Posts Tagged ‘Growth scepticism’
Sometimes I get scared that the hardcore greenies might be right.
There’s a challenging talk up on my old fav, TED.com, by Tim Jackson who studies links between lifestyle, society and the environment. Basically he’s an economic growth sceptic.
In the talk he has a great line: “This is a story about us being persuaded to spend money we don’t have on things we don’t need, to create impressions on people we don’t care about.”
And that’s a modern economy in a nutshell. Debt, free markets, consumerism, advertising etc simply help keep the show on the road.
The TED talk also touches on a number of BigCake themes:
• The growing gap between rich and power
• The coping mechanisms of more debt and more work to maintain living standards and
• The allure of the ‘zombie’ economy’.
But it also confronts another belief – that the human race is smart enough to recognise that modern economies have created a hole and that we are clever enough to dig our way out.
BigCake’s always believed we can do this within the current system.
But Jackson reckons the human race has a choice: Trash the system or trash the planet.
What follows is an edited version of the first 10 minutes of his 20-minute TED talk. Part 2 to come.
Imagine, he says a world in 2050 of 9 billion people all aspiring to Western incomes.
How fast do we have to move – how clever do we need to be – to deliver our carbon targets?
Our current carbon intensity of economic growth [that is emissions per dollar of real gross domestic product] is about 770 grams of carbon.
In 2050 it has to be 6 grams of carbon – a 130-fold improvement.
That is 10 times faster and further than anything we have ever achieved in industrial history.
May be we can do – who knows.
Believing these numbers is crucial if you want to buy into Jackson’s argument. I haven’t been able to find any arguments to the contrary and anyway, he’d have to by way out to be wrong, so I’ll go with them for now.
Also as he writes elsewhere “efficiency improvements are continually offset by increases in scale”.
Back to TED Jackson says the only thing that has remotely slowed down the relentless rise of carbon emissions over the last decade is recession.
We are caught in a trap – a dilemma – of growth. We can’t live with it; we can’t live without it.
Our best avenue to escape from this is a kind of blind faith in technology, in our cleverness and in efficiency.
But shouldn’t we just check first that the economic system we have is remotely capable of delivering this kind of improvement.
The system works thus: Firms produce goods and provide us with incomes and then we can spend those incomes on goods and services.
This look harmless enough. The key feature is investment which equals a 5th of national income in most economies. It stimulates further consumption growth.
It also seeks out novelty – a process of creative destruction, continually chasing expanding consumer markets.
Human beings apparently love new stuff (and ideas and experiences). In every language, stuff is a symbolic language we use to tell each other stories, for example how important we are.
This ties in with the posts I’ve been writing about growing inequality based on the book ‘The Spirit Level’ which roughly says problems in rich countries are not caused by people not being rich enough, but by the scale of material differences.
So, says Jackson here’s a system that is locking economic structure with social logic. It’s an engine of economic growth driven by a sense of anxiety, what Adam Smith called “a life with shame”.
Now you need the hybrid car, the HDTV, two holidays a year in the sun, the net book, the ipad…[The zombie economy]
And even if we don’t want them, we need to buy them because if we don’t buy them the system crashes.
To stop it crashing over the last decades we have expanded the money supply – expanded credit and debt so we can keep buying stuff.
But is this really how people are?
We run up against a couple of anomalies.
In the crisis what do people want to do – they want to look to the future, they want to hunker down. Spend less and save more.
But saving is exactly the wrong thing do from the system point of view.
The system is at odds with who we are as people.
[More to come]
Hat Tip – NZ Institute
This post has been boiling away for awhile.
It pretty much gets some thought every time I do a post when I’m hit by the dull uninspiring language I’m sucked into using to describe economic growth.
Words and images are powerful beasts if they’re attached to vibrant, relevant and exciting ideas. I’ve found heaps of these ideas in the economic growth arena, but the life is crushed out of them by the words we use to describe them.
I’m not ignoring the fact that one person’s exciting idea is another’s crap one. However, most NZers have no fundamental problem with economic growth, as in they’d rather have it than not. It’s just that they’re not very enthused and that’s got a lot to do with the way it’s being sold.
Basically we need a new economic growth lexicon.
“Economic growth” as a way of describing our goal is both polarizing and dull.
There are negative connotations around both words. Economic, well there’s always been an public perception problem there, and growth is increasingly seen in cost terms rather than benefits.
