THE GROWTH ILLUSION

How economic growth has enriched the few,
impoverished the many,
and endangered the planet

by

Richard Douthwaite, 1992

Second Edition, 1999
ISBN 0-86571-396-0

Published by New Society Publishers
P.O. Box 189, Gabriola Island
BC, Canada, V0R 1X0
800-567-6772
nsp@island.net

Ever wondered how we could progress along the glorious path of growth, technical innovation and increasing efficiency for so long and end up with massive unemployment, wide spread poverty and the fear of economic collapse? This landmark book pulls together an impressive volume of economic history and historical data to reveal how the pursuit of growth benefits only a small portion of the population, and how the vast majority still fall for the rhetoric that we will solve our problems by aiming for growth, whatever the costs.

The following excerpts from The Growth Illusion will give you a small taste of the wealth of insight this 367 page book contains. Quotations, unless otherwise attributed, are from Mr. Douthwaite's writing.
" . . although (Adam) Smith delayed publishing his book The Wealth of Nations (1776) for several years in a vain effort to come to some other conclusion, he was finally forced to write that if each individual pursued his own advantage he was 'led by an invisible hand to promote an end which was no part of his intention,' and as a result did more to promote the interests of society than if he had deliberately set out to do so." "In spite of Smith's misgivings about endorsing a shallow excuse for selfishness and greed, his 'invisible hand' theory governs our thought about commercial behavior today and lies at the root of most of our economic and environmental problems." pp, 34
Douthwaite provides voluminous facts and figures which demonstrate that as growth progresses it takes more and more resources to achieve additional increments of growth, making the whole process progressively more inefficient.

As for international trade. . .
". . . The gains from trade are largely a myth fostered by those companies and countries in strong trading positions that stand to gain from bigger markets. "International free trade inescapably leads to a leveling down. It means that salaries and wages will tend to converge at Third World levels, and social security provisions in industrial countries will have to be cut, since these are an overhead which economies cannot bear if they are to compete successfully with countries without them. Only the owners of surviving trans-national companies and of natural resources will escape the general impoverishment. Already the islands of prosperity are growing steadily smaller in an otherwise sick, dilapidated and hungry world. The quest for corporate growth has much to answer for." pp, 95
Quoting Sir Arthur Lewis from his book The Theory of Economic Growth, published in the mid 1950's.
"The advantage of economic growth is not that wealth increases happiness, but that it increases the range of human choice. . . . Wealth would increase happiness if it increased resources more than it increased wants, but it does not necessarily do this and there is no evidence that the rich are happier than the poor or that individuals grow happier as their incomes increase. Wealth decreases happiness if, in the acquisition of wealth one ceases to take life as it comes and worries more about resources and the future. . . . happiness is not the only good thing in life . . . The case for economic growth is that it gives man a greater control over his environment and thereby increases his freedom." pp, 98-99
The pursuit of growth has marked the very core of society.
"The national obsession with rising GNP caused the main value change. A society was created in which wealth creators -- those actively involved in the productive process -- felt superior to other mortals. Paid work became much more important than anything done in the home, even something as literally vital as raising the next generation." pp, 122
Unemployment was even welcomed for its economic value.
"In 1958 a professor at the London School of Economics, A.W. Phillips, published a paper that was to have a profoundly damaging effect on millions of lives, By plotting the annual rate at which wages in Britain rose against the percentage of people unemployed for each year from 1867 to 1913 he produced what came to be known as the Phillips Curve."
From his investigation, Phillips concluded that "the level of unemployment might explain the level of inflation." He hypothesized that by maintaining a certain level of unemployment it might be possible to control inflation.

Douthwaite continues that this reasoning. . .
". . . proved enormously attractive to the politicians who immediately forgot the author's caveats. . . They were excited because Phillips work made it entirely defensible for them to let unemployment figures rise, as, the higher the figures were, the more downward pressure they could say they were placing on the inflation rate. Lower inflation, of course, meant more competitive exports, and hence better prospects for growth, quite apart from preserving the wealth of those with monetary assets." pp, 126
At the time an increase of unemployment to 1.5% was thought to be enough to control inflation. We have since been slowly conditioned to accept ever higher rates, with 10% now being reported as a condition we ought to expect. As we look with reverence to the 'greater good' of economic growth, we are supposed to overlook the trauma which unemployment causes in individual lives and the social problems which result.

