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Prosperity
without
growth?
The transition to a
sustainable economy
Prosperity without growth?
The transition to a sustainable economy
Professor Tim Jackson
Economics Commissioner
Sustainable Development Commission
Acknowledgements
This report was written in my capacity as Economics Commissioner for the Sustainable Development Commission
at the invitation of the Chair, Jonathon Porritt, who provided the initial inspiration, contributed extensively
throughout the study and has been unreservedly supportive of my own work in this area for many years.
For all these things, my profound thanks.
The work has also inevitably drawn on my role as Director of the Research group on Lifestyles, Values
and Environment (RESOLVE) at the University of Surrey, where I am lucky enough to work with a committed,
enthusiastic and talented team of people carrying out research in areas relevant to this report. Their research
is evident in the evidence base on which this report draws and I’m as grateful for their continuing intellectual
suþþorI as l am Ior Ihe Inancial suþþorI oI Ihe Lconomic and Social kesearch Council (6ranI No: kLS·152·25·1ûû4)
which keeps RESOLVE going.
Though written as an individually authored thinkpiece, this study builds on work from right across the
Commission. In particular, it draws extensively from the work programme on Redefining Prosperity which has
been develoþed aI Ihe S0C over Ihe lasI Ive years (see Aþþendix 1 Ior a summary oI recenI work). IhroughouI
Ihis þeriod, my Iellow commissioners þasI and þresenI - |an 8ebbingIon, 8ernie 8ulkin, Lindsey Colbourne, Anna
CooIe, PeIer 0avies, SIewarI 0avies, Ann |inlayson, Iess 6ill, Alan KnighI, Iim Lang, Alice 0wen, Anne Power,
Hugh Raven, Tim O’Riordan, Waheed Saleem and Becky Willis – have been generous with their time, attending
workshops, offering critical commentary and reviewing various drafts of this document.
Special thanks are owed to all those who contributed directly to the Redefining Prosperity workshops, in
þarIicular Simone d´Alessandro, |rederic 8ouder, Vadeleine 8unIing, lan ChrisIie, herman 0aly, Arik 0ondi,
Paul Lkins, Iim Kasser, Viriam KenneI, 6uy Liu, Iommaso LuttaIi, |esse Norman, Avner 0IIer, |ohn 0´Neill, Llke
Pirgmaier, Iom Prugh, hilde kaþþ, |onaIhan kuIherIord, |ill kuIIer, lia Sardar, KaIe Soþer, SIeve Sorrell, Nick
Spencer, Peter Victor, Derek Wall, David Woodward and Dimitri Zenghelis.
A number oI oIher colleagues and Iriends have helþed and advised - someIimes wiIhouI even knowing iI!
ParIicular Ihanks are due Io Vick Common, Andy 0obson, Angela 0ruckman, lan 6ough, 8ronwyn hayward, LesIer
hunI, Nic Varks, Viriam Peþþer, Alison Pridmore and |ohn urry.
Finally, my thanks are due to the SDC Secretariat for their boundless expertise and enthusiasm throughout the
þrojecI. Sue 0ibb, Sara Lþþel, Andrew Lee, khian Ihomas, |acoþo IorriIi, |oe IurrenI and Kay wesI in þarIicular
have been a consIanI source oI invaluable advice IhroughouI. l owe a sþecial debI oI graIiIude Io VicIor Anderson,
whose wealth of intellectual experience and unswerving personal support have been indispensable at every turn.
Contents
|oreword 5
Summary 6
1 Introduction 15
2 The Age of Irresponsiblity 19
3 5HGHßQLQJ3URVSHULW\ 29
4 The Dilemma of Growth 37
5 The Myth of Decoupling 47
6 Confronting Structure 59
7 Keynesianism and the ‘Green New Deal’ 67
8 Macro-economics for Sustainability 75
9 Flourishing – within limits 85
10 *RYHUQDQFHIRU3URVSHULW\ 93
11 Steps towards a Sustainable Economy 101
Appendix 1 Ihe S0C ´6reen SIimulus´ Package 1û8
Appendix 2 Iowards a SusIainable Vacro·Lconomy 11û
keIerences 113
LndnoIes 122
Every society clings to a myth by which it lives. Ours
is Ihe myIh oI economic growIh. |or Ihe lasI Ive
decades the pursuit of growth has been the single
most important policy goal across the world. The
global economy is almosI Ive Iimes Ihe site iI was
half a century ago. If it continues to grow at the
same raIe Ihe economy will be 8û Iimes IhaI site
by Ihe year 21ûû.
This extraordinary ramping up of global economic
activity has no historical precedent. It’s totally at
odds wiIh our scienIiIc knowledge oI Ihe IniIe
resource base and the fragile ecology on which
we deþend Ior survival. And iI has already been
accompanied by the degradation of an estimated
6û% oI Ihe world´s ecosysIems.
For the most part, we avoid the stark reality
of these numbers. The default assumption is that
- Inancial crises aside - growIh will conIinue
indeIniIely. NoI jusI Ior Ihe þooresI counIries, where
a better quality of life is undeniably needed, but
even for the richest nations where the cornucopia
of material wealth adds little to happiness and
is beginning to threaten the foundations of our
wellbeing.
The reasons for this collective blindness are easy
enough Io Ind. Ihe modern economy is sIrucIurally
reliant on economic growth for its stability. When
growth falters – as it has done recently – politicians
panic. Businesses struggle to survive. People lose
Iheir jobs and someIimes Iheir homes. A sþiral oI
recession looms. Questioning growth is deemed to
be the act of lunatics, idealists and revolutionaries.
But question it we must. The myth of growth
has failed us. It has failed the two billion people
who sIill live on less Ihan S2 a day. lI has Iailed
the fragile ecological systems on which we depend
for survival. It has failed, spectacularly, in its own
terms, to provide economic stability and secure
people’s livelihoods.
Ioday we Ind ourselves Iaced wiIh Ihe imminenI
end of the era of cheap oil, the prospect (beyond the
recent bubble) of steadily rising commodity prices,
Ihe degradaIion oI IoresIs, lakes and soils, conIicIs
over land use, waIer qualiIy, Ishing righIs and Ihe
momentous challenge of stabilising concentrations
oI carbon in Ihe global aImosþhere. And we Iace
these tasks with an economy that is fundamentally
broken, in desperate need of renewal.
In these circumstances, a return to business
as usual is not an option. Prosperity for the few
founded on ecological destruction and persistent
social injustice is no foundation for a civilised society.
Economic recovery is vital. Protecting people’s jobs –
and creating new ones – is absolutely essential. But
we also stand in urgent need of a renewed sense
oI shared þrosþeriIy. A commiImenI Io Iairness and
Iourishing in a IniIe world.
Delivering these goals may seem an unfamiliar
or even incongruous task to policy in the modern
age. The role of government has been framed so
narrowly by material aims, and hollowed out by a
misguided vision of unbounded consumer freedoms.
The concept of governance itself stands in urgent
need of renewal.
But the current economic crisis presents us with
a unique opportunity to invest in change. To sweep
away Ihe shorI·Ierm Ihinking IhaI has þlagued
society for decades. To replace it with considered
policy capable of addressing the enormous challenge
of delivering a lasting prosperity.
For at the end of the day, prosperity goes beyond
material pleasures. It transcends material concerns.
It resides in the quality of our lives and in the health
and happiness of our families. It is present in the
strength of our relationships and our trust in the
community. It is evidenced by our satisfaction at
work and our sense of shared meaning and purpose.
It hangs on our potential to participate fully in the
life of society.
ProsþeriIy consisIs in our abiliIy Io Iourish
as human beings – within the ecological limits of
a IniIe þlaneI. Ihe challenge Ior our socieIy is Io
create the conditions under which this is possible. It
is the most urgent task of our times.
Tim Jackson
Economics Commissioner
Sustainable Development Commission, March 2009
Foreword
6rowIh has delivered iIs beneIIs, aI besI, unequally.
A IIIh oI Ihe world´s þoþulaIion earns jusI 2% oI
global income. Inequality is higher in the OECD
naIions Ihan iI was 2û years ago. And while Ihe
rich goI richer, middle·class incomes in wesIern
countries were stagnant in real terms long before
the recession. Far from raising the living standard
for those who most needed it, growth let much of
the world’s population down. Wealth trickled up to
the lucky few.
Fairness (or the lack of it) is just one of several
reasons to question the conventional formula for
achieving þrosþeriIy. As Ihe economy exþands, so do
the resource implications associated with it. These
impacts are already unsustainable. In the last quarter
of a century the global economy has doubled, while
an esIimaIed 6û% oI Ihe world´s ecosysIems have
been degraded. 6lobal carbon emissions have risen
by 4û% since 199û (Ihe KyoIo ProIocol ´base year´).
SigniIcanI scarciIy in key resources - such as oil - may
be less than a decade away.
A world in which Ihings simþly go on as usual
is already inconceivable. But what about a world
in which nine billion people all aspire to the level
oI aIIuence achieved in Ihe 0LC0 naIions` Such an
economy would need Io be 15 Iimes Ihe site oI
Ihis one by 2û5û and 4û Iimes bigger by Ihe end oI
Ihe cenIury. whaI does such an economy look like`
whaI does iI run on` 0oes iI really oIIer a credible
vision Ior a shared and lasIing þrosþeriIy`
These are some of the questions that prompted
this report. They belong in a long tradition of serious
reIecIion on Ihe naIure oI þrogress. 8uI Ihey also
reIecI real and immediaIe concerns. ClimaIe
change, fuel security, collapsing biodiversity and
global inequality have moved inexorably to the
forefront of the international policy agenda over
the last decade. These are issues that can no longer
be relegated to the next generation or the next
electoral cycle. They demand attention now.
Accordingly, Ihis reþorI seIs ouI a criIical
examination of the relationship between
prosperity and growth. It acknowledges
at the outset that poorer nations stand in
urgent need of economic development.
8uI iI also quesIions wheIher ever·rising incomes Ior
Ihe already·rich are an aþþroþriaIe goal Ior þolicy in
a world constrained by ecological limits.
Its aim is not just to analyse the dynamics of
an emerging ecological crisis that is likely to dwarf
the existing economic crisis. But also to put forward
coherenI þolicy þroþosals (8ox 1) IhaI will IaciliIaIe
the transition to a sustainable economy.
In short, this report challenges the assumption
of continued economic expansion in rich countries
and asks: is iI þossible Io achieve þrosþeriIy wiIhouI
growIh`
The Age of Irresponsibility
Recession throws this question into sharp relief.
Ihe banking crisis oI 2ûû8 led Ihe world Io Ihe
brink oI Inancial disasIer and shook Ihe dominanI
economic model Io iIs IoundaIions. lI redeIned Ihe
boundaries between market and state and forced
us Io conIronI our inabiliIy Io manage Ihe Inancial
sustainability – let alone the ecological sustainability
– of the global economy.
This may seem an inopportune moment to
question growth. It is not. On the contrary, this crisis
oIIers Ihe þoIenIial Io engage in serious reIecIion.
lI is a unique oþþorIuniIy Io address Inancial and
ecological susIainabiliIy IogeIher. And as Ihis reþorI
argues, the two things are intimately related.
ChaþIer 2 argues IhaI Ihe currenI Iurmoil is noI
the result of isolated malpractice or simple failures
of vigilance. The market was not undone by rogue
individuals or the turning of a blind eye by incompetent
regulators. It was undone by growth itself.
The growth imperative has shaped the
architecture of the modern economy. It motivated
Ihe Ireedoms granIed Io Ihe Inancial secIor. lI
stood at least partly responsible for the loosening
of regulations and the proliferation of unstable
Inancial derivaIives. ConIinued exþansion oI crediI
was deliberately courted as an essential mechanism
to stimulate consumption growth.
Economic growth is supposed to deliver prosperity. Higher incomes should mean better
choices, richer lives, an improved quality of life for us all. That at least is the conventional
wisdom. But things haven’t always turned out that way.
Summary
6 Prosperity without Growth? Sustainable Development Commission
This model was always unstable ecologically. It
has now proven itself unstable economically. The
age of irresponsibility is not about casual oversight
or individual greed. If there was irresponsibility it
was systematic, sanctioned widely and with one
clear aim in mind: Ihe conIinuaIion and þroIecIion
of economic growth.
The failure of this strategy is disastrous in all sorts
oI ways. NoI leasI Ior Ihe imþacIs IhaI iI is having
across the world, in particular in poorer communities.
But the idea that growth can deliver us from the
crisis is also deeply problematic. Responses which
aim to restore the status quo, even if they succeed
in the short term, simply return us to a condition of
Inancial and ecological unsusIainabiliIy.
kedehning Presperity
A more aþþroþriaIe resþonse is Io quesIion Ihe
underlying vision of a prosperity built on continual
growIh. And Io search Ior alIernaIive visions - in
which humans can sIill Iourish and yeI reduce Iheir
material impact on the environment. In fact, as
ChaþIer 3 makes clear, Ihe voluminous liIeraIure on
human wellbeing is replete with insights here.
Prosperity has undeniable material dimensions.
It’s perverse to talk about things going well where
there is inadequate food and shelter (as is the case
