From GDPism to genuine equity

Blog reflection

Praful Bidwai | June 30, 2010

Praful Bidwai examines articles and blog posts by The Broker to discuss the disconnect between gross domestic product and social progress. He concludes that a radically new economics must be developed from the bottom up.

As someone living in India, where worship of gross domestic product (GDP) growth (GDPism) is the official religion, I am struck by the utter bankruptcy of neoliberalism. India’s two decades-long annual growth of 6-8% has done little to pull the bottom third of its 1.1 billion people out of grinding, degrading poverty or provide healthcare, safe drinking water and education to the majority of the population. The top 10-15% have prospered as never before and developed an insatiable consumerist appetite, which is one of the main drivers of growth.

India’s story starkly illustrates the disconnect between GDP and social progress. This is one of the central themes that The Broker is exploring in its new series of articles and in the Global Green Economics blog, 1 launched at the Degrowth Conference in Barcelona in March 2010. I generally agree with the need for a new economic paradigm.

Until the 1970s – jocularly termed the period of the 'Hindu rate of growth' (3-3.5%), since Hindu society has supposedly remained unchanged for centuries – employment usually rose by 2% a year. Now, an 8.5% rise in GDP only produces 1.3% more jobs. Organized sector jobs are shrinking as work becomes informalized. The unorganized sector – where conditions are harsh and wages are barely at subsistence level without job security – accounts for 93% of total employment.

India’s growth is unbalanced. It has a near-stagnant agricultural sector (on which 600 million people depend), sluggish to moderate industrial expansion and a services boom. Faster GDP growth has widened regional disparities to a point where it is hard to speak of one India. Income differentials, always notoriously high, have grown explosively. Agriculture is in great distress: 200,000 farmers committed suicide between 1997 and 2008. And 77% of Indians make do with less than half a dollar a day. India’s Human Development Index ranking captures this reality very poorly. Even so, it has fallen from 121 to 134 since 1991. India has performed poorly in quality of life and economic welfare during the two highest-growth decades in recent history.

Unequal growth has increased mass suffering through dispossession (especially of land) and forced migration, while festering urban slums persist. GDPism has exacerbated social stress and nature-society imbalances, and grievously damaged social cohesion. India is seething with countless conflicts – ethno-religious, inter-caste, over regional autonomy – and violence against the poor, women and low castes, not to speak of the Maoists and counter-insurgency operations in Central and Eastern India. Even the elite, which increasingly lives in gated communities, is not secure or confident.

India’s environmental record is dismal. It is turning rivers into sewers, destroying rainforests and polluting cities at a nightmarish rate, even as climate change effects become apparent. With its greenhouse gas emissions rising twice as fast as the world average, India has become the world’s fourth largest emitter. The bulk of this increase is caused by elite consumption: car sales are growing 30% annually. However, most Indians live frugally and have a carbon footprint of under one tonne, compared to a 10 tonne average in the European Union. A tenth of the Indian population, like forest dwellers and urban waste recyclers, have a negative footprint!

If you can fix India’s social equity and ecological problems in climate responsible ways, you can fix the world’s.

A new economics

Recent articles in The Broker and blog contributions on the magazine’s website discuss the need for a new economics that incorporates solutions to these very problems. They provide interesting perspectives and propositions for reflection. Especially relevant are the articles by Jeffrey Sachs and Peter May on ecological economics, 2 by Jeroen van den Bergh on ignoring GDP, 3 by José Eli da Veiga on alternative measurements of well-being and the blog contributions by Joan Martinez-Alier, 4 Tom Green and Gjalt Huppes on degrowth. 5

These not only lucidly critique market-obsessed economics and metrics, but advocate establishing new institutions and changing behaviour in order to provide the social and environmental equity that is lacking in the market. They emphasize a decisive break with fossil fuel dependence. Yet, they do not minimize the complexities of the task, such as introducing these concerns into the political mainstream.

Even Jeffrey Sachs – of all these authors the closest to the mainstream – concedes the limitations of the market and business-as-usual (BAU) approaches, and argues for pluralism in macroeconomic decision making. One wishes, however, that he had sought alternatives that went beyond the Group of Twenty (plus Africa) and public-private partnerships, and explored to what extent food, energy, transport and health problems are related to the maldistribution of technologies and resources. Richard Register and Ellie Perkins’ reports from the 3rd International Conference on Eco-Efficiency and recent blog contributions on degrowth and city redesign are also insightful. 6

But some of these issues need more critical reflection. First, the central question does not revolve around ‘"decoupling" economic growth from natural resource depletion’, as Peter May writes in ‘Revaluing the environment’ in issue 18 of The Broker. Rather, the question is how to decouple the provision of the basic necessities of life from economic damage with human dignity for all (which might not need conventional growth). Human welfare must be defined by the fundamental criterion of universal access to the many dimensions of well-being, including food security, safe drinking water, healthcare, shelter, education, modern energy services, political voice, participatory governance, nourishing relationships and personal and community security. Da Veiga examines well-being by way of the Stiglitz Commission’s 2009 Report on the Measurement of Economic Performance and Social Progress, and other proposals which are not confined to product-driven accounting.

The welfare agenda

The welfare agenda entails creating a global society with equal entitlements for all, while reducing the human economy’s burden upon the Earth. This is dauntingly ambitious given the global South’s huge human development deficit and pervasive deprivation, and the disproportionate burden it bears from the effects of climate change, historically caused primarily by the North. It will necessarily require a massive North-South transfer of resources, including knowledge. The debate in The Broker has not given this issue enough attention yet.

