Is Growth The Be All And End All?Karen Pennar
The Economics of Sustainable Development
By Herman E. Daly
Beacon -- 253pp -- $27.50
Every four years, in what has become a campaign ritual, Americans are asked whether they are better off than they were before. Voters' moods may be hard to gauge, but economic measures of well-being are readily at hand. And there is little room for debate: Incomes and wealth should be rising. Economic growth, as measured in the national income accounts, is an unalloyed good.
But is it? Hardly, says Herman E. Daly, formerly of the World Bank and now on the faculty of the University of Maryland. Daly is no rabid environmentalist: In his new book, Beyond Growth, he even criticizes some positions adopted by the "greens." Nonetheless, he believes that our consumption of resources and our despoliation of the environment are not only morally reprehensible but also "uneconomic." His solution: jettison cherished notions about economic growth and promote a "steady-state economy"--one that does not grow by adding income each year but develops by using and allocating resources in new ways, often by the application of new technologies.
Even by the standards of many environmentalists who advocate "sustainable development," this is a tall order. But Daly is adamant. Too many people have confused growth, which he defines as quantitative expansion, with development, which he defines as qualitative improvement. As a result, even the term "sustainable development" has lost much of its meaning.
Beyond Growth is not an easy read. A moralizing, self-righteous tone surfaces periodically, excessive theorizing weighs down some passages, and certain recommendations seem utterly pie-in-the-sky. Still, the arguments are so provocative, and frequently so compelling, that this volume is well worth inspection.
Underlying Daly's arguments is the premise that the global economy is but a subsystem of the global environment. Hence, it must function within the limits set by the environment: It was never meant to grow in perpetuity. By contrast, he argues, most economists view the environment and its material resources--if they consider them at all--as a subset of the global economy. And the raison d'etre of the global economy is growth.
In an earlier time, when resources indeed seemed limitless, says Daly, this view might have been acceptable. But exponential growth has made the world "full of us and our things, but relatively empty of what had been there before." Today, both resource consumption and measures to protect the environment are counted as increments to income, and hence as contributors to growth. In fact, says Daly, it is likely that the marginal costs of each increment of growth now exceed the marginal benefits--but we don't know it, because we don't properly measure the costs.
Daly is no naif. He knows full well that he is questioning the very essence of the way we live and the way governments operate. He knows, too, that his arguments challenge the most basic premise of economic orthodoxy--that growth is good.
So Daly anticipates and tries to demolish counterarguments, such as economists' overriding faith in technology. While he agrees that technology does indeed spur development and helps to substitute for resources, it cannot do so indefinitely, he argues: "You cannot make the same house by substituting more saws for less wood." And drawing on microeconomics' notion that there is an optimal scale for every enterprise, the author argues that we must recognize an optimal scale, too, for national economies. He favors, for instance, the tradable pollution-permits scheme, which "limits the total scale of pollution...yet allows reallocation among individuals in the interest of efficiency."
He takes aim at widely accepted arguments that free trade benefits all nations: David Ricardo, the father of the principle of comparative advantage, assumed that goods were mobile but that capital was immobile. Since we now see the latter to have been untrue, "the argument for globalization based on comparative advantage is therefore embarrassed by a false premise." And he gamely tackles subjects that economists have generally regarded as beyond their ken, such as the need to curb population growth. To accomplish this, he advocates the "democratization of birth control--both attitudes and techniques."
Daly's critiques of economic orthodoxy, even when they are not entirely convincing, deliver a powerful and much-needed jolt to conventional thinking. But Daly will lose some readers, especially toward the end of his book. Two chapters on relatively unknown researchers who criticized traditional economic policies for their effect on the environment seem gratuitous.
And Daly's final section on ethics, religion, and sustainable development will strike many readers as over the top. For instance, he invokes Biblical injunctions against inequality of incomes to make the case for limiting to 10 or at most 20 the multiple by which the top income in a society should exceed the lowest. Leaving aside the question of whether or not such arbitrary limits are desirable, the chances for mandating any limits are clearly nil. Too often, Daly seems to gloss over the myriad obstacles to changes he recommends. Perhaps that shouldn't come as a surprise. Radicals who try to topple an orthodoxy are not noted for being practical.