for billions in the developing world). But it is also
plain to see that the simple equation of quantity with
quality, of more with better, is false in general.
When you’ve had no food for months and the
harvest has failed again, any food at all is a blessing.
when Ihe American·sIyle Iridge Ireeter is already
stuffed with overwhelming choice, even a little
extra might be considered a burden, particularly if
you’re tempted to eat it.
An even sIronger Inding is IhaI Ihe requiremenIs
of prosperity go way beyond material sustenance.
Prosperity has vital social and psychological
dimensions. To do well is in part about the ability
to give and receive love, to enjoy the respect of
your peers, to contribute useful work, and to have
a sense of belonging and trust in the community.
In short, an important component of prosperity is
the ability to participate meaningfully in the life
of society.
This view of prosperity has much in common
wiIh AmarIya Sen´s vision oI develoþmenI as
´caþabiliIies Ior Iourishing´. 8uI IhaI vision needs Io
be inIerþreIed careIully: noI as a seI oI disembodied
freedoms, but as a range of ‘bounded capabilities’
Io live well - wiIhin cerIain clearly deIned limiIs.
A Iair and lasIing þrosþeriIy cannoI be isolaIed
from these material conditions. Capabilities are
bounded on the one hand by the scale of the global
þoþulaIion and on Ihe oIher by Ihe IniIe ecology
of the planet. To ignore these natural bounds to
Iourishing is Io condemn our descendenIs - and our
fellow creatures – to an impoverished planet.
Conversely, the possibility that humans can
Iourish and aI Ihe same Iime consume less is an
intriguing one. It would be foolish to think that it
is easy to achieve. But it should not be given up
lightly. It offers the best prospect we have for a
lasting prosperity.
The Dilemma of Growth
Having this vision to hand doesn’t ensure that
prosperity without growth is possible. Though
formally distinct from rising prosperity, there
remains the possibility that continued economic
growth is a necessary condition for a lasting
þrosþeriIy. And IhaI, wiIhouI growIh, our abiliIy Io
Iourish diminishes subsIanIially.
ChaþIer 4 exþlores Ihree relaIed þroþosiIions in
deIence oI economic growIh. Ihe IrsI is IhaI maIerial
oþulence is (aIIer all) necessary Ior Iourishing.
The second is that economic growth is closely
correlated with certain basic ‘entitlements’ – for
health or education, perhaps – that are essential to
prosperity. The third is that growth is functional in
maintaining economic and social stability.
There is evidence in support of each of these
þroþosiIions. VaIerial þossessions do þlay an
important symbolic role in our lives, allowing us
to participate in the life of society. There is some
statistical correlation between economic growth and
key human develoþmenI indicaIors. And economic
resilience – the ability to protect jobs and livelihoods
and avoid collapse in the face of external shocks –
really does matter. Basic capabilities are threatened
when economies collapse.
6rowIh has been (unIil now) Ihe deIaulI
mechanism for preventing collapse. In particular,
market economies have placed a high emphasis
on labour productivity. Continuous improvements in
technology mean that more output can be produced
for any given input of labour. But crucially this also
means that fewer people are needed to produce the
same goods from one year to the next.
Sustainable Development Commission Prosperity without Growth? 7
As long as Ihe economy exþands IasI enough Io
offset labour productivity there isn’t a problem. But
if the economy doesn’t grow, there is a downward
pressure on employment. People lose their jobs.
With less money in the economy, output falls, public
spending is curtailed and the ability to service
þublic debI is diminished. A sþiral oI recession
looms. 6rowIh is necessary wiIhin Ihis sysIem jusI
to prevent collapse.
This evidence leads to an uncomfortable and
deeþ·seaIed dilemma: growIh may be unsusIainable,
buI ´de·growIh´
1
aþþears Io be unsIable. AI IrsI Ihis
looks like an impossibility theorem for a lasting
prosperity. But ignoring the implications won’t make
them go away. The failure to take the dilemma of
growth seriously may be the single biggest threat to
sustainability that we face.
The Myth of Decoupling
The conventional response to the dilemma of growth
is Io call Ior ´decouþling´: conIinued economic growIh
with continually declining material throughput.
Since eIIciency is one oI Ihe Ihings IhaI modern
capitalist economies are supposed to be good at,
decoupling has a familiar logic and a clear appeal as
a solution to the dilemma of growth.
As ChaþIer 5 þoinIs ouI, iI´s viIal Io disIinguish
between ‘relative’ and ‘absolute’ decoupling.
Relative decoupling refers to a situation where
resource imþacIs decline relaIive Io Ihe 60P. lmþacIs
may still rise, but they do so more slowly than the
60P. Ihe siIuaIion in which resource imþacIs decline
in absolute terms is called ‘absolute decoupling’.
Needless Io say, Ihis laIIer siIuaIion is essenIial iI
economic activity is to remain within ecological
limits.
Evidence for declining resource intensities
(relative decoupling) is relatively easy to identify.
The energy required to produce a unit of economic
output declined by a third in the last thirty years, for
insIance. 6lobal carbon inIensiIy Iell Irom around
one kilo per dollar of economic activity to just under
77û grams þer dollar.
Evidence for overall reductions in resource
throughput (absolute decoupling) is much harder
Io Ind. Ihe imþrovemenIs in energy (and carbon)
intensity noted above were offset by increases
in the scale of economic activity over the same
þeriod. 6lobal carbon emissions Irom energy use
have increased by 4û% since only 199û (Ihe KyoIo
base year).
There are rising global trends in a number of other
resources – a range of different metals and several
non·meIallic minerals Ior examþle. worryingly,
in some cases, even relative decoupling isn’t
happening. Resource productivity in the use of some
structural materials (iron ore, bauxite, cement) has
been declining globally since 2ûûû, as Ihe emerging
economies build up physical infrastructures, leading
to accelerating resource throughput.
The scale of improvement required is daunting.
In a world of nine billion people, all aspiring to a
level oI income commensuraIe wiIh 2% growIh on
the average EU income today, carbon intensities
(for example) would have to fall on average by
over 11% þer year Io sIabilise Ihe climaIe, 16 Iimes
IasIer Ihan iI has done since 199û. 8y 2û5û, Ihe
global carbon intensity would need to be only six
grams þer dollar oI ouIþuI, almosI 13û Iimes lower
than it is today.
Substantial economic investment will be needed
to achieve anything close to these improvements.
Lord Stern has argued that stabilising atmospheric
carbon aI 5ûû þarIs þer million (þþm) would mean
invesIing 2% oI 60P each year in carbon emission
reducIions. Achieving 45û þþm sIabilisaIion would
require even higher levels of investment. Factor
in Ihe wider caþiIal needs Ior resource eIIciency,
material and process substitution and ecological
protection and the sheer scale of investment
becomes an issue. Ihe macro·economic imþlicaIions
oI Ihis are addressed in ChaþIer 8.
Vore Io Ihe þoinI, Ihere is liIIle aIIemþI in exisIing
scenarios to achieve an equitable distribution of
incomes across nations. Unless growth in the richer
nations is curtailed, the ecological implications of a
truly shared prosperity become even more daunting
to contemplate.
The truth is that there is as yet no credible,
socially just, ecologically sustainable scenario of
continually growing incomes for a world of nine
billion people.
In this context, simplistic assumptions that
caþiIalism´s þroþensiIy Ior eIIciency will allow us
to stabilise the climate and protect against resource
scarcity are nothing short of delusional. Those who
promote decoupling as an escape route from the
dilemma of growth need to take a closer look at
the historical evidence – and at the basic arithmetic
of growth.
1
De-growth (décroissance in the French) is an emerging term for (planned) reductions in economic output.
8 Prosperity without Growth? Sustainable Development Commission
The ‘Iron Cage’ of Consumerism
In the face of the evidence, it is fanciful to suppose
that ‘deep’ resource and emission cuts can be
achieved without confronting the nature and
structure of market economies. Chapter 6 exposes
two interrelated features of modern economic
liIe IhaI IogeIher drive Ihe growIh dynamic: Ihe
production and consumption of novelty.
Ihe þroII moIive sIimulaIes a conIinual search
by producers for newer, better or cheaper products
and services. This process of ‘creative destruction’,
according to the economist Joseph Schumpeter, is
what drives economic growth forwards.
|or Ihe individual Irm, Ihe abiliIy Io adaþI and
to innovate – to design, produce and market not just
cheaper products but newer and more exciting ones
– is vital. Firms who fail in this process risk their own
survival.
But the continual production of novelty would be
oI liIIle value Io Irms iI Ihere were no markeI Ior Ihe
consumption of novelty in households. Recognising
the existence, and understanding the nature, of this
demand is essential.
It is intimately linked to the symbolic role that
material goods play in our lives. The ‘language of
goods’ allows us to communicate with each other
– most obviously about social status, but also about
idenIiIy, social aIIliaIion, and even - Ihrough giving
and receiving gifts for example – about our feelings
for each other.
NovelIy þlays an absoluIely cenIral role here
for a variety of reasons. In particular, novelty has
always carried important information about status.
But it also allows us to explore our aspirations for
ourselves and our family, and our dreams of the
good life.
Perhaps the most telling point of all is the
almosI þerIecI II beIween Ihe conIinual þroducIion
oI novelIy by Irms and Ihe conIinuous consumþIion
of novelty in households. The restless desire of the
consumer is the perfect complement for the restless
innovation of the entrepreneur. Taken together
Ihese Iwo selI·reinIorcing þrocesses are exacIly
what is needed to drive growth forwards.
0esþiIe Ihis II, or þerhaþs because oI iI, Ihe
relentless pursuit of novelty creates an anxiety that
can undermine social wellbeing. Individuals are at
the mercy of social comparison. Firms must innovate
or die. Institutions are skewed towards the pursuit
of a materialistic consumerism. The economy itself
is dependent on consumption growth for its very
survival. The ‘iron cage of consumerism’ is a system
in which no one is free.
It’s an anxious, and ultimately a pathological
system. But at one level it works. The system
remains economically viable as long as liquidity is
preserved and consumption rises. It collapses when
either of these stalls.
Keynesianism and the Green New Deal
Policy responses to the economic crisis are more or
less unanimous IhaI recovery means re·invigoraIing
consumer sþending so as Io kick·sIarI economic
growIh. 0iIIerences oI oþinion are mainly conIned
to how this should be achieved. The predominant
(Keynesian) resþonse is Io use a mixIure oI þublic
spending and tax cuts to stimulate consumer
demand.
Chapter 7 summarises some of the more
interesting variations on this theme. It highlights
in particular the emerging international consensus
around a very simple idea. Economic recovery
demands investment. Targeting that investment
careIully Iowards energy securiIy, low·carbon
infrastructures and ecological protection offers
mulIiþle beneIIs. Ihese beneIIs include:
% freeing up resources for household spending
and productive investment by reducing
energy and material costs
% reducing our reliance on imports and our
exposure to the fragile geopolitics of
energy supply
% þroviding a much·needed boosI Io
employment in the expanding ‘environmental
industries’ sector
% making progress towards demanding global
carbon reduction targets
% protecting valuable ecological assets
and improving the quality of our living
environment for generations to come.
In short, a ‘green stimulus’ is an eminently
sensible response to the economic crisis. It offers
jobs and economic recovery in the short term,
energy security and technological innovation in
the medium term, and a sustainable future for our
children in the long term.
NoneIheless, Ihe deIaulI assumþIion oI even
Ihe ´greenesI´ Keynesian sIimulus is Io reIurn Ihe
economy to a condition of continuing consumption
growth. Since this condition is unsustainable, it is
Sustainable Development Commission Prosperity without Growth? 9
diIIculI Io escaþe Ihe conclusion IhaI in Ihe longer
Ierm someIhing more is needed. A diIIerenI kind
oI macro·economic sIrucIure is essenIial Ior an
ecologically·consIrained world.
Macroeconomics for Sustainability
There is something odd about the modern refusal to
countenance anything but growth at all costs. Early
economisIs such as |ohn SIuarI Vill (and indeed
Keynes himselI) Ioresaw a Iime in which growIh
would have to stop.
herman 0aly´s þioneering work deIned Ihe
ecological condiIions oI a sIeady·sIaIe economy in
terms of a constant stock of physical capital, capable
of being maintained by a low rate of material
throughput that lies within the regenerative and
assimilative capacities of the ecosystem.