The book contains several examples showing how the cycle of innovation, increased efficiency and growth create strong pressures to get new technology into the market as quickly as possible. The first enterprise using a new technology, will often make a great deal of money. The next ones to come on line do some-what less well and those that join later have to invest in the new process, but by then the market is covered, prices are falling and they are lucky to make back their investment. Those who do not adopt the new technology are left behind in the non-competitive dust.
". . .We have introduced and are introducing changes at too rapid a rate, long before their effects can be assessed, because the firms and the farmers that adopt new technologies early on make the highest profits, and those that adopt them more slowly or cautiously are driven to the wall." pp, 192
Rather than relying on the pursuit of self-interest to create wealth which will then 'trickle down' to the population, Douthwaite draws attention to Mahatma Gandhi's message that the route to a healthy society is to put the needs of the poorest first. He quotes from an Indian community leader who was influenced by the Hindu philosopher, --Vivekananda,
". . . the noblest thing a person can do is to work for the good of others. . .Getting a better house or being able to buy a motor bike is not development. What is important is one's relationship with one's neighbors." pp, 245
There is a fascinating chapter on a bold experiment at self-sufficiency which Ireland made during the 1930's. Tired of seeing large portions of their population emigrate for lack of work, the Irish elected a government that promised to put them to work making things for their own country. Douthwaite quotes from a lecture given by John Maynard Keynes at University College, Dublin, in April 1933, noting that . . "Keynes also attacked the paying of too much attention to what today we would call the 'bottom line'." The famous economist said:
"This whole conduct of life was made into a sort of parody of an accountant's nightmare. Instead of using their vastly increased material and technical resources to build a wonder-city they built slums, and they thought it right and proper to build slums because slums, on the test of private enterprise, 'paid', whereas a wonder-city would, they thought, have been an act of foolish extravagance which would, in the imbecile idiom of the financial fashion, have 'mortgaged the future'; though how the construction today of great and glorious works can impoverish the future, no man can see until his mind is beset by false analogies from an irrelevant accountancy . . .[emphasis added] The nation as a whole will assuredly be richer if unemployed men and machines are used to build much needed houses than if they are supported in idleness."
"The same rule of self-destructive financial calculation governs every walk of life. We destroy the beauty of the countryside because the unappropriated splendors of the countryside have no economic value ... London is one of the richest cities in the history of civilization but it cannot afford the highest standard of achievement of which its own living citizens are capable because they do not 'pay'." pp, 267
Growth requires ever expanding levels of consumption, but as Douthwaite observes;
"It does not take a high level of consumption to enable a country to be fed, clothed, housed, educated and entertained to an excellent standard -- unless, that is, an extraordinarily wasteful system dictates otherwise." pp, 280
Not only does this wasteful system put stresses on people and the environment, it doesn't work.
"No government has yet openly admitted that the rise in unemployment is a global consequence of economic growth. . . . , the fact that governments everywhere attempt to solve unemployment at home by raising national competitiveness in order to steal work from less competitive producers overseas proves that it is." (emphasis added) pp, 305
How has our society become so one-sided in its sense of values?
"Historically, a troika of competing influences has generally governed Western societies. The economic system was, of course, one influence, but it was constantly regulated and modified by the other two, the political system and the moral-cultural system, which is made up of diverse elements such a the press, the universities, writers and artists and, of course, the churches. Unfortunately, however, this latter group largely abdicated its moderating role in favor of the 'invisible hand' almost two centuries ago and then, when politicians made increasing national income their paramount objective, the rule of economics became absolute." pp, 315
Increasing numbers of people are becoming suspicious of this economic totalitarianism. We seek a society which takes into account other factors besides the bottom line. As the 'invisible hand' increasingly empties the pockets of those who cannot see it, and degrades the environment which it cannot see, people are more and more willing to think the unthinkable -- that growth is not the ultimate good. It is still heresy to say so however, so we want to get our arguments straight. The Growth Illusion will help immensely in developing your personal clarity on the matter. Much clarity is needed since people at present have little background for understanding anything besides the maxims of growth everlasting.