Does growth really help the poor?

15 October 2008 by Andrew Simms

THE last line of defence for advocates of indefinite global economic growth is that it is needed to eradicate poverty. This argument is at best disingenuous. By any reasonable assessment it is claiming the impossible.

Here's why. During the 1980s, for every $100 added to the value of the global economy, around $2.20 found its way to those living below the World Bank's absolute poverty line. During the 1990s, that share shrank to just 60 cents. This inequity in income distribution - more like a flood up than a trickle down - means that for the poor to get slightly less poor, the rich have to get very much richer. It would take around $166 worth of global growth to generate $1 extra for people living on below $1 a day.

Fair enough, you might think, it's worth it. But consider the resources it would require. The measure known as the "ecological footprint" compares what we harvest from the biosphere, and return to it as waste, with the biosphere's ability to absorb this and regenerate. It reveals whether we are living within our means or eating into our ecological capital.

Humanity has been overshooting the biosphere's capacity to sustain our activities every year since the mid-1980s, and each year we do it sooner. In 2008, we had consumed the ration for the year by 23 September, five days earlier than the previous year. It would take at least three Earths to sustain us if everyone had the lifestyle of people in the UK; five if we all lived like Americans.

Perversely, under the current economic system, reducing poverty by a tiny amount will necessitate huge extra consumption by those who are already rich. To get the poorest onto an income of just $3 per day would require an impossible 15 planets' worth of biocapacity. In other words, we will have made Earth uninhabitable long before poverty is eradicated. If we are serious about helping the poor rather than the rich, we need a new development model.

Let's say we want an economy that gives us long, satisfied lives, within the tolerance levels of supporting ecosystems. Progress then requires maximising the efficiency with which an economy converts natural resources such as fossil fuels into desirable human outcomes. At the New Economics Foundation, we compare the ecological footprint with life expectancy and satisfaction, to see how well different nations are doing. By this measure, middle-income developing countries - and especially small island states - score best, while developed nations lag behind. Per unit of carbon, Europe delivers less well-being for its citizens now than it did in 1961. Across Europe, however, people report comparable levels of well-being whether they consume a lot or a little. In the UK, for example, people are just as satisfied whether their lifestyles would require eight planets to sustain or just one. This is a message of hope: good lives don't have to cost the earth.

But we have to overcome knee-jerk rejection of the "R" word - redistribution. With global growth constrained by the need to limit carbon emissions (remember that the poorest will be the first and worst victims of climate change), redistribution becomes the only viable route to poverty reduction. Given the triple crunch of the credit crisis, high oil prices and climate change, industrialised economies need radical, practical plans to address all these issues at once. Susan George discusses one approach on Special Beyond economic growth: Why big is beautiful. Another is the Green New Deal, launched last month. It calls for capital controls and tax reforms to stabilise the economy and raise funds for a massive and quick environmental transformation, creating thousands of jobs while narrowing the gap between rich and poor.

It took just days for governments in the UK and US to abandon decades of economic doctrine to try to rescue the reckless financial system from complete meltdown. Why should it take longer to introduce a plan to stop the planet crunch brought on by an equally reckless and even more dangerous obsession with growth?

Profile
Andrew Simms is policy director of the New Economics Foundation in London, UK. He is co-editor of Do Good Lives Have to Cost the Earth? (Constable 2008).
From issue 2678 of New Scientist magazine, page 49.