whaI we sIill miss Irom Ihis is a viable macro·
economic model in which these conditions can be
achieved. There is no clear model for achieving
economic sIabiliIy wiIhouI consumþIion growIh. Nor
do any of the existing models account fully for the
deþendency oI Ihe macro·economy on ecological
variables such as resources and emissions. In short
Ihere is no macro·economics Ior susIainabiliIy and
there is an urgent need for one.
ChaþIer 8 exþlores Ihe dimensions oI Ihis
call in more detail. It presents results from two
sþeciIc aIIemþIs Io develoþ a macro·economics
of sustainability. One of these suggests that it is
possible, under certain assumptions, to stabilise
economic output, even within a fairly conventional
macro·economy. A crucial role is þlayed by work·
time policies in this model, to prevent rising
unemployment.
Ihe second model addresses Ihe macro·
economic implications of a shift away from fossil
fuels. It shows that there may only be a narrow
‘sustainability window’ through which the economy
can pass if it is to make this transition successfully.
But crucially, this window is widened if more of
the national income is allocated to savings and
investment.
Ihese exercises reveal IhaI a new macro·
economics for sustainability is not only essential,
but possible. The starting point must be to identify
clearly Ihe condiIions IhaI deIne a susIainable
economy.
These conditions will still include a strong
requirement for economic stability as the basis for
protecting both people’s jobs and their capabilities
Ior Iourishing. 8uI Ihis condiIion will need Io
be supplemented by conditions that ensure
distributional equity, establish sustainable levels of
resource throughput and emissions, and provide for
the protection of critical natural capital.
In operational terms, there will be important
differences in the way that the conventional
variables þlay ouI in Ihis new macro·economy.
The balance between consumption and investment,
the split between the public and the private sector
spending, the nature of productivity improvements,
Ihe condiIions oI þroIIabiliIy: all oI Ihese will have
Io be re·negoIiaIed.
The role of investment is particularly crucial.
Sustainability will need enhanced investment in
public infrastructures, sustainable technologies
and ecological maintenance and protection.
These investments will operate differently from
convenIional caþiIal sþending (Aþþendix 2) and will
have to be judged and managed accordingly.
Above all, a new macro·economics Ior
sustainability must abandon the presumption of
growth in material consumption as the basis for
economic stability. It will have to be ecologically
and socially literate, ending the folly of separating
economy from society and environment.
Flourishing – within Limits
Fixing the economy is only part of the problem.
Addressing Ihe social logic oI consumerism is also
vital. This task is far from simple – mainly because
of the way in which material goods are so deeply
implicated in the fabric of our lives.
8uI change is essenIial. And some mandaIe Ior
IhaI change already exisIs. A nascenI disaIIecIion
with consumerism and rising concern over the
‘social recession’ have prompted a number of
initiatives aimed at improving wellbeing and
pursuing an ‘alternative hedonism’ – sources of
identity, creativity and meaning that lie outside the
realm of the market.
AgainsI Ihe surge oI consumerism Ihere are
already those who have resisted the exhortation to
‘go out shopping’, preferring instead to devote their
time to less materialistic pursuits, to their family, or
to the care of others.
Small scale ‘intentional’ communities (like the
Findhorn community in Scotland or Plum Village in
France) are exploring the art of the possible. Larger
10 Prosperity without Growth? Sustainable Development Commission
social movements (such as the ‘transition town’
movement) are mobilising people’s desire to live
more sustainably. These initiatives don’t appeal
to everyone. But they do provide an invaluable
learning ground, giving us clues about the potential
for more mainstream social change.
ChaþIer 9 discusses Iheir sIrengIhs and limiIaIions.
It explores why people may turn out both to be
happier and to live more sustainably when they
favour intrinsic goals that embed them in family
and community rather than extrinsic ones which
tie them into display and social status. Flourishing
within limits is a real possibility, according to this
evidence.
On the other hand, those at the forefront of social
change are oIIen haunIed by Ihe conIicI oI Irying Io
live, quite literally, in opposition to the structures
and values that dominate society. These structures
represent a culture of consumption that sends all
the wrong signals, penalising ‘good’ environmental
choices and making it all but impossible, even for
highly·moIivaIed þeoþle, Io live susIainably wiIhouI
þersonal sacriIce.
In this context, simplistic exhortations for people
to resist consumerism are destined to failure.
Urging people to insulate their homes, turn down
the thermostat, put on a jumper, drive a little less,
walk a little more, holiday at home, buy locally
produced food (and so on) will either go unheard
or be rejected as manipulation for as long as all the
messages about high street consumption point in
the other direction.
For this reason, structural change must lie at the
heart of any strategy to address the social logic of
consumerism. And iI musI consisI in Iwo main avenues.
Ihe IrsI is Io dismanIle Ihe þerverse incenIives Ior
unproductive status competition. The second must be
to establish new structures that provide capabilities
Ior þeoþle Io Iourish - and in þarIicular Io þarIiciþaIe
meaningfully and creatively in the life of society – in
less materialistic ways.
The advantages in terms of prosperity are likely
Io be subsIanIial. A less maIerialisIic socieIy will
enhance liIe saIisIacIion. A more equal socieIy
will lower Ihe imþorIance oI sIaIus goods. A less
growIh·driven economy will imþrove þeoþle´s
work·liIe balance. Lnhanced invesImenI in
public goods will provide lasting returns to the
nation’s prosperity.
Governance for Prosperity
Achieving Ihese goals ineviIably raises Ihe quesIion
of governance – in the broadest sense of the word.
How is a shared prosperity to be achieved in a
þluralisIic socieIy` how are Ihe inIeresIs oI Ihe
individual to be balanced against the common
good` whaI are Ihe mechanisms Ior achieving Ihis
balance`
Particular questions arise about the role of
governmenI iIselI. ChaþIer 1û idenIiIes an almosI
undisþuIed role Ior Ihe sIaIe in mainIaining macro·
economic stability. For better or worse, government
also ´co·creaIes´ Ihe culIure oI consumþIion, shaþing
Ihe sIrucIures and signals IhaI inIuence þeoþle´s
behaviour. AI Ihe same Iime, oI course, governmenI
has an essential role to play in protecting the
‘commitment devices’ that prevent myopic choice
and suþþorI long·Ierm social goals.
History suggests a cultural drift within government
towards supporting and encouraging a materialistic
and individualistic consumerism. This drift is not
entirely uniform across all countries. For example,
different ‘varieties of capitalism’ place more or less
emþhasis on de·regulaIion and comþeIiIion. 8uI all
varieties have a structural requirement for growth,
and rely directly or indirectly (eg in export markets)
on consumerism to achieve this.
6overnmenI iIselI is conIicIed here. 0n Ihe one
hand, it has a role in ‘securing the future’ – protecting
long·Ierm social and ecological goods, on Ihe oIher
iI holds a key resþonsibiliIy Ior macro·economic
sIabiliIy. |or as long as macro·economic sIabiliIy
depends on economic growth, government will
have an incentive to support social structures that
undermine commitment and reinforce materialistic,
novelIy·seeking individualism. ParIicularly where
that’s needed to boost high street sales.
Conversely, Ireeing Ihe macro·economy Irom a
structural requirement for growth will simultaneously
free government to play its proper role in delivering
social and ecological goals and þroIecIing long·Ierm
interests.
The narrow pursuit of growth represents a
horrible distortion of the common good and of
underlying human values. It also undermines the
legiIimaIe role oI governmenI iIselI. AI Ihe end oI
the day, the state is society’s commitment device,
par excellence, and the principal agent in protecting
our shared þrosþeriIy. A new vision oI governance
that embraces this role is urgently needed.
Sustainable Development Commission Prosperity without Growth? 11
The Transition to a Sustainable Economy
Ihe þolicy demands oI Ihis analysis are signiIcanI.
ChaþIer 11 þresenIs a series oI sIeþs IhaI governmenIs
could take now to effect the transition to a sustainable
economy. 8ox 1 summarises Ihese sIeþs. Ihey Iall
inIo Ihree main caIegories:
% building a susIainable macro·economy
% þroIecIing caþabiliIies Ior Iourishing
% respecting ecological limits.
Ihe sþeciIc þroþosals Iow direcIly Irom Ihe
analysis in this report. But many of them sit within
longer and deeper debates about sustainability,
wellbeing and economic growIh. And aI leasI some
of them connect closely with existing concerns of
government – for example over resource scarcity,
climate change targets, ecological taxation and
social wellbeing.
A þarI oI Ihe aim oI Ihis reþorI is Io þrovide a
coherent foundation for these policies and help
strengthen the hand of government in taking them
forward. For at the moment, in spite of its best
efforts, progress towards sustainability remains
þainIully slow. And iI Iends Io sIall endlessly on
Ihe over·arching commiImenI Io economic growIh.
A sIeþ change in þoliIical will - and a renewed vision
of governance – is essential.
But there is now a unique opportunity for
government – by pursuing these steps – to
demonstrate economic leadership and at the
same time to champion international action on
sustainability. This process must start by developing
Inancial and ecological þrudence aI home. lI musI
also begin to redress the perverse incentives and
damaging social logic that lock us into unproductive
status competition.
Above all, Ihere is an urgenI need Io develoþ
a resilienI and susIainable macro·economy IhaI is
no longer predicated on relentless consumption
growIh. Ihe clearesI message Irom Ihe Inancial
crisis oI 2ûû8 is IhaI our currenI model oI economic
success is IundamenIally Iawed. |or Ihe advanced
economies of the Western world, prosperity without
growIh is no longer a uIoþian dream. lI is a Inancial
and ecological necessity.
12 Prosperity without Growth? Sustainable Development Commission
Box 1: 12 SIeþs Io a SusIainable Lconomy
Building a Sustainable Macro-Economy
0ebI·driven maIerialisIic consumþIion is deeþly unsaIisIacIory as Ihe basis Ior our macro·economy. Ihe Iime is
now riþe Io develoþ a new macro·economics Ior susIainabiliIy IhaI does noI rely Ior iIs sIabiliIy on relenIless
growIh and exþanding maIerial IhroughþuI. |our sþeciIc þolicy areas are idenIiIed Io achieve Ihis:
1. 0eveloþing macro·economic caþabiliIy
2. lnvesIing in þublic asseIs and inIrasIrucIures
3. lncreasing Inancial and Iscal þrudence
4. keIorming macro·economic accounIing
Protecting Capabilities for Flourishing
The social logic that locks people into materialistic consumerism is extremely powerful, but detrimental ecologically
and þsychologically. A lasIing þrosþeriIy can only be achieved by Ireeing þeoþle Irom Ihis damaging dynamic and
þroviding creaIive oþþorIuniIies Ior þeoþle Io Iourish - wiIhin Ihe ecological limiIs oI Ihe þlaneI. |ive þolicy areas
address this challenge.
5. Sharing Ihe available work and imþroving Ihe work·liIe balance
6. Tackling systemic inequality
7. Veasuring caþabiliIies and Iourishing
8. SIrengIhening human and social caþiIal
9. keversing Ihe culIure oI consumerism
Respecting Ecological Limits
Ihe maIerial þroIigacy oI consumer socieIy is deþleIing naIural resources and þlacing unsusIainable burdens on
the planet’s ecosystems. There is an urgent need to establish clear resource and environmental limits on economic
activity and develop policies to achieve them. Three policy suggestions contribute to that task.
1û. lmþosing clearly deIned resource/emissions caþs
11. lmþlemenIing Iscal reIorm Ior susIainabiliIy
12. PromoIing Iechnology IransIer and inIernaIional ecosysIem þroIecIion.
For further details see pages 103-107
Sustainable Development Commission Prosperity without Growth? 13
Introduction
1
“ I think all of us here today would acknowledge
that we’ve lost that sense of shared prosperity.”
Barack Obama
March 2008
1
16 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
There is also a sense in which individual prosperity
is curtailed in the presence of social calamity.
That things are going well for us personally is of
little consolation if our family, our friends and our
community are in dire straits. In both these senses
– of caring about the future and of caring about
others – prosperity has something in common with
the concept of sustainability. The broad aim of this
report is to explore that relationship – between
prosperity and sustainability – in more detail.
AI Ihe hearI oI Ihis exþloraIion is a simþle quesIion:
whaI can þrosþeriIy þossibly mean in a IniIe world
with a rising population that is expected to exceed
nine billion þeoþle wiIhin decades`
1