Put the two words together and you’re pushing sh!t up hill.
The same problem applies to chunks of the way the pro-growth debate is couched:
• Gross domestic product per capita.
BigCake reckons anyone trying to sell economic growth to growth-sceptic Kiwis is going to fail if they solely push these buttons.
The (in PR speak) framing is just wrong:
• The majority of us are more interested in lifestyle than wealth
• Productivity improvements we have made have come from working longer (at the cost of lifestyle)
• GDP per capita – see lifestyle.
Governments have tried to sex up the issue with “economic transformations” and “economic agendas” with pretty dismal results in terms of rallying the troops.
So how do you frame the economic growth issue.
One word BigCake has always liked is progress. Definitions:
• Gradual betterment, especially the progressive development of human kind. (Merriam Webster)
• Advance or development, especially to better state (my old Pocket Oxford).
But that word has become old fashioned and a little bit political. It’s probably why it appealed to fellow blogger Policy Progress – a great word with a political subtext.
For a long while I think it was a powerful word for New Zealanders. It was a common theme in the first Labour Government’s thinking.
Some of its power came from the suggestion that progress was inclusive – everyone benefitted.
But it probably began to lose its power around the time people started saying ‘you can’t stand in the way of progress’. Then it was clear there were some losers.
Part of the problem is we now live in a much more complex, fast-moving, interconnected world. Finding an inclusive and non-weasel word or phrase to describe economic growth, that’s not so general that it becomes meaningless, is tough.
BigCake can’t think of one.
But I reckon part of the trick is to move away from having the economy as the central (and sometimes only) focus of what we want to achieve.
It’s more than that.
It’s scary how shakey support for economic growth in NZ is.
Most of us support growth, but that backing is delicately poised. It doesn’t take much to tip support over into opposition.
I’ve had a shot at grouping levels of Kiwi growth support:
- The majority of NZers. However, a 2004 Growth and Innovation Advisory Board survey described this support as “polite”, “fragile” and lacking “passion”.
- Few register as opposed to growth, but a significant number are at the ‘lukewarm’ end of positive.”
- And as Bridget Liddell has pointed out: “[We] don’t want too much growth that might mean too many people and that might mean a deterioration in access to this wonderful country”.
- Passionate growth support is largely the domain of the business community, particularly so-called ‘big business’.
- Mainstream NZ. The term ‘growth scepticism’ refers to the idea that previous promises of economic growth have either not been fulfilled, or if they have, the benefits have gone to the already rich and powerful. As a result Kiwis are very sceptical of the motives of growth proponents.
- BigCake figures this phenomenon spans the political spectrum with both main political parties open to attack in this regard.
- Many in the business community, particularly small enterprise owners, subscribe.
- A minority. As the GIAB survey showed, those who believe economic growth doesn’t matter are few.
- If it does matter for growth apathetics, it’s a close run thing between the benefits of growth (more jobs etc) and its costs (increased congestion etc) so ‘who cares’.
- Another minority who believe our ability to improve our economic lot is beyond our control.
- Much of this attitude maybe instinctive, but it has academic support from people like Philip McCann who believe factors we can’t control, like our geography (small and peripheral) and globalisation, mostly determine our destiny.
- A significant minority, not for its size but organisation. Opposition is based on the premise that growth, and particularly capitalism’s drive for ever greater levels of private consumption, have put us well down the road to environmental disaster.
From a growth backers’ view point, that’s that adds up to an ugly picture.
The main aim of the BigCake blog is to help increase Kiwi support for economic growth that improves our quality of life (which wraps in our personal wealth, how healthy we are, education levels, the quality of our natural environment, our lifestyle etc).
But without greater wealth, our quality of life will eventually suffer.
Anyway when BigCake’s is faced with a communications-type problem, he falls back on his PR training and lists the stakeholders (as above), and then tries to figure out what’s going on in their heads, then how do you get them from point A to desirable point B.
Support for growth is, in the words of the Growth and Innovation Advisory Board “fragile”. The GIAB’s work is getting a bit old now, but there’s no reason to believe our attitudes have changed that much.
The Global Financial Crisis and Recession represented what the GIAB would call “burning platforms” for change, but they’re now just smouldering, so not much hope there.
BigCake figures we still don’t see our lifestyle as being that bad compared to other countries and for the moment international surveys support this.
But it looks like we’re betting that this will remain the case, even if our level of personal wealth continues to fall relative to that of other countries.
