuznets argued for a measure that would help us maximize human well-being and track the progress of human welfare. But when World War II struck, Keynes argued that we should count all money-based activities—even negative ones—so we would know what was available for the war effort.

In the end Keynes won, and his version of GDP came into use. GDP was intended to be a war-time measure, which is why it’s so single-minded—almost violent. It counts money-based activity, but it doesn’t care whether that activity is useful or destructive. If you cut down a forest and sell the timber, GDP goes up; GDP does not count the cost of losing the forest as a habitat, or as a future resource, or as a sinkhole for carbon. What is more, GDP doesn’t count useful activities that are not monetized. If you grow your own food, clean your own house, or take care of your aging parents, GDP says nothing. But if you buy food from Tesco, hire a cleaner, and send your parents to a nursing home, GDP goes up.

Of course, there’s nothing inherently wrong with measuring some things and not others. GDP itself doesn’t have any impact in the real world. GDP growth, however, does. As soon as we start focusing on GDP growth, we’re not only promoting the things that GDP measures, we’re promoting the indefinite increase of those things. And that’s exactly what we started to do in the 1960s. GDP was adopted during the Cold War for the sake of adjudicating the grand pissing match between the West and the USSR. Suddenly, politicians on both sides became feverish about promoting GDP growth. GDP growth became a sacred rule. And we remain in thrall to it today.

The imperative for growth is incredibly powerful; probably the most powerful force in our world. When the entire global political establishment puts its force behind this goal, human and natural systems come under enormous, overwhelming pressure.

What does this pressure look like in the real world? In India, it looks like corporate land grabs, which leave peasant farmers dispossessed. In the U.K., it looks like privatization of public services—with corporations eager to exploit untapped markets. In Brazil it looks like deforestation, which is eating the Amazon at a rapid clip. In the U.S. it looks like fracking, backed by a government desperate for cheap energy. Around the world it looks like trade agreements that strip away regulations that protect workers and the environment. And for all of us it looks like longer working hours, expensive housing, depleted soils, polluted cities, wasted oceans, and—above all—climate change.

We normally think of these as separate crises. But they are not: they are all connected. They all proceed from the same deep logic of GDP growth, the collective madness at the heart of our economic system. To fight them as separate issues is to mistake the symptoms for the disease.

People who spend their lives pushing against these destructive trends will tell you how futile it feels. It is futile because our governments don’t care. They don’t care because according to their most important measure of progress, destruction counts as good. Indeed, under the tyranny of GDP growth, the destruction must continue at all costs. The problem here is not that humans are inherently destructive. The problem is that we have created a myth that encourages us to behave in destructive ways, and have given that myth the power of a sacred rule. As Joseph Stiglitz has put it, "What we measure informs what we do. And if we’re measuring the wrong thing, we’re going to do the wrong thing."

Why does GDP growth retain such a hold on our imagination? Because we assume that when GDP goes up, it makes our lives better: it raises our incomes, it creates more jobs, it means better schools and hospitals and so on. This may have been true in the past. But unfortunately it no longer holds. In the United States GDP has risen steadily over the past half century, yet median incomes have stagnated, the poverty rate has increased, and inequality has grown. The same is true on a global scale: since 1980, global GDP has grown by 380%, but the number of people living in poverty has, according to World Bank numbers of people living on $5 a day, increased by more than 1.1 billion. Why is this? Because past a certain point, GDP growth begins to produce more negative outcomes than positive ones—more "illth" than wealth, as the economist Herman Daly has put it (if "ill" is the opposite of "well," "illth" is the opposite of "wealth").

GDP growth might make sense on a planet with endless room and endless resources. But we don’t live on such a planet. In fact, we’re already overshooting our planet’s biocapacity by more than 50% each year. There are no longer any frontiers where accumulation doesn’t directly harm someone else, by, say, degrading the soils, polluting the water, poisoning the air, and exploiting human beings. At this point in our history, GDP growth is creating more misery than it eliminates. And the problem is not just that the growth is inequitably shared, although that it is a major issue; the problem, rather, is aggregate growth itself. In our era of climate change, even sober scientists are pointing out that growth is leading us down a path that that has widespread famine and mass displacement just around the corner.

Yes, some try to reassure us that our economy is gradually "decoupling" from material throughput, and that soon we will have growth without destruction. But study after study has proven that it’s not true. In fact, global consumption of materials has nearly doubled over the past 30 years, and accelerated since 2000.

The rule of GDP growth may seem sacred, but it is not. As quickly as we created it, we can pull it apart. And pull it apart we must—it’s time for the giant stone heads to roll. There are already movements in this direction. A number of states and countries have adopted much more sensible alternatives, like the Genuine Progress Indicator, which seek to promote human and environmental well-being. There are many others we might consider, and it doesn’t much matter which we choose—indeed, each city or country could pick a different measure, or no measure at all. The important thing is that we shake off the tyranny of GDP growth and open up a creative, democratic conversation about what kind of world we want to live in.

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