One response – perhaps the most familiar one
– is to cast prosperity in economic terms and to
recommend a continual rise in national (and global)
economic output, with a corresponding increase in
people’s incomes. This response has an appealing
logic Ior Ihe world´s þooresI naIions, where 2û% oI
Ihe þoþulaIion earn jusI 2% oI Ihe world´s income.
A meaningIul aþþroach Io þrosþeriIy musI cerIainly
address the plight of the one billion people across
Ihe world who are living on less Ihan S1 a day - halI
the price of a small cappuccino in Starbucks.
2

But prosperity is not synonymous with income or
wealth. Rising prosperity is not the same thing as
economic growth. Until quite recently, prosperity
was noI casI sþeciIcally in Ierms oI money aI all, iI
was simþly Ihe oþþosiIe oI adversiIy or aIIicIion.
3

The concept of economic prosperity – and the elision
of rising prosperity with economic growth – is a
modern construction. It is a construction that has
come under considerable criticism.
Economic growth, claim its critics, doesn’t always
increase our prosperity. On the contrary, it can detract
from it in various ways. Perhaps most relevant here,
the material implications of economic growth lead to
the depletion of natural resources and the degradation
of the environment, impoverishing both present and
future generations. Climate change, depletion of oil
resources, waIer scarciIy, Ihe collaþse oI Ish sIocks
and the chronic loss of biodiversity are a few of these
material concerns.
4

Particular urgency pertains to the twin challenges
of climate change and ‘peak oil’.
i
ln Ihe IrsI case,
we can probably keep the economy going for a
while even as we head towards the cliff. But as Sir
Nicholas SIern has argued, cosIs will be þunishingly
high when the crunch comes. Early investment in
the transition to a low carbon society is vital to
avoid economic collapse later on.
5
In the second case, oil price hikes have already
shown they have the potential to destabilise the
global economy and threaten basic securities. Fears
þeaked in |uly 2ûû8 when oil þrices reached S147
a barrel. Though prices fell sharply in the following
months, the threat of peak oil hasn’t gone away.
Ihe lnIernaIional Lnergy Agency esIimaIes IhaI
Ihe ´þeak´ could arrive as early as 2û2û. 0Iher
commentators believe it could be even sooner.
6

Beyond these ecological concerns lie social ones.
Ihere is disIurbing evidence IhaI boIh Ihe beneIIs
and the costs of economic growth are unevenly
distributed. The continuing disparities between
rich and poorer nations are unacceptable from a
humanitarian point of view and generate rising social
Iensions: real hardshiþs in Ihe mosI disadvanIaged
communiIies have a sþill·over eIIecI on socieIy as
a whole.
7

Finally, the continued pursuit of economic growth
(beyond a certain point at least) does not appear to
advance and may even impede human happiness.
Talk of a growing ‘social recession’ in advanced
economies has accompanied the relative economic
success of the last decade.
8
Prosperity is about things going well for us – in accordance with (pro- in the Latin) our
hopes and expectations (speres). Wanting things to go well is a common human concern.
It’s understood that this sense of things going well includes some notion of continuity.
we are net inrIined te think that Iife is geing weII, if we renhdentIy expert things te faII apart
tomorrow. There is a natural tendency to be at least partly concerned about the future.
i
Peak oil is the term used to describe the point at which global oil output reaches a peak, before entering a terminal decline.
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 17
These three related arguments – ecological, social
and þsychological - are now well·rehearsed in Ihe
literature on sustainability (and on happiness). It is
not the aim of this study to dwell on them in detail.
Rather the intention is to turn the relationship
between rising prosperity and economic growth on
its head. If economic growth and rising prosperity
are not the same thing, and since growth can
damage both people and planet, should we not
perhaps think about doing without growth, at least
in Ihe richer naIions`
Clearly such a prospect is problematic in the
poorest countries. But the conditions of living in
cosmoþoliIan Luroþe or Ihe uSA are a Iar cry Irom
Ihe abjecI þoverIy oI rural AIrica and þarIs oI SouIh
Asia and LaIin America.
ln a world oI IniIe resources, consIrained by sIricI
environmental limits, still characterised by ‘islands
of prosperity’ within ‘oceans of poverty’,
9
are
ever·increasing incomes Ior Ihe already·rich really
a legitimate focus for our continued hopes and
exþecIaIions` ls Ihere some oIher þaIh Iowards
a more sustainable, a more equitable form of
þrosþeriIy`
In short, this report challenges the assumption of
continued economic expansion in rich countries and
asks: is iI þossible Io achieve þrosþeriIy without
growIh`
Some would say it’s ironic to be asking such
questions when economic stability is itself
under threat and the world struggles with global
recession. Raising deep, structural questions about
the nature of prosperity in this climate might seem
inopportune if not insensitive. ‘That is not what
þeoþle are inIeresIed in when Inancial markeIs are
in Iurmoil,´ admiIs 6eorge Soros oI his own aIIemþI
to dig deeper into the global credit crisis.

But there
are several reasons not to postpone this inquiry until
the economy looks brighter.
Ihe IrsI is IhaI Ihe cumulaIive imþacIs oI economic
growth – climate change, resource depletion, social
recession, for example – are unlikely to go away,
just because growth slows down in the advanced
economies. Some may get better, temporarily. But
some of them may even get worse.
The second is that the current state of the economy
and the concerns of this report are not unrelated.
0n Ihe conIrary, as we see in ChaþIer 2, iI is imþossible
Io ignore Ihe inIuence oI Inancial markeIs and
commodity prices in the relationship between
growth and prosperity. This interrelatedness has not
gone unnoticed amongst world leaders. Speaking on
Ihe oþening day oI Ihe 2ûû8 68 SummiI in hokkaido,
uN SecreIary 6eneral 8an Ki·Voon reIerred Io Ihe
problems of climate change, soaring food prices and
development as ‘deeply interconnected’ crises that
need to be addressed simultaneously.
11

The economist Peter Victor, one of the contributors to
the SDC’s Redefining Prosperity project, has argued
that our overriding challenge is to build economies
which are ‘slower by design, not by disaster’.
12

