Beyond Growth - Living with Limits

November 2012, Volume V, No. 1

This issue of Open Space introduces the umbrella theme of degrowth - an awkward word, but one that might begin to capture the imagination as it becomes more known.

“That’s not the right way to look at it.” This was the spontaneous reaction of Lawrence Summers to Herman Daly’s book Beyond Growth, published in 1996. (Summers was Secretary of the US Treasury and economic advisor to President Obama.) Because Daly’s thinking is still popular and is bandied about in international circles seriously questioning the ideology of economic growth, we decided to reprint Bill Ryan’s 1997 review of his book, originally written after meeting him personally.

Beyond Growth: The Economics of Sustainable Development
Herman E. Daly. Boston: Beacon Press, 1996

The thesis of this book will be profoundly exhilarating and challenging for some, and profoundly disturbing - even heretical – for most involved in the World Bank, academia and the business community. The chief economist at the World Bank [in 1996], Lawrence Summers, refused to debate its thesis with the simple put-down: ‘That’s not the right way to look at it!’ And, although economist Herman Daly was a distinguished employee of the Bank, it refused to publish his views. So did MIT University Press, even though four out of five of its official readers voted for publication!

Daly’s crime? Using traditional economic logic, he dethrones the saviour-god of ‘economic growth.’ He also defies political correctness by including a section on ‘Ethics, Religion, and Sustainable Development’ in a professional economic study. In fact, his final paragraph says: “We must face the failure of growth idolatry. We must stop crying out to the growing economy, ‘Deliver me, for thou art my god!’ Instead, we must have the courage to ask with Isaiah, ‘Is there not a lie in my right hand?’“

Daly’s own preanalytic vision is that the economy must be seen as a subsystem of the world’s environment, sustained by this larger system whose limits and capacities are finite and must be respected. Neoclassical and neo-liberal economists simply ignore any limit to the natural resources [natural capital] transformed in production, and only recently have some of them begun to advert to the fact that this process also produces mountains of low-energy, non-recyclable waste.

In practice, most have continued to deny the relevance of the second law of thermodynamics by not taking into account that modern economic production is rapidly consuming the huge amounts of energy stored over the ages in natural resources and in the world’s environment. Their glib solution to all related problems is technology; but we have growing evidence that human-made capital is already failing to replace natural capital.

More sophisticated fishing boats are useless without fish in the sea; better sawmills do not produce more bounteous forests! Natural capital, not human capital or technology, has now become the real limit on economic growth. Since our world is a closed system environmentally, the economy, its sub-system, must also be limited. We must now finally face, as crucial, three separate issues: overall scale of the economy, distribution of wealth and income, and allocation of resources.
For Daly there is no market magic here. Decisions on scale and distribution are political and social, and must be taken prior to letting the free market allocate scarce resources efficiently. Indeed, if governments and civil societies renege on making these decisions, they will simply be offering multinational corporations a power vacuum to use at their whim without accountability! Daly also argues that GNP [Gross National Product], our daily much-overworked statistic, is becoming useless as a measure of comparative human welfare. In his eyes, globalized free trade is operating on a fundamentally false assumption.
Economist, David Ricardo, free trade’s intellectual founder, based comparative advantage in free trade on the assumption that capital stays in the home country: goods, not capital, move between countries. However, if goods, capital and labour are all mobile, how can a local community or even a country long keep its identity? Daly believes that within a decade popular slogans will again be advocating the protection of domestic natural capital and warning of the dangers of letting foreign capital mindlessly exploit it to the detriment of local populations and their environment.

Daly makes suggestions for re-writing Samuelson’s basic economic textbook, since its basic contents remain the bible for training young economists worldwide. He would keep traditional economic logic but keep it consistent with his own very different pre-analytic vision. For him this is crucial. He is convinced that economists and politicians are at least vaguely aware of the weakness of continuing to regard the economy as a closed circulatory system. Their real problem, as he sees it, is that they consider it ‘politically impossible’ at present to face the consequences of having to take political and social decisions on population size and natural resource control, as well as on the distribution of wealth and income. We had some evidence of this nightmare dilemma for political leaders at the recent international meeting in Kyoto on climate change! [1997]

Guaranteed minimum income - but also maximum individual income

Finally, Daly turns to religion for energizing insight and inspiration to help convince people that - in spite of the World Bank and the MIT press - his is ‘the right way of seeing it.’ He does not expect the necessary sustained motivation and commitment to come from those materialist scientists who believe our world is merely a cosmological accident. He will accept any help he can get from secular ethicists such as John Rawls, but he prefers to go back to the original sources of the values needed, that is, to world religions, and in particular to the Judeo-Christian revelation. He believes he can find there, as well in other religions, the inspiration necessary to help us accept our human and natural limits and social obligations towards one another. He also finds in the institution of the Jewish Jubilee Year compelling insight into the limits of private property as well as society’s consequent need regularly to redistribute its wealth, income and power.

Daly notes that the need for guaranteed minimum income is already widely accepted. He now sees that society also needs to accept the concept of maximum individual income. It is economically feasible since there is no evidence that incomes more than ten to twenty times average earnings are needed to motivate high achievers and wealthy people to work energetically for the common good. He also sees belief in a Creator God as the source of our obligation to creation, including other creatures and especially members of our own species who are suffering.

Develop qualitatively without growing quantitatively

Daly draws from religious insights found in the Old and New Testaments two ethical principles applicable to our present situation. The first which he calls an ‘eleventh commandment: ‘Thou shalt not allow unlimited inequality in the distribution of private property.’ The second is more embracing: ‘We should strive for per capita income wealth - efficiently maintained and allocated, and equitably distributed - for the maximum number of people that can be sustained over time under these conditions.’ And, like the earth itself, we must develop qualitatively without growing quantitatively. Sustainability, not growth, should become the ruling ethic for ‘a Creation-centred economy.’ In this vision, along with sustainability, the associated values of sufficiency, equity and efficiency become the organizing principles of the economy.

For him, the technical and economic problems involved in achieving sustainability will be less difficult than getting our experts to overcome their addiction to growth as the favoured way to assert our creative power, and the idolatrous belief that our derived creative power is autonomous and unlimited. Religious belief can and should prove a source of achieving the personal and societal freedom to break this destructive addiction. In turn, Daly uses religious terms because he believes that ‘sustainable development will require a change of heart, a renewal of mind, and a healthy dose of repentance.
What are we to make of Daly’s challenging tour-de force in
economic and ethical thinking?

Personally, I find it intellectually stimulating and spiritually compelling. For me as an economist and a theologian, it is the book I was waiting for an economist to write!

One can find most of the economic and ecological insights elsewhere, in the writings of such authors as Hazel Henderson and Thomas Berry. Nor are the religious insights new.

What is new is to have all these insights synthesized together in a consistent, well thought-out, well-ordered, and well-written thesis by a respected, even if controversial, economist.

Daly’s crisp, clear general introduction and briefer introductions to his seven general themes are a welcome service to the reader.

I believe that for specialist and non-specialist alike this will be an intense, exhilarating and challenging read! Perhaps not the final word - but still a very welcome contribution in an atmosphere of economic growth and global free-market madness!

Bill Ryan sj