A fourth of the South’s population lacks secure access to adequate nutrition, including 48% of Indian children. Similarly, billions have no access or very poor access to modern energy services like electricity. (In India, 45% of households have no electricity connection. And only 11% of its population consume more than 100 kWh every month – compared to the average US household’s 900 kWh.) Similar disproportions exist in other indices.

Economists often assume a North-South equivalence (for example in water or electricity costs) and BAU scenarios in resource-use efficiency when translating the agenda of the universal provision of basic necessities in the South into physical or GDP terms. But Southern costs tend to be considerably lower in purchasing power parity. Many Southern economies are not yet locked into emission-intensive production or systems of organizing social life. They can leapfrog to more resource-efficient or low-carbon processes without going through the same technological stages as the North. 8

Thus, the agenda will be less onerous in practice than it appeared initially, especially if non-BAU scenarios (which many contributors to The Broker consider relevant for macroeconomics) are assumed for technology development too. These developments pertinent to the South must be facilitated by open-source and common-pool knowledge and by relaxing intellectual property restrictions – another insufficiently debated issue.

Second, an emphasis on eco-efficiency leads, as has been noted by Bas de Leeuw at the eco-efficiency conference, to ‘rebound’. In other words, people buy more of a particular product, which is what happened with fuel-efficient cars. This calls not for a price increase, but a substitution of the product or alternative methods to achieve the same goal. If the goal is mobility, public transportation must replace cars.

Even here, we must abandon familiar formulas and seek radically different solutions. For instance, high-speed trains are ecologically superior to airplanes for commuting between cities that are hundreds or even a thousand kilometres apart. But they require infrastructure investments with a high carbon footprint. The real question is whether people must live in large urban agglomerations and commute, and whether alternative means of organizing habitats, workplaces and communications can be created at low economic and ecological costs. Here, Richard Register’s work on redesigning cities and ‘rolling back sprawl’ merits attention, as does Ellie Perkins’ work on the potential of greener cities. 9

Third, as several contributors rightly state (for example May and Huppes), we must seek alternatives in fields such as energy, urban planning, construction, transportation, agriculture, industry, water and home appliances, which involve significant greenhouse gas emissions. ‘We’ means local communities, cities, national governments and multilateral organizations, and along another axis, climate scientists, economists, energy planners, architects, water engineers, agronomists, anthropologists, and other social scientists. 10

Take energy. The conventional planning approach is dominated by supply-side considerations that correspond to corporate concerns. But people do not need energy for its own sake. They need the services it provides for tilling fields, grinding grain, mobility, running fans, space-heating, pumping water or running computers. The right question to ask is which energy sources can sustainably provide specific services at the lowest economic and ecological costs.

Electricity, the most versatile form of energy, is not necessarily the ideal choice. Electricity is an expensive, refined form of energy with a large carbon footprint. Typically, only a third of the heat used in running a turbine gets converted into electricity. No one needs electricity to lift water or cook food, for instance. A windmill or biogas will do. Outstanding work has been done in demand-sensitive energy services-oriented planning by the International Energy Initiative. 11

Quasi-conventional approaches like Jeffrey Sachs’ ignore such paradigms. Sachs favours carbon capture and storage, an unproven, potentially very risky technology, which is compatible with more fossil-fuel burning and detracts from the urgent agenda of low-carbon development. Sachs also classifies nuclear power as a sustainable technology and seems to assume its problems are confined to proliferation and nuclear terrorism, because he does not mention its high costs, long gestation, radiation-related safety, long-term waste storage (for which there is no solution yet) and unique potential for catastrophic accidents.

Fourth, we must exploit the scope for resource-saving in diverse areas like energy generation and distribution (where we can generate savings of 40-50%), agriculture and industry (where the scope for saving is more than 20-30%), construction (savings can be doubled), transportation, motors, lighting (where the LED promise is taking root) and domestic appliances (which has an efficiency improvement potential of more than 30%).

This potential must be tapped by mandatorily phasing out inefficient devices, within a broader framework of reordering production and consumption, changing lifestyles and the way communities, and work and living spaces, are organized. The way cities are constituted today is not the sole conceivable or viable model.

Who decides?

Finally, there is the question of agency, or who decides. Decision makers cannot be corporations, who are simply incapable of doing business without polluting, wasting, dumping costs (‘externalities’) on society, and further endangering the ecosystem. The basic decision-making agency must be communities from the local level up, which do resource-mapping, set levels of entitlements to basic services, determine the cost of basic services, finance their provision through taxes (partly devolved from above) and participate in their management. This means inverting the decision-making pyramid and ending the market’s primacy.

That is why Richard Register’s advocacy of ‘small capitalism’ is misplaced. 12 Any market-based system is incapable of ecologically sound resource allocation. Entrepreneurship and innovation play a valuable role, but that must not result in a system driven by profit seeking, the very rationale of which is incompatible with ecological economics, degrowth and sustainable development aimed at human well-being. ‘Small capitalism’ is fine in a limited, transitional sense. But the real goal – sustainable low-carbon economies – can only be achieved through a new paradigm of production, distribution and consumption to which the Gandhian notions of individual austerity, community solidarity and responsibility towards nature are relevant.

The Broker has done well to launch a discussion on the new paradigm. It could enrich the debate with more Southern input.

Photo credit main picture: ANP/ Sebastian d’Souza