But if the current economic crisis really does indicate
(as some predict) the end of an era of easy growth,
then the concerns of this report are doubly relevant.
Prosperity without growth is a very useful trick to
have up your sleeve when the economy is going
down the pan.
Perhaps most telling of all is the clear window of
opportunity – and overwhelming imperative – that
now exists for change. In the face of economic
collapse, governments have an undisputed duty
to intervene. Public investment is essential.
Restructuring is inevitable. Targeting these
interventions towards sustainability makes obvious
sense.
In short, there is no better time to make progress
towards a more sustainable society. To invest in
renewable technologies that will reduce both carbon
emissions and our deþendence on IniIe resources.
Io renew our Inancial and social insIiIuIions and
create a fairer world. To invest in the jobs and skills
that these tasks demand. To initiate the transition to
a sustainable economy.
Whatever the state of the economy, the central
question addressed in this report is undiminished.
It has haunted debates on sustainable development
Ior several decades. And in a very real sense, now
may be the best possible time to make some clear
progress in answering it. That at any rate is the
intention of the following pages.
18 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
“ This has been an age of global prosperity.
It has also been an era of global turbulence.
And where there has been irresponsibility,
we must now clearly say: the age of
irresponsibility must be ended.”
2
The Age of
Irresponsibility
Gordon Brown
SeþIember 2ûû8
1
20 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
This question was thrown into sharp relief during
the course of writing the report. The banking crisis
oI 2ûû8 led Ihe world Io Ihe brink oI Inancial
disaster and shook the dominant economic model
Io iIs IoundaIions. lI redeIned Ihe boundaries
between market and state and forced us to confront
our inabiliIy Io manage Ihe Inancial - leI alone
social or environmental – sustainability of the global
economy.
Consumer conIdence has been shaIIered.
Investment has stalled and unemployment is rising
sharþly. Advanced economies (and some develoþing
countries) are faced with the prospect of a deep and
long·lasIing recession. Public secIor Inances will be
sIreIched Ior a decade or more. IrusI in Inancial
markets will suffer for some considerable time to
come. NoI Io sIand back now and quesIion whaI
haþþened would be Io comþound Iailure wiIh Iailure:
failure of vision with failure of responsibility.
In search of villains
The causes of the crisis were complex. The most
prominent villain was taken to be subprime lending
in the US housing market. Some highlighted the
unmanageability of the ‘credit default swaps’ used
to parcel up ‘toxic debts’ and hide them from the
balance sheeI. 0Ihers þoinIed Ihe Inger oI blame aI
greedy speculators and unscrupulous investors intent
on making a killing at the expense of vulnerable
institutions.
A dramaIic rise in basic commodiIy þrices during
2ûû7 and early 2ûû8 (|igure 1) cerIainly conIribuIed
Io economic slowdown by squeeting comþany
margins and reducing discretionary spending.
AI one þoinI in mid·2ûû8, advanced economies
were Iacing Ihe þrosþecI oI ´sIagIaIion´ - a
simulIaneous slow·down in growIh wiIh a rise in
inIaIion - Ior Ihe IrsI Iime in IhirIy years. 0il þrices
doubled in Ihe year Io |uly 2ûû8, while Iood þrices
rose by 66%, sþarking civil unresI in some þoorer
nations.
2

All oI Ihese can be counIed as conIribuIory IacIors.
None on Iheir own oIIers an adequaIe exþlanaIion
Ior how Inancial markeIs managed Io desIabilise
entire economies. Why loans were offered to people
who couldn’t afford to pay them off. Why regulators
Iailed Io curb individual Inancial þracIices IhaI could
bring down monolithic institutions. Why unsecured
debt had become so dominant a force in the
economy. And why 6overnmenIs had consisIenIly
turned a blind eye or actively encouraged this ‘age
of irresponsibility’.
Political response to the crisis provides us with some
clues. 8y Ihe end oI 0cIober 2ûû8, governmenIs
across the world had committed a staggering $7
Irillion oI þublic money - over Ihree Iimes Ihe 6ross
0omesIic ProducI (60P) oI Ihe uK - Io securiIise
risky assets, underwrite threatened savings and
recapitalise failing banks.
3
No one þreIended IhaI
Ihis was anyIhing oIher Ihan a shorI·Ierm and deeþly
regressive soluIion. A Iemþorary Ix IhaI rewarded
those responsible for the crisis at the expense of the
taxpayer. It was excused on the grounds that the
alternative was simply unthinkable.
Collaþse oI Ihe Inancial markeIs would have
led to a massive and completely unpredictable
global recession. Entire nations would have been
bankrupted. Commerce would have failed en
masse. Livelihoods would have been destroyed.
Homes would have been lost. The humanitarian
cost of failing to save the banking system would
have been enormous. Those who resisted the US’s
Iroubled AsseIs kelieI Program (IAkP) on iIs IrsI
reading through Congress appeared oblivious to
Ihese consequences, inIamed as Ihey were wiIh
The conventional formula for achieving prosperity relies on the pursuit of economic growth.
Higher incomes will increase wellbeing and lead to prosperity for all, in this view.
This report challenges that formula. It questions whether economic growth is still
a legitimate goal for rich countries like the UK, in the context of the huge disparities in
inreme and weIIbeing that persist arress the gIebe and the renstraints ef Iiving within hnite
envirenmentaI Iimits. It expIeres whether the benehts ef rentinued erenemir grewth stiII
outweigh the costs and scrutinises the assumption that growth is essential for prosperity.
In short, it asks: is it possible to have prosperity without growth?
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 21
understandable indignation over the unjustness of
the solution.
But the harsh reality was that politicians had no
choice but to intervene in the protection of the
banking sector. In the language of the media, Wall
SIreeI is Ihe liIeblood oI Vain SIreeI. Ihe healIh oI
the modern economy hangs on the health of the
Inancial secIor. AnyIhing less Ihan IoIal commiImenI
to its survival would have been unthinkable. The
appropriate goal of policy at that point in time was
inconIesIably Io sIabilise Ihe sysIem: Io reassure
savers, to encourage investors, to assist debtors,
Io resIore conIdence in Ihe markeI. Very much as
governments around the world tried to do.
They were only partially successful – halting an
immediate slide into chaos but failing to avert the
prospect of a deep recession across the world. This
prompted a further round of economic recovery
þackages early in 2ûû9 which aimed Io ´kick·sIarI´
consumer spending, protect jobs, and stimulate
economic growth again. In Chapter 7 we explore
some of these ‘stimulus packages’ in more detail.
It was abundantly clear, by the time the World
Lconomic |orum meI in 0avos in |ebruary 2ûû9,
IhaI a liIIle reIecIion was in order. PoliIical leaders,
economisIs and even Inanciers acceþI Ihe þoinI.
Ihe susþension oI þracIices like shorI·selling,
increased regulaIion oI Inancial derivaIives,
beIIer scruIiny oI Ihe condiIions oI lending: all oI
these became widely accepted as inevitable and
necessary responses to the crisis. There was even
a grudging acceptance of the need to cap executive
remuneraIion in Ihe Inancial secIor.
AdmiIIedly, Ihis was born more oI þoliIical necessiIy
in the face of huge public outcry over the bonus
culture than through recognition of a point of
principle. In fact, huge executive bonuses were still
being þaid. 6oldman Sachs þaid ouI S2.6 billion in
end oI year (2ûû8) bonuses in sþiIe oI iIs S6 billion
dollar bailout by the US government, justifying
these on the basis that they helped to ‘attract and
motivate’ the best people.
5

8uI even Ihese resþonses were seen as shorI·Ierm
interventions, designed to facilitate the restoration
oI business as usual. ShorI·selling was susþended
Ior six monIhs, raIher Ihan banned. Ihe þarI·
naIionalisaIion oI Inancial insIiIuIions was jusIiIed
on the basis that shares would be sold back to
the private sector as soon as reasonably possible.
The capping of executive remuneration was
‘performance related’.
J
a
n

2
0
0
3

=

1
0
0
Figure 1: Global Commodity Prices: Jan 2003 – Feb 2009
Figure 2: UK Consumer Debt and Household Savings 1993-2008
S
a
v
i
n
g
s

a
s

%

o
f

d
i
s
p
o
s
a
b
l
e

i
n
c
o
m
e
P
e
r
s
o
n
a
l

d
e
b
t

a
s

%

o
f

G
D
P
1993 1993 1997 1996 1994 1995 1998 1999 2003 2002 2000 2001 2004
Personal debt
Metals
Household savings ratio
2007 2006 2005 2008
12%
10%
8%
6%
4%
2%
0%
-2%
120%
100%
80%
60%
40%
20%
0%
-20%
450
400
350
300
250
200
150
100
50
500
0
J
a
n

2
0
0
3
J
U
L

2
0
0
3
J
u
l

2
0
0
8
J
a
n

2
0
0
8
J
u
l

2
0
0
7
J
a
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2
0
0
7
J
u
l

2
0
0
6
J
a
n

2
0
0
6
J
u
l

2
0
0
5
J
a
n

2
0
0
5
J
U
L

2
0
0
4
J
a
n

2
0
0
4
J
a
n

2
0
0
9
Food
Oil
Figure 1 Global Commodity Prices: Jan 2003 – Feb 2009
4
Extraordinary though some of these interventions
were, they were largely regarded as temporary
measures. Necessary evils in Ihe resIoraIion oI a
free market economy. Their declared aim was clear.
By pumping equity into the banks and restoring
conIdence Io lenders, Ihe world´s leaders hoþe Io
re·invigoraIe demand and halI Ihe recession.
Their ultimate goal was to protect the pursuit of
economic growth. Throughout the crisis, this has
been Ihe one non·negoIiable: IhaI growIh musI
continue at all costs. Renewed growth was the
end IhaI jusIiIed inIervenIions unIhoughI oI only a
Iew monIhs þreviously. No þoliIician seriously
questions it.
YeI quesIion iI we musI. Allegiance Io growIh was
the single most dominant feature of an economic
and political system that led the world to the brink
of disaster. The growth imperative has shaped the
architecture of the modern economy. It motivated
Ihe Ireedoms granIed Io Ihe Inancial secIor.
It stood at least partly responsible for the loosening
oI regulaIions, Ihe over·exIension oI crediI and
the proliferation of unmanageable (and unstable)
Inancial derivaIives.
The labyrinth of debt
In fact, it is generally agreed that the unprecedented
consumþIion growIh beIween 199û and 2ûû7
was fuelled by a massive expansion of credit and
increasing levels oI debI (8ox 2). 0ne asþecI oI Ihis
was the rise and rise of consumer indebtedness.
Over the course of more than a decade consumer
debt served as a deliberate mechanism for freeing
personal spending from wage income and allowing
consumption to drive the dynamics of growth.
NoI all economies were equally susceþIible Io Ihis
dynamic. Indeed it’s a feature of the system of debt
that for one part of the global economy to be highly
indebted, another part must be saving hard. During
Ihe IrsI decade oI Ihe 21
st
Century, the savers were
largely in the emerging economies. The savings rate
in China during 2ûû8 was around 25% oI disþosable
income, while in lndia iI was even higher aI 37%.
Ihere were also clear diIIerences beIween Ihe so·
called ‘liberal’ and ‘coordinated’ market economies’,
with the former typically showing higher levels of
consumer indebtedness than the latter.
6
Ihe uK and
the US were particularly vulnerable to the problem.
Personal debI in Ihe uK more Ihan doubled in less
Ihan a decade. Lven during 2ûû8, as recession
loomed, iI was growing aI Ihe raIe oI £1m every 11
minutes. Though the rate of growth slowed down –
as iI Iends Io do in a recession - by Ihe end oI 2ûû8,
the cumulative personal debt still stood at almost
£1.5 Irillion, higher Ihan Ihe 60P Ior Ihe second
year running.
7
Savings, on the other hand, had
þlummeIed. 0uring Ihe IrsI quarIer oI 2ûû8, Ihe
household savings raIio in Ihe uK Iell below tero Ior
Ihe IrsI Iime in Iour decades (|igure 2).
J
a
n

2
0
0
3

=

1
0
0
Figure 1: Global Commodity Prices: Jan 2003 – Feb 2009
Figure 2: UK Consumer Debt and Household Savings 1993-2008
S
a
v
i
n
g
s

a
s

%

o
f

d
i
s
p
o
s
a
b
l
e

i
n
c
o
m
e
P
e
r
s
o
n
a
l

d
e
b
t

a
s

%

o
f

G
D
P
1993 1993 1997 1996 1994 1995 1998 1999 2003 2002 2000 2001 2004
Personal debt
Metals
Household savings ratio
2007 2006 2005 2008
12%
10%
8%
6%
4%
2%
0%
-2%
120%
100%
80%
60%
40%
20%
0%
-20%
450
400
350
300
250
200
150
100
50
500
0
J
a
n