And that’s a pretty dodgy bet.
I’m going through the interviews on the New Zealand Institute’s nzahead website looking for good quotes.
This one is from Bridget Liddell, a New Zealander and managing principal of New York-based innovation consultancy Fahrenheit 212. Liddell has also been closely involved in New Zealand’s economic growth debate.
“Kiwis have an ambiguous attitude to growth. They don’t want too much growth that might mean too many people and that might mean a deterioration in access to this wonderful country.
“In fact this is a false choice.
“The more that we don’t address these issues, the further down we slip and the more difficult it comes to retrieve the situation.”
Capita tunnel syndrome
For the last 10 years, government economic growth targets have missed the mark with the Kiwi public.
We’re more motivated by national wellbeing, our health, education levels and environment than by pure wealth which is how the last two governments have chosen to measure our place in the world.
Basically we’re much more interested in a better quality of life than a higher standard of living.
Our politicians’ tunnel vision means they keep banging away at sterile comparative income measures, such as top half of OECD in income or matching Australia’s wealth by 2025.
This fixation actually goes back to the 90s.
As a result, attempts to prod us into action over our falling relative incomes will ultimately fail because they won’t have long-term voter support. There are five elections between now and 2025.
In fact all past ones have failed and we’re not off to a great start in the current run chase against Australia.
The targets of course are not just politically difficult. In fact this is probably the easy bit compared to organising our economy to lift its performance.
The New Zealand Institute is about to plug the target gap with its nzahead campaign for a “big picture” growth goal that has 16 measures including a traditional gross domestic product (gdp) one along with ones for inequality, education, unemployment, productivity, innovation and the environment.
The Institute wants New Zealanders to start talking about what really matters and how we measure those things we identify as important.
As I think the Institute found out when nailing down its 16 measures, this is a difficult exercise.
Calculations for standard of living and quality of life overlap – both include information on wealth and income, but standard of living uses it as the main measure while quality of life focuses more on general wellbeing.
But it’ll be the ‘big picture’ measure of how we’re doing overall as a nation that’ll motivate Kiwis to change, not harping on about falling incomes, gdp per capita etc.
The fact is we perform a hell of a lot better internationally in the ‘soft’ standard of living measures, such as education, health and environment than we do in income.
Economists have figured out that gdp measures are flawed; Kiwis just know it is by looking around them.
For example, in Mecer’s Quality of Living Global City 2009 rankings, Auckland comes in at fourth equal. Sydney is the top ranked Australian city at 10th; Wellington is 12th.
This compares our country ranking of 22nd in the OECD in terms of per capita gdp.
The Mercer survey evaluates social environments, health, education, public services, recreation, shopping (!), housing, and the natural and economic environments.
In the Growth and Innovation Advisory Board’s 2004 survey of Kiwi attitudes towards growth (there’s been nothing similar since) quality of life was rated the most important with 93% of respondents rating it very important or important.
Next highest was education (83%).
Standard of living wasn’t among the measures included, but the money ones came in well down with employment prospects appearing in 6th place (at 76 percent) of the 12 measures and the potential to increase personal wealth 7th (68%).
So our standard of living is not, to use the GIAB’s phrase, a “burning platform” for change. Well actually, this is a burning platform – we just don’t see it or feel it.
Our quality of life isn’t a burning platform. The latest New Zealand General Social Survey found that our level of overall life satisfaction (at nearly 86%) is broadly comparable with other countries including Canada, the United Kingdom and Australia.
You’d think someone along the line would have realised this reality when they tried to set and sell an economic target.
The latest mistake is the current Government’s “close the income gap with Australia by 2025”.
At one level it’s clever – it’s catchy and something easy to get your head around – but it presupposes that Kiwis actually see the need to do this.
Yeah, I know the target is there as a way of measuring progress, but BigCake is convinced that the Australia 2025 target mainly exists to impress voters.
The GIAB survey, and from what BigCake can see around him, indicates we don’t consider matching Australia as a meaningful target.
Same for Labour’s top half of the OECD in gdp per capita and Morrison and Co’s Measurable Goal project’s aim of gdp per capita in the top 10 by 2025.
We need a measurable economic goal, but it’s got to be one that motivates your average Kiwi.
As Peter Biggs from the GIAB said at the time of the survey: “I suspect New Zealanders have reached a point of confidence in their values that they are now a bottom line.
