After so many years of being told the same thing, it is barely surprising that we believe it. Economic growth is good, we are told, and essential to all we do. Growth creates work. Work creates wealth. Wealth closes the gap between rich and poor.



Once we have a stronger economy, the economists say, we can tackle our environmental problems.



The only trouble is, this is all wrong.

1. Growth does not create jobs

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The way the current economic system is designed, it does the opposite. The constant drive to increase productivity, which is what economic growth really is, requires manufacturers to steadily reduce input costs. Economic growth destroys jobs.



Before the 1980s this didn’t matter much, because many new manufacturing businesses were established to soak up a rising working population. Since then, though, this has not happened – growth has increased the number of people without jobs, certainly in the rich world.



In the last 35 years, the world has experienced the fastest economic growth in human history. Yet, according to the Organisation for Economic Co-operation and Development (OECD), unemployment went up. Even extreme policy tools introduced since 2007, such as ultra-low interest rates and quantitative easing, have not achieved much. We were told that these would generate faster economic growth, yet growth has remained weak and unemployment is still higher than it was three decades ago.

2. Economic growth does not reduce inequality

Because the system is designed to reward those who already have money and assets, the free market economic model takes wealth from the poor and gives it to the rich. This is especially true since 2008 as government and consumer debts in the rich world have risen and average incomes have stagnated or fallen. The gap between the rich and poor is bigger today than in 1914. The gap between rich countries and poor ones is also much greater.

The coming wave of new technology will make these problems worse. A study on the future of employment at Oxford University predicts that almost half of all jobs are at threat from robotisation in the next 20 years. Many of these are highly skilled jobs, such as those done by pilots, doctors, accountants and lawyers. The jobs that will be left are those that require a great deal of personal attention or artistic input – in other words, those that are generally poorly paid.

3. Boosting growth is not the way to solve environmental problems

Economic growth is the cause of them. It requires a constant increase in the flow of raw materials extracted from the planet to be turned into goods, services and waste. The more we grow, certainly using current economic thinking, the more resources we need to use and the more pollution we create.



Rather then pursuing economic growth then, we should tackle our problems head on. We should develop policies to ensure that everyone has enough money to live on, because it leads to healthier and more stable societies. We should plan to reduce the gap between rich and poor, and we need to stop prevaricating when it comes to the environment and actually do something.



Moving forward

None of this is as hard as it might appear, because the social troubles in the rich world are nothing to do with the overall level of economic activity. It is the way the proceeds are distributed that is the problem, and our single-minded belief in the need for growth that is wrong.

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If we take the gross domestic product of the OECD and divide it by the population, we already generate enough income for everyone to live comfortably. If we start to design and make products that last longer, as well as make them more recyclable, we can drastically reduce the turnover of resources as well as the pollution.

And we can do all this and actually increase the average standard of living. We just need to share the work around more evenly and start making and using products differently.

Taking a different approach to economic development will be fiercely opposed by all those who benefit from the current system. Yet a radical change in approach is both possible and necessary.

The rethinking prosperity hub is sponsored by DNV GL. All content is editorially independent except for pieces labelled “brought to you by”. Find out more here.



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