2
0
0
3
J
U
L

2
0
0
3
J
u
l

2
0
0
8
J
a
n

2
0
0
8
J
u
l

2
0
0
7
J
a
n

2
0
0
7
J
u
l

2
0
0
6
J
a
n

2
0
0
6
J
u
l

2
0
0
5
J
a
n

2
0
0
5
J
U
L

2
0
0
4
J
a
n

2
0
0
4
J
a
n

2
0
0
9
Food
Oil
Figure 2 UK Consumer Debt and Household Savings 1993–2008
8
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 23
Box 2: Debt in Perspective
Lending and borrowing money is (in normal times at least) a fundamental feature of the modern economy (see
Chapter 6). Households, companies and governments all participate both in lending (e.g. through savings and
investments) and in borrowing (e.g. through loans, credit accounts and mortgages). Financial debts (sometimes
called liabiliIies) are Ihe accumulaIed money owed aI any one þoinI in Iime by a þerson, a Irm, a governmenI or
indeed the nation as a whole.
A IundamenIal þrinciþle oI caþiIalism is IhaI Ihese accumulaIed liabiliIies aIIracI inIeresI charges over Iime.
0ebI rises in Iwo ways: IrsIly by borrowing more money (e.g. Ior increased þublic sþending), and secondly
through interest accumulated on the debt. For any given interest rate, a higher level of debt places a greater
demand on people’s income to pay off the interest and stop the debt accumulating.
Some oI Ihis requiremenI could be meI Irom revenues generaIed by þeoþle´s own Inancial ´asseIs´ or savings.
8y þarIiciþaIing in Ihe economy boIh as savers and as borrowers, þeoþle can Iry and balance Iheir Inancial
liabiliIies (money borrowed) againsI Iheir Inancial asseIs (money lenI). Ihe exIenI Io which iI ´maIIers´ how
much debI we hold deþends (in þarI) on Ihis balance beIween asseIs and liabiliIies. And as Ihe currenI crisis has
shown, on Ihe Inancial reliabiliIy oI Ihe asseIs.
Ihree asþecIs oI debI have aIIracIed media and þolicy aIIenIion over Ihe lasI decade: þersonal debI, Ihe
national debt and the gross external debt. Though all are concerned with money owed, these debts are quite
different and have different policy implications. The following paragraphs set out the key elements of each and
their relevance for economic sustainability.
Personal Debt
Personal (or consumer) debI is Ihe amounI oI money owed by þrivaIe ciIitens. lI includes home loans, crediI card
debI and oIher Iorms oI consumer borrowing. Personal debI in Ihe uK is currenIly dominaIed by home loans,
which aI Ihe end oI 2ûû8 comþrised 84% oI IoIal. |or as long as Ihe value oI homes conIinued Io rise þeoþle´s
Inancial liabiliIies (home loans) were oIIseI by Ihe value oI Iheir þhysical asseIs (homes). Problems arise when
house values collapse. Liabilities are no longer balanced by assets. When this is compounded (as in a recession)
by Ialling incomes, debI - and Ihe Inancial viabiliIy oI households - becomes highly unsIable. Like much oI Ihe
growIh economy (ChaþIers 4 and 6), Inancial sIabiliIy Iurns ouI Io be deþendenI in an unsusIainable way on
growth – in this case growth in the housing market.
National Debt
The national (or public sector) debt is the money that government owes to the private sector.
9
When a government
conIinually runs a deIciI (i.e. sþends more Ihan iI receives in revenues) Ihe naIional debI rises. |usI as Ior
households, reducing the debt is only possible when the public sector runs a surplus (i.e. it spends less than it
receives). lncreased debI is a common IeaIure oI þublic Inances during recession. 8uI servicing Ihis debI - wiIhouI
compromising public services – depends heavily on future government revenues increasing. This can happen in
only Ihree ways. |irsI, by achieving Ihe desired aim oI growIh. Second, by increasing Ihe Iax raIe. And Ihird, by
using Ihe debI Io invesI in þroducIive asseIs wiIh þosiIive reIurns Io Ihe þublic þurse. A conIinually rising þublic
debt in a shrinking economy is a recipe for disaster.
External debt
The total debt held outside the country by government, business and households is called the external debt.
The sustainability of this debt depends on a complex mix of factors, including the extent to which it is balanced
by external ‘assets’, the form of both assets and liabilities (including the currency in which they are held) and the
relative strength of domestic currency on the international market. Particular pressure is placed on an economy
when iIs economy is shrinking and iIs currency is losing value. ln exIreme circumsIances, a counIry may Ind iIselI
unable to attract investors willing to support its spending and unable to liquidate its assets to compensate for this.
AI Ihis þoinI Ihe level oI exIernal debI relaIive Io Ihe 60P becomes criIical. Calling in debIs worIh almosI Ive Iimes
Ihe naIional income (as in Ihe uK) would be caIasIroþhic.
24 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
People are encouraged into debt by a complex
mix of factors including (Chapter 6) the desire for
social status and the drive to boost high street
sales. But when this strategy becomes unstable –
as iI did during 2ûû8 - iI þlaces large secIions oI
Ihe þoþulaIion aI risk oI lasIing Inancial hardshiþ.
Inevitably, that risk falls mainly on those who are
most vulnerable already – the lower income groups
who þroIIed less Irom Ihe lasI Iwo decades oI
growth.

Far from delivering prosperity, the culture
of ‘borrow and spend’ ends up detracting from it.
Ihe same vulnerabiliIy can aIIicI Ihe naIion as a
whole. There are different kinds of indebtedness at
Ihe naIional level (8ox 2). 0ne oI Ihe key measures
is the national – or public sector – debt which
measures how much government owes to the
private sector. This can vary widely across nations.
|rance, 6ermany, Canada and Ihe uS all have þublic
secIor debIs above 6û% oI 60P. lIaly and |aþan hold
þublic secIor debIs IhaI are higher Ihan Iheir 60P.
Norway by conIrasI holds no þublic debI aI all and
on Ihe conIrary has enormous Inancial asseIs.
ln Ihe uK, þublic secIor debI rose sharþly Ihrough
Ihe Inancial crisis (|igure 3). Ihis was in þarI a
result of the increased borrowing needed to protect
the banks and fund economic recovery. By the
end oI 2ûû8, Ihe naIional debI was already higher
Ihan aI any Iime since Ihe early 198ûs, well above
Ihe Ireasury´s selI·imþosed ceiling oI 4û% oI Ihe
60P and rising IasI. Ihe uK 6overnmenI´s own
calculations had public sector borrowing rising
Irom 2.6% oI 60P in 2ûû8 Io 8% wiIhin a year or
so. And Ihe 6overnmenI acceþIed IhaI Ihis would
þush naIional debI Io almosI 6û% oI 60P by 2û1û.
Crucially, Ihis Igure excluded Ihe cosIs oI þurchasing
equiIy in Ihe þarI·naIionalised banks.
11

Public sector debt is not in itself a bad thing. It simply
reIecIs Ihe amounI oI money IhaI governmenI owes
to the private sector. This includes money saved by
iIs own ciIitens. And Ihe idea IhaI ciIitens hold a
Inancial inIeresI in Ihe þublic secIor has some clear
advantages. It can be thought of as part of the ‘social
conIracI´ beIween ciIiten and sIaIe. 8uI when Ihe
household savings raIe collaþses (|igure 2) and Ihe
naIional debI rises (|igure 3), IurIher borrowing
increases whaI is called Ihe exIernal debI (8ox 1) -
the money a country borrows from outside its own
boundaries. This inevitably exposes the nation to
the volatility of international markets.
Figure 3: The UK Net Public Sector Debt: 1993-2008
60%
50%
40%
30%
20%
10%
0%
1993 1997 1996 1994 1995 1998 1999 2003 2002 2000 2001 2004 2007 2006 2005 2008 2010 2009
Increase largely due to
higher spending on
health and education
Projected on basis
PBR 2008 forecast
UK Treasury ceiling
on national debt
Includes the cost
of financial sector
interventions
%

o
f

G
D
P
Figure 4: Gross External Debt across Nations (2007/8)
16
14
12
10
8
6
4
2
0
US Germany UK France Japan Ireland Norway China India
Absolute value of external debt ($ trillion)
External debt as multiple of GDP
Figure 3 The UK Net Public Sector Debt: 1993–20081
2
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 25
Some countries may be better placed than others
to weather this volatility. External debt varied
widely across naIions (|igure 4) during 2ûû7/8,
Irom as liIIle as 5% oI 60P (in China and lndia Ior
examþle) Io over 9ûû% oI 60P (in lreland). ln Ihe
uK, Ihe gross exIernal debI increased seven and a
half times in the space of just two decades. By the
end oI 2ûû8, iI was equivalenI Io almosI Ive Iimes
Ihe 60P and ranked as Ihe second highesI absoluIe
level of external debt in the world after the US.
These external liabilities were set off – at least
in part – by a higher than usual level of external
asseIs. 8uI in an unsIable markeI Ihis þlaced Ihe uK
in a vulnerable Inancial þosiIion. Vore Io Ihe þoinI,
as Ihe lnIernaIional VoneIary |und þoinIs ouI, Ihis
þosiIion was deliberaIely courIed by Ihe uK in iIs
role as an inIernaIional cenIre oI Inance.
Ihe archiIecIure oI Inancial recovery in Ihe wake
oI Ihe 2ûû8 crisis - and in þarIicular Ihe role oI Ihe
þublic secIor as an equiIy·holder in Ihe banks - owed
much Io Ihe uK Prime VinisIer, 6ordon 8rown. ln
Ihis resþecI, Ihe uK 6overnmenI aIIracIed deserving
þraise Ior iIs resþonse Io Ihe crisis. ParI·naIionalising
the banks may have been suboptimal from a
free market perspective but it was considerably
more progressive than simply pumping in cash or
guaranIees Io ensure liquidiIy. AI leasI iI allowed
Ior Ihe þossibiliIy oI a Inancial reIurn Io Ihe þublic
purse.
AI Ihe same Iime, whaI became clear Ihrough Ihe
crisis was the extent to which economic policy over
Iwo decades had þosiIioned Ihe uK slaþ bang across
an emerging IaulI line in Ihe Inancial secIor. high
levels of consumer debt and the second highest level
of external debt in the world were not just accidental
IeaIures oI economic liIe, buI Ihe resulI oI sþeciIc
policies to increase liquidity and boost spending. The
one area oI Iscal þrudence in Ihe uK - a relaIively
low level oI þublic secIor debI - became Ihe IrsI
casualty of the collapse.
Ihis is noI Io suggesI IhaI Ihe uK is alone in Iacing
the severity of the current crisis. On the contrary,
in an increasingly globalised world, iI was diIIculI
for any country to escape this recession. Even those
economies - like 6ermany, |aþan and China - which
retained strong manufacturing sectors, largely
avoided consumer debt and delivered strong public
sector surpluses – suffered. During the last quarter
Figure 3: The UK Net Public Sector Debt: 1993-2008
60%
50%
40%
30%
20%
10%
0%
1993 1997 1996 1994 1995 1998 1999 2003 2002 2000 2001 2004 2007 2006 2005 2008 2010 2009
Increase largely due to
higher spending on
health and education
Projected on basis
PBR 2008 forecast
UK Treasury ceiling
on national debt
Includes the cost
of financial sector
interventions
%

o
f

G
D
P
Figure 4: Gross External Debt across Nations (2007/8)
16
14
12
10
8
6
4
2
0
US Germany UK France Japan Ireland Norway China India
Absolute value of external debt ($ trillion)
External debt as multiple of GDP
Figure 4 Gross External Debt across Nations (2007/8)
13

