Growth is bad: a steady state economy is good

Illth (Img src:
Illth (Img src:

The mantra of all governments is growth. But how realistic is this? Is it an unachievable dream? The following provides an alternative point of view. Growth is bad: A steady state economy is good. The author is well known ecological economist Herman Daly.

The following is in part a re-type of an article that appeared in the Nov/Dec 2014 edition of Resurgence & Ecologist.

“Every encroachment of the economy into the ecosystem is a physical transformation of ecosystem into economy. Growth means less habitat for other species, with loss of both their instrumental value to the ecosystem, and the intrinsic value of their own sentient life. Clearly, in addition to a maximum scale of the economy relative to the containing ecosystem, there is also an optimal scale (much smaller), beyond which growth becomes uneconomic in the literal sense that it increases environmental and social costs faster than production benefits. We fail to recognise the point at which economic growth become uneconomic, because we measure only production costs (for which there is market demand), and fail to measure environmental and social costs (for which there is little market demand).

Neverless, illth – the opposite of wealth – is also a consequence of wealth production. Examples of Illth are everywhere, even if usually unmeasured in national accounts. They include nuclear waste, climate change from excess carbon in the atmosphere, biodiversity loss, depleted mines, deforestation, eroded topsoil, dry wells and rivers, sea-level rise, the ‘dead zone’ in the Gulf of Mexico, gyres of plastic waste in the oceans, the hole in the ozone layer, exhausting and dangerous work, and the unrepayable debt from attempting to push growth in the symbolic financial sector beyond what is possible in the real sector.

Growth all the way to the limit of carrying capacity has an unrecognised political cost as well. Excess capacity is a necessary condition for freedom and democracy. Living very close to the carrying capacity limit, as on a submarine or spaceship, requires very strict discipline. On submarines we have a captain with absolute authority, not a two-party democracy. If we want a democracy, we had better not grow up to the limit of carrying capacity – better to leave some slack, some margin for tolerance of the errors that freedom entails.

We need a non-growing economy that strives to maintain itself in a steady state at something like the optimum scale. How are we to achieve this?

It is simple, and as difficult, as going on a diet. Cut the matter-energy throughput to a sustainable level by cap-auction-trade) quotas on the right to extract resources are set within ecological limits, then auctioned by government and then freely traded among purchasers – the auction receipts are then used to lower income taxes, especially to those on lower incomes) and /or ecological tax reform (taxing resource throughput – fossil fuels – rather than value added).

We should cap or tax fossil fuels first, and then redistribute the auction or eco-tax revenues by cutting income taxes for all, but first and mainly for the poor. A policy of quantitative limits on throughput (cap-auction-trade) raises resource prices and induces resource-saving technologies. The quantitative cap will also block the subsequent erosion of resource savings, as induced efficiency makes resources effectively cheaper (known as the Jevons effect). In addition, the auction will raise much revenue and make it possible to tax value added less, because in effect we will have shifted the tax base to resource throughput. Value adding is a good thing, so it should not be taxed. Depletion and pollution are bad things and should be taxed accordingly.”

On population Hermann Daly makes the point: “More people are better than fewer, but not if all are alive at the same time. We should strive to maximise the cumulative number of people ever to live over time in a condition of sufficiency. That means not too many people alive at the same time – no more than could enjoy a per capita resource availability that is enough for good (not luxurious) life. Exactly how many people at exactly what per capita standard would that be? We do not know, but the current rate of ecological degradation tells us that it is not more people at a higher per capita consumption, and that is enough to get started in the right direction.”

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