“If we are to encourage economic growth and innovation we need to start with these core values, create a values-driven growth strategy, and move forward on that basis.”
BigCake hopes the New Zealand Institute project may have at last started a public discussion on a broader confident Kiwi-focused approach to creating a target.
But any new target should not downplay the importance of what’s in the wallet. Our future as a first world nation depends on that.
The idea of this post began with scented toilet rolls – Western civilization has brought us to this?
It’s an example of the complete and utter madness and waste done in the name of the consumer.
I don’t know if the manufacturers did any consumer research to show there was any demand for scented arse wipes, but they probably saw an chance to differentiate from the ones that don’t leave you smelling of roses after a sh!t.
Or maybe I’ve missed the point.
Anyway, this is but a small and seemingly innocuous example of a humungous problem called the Zombie economy.
A larger more offensive example is food waste. It’s estimated that 40% of US food production is thrown away and that food waste per person has increased 50% since 1974.
“Food waste now accounts for more than one quarter of the total freshwater consumption and 300 million barrels of oil per year,” says a study by the National Institute of Diabetes and Digestive and Kidney Diseases in the US.
According to the study, food waste also accounts for:
• more than one quarter of total freshwater consumption
• about 300 million barrels of oil per year.
I first spotted the term Zombie economy on a friend’s blog (H1BPositive). He describes it as “the massive brainwashing people are getting this century into thinking that if you don’t have a 50″ flat screen Sony TV, XBOX, surround sound, $10,000 on your credit card, an iPhone 3GS, 2,000 Facebook friends, the new Commodore and a 6 figure mortgage, you are not actually living”.
Just checked – got none of those.
But a lot of people do, or want to, along with scented poo paper.
And this type of behaviour is the foundation of economic growth – new consumer wants and needs are stoked by marketers to feed the never ending growth demands of business.
And does it make us any happier? Mostly not.
But as mentioned in a previous post There’s more to growth than more, more .
The Zombie economy represents a dumpster-sized target for opponents of economic growth. And they have a point.
Our desire to fill our lives with bling is not sustainable – we’re going to run out of resources to keep pumping this stuff out.
Turning the bling ship around before it runs aground won’t be easy, but there are signs that more of us are wising up.
As mentioned in a previous post (Kiwi authenticity – Crafars v Icebreaker) “clean and green” has been a huge hot trend in major markets for a while and on a list of micro trends for 2010 produced by Marketing Week was authenticity.
H1BPositive thinks this is an “equal and opposite force of the zombie economy”.
[Maybe not equal... yet - BigCake]
“As things get more fake, buying local produce, riding a bike (not a hipster fixie though) or going to live music becomes a life-enhancing thing,” says H1BPositive.
Dunno if I’m being overly optimistic, but I think Kiwis get this more than many other countries. (Note: H1BPositive is based in Melbourne).
As a gross generalisation, our lifestyle is seen as more important than possessions beyond the ones to put a roof over our heads, get from A to B, watch sport, cook dinner, catch fish…
The public reaction to planned tax changes comes down to a matter of faith in two things we mostly ain’t got much faith in – economic theory and politicians.
But a faith divide appears to have developed - some of us have more faith than others.
The rich appear to have it; the poor not.
The young have it; not the old.
BigCake would pick the poor and old as the bedrock of the growth skepticism movement – the belief that economic growth promises of the past have failed to deliver, so why trust current ones?
The public reaction to the Government’s planned tax and property rules changes, based on the latest Westpac McDermott Miller Consumer Confidence Index, is a variation on the old saying ‘what you believe depends on where you sit’.
The rich, and to a lesser extent the young, will be the winners from the increased GST/tax cuts tradeoff, so not surprisingly think it’s great.
Changes to property taxes will favour the young (houses will be cheaper to buy) and not be so good for the old (the houses they own will be worth less and if they have rental properties, they’re likely to lose the right to depreciate the building).
The poor (and maybe the old) probably won‘t be any poorer, but they won’t be a hell of a lot better off either, so predictably they are less enthused.
For this last group to see any upside in the changes, they need to have faith not only in politician promises to ensure no one (or at least very few people) will be worse off, but also faith in economic theory.
In short the theory is that, in the words of the Tax Working Group, “increasing the GST rate to 15% would …result in reducing the taxation bias against saving and investment”.
This is a good thing because without this bias there’ll be more savings and investment which will lead to more economic growth and more economic growth will be good for the poor.