26 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
oI 2ûû8, 6ermany´s economy sank IasIer Ihan any
oIher Luroþean naIion, conIracIing by 2.1%.
14
Ironically, these economies built their stability not on
domestic consumption growth but on consumption
growth abroad. Unable to persuade their own
consumers to spend rather than save, they achieved
growth by exporting to countries like the US and
Ihe uK where consumers were sIill þreþared Io
spend rather than save. When credit collapsed and
consumer spending slowed everywhere, there were
knock·on imþacIs Ior everyone.
So Ihe sense IhaI economic þolicy consciously IirIed
wiIh Inancial risk goes much wider Ihan Ihe uK´s
dalliance in the banking sector. In fact, the roots of
the crisis lie at least in part in a concerted effort
to free up credit for economic expansion across the
world.
In The New Paradigm for Financial Markets, 6eorge
Soros traces the emergence of what he calls a
´suþer·bubble´ in global Inancial markeIs Io a series
of economic policies to increase liquidity as a way
of stimulating demand. Loosening restraints on the
uS |ederal keserve, de·regulaIing Inancial markeIs
and promoting the securitisation of debts through
comþlex Inancial derivaIives were also deliberaIe
interventions. Their overriding aim was to promote
economic growth.
15

In other words, the market was not undone by
isolated practices carried out by rogue individuals.
Or even through the turning of a blind eye by
less than vigilant regulators. It was undone by
growth itself.
The enemy within
Securitisation of mortgage debts (for example) was
championed at the highest level, spearheaded by
Alan 6reensþan, Iormer chairman oI Ihe |ederal
Reserve. In The Age of Turbulence, 6reensþan
defends the practice explicitly, arguing that
‘transferring risk away from… highly leveraged loan
originators can be critical for economic stability,
especially in a global environment.’
16

ln IesIimony Io uS Congress in laIe 0cIober 2ûû8,
6reensþan admiIIed Io being ´shocked´ IhaI
markets hadn’t worked as expected.
17
But this only
underlines the point that these interventions were
deliberaIe. All along Ihe way, decisions Io increase
liquidity were made with a view to expanding the
economy. ´Amid Ihe crisis oI 2ûû8´, remarked an
Economist leader article, ‘it is easy to forget that
liberalisaIion had good consequences as well: by
making it easier for households and businesses to
get credit, deregulation contributed to economic
growth.’
18

|or over Iwo decades, deregulaIion oI Inancial
markets was championed under monetarism as
the best way to stimulate demand. The monetarists
may have been reacting against the levels of public
debI incurred by Keynesian sþending þrogrammes in
Ihe 197ûs.
19
But a strategy that ended up replacing
public debt with private debt was always a risky one.
‘When the music stops, in terms of liquidity, things
will be complicated,’ the CEO of Citibank reportedly
remarked, just before the bubble burst. ‘But as long
as the music is playing, you’ve got to get up and
dance. We’re still dancing.’


8y Ihe end oI 2ûû8, CiIibank was no longer dancing.
No bank was. Ihe music had clearly sIoþþed - and Ihings
were deIniIely comþlicaIed.
21
Just how complicated
was indicaIed by Ihe sheer site oI Ihe inIernaIional
bail·ouI. And Ihe IacI IhaI even an esIimaIed S7 Irillion
oI Iaxþayers´ money þroved insuIIcienI Io guaranIee
stability and avoid recession.
In short, the message from this chapter is that the
‘age of irresponsibility’ is not about casual oversight
or individual greed. The economic crisis is not a
consequence of isolated malpractice in selected
parts of the banking sector. If there has been
irresponsibility, it has been much more systemic,
sanctioned from the top, and with one clear aim in
mind: Ihe conIinuaIion and þroIecIion oI economic
growth.
The realisation that the credit crisis and the ensuing
recession were part of a systemic failure in the
current economic paradigm is reinforced by an
understanding of the resource and environmental
implications of economic growth.
The commodity price ‘bubble’ that developed over
several years and þeaked in mid·2ûû8 had clearly
bursI by Ihe end oI Ihe year (|igure 1). lI now
seems likely that the very high prices attributed to
key commodiIies in mid·2ûû8 were in þarI Ihe resulI
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 27
oI sþeculaIion and in þarI Ihe resulI oI idenIiIable
suþþly·side þroblems such as limiIed reInery
capacity in the face of high demand.
8uI Ihis shorI·Ierm bubble saI on Ioþ oI a rising
trend in commodity prices that cannot entirely
be explained away in these terms. Environmental
factors, resource and land scarcities, also played a
key part and will inevitably continue to do so as the
economy recovers. Concerns around peak oil and gas
are already gathering momentum. The natural rate
oI decline in esIablished oil Ields is now believed Io
be as high as 9% a year.
22

Economic expansion in China and the emerging
economies has accelerated the demand for fossil
Iuels, meIals, and non·meIallic minerals (see
ChaþIer 5) and will ineviIably reduce Ihe reserve
liIe oI IniIe resources. Ihe comþeIiIion Ior land
between food and biofuels clearly played a part in
rising Iood þrices. And Ihese demands in Iheir Iurn
are intimately linked to accelerating environmental
imþacIs: rising carbon emissions, declining
biodiversiIy, ramþanI deIoresIaIion, collaþsing Ish
stocks, declining water supplies and degraded soils.
The material and environmental impacts of growth
were paramount in prompting this inquiry. The
economic crisis may aþþear Io be unrelaIed, buI iI is
noI. Ihe age oI irresþonsibiliIy demonsIraIes a long·
term blindness to the limitations of the material
world. This blindness is as evident in our inability
Io regulaIe Inancial markeIs as iI is in our inabiliIy
to protect natural resources and curtail ecological
damage. Our ecological debts are as unstable as our
Inancial debIs. NeiIher is þroþerly accounIed Ior in
the relentless pursuit of consumption growth.
To protect economic growth we have been prepared
to countenance – and have even courted – unwieldy
Inancial and ecological liabiliIies, believing IhaI
these are necessary to deliver security and keep us
from collapse. But this was never sustainable in the
long·Ierm. Ihe Inancial crisis has shown us IhaI iI
isn´I even susIainable in Ihe shorI·Ierm.
The truth is that we have failed to get our economies
working susIainably even in Inancial Ierms. |or
this reason, responses to the crisis which aim to
restore the status quo are deeply misguided and
doomed to failure. Prosperity today means nothing
if it undermines the conditions on which prosperity
Iomorrow deþends. And Ihe single biggesI message
Irom Ihe Inancial melIdown oI 2ûû8 is IhaI
tomorrow is already here.
28 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
Zia Sardar
November 2007
1
Redefining Prosperity
3
“ The good life of the good person
can only be fully realised in the
good society. Prosperity can
only be conceived as a condition
that includes obligations and
responsibilities to others.”
30 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
Climate change, ecological degradation and the
spectre of resource scarcity compound the problems
oI Iailing Inancial markeIs and lengIhening
recession. ShorI·Ierm Ixes Io þroþ uþ a bankruþI
system aren’t good enough. Something more is
needed. An essenIial sIarIing þoinI is Io seI ouI a
coherent notion of prosperity that doesn’t rely on
default assumptions about consumption growth.
Accordingly, Ihis chaþIer searches Ior a diIIerenI kind
oI vision Ior þrosþeriIy: one in which iI is þossible
Ior humans beings Io Iourish, Io achieve greaIer
social cohesion, Io Ind higher levels oI wellbeing
and yet still to reduce their material impact on the
environment.
A þarI oI Ihe aim oI Ihe S0C´s Redefining Prosperity
sIudy was Io exþlore Ihis þossibiliIy. A key Inding
from the study was that, beyond the narrow
economic framing of the question, there are some
strong competing visions of prosperity. Some of
Ihese visions hail Irom þsychology and sociology,
others from economic history. Some draw on
secular or þhilosoþhical viewþoinIs, oIhers Irom Ihe
religious or ‘wisdom’ traditions.
2

There are differences between these approaches.
8uI Ihere are also some sIriking similariIies. Vany
perspectives accept that prosperity has material
dimensions. It is perverse to talk about things going
well if you lack the basic material resources required
Io susIain yourselI: Iood and waIer Io be adequaIely
nourished or materials for clothing and shelter.
Security in achieving these aims is also important.
8uI Irom aI leasI Ihe Iime oI ArisIoIle, iI has been
clear that something more than material security is
needed Ior human beings Io Iourish. ProsþeriIy has
vital social and psychological dimensions. To do well
is in part about the ability to give and receive love, to
enjoy the respect of your peers, to contribute useful
work, and to have a sense of belonging and trust in
the community. In short, an important component
of prosperity is the ability to participate freely in the
life of society.
3

Some approaches suggest a ‘transcendental’ need in
human beings. For the more religious perspectives
this may entail belief in some higher power. But
even secular understandings accept that the human
psyche craves meaning and purpose in life.
Some perspectives – particularly from the wisdom
traditions – add in an important moral or ethical
component to prosperity. Islamic commentator
Zia Sardar makes this point very clearly in his
contribution to Redefining Prosperity. ‘Prosperity
can only be conceived,’ he writes, ‘as a condition
that includes obligations and responsibilities to
others’.
4
The same principle is enshrined in the
Quaker’s Moral Economy Project.
5
Vy þrosþeriIy
hangs on the prosperity of those around me, these
traditions suggest, as their’s does on mine.
There is an interesting overlap between components
of prosperity and the factors that are known to
inIuence subjecIive wellbeing or ´haþþiness´
(|igure 5). lndeed, Io Ihe exIenI IhaI we are haþþy
when things go well and unhappy when they don’t,
there is clearly some connection between prosperity
and happiness. This doesn’t necessarily mean that
prosperity is the same thing as happiness. But the
connection between the two provides a useful link
into recent policy debates about happiness and
subjective wellbeing.
6
In fact, there are at least three different candidates
on offer here as concepts of prosperity. It’s useful
to distinguish carefully between them. Perhaps the
easiesI way Io do Ihis is Io borrow Irom AmarIya
Sen, who set out the distinctions very clearly in
a landmark essay on ´Ihe living sIandard´ IrsI
þublished in 1984.
8
One of Sen’s concepts was
characterised by the term opulence, anoIher, by
the term utility, and a Ihird Ihrough Ihe idea oI
capabilities for flourishing.
The prevailing vision of prosperity as a continually expanding economic paradise has come
unravelled. Perhaps it worked better when economies were smaller and the world was less
pepuIated. ßut if it was ever fuIIy ht fer purpese, it rertainIy isn´t new.
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 31
Prosperity as opulence
8roadly sþeaking, Sen´s IrsI conceþI - oþulence -
corresponds to a conventional understanding that
prosperity is about material satisfactions. Opulence
refers to the ready availability and steady throughput
oI maIerial commodiIies. An increase in Ihe volume
Iow oI commodiIies reþresenIs an increase in
prosperity. The more we have the better off we are,
in this view.
The logic of abundance as the basis for doing well
daIes back Io Adam SmiIh. ln Ihose days þroviding
material commodities to meet the necessities of life
was a priority. But it is pretty straightforward to see
that this simple equation of quantity with quality, of
more with better, is false in general. Even economic
theory recognises this limitation. The ‘diminishing
marginal utility’ of goods (indeed of income itself)
reIecIs Ihe IacI IhaI having more oI someIhing
usually provides less additional satisfaction.
The sense that more can sometimes be less
provides the beginnings of an understanding of the
dissaIisIacIions oI Ihe consumer socieIy (ChaþIer 9).
It also offers a strong humanitarian argument for
redistribution.
When you’ve had no food for months and the harvest
has failed again, any food at all is a blessing. When
Ihe American sIyle Iridge·Ireeter is already sIuIIed
with overwhelming choice, even a little extra might
be considered a burden, particularly if you’re tempted
to eat it. Once my appetite for strawberries, say, is
sated, more of them provide no further joy at all.
On the contrary, they may even make me feel ill.
And iI l´m IemþIed Io ignore Ihese bodily Ieedback
mechanisms againsI excess l will Ind myselI on Ihe
road Io obesiIy and ill·healIh: ouIcomes which iI is
nonsensical to describe as desirable or satisfying.
Prosperity as utility
Quantity is not the same thing as quality. Opulence
is not the same thing as satisfaction. Sen’s
second characterisation of prosperity – as utility –
recognises this. Rather than focusing on the sheer
volume of commodities available to us, this second
version relates prosperity to the satisfactions which
commodities provide.
9

Though it is easy enough to articulate this difference,
iI is more diIIculI Io deIne exacIly how commodiIies
relate to satisfaction, as many people have noted.


