Growth In Crisis

1 In 1857, for instance, John Stuart Mill wrote:

1 cannot...regard the stationary state of capital and wealth with the unaffected aversion so generally manifested towards it by political economists of the old school. I am inclined to believe that it would be, on the whole, a very considerable improvement on our present condition.

The most vociferous contemporary proponent of the steady-state economy is former World Bank economist Herman Daly. See also Douthwaite's trenchant critique in Growth Illusion.

2 This drive for 'reduced labour content' can also be driven by the desire to reduce product prices. Generally speaking, however, reduced product prices are an attempt to capture a wider market, and thereby expand sales output.

3 The Keynesians were followers of John Maynard Keynes, whose views on demand-determined output and employment were first published in The General Theory of Employment, Interest, and Money in 1936. The monetarists were generally followers of Milton Friedman and the 'Chicago school' of economists which emerged in the 1970s.

4 Useful discussion of the underlying theory can be found in many economics textbooks, for instance: D.Begg, S.Fischer and R.Dornbusch, Economics, McGraw-Hill, London, 1991.

5 This kind of employment is usually called frictional unemployment.

6 Growth, Competitiveness and Employment—the challenges and ways forward into the 21st century, White Paper, Commission of the European Communities, Luxembourg, 1993.

7 The labour force includes potentially employable people who are actually unemployed for various reasons.

8 'Overheating' in the economy means that high levels of inflation replace rises in real output.

9 For a more detailed discussion of this question in relation to European Union economic policy see David Fleming's paper 'Towards the Low-Output Economy: the future that the Delors White Paper tries not to face', European Environment, vol. 4, part 2, April 1994, pp. 11-16.

10 In fairness, I should say that the monetarist response would also point to the need to reduce distorting taxes and benefits in the economy. But the reality is that income taxes cannot really be held responsible for the continuing rise in unemployment for the simple reason that they themselves have remained constant or fallen. Equally, unemployment benefits have fallen in real terms: see Table 27.4 in Begg et al., Economics.

11 These remarks suggest that some questions of international equity are raised by the dematerialisation of Western economies. Many of the raw materials required for the manufacture of products consumed in the West come from developing countries. A decline in the consumption of material products in the West would reduce the demand for these resources, and thereby reduce the export potential of raw materials producers.

12 Growth, Competitiveness and Employment, White Paper, Commission of the European Communities.

13 Nevertheless, GNP is more generally used as an indicator of economic and political success, and as an index of welfare, than is the NNP.

14 The reader unfamiliar with this term will find plenty of discussion in the literature; for example, see Pearce et al., Blueprint for a Green Economy.

15 See S.Schmidheiny (ed.), Changing Course, MIT Press, Cambridge, MA, 1992.

16 This index was prepared for and is discussed in more detail in T Jackson and N.Marks, Measuring Sustainable Economic Welfare—a pilot index: 1950-1990, Stockholm Environment Institute, Stockholm, 1994.

17 This is by no means the only way of making the judgement. Some have argued that it is more appropriate to consider several different indices relating to different elements of welfare such as air quality, water quality, infant mortality, longevity, mineral reserves and so on. See, for example, Victor Andersen's Alternative Economic Indicators, Routledge, London, 1991. In 1991 the OECD published a 'preliminary set' of environmental indicators for the OECD countries.

18 The US index was developed by Herman Daly and John Cobb in their book For the Common Good—redirecting the economy towards community, the environment and a sustainable future, Green Print, London, 1990, and by Clifford Cobb and John Cobb in The Green National Product, The Human Economy Center, University Press of America, Lanham, MD, 1994. A similar index for the UK was developed by Jackson and Marks in Measuring Sustainable Economic Welfare, and an index for Germany developed by Diefenbacher is also published in Cobb and Cobb, The Green National Product.

19 L.Summers, 'Research Challenges for Development Economists', Finance and Development, vol. 28, pp. 2-5, Washington, DC, September 1991.

20 See the introduction to the World Resources Institute's World Resources 1993-4, Oxford University Press, Oxford, 1994.

21 These figures come from the World Resources Institute's World Resources 1992-3, Oxford University Press, Oxford, 1992, p. 19.

22 Some would also add war and famine to its list of crimes. Douthwaite, for example, makes a strong case that the capitalist development of Western Europe led directly to the First World War—with the loss of almost 9 million lives. Schumacher also makes the case strongly in Small Is Beautiful. The evidence that Britain's rapid industrialisation was based in part on military might is also compelling. And resource domination has been closely implicated in more recent military conflicts, such as the Gulf War. 'War is a judgement', wrote Dorothy Sayers, 'that overtakes societies when they have been living upon ideas that conflict too violently with the laws governing the universe.'

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