Similarly, the theory is tax cuts are good for growth and the poor.
Join the dots and everyone will be happy…eventually.
Intriguingly there’s a suggestion that not all members of the Tax Working Group buy this wholesale. The report says “Most members of the Group consider that increasing the GST rate…”
Anyway, the poor and the old are not buying it.
BigCake suspects the public backlash over the increased GST/tax cuts package will quickly wash away after the changes are implemented.
But the Government’s tentative actions on the tax front highlight a mismatch between the Government’s economic growth aspirations, such as a “step change” and matching Australia’s wealth by 2025, and the reality of what it is doing.
Get the faith guys!
Today’s Dominion Post has an ad (Closing the NZ v Oz gap – Mission impossible) from a Leon Dale whose beef is against selling New Zealand state-owned assets overseas.
He asks the classic growth sceptic question: 20 years after Government reformers promised we would be better off after selling state assets and restructuring public assets, why do we need to borrow $250 million a week to balance the books?
Which is a fair enough question, though there’s the effect of the recession. No recession and the Government books (like many companies) wouldn’t be in such a big mess.
Dale’s worry is about profits from our overseas-owned banks, supermarkets, electricity retail and transport services leaving New Zealand.
BigCake is not sure this necessarily leaves us poorer – it depends what these companies put back in to New Zealand.
Without Australian-owned banks we wouldn’t have much of a banking system.
Being clever about how we sell our assets is the key. As Dale points out, some sales in the past were bad for the country, but that doesn’t mean we can’t get it right in the future.
One thing BigCake would like to see is more New Zealand public ownership of state-owned assets that are sold.
The problem here is we ain’t got enough savings to do it, though KiwiSaver and the New Zealand Superannuation Fund are helping put this right.
Dale also believes, like BigCake, we should be encouraging foreign ownership in our export companies.
Selling New Zealand businesses, whether state or publicly owned, is not necessarily a bad thing to do.
We’ve just got to make sure the new owners put more back into New Zealand, through investment, jobs, access to markets and introduction of new technology and ideas, than they take out in profits.
Dale’s parting shot is: “If this situation isn’t fixed soon, my family and I will be on our way to a country that can look after its own interests.”
As well as the Kiwi growth sceptic, there’s a group I call the growth fatalists – those who believe that if we go down the economic gurgler, “well, you know there’s not much we could have done about it.
“We’ve got no mineral wealth, we’re thousands of ks away from our markets, the government can’t fight its way out of a wet paper bag, blah, blah…”
But all is not lost for the economic basket cases of the world (and future ones).You don’t have to be poor losers.
That’s pretty much the message of False economy – A surprising economic history of the world, a book I’m reading at the moment and have blogged on before (see “Don’t cry for me Argentina”).
The book’s author, Financial Times trade editor Alan Beattie, attacks the idea that a country’s economic future is “predestined and that we are helplessly borne by huge, uncontrollable, impersonal forces.”
BigCake suspects this school of thought is stronger in New Zealand than many other countries thanks to the fact that as a piece of economic jetsam at the bottom of the world, we often feel shoved around. Well more so than larger countries.
Beattie’s list of fatalistic myths includes:
• The US and Western Europe were always going to be rich
• Other regions such as Africa were always going to stay poor
• Market forces and globalisation are unstoppable.
His book points out that countries have choices and those choices have “substantially determined whether they succeeded or failed.
“You don’t get rich by accident.”
Same for becoming poor.
“There are plenty of reasons why countries have made mistakes. Often their decisions are driven by a particular interest group, or a coalition of groups, whose short-term gains stand at odds with the nation’s longer term benefits.
“But such interests can be overcome.
“Countries that succeed are those that are flexible enough to learn from experience and which do not come to be captured by groups whose interests are sharply at odds with those of the country as a whole,” Beattie says.
Argentina is country that has failed on both counts. Ireland is probably a country that has succeeded along with the Asian tiger countries (Hong Kong, Singapore, South Korea and Taiwan).
How does New Zealand stack up to Beattie’s test? (BigCake’s ratings):
• Flexible enough to learn from experience – poor. Flexibility only extends to the extremities of the political, social and commercial corpuses
• Not captured by interest groups – hah! Where to start: monopolists and semi monopolists, antediluvian farmers, oldies, banks and anyone else opposed to change only because it threatens some “right” they have been given at the expense of the rest of the country.