Ihe one Ihing IhaI´s þreIIy easy Io Igure ouI is IhaI
Ihe relaIionshiþ is highly non·linear. Lven someIhing
Figure 5: Factors influencing subjective wellbeing (happiness)
Work fulfilment 2%
Partner/spouse
and family
relationships
47%
Health
24%
Don’t know/other 1%
Community and Friends 5%
Money and financial situation 7%
A nice place
to live 8%
Religious/spiritual life 6%
Figure 6: Happiness and average annual income
Armenia
Ukraine
Moldova
Belarus
Russia
Bulgaria
Latvia
Romania
Estonia
Lithuania
Georgia
Azerbaijan
Peru
Macedonia
Hungary
Slovakia
Croatia
South Africa
Slovenia
Portugal
Turkey India
Pakistan Czech
Republic
Colombia
Bangladesh
Nigeria
Ghana
Philippines
Brazil
Puerto Rico
Taiwan
Poland
Dom. Rep
China
Mexico
Argentina
Venezuela
Uruguay
Chile
South Korea
Spain
New Zealand
Ireland
N. Ireland
Netherlands
Iceland
Sweden
Switzerland
United States
Austria
Canada
France
Japan
Finland
Australia
Britain
Belgium
Norway
Italy
Denmark
80
90
70
60
50
40
30
100
1000 5000 9000 25000 21000 9000 17000
GDP per person (Purchasing Power Parity, 1995 dollars)
M
e
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n

o
f

P
e
r
c
e
n
t

H
a
p
p
y

a
n
d

P
e
r
c
e
n
t

S
a
t
i
s
f
i
e
d

w
i
t
h

L
i
f
e

a
s

a

W
h
o
l
e
Figure 5 farters inhuenring subjertive weIIbeing {happinessJ
7
32 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
as basic as food doesn’t follow a simple linear
pattern in which more is always better.
There’s a particularly important complexity here.
Increasingly, the uses to which we put material
commodities are social or psychological in nature
rather than purely material.
11
In the immediate
þosI·war years, iI was a challenge Io þrovide Ior
basic necessiIies, even in Ihe mosI aIIuenI naIions.
Today, consumer goods and services increasingly
furnish us with identity, experience, a sense of
belonging, perhaps even meaning and a sense of
hope (Chapter 6).
Veasuring uIiliIy in Ihese circumsIances is even
more diIIculI. whaI is Ihe ´þsychic saIisIacIion´
Irom an i·Phone` A new bicycle` A holiday abroad`
A birIhday þresenI Ior a lover` Ihese quesIions
are practically impossible to answer. Economics
geIs round Ihe diIIculIy by assuming Iheir value is
equivalent to the price people are prepared to pay
for them in freely functioning markets. It casts utility
as the monetary value of market exchanges.
Ihe 60P sums uþ all Ihese markeI exchanges.
Broadly speaking, it measures the total spending
across Ihe naIion on all Ihe commodiIies IhaI Iow
through the economy. In this way, total spending is
Iaken as a þroxy Ior uIiliIy. And Ihis, in a nuIshell,
is Ihe case Ior believing IhaI Ihe 60P is a useIul
measure of wellbeing.
But the case is deeply problematic at best. There
is a huge liIeraIure criIiquing Ihe value oI 60P as
a wellbeing measure.
12
Obvious limitations include
iIs Iailure Io accounI Ior non·markeI services (like
household or voluntary labour) or negative utilities
(externalities) like pollution. Critics point to the
IacI IhaI Ihe 60P counIs boIh ´deIensive´ and
‘positional’ expenditures even though these don’t
contribute additionally to wellbeing.
13
And, þerhaþs
mosI criIically, Ihe 60P Iails Io accounI þroþerly Ior
changes in the asset base which affect our future
consumption possibilities.
Some have argued that the underlying concept of
utility as exchange value is itself fundamentally
Iawed. A key Inding here is Ihe so·called
haþþiness or liIe·saIisIacIion þaradox. lI 60P really
does measure uIiliIy, iI´s a mysIery Io Ind IhaI
reported life satisfaction has remained more or
less unchanged in most advanced economies over
several decades in sþiIe oI signiIcanI economic
growth. Real income per head has tripled in the US
since 195û, buI Ihe þercenIage oI þeoþle reþorIing
themselves very happy has barely increased at all,
and has declined since Ihe mid·197ûs. ln |aþan,
Ihere has been liIIle change in liIe·saIisIacIion over
several decades. ln Ihe uK Ihe þercenIage reþorIing
Ihemselves ´very haþþy´ declined Irom 52% in 1957
Io 36% Ioday, even Ihough real incomes have more
than doubled.
14

AcIually, as |igure 6 illusIraIes, Ihe so·called liIe·
satisfaction paradox is largely a malaise of the
advanced economies. It is only after an income
level oI abouI S15,ûûû þer caþiIa, IhaI Ihe liIe·
satisfaction score barely responds at all even to
quiIe large increases in 60P. ln IacI Ihe assumed
relaIionshiþ beIween income and liIe·saIisIacIion
can be turned on its head here. Denmark, Sweden,
lreland and New lealand all have higher levels oI
liIe·saIisIacIion Ihan Ihe uSA, buI signiIcanIly lower
income levels.
By contrast, at very low incomes there is a huge
spread in terms of life satisfaction, but the general
Irend is a quiIe sIeeþly rising curve. A small increase
in 60P leads Io a big rise in liIe saIisIacIion.
These data underline one of the key messages of this
report. There is no case to abandon growth universally.
But there is a strong case for the developed nations
to make room for growth in poorer countries. It is
in these poorer countries that growth really does
make a difference. In richer countries the returns on
further growth appear much more limited. In the
language of economics, marginal utility (measured
here as subjective wellbeing) diminishes rapidly at
higher income levels.
Vore imþorIanIly, iI becomes clear Irom Ihis analysis
IhaI a haþþiness·based measure oI uIiliIy and an
exþendiIure·based measure oI uIiliIy behave in
very diIIerenI ways. And since Ihey boIh claim Io
measure utility we can conclude that there is a
problem somewhere. One or other – perhaps both
– of these measures appears not to be doing its job
properly.
Ihe wellbeing þroIagonisIs claim iI´s Ihe 60P IhaI´s
Iailing. 8uI Ihe selI·reþorI measures also have Iheir
critics. In their contributions to Redefining Prosperity,
boIh Paul 0rmerod and |ohn 0´Neill þoinIed Io Ihe
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 33
fact that people are known to be inconsistent in
assessments of their own happiness.
16

Nobel·þrite winner 0aniel Kahneman has shown
that if you ‘add up’ people’s assessments of
subjective wellbeing over time you don’t get the
same answer as you would if you ‘take all things
together’. This may partly be because people adapt
quickly to any given level of satisfaction and this
changes their future valuations. Even something
simple like a change in the order of events can
alter our assessment of how well things have
gone overall.
17

0ne oI Ihe diIIculIies in comþaring Ihe selI·reþorI
measure againsI Ihe 60P is IhaI Ihey are simþly
diIIerenI kinds oI scales. Ihe 60P is (in þrinciþle aI
least) unbounded. It can (politicians hope) go on
growing indeIniIely. Ihe liIe·saIisIacIion measure
on the other hand is a bounded scale. You can only
score Irom û Io 1û, how ever oIIen you go on making
Ihe assessmenI. lI is imþliciI in Ihe deIniIion oI Ihe
selI·reþorI scale IhaI uIiliIy iIselI is bounded.
18

Here we come close to the crux of the matter.
Obviously the two measures presume fundamentally
different concepts of utility. In one interpretation
there is no limit to the satisfaction that humans
can achieve. The other is more circumspect in its
view of the human psyche. Whatever else we may
say abouI Ihe relaIionshiþ beIween 60P and liIe·
satisfaction, it’s clear they are not measuring the
same kind of utility.
when iI comes Io Inding a reliable conceþI oI
prosperity, we appear to be no further forwards.
Arguably, Ihere are as many reasons Ior noI
equating prosperity with happiness as there are
for not equating prosperity with exchange values.
For one thing, the overriding pursuit of immediate
pleasure is a very good recipe for things not going
well in the future. This was a point highlighted
Figure 5: Factors influencing subjective wellbeing (happiness)
Work fulfilment 2%
Partner/spouse
and family
relationships
47%
Health
24%
Don’t know/other 1%
Community and Friends 5%
Money and financial situation 7%
A nice place
to live 8%
Religious/spiritual life 6%
Figure 6: Happiness and average annual income
Armenia
Ukraine
Moldova
Belarus
Russia
Bulgaria
Latvia
Romania
Estonia
Lithuania
Georgia
Azerbaijan
Peru
Macedonia
Hungary
Slovakia
Croatia
South Africa
Slovenia
Portugal
Turkey India
Pakistan Czech
Republic
Colombia
Bangladesh
Nigeria
Ghana
Philippines
Brazil
Puerto Rico
Taiwan
Poland
Dom. Rep
China
Mexico
Argentina
Venezuela
Uruguay
Chile
South Korea
Spain
New Zealand
Ireland
N. Ireland
Netherlands
Iceland
Sweden
Switzerland
United States
Austria
Canada
France
Japan
Finland
Australia
Britain
Belgium
Norway
Italy
Denmark
80
90
70
60
50
40
30
100
1000 5000 9000 25000 21000 9000 17000
GDP per person (Purchasing Power Parity, 1995 dollars)
M
e
a
n

o
f

P
e
r
c
e
n
t

H
a
p
p
y

a
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d

P
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a
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a

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Figure 6 Happiness and average annual income
15
34 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
clearly by Avner 0IIer´s incisive conIribuIion Io Ihe
Redefining Prosperity project. ‘True prosperity is a
good balance beIween shorI·Ierm arousal and long·
term security,’ he writes.
19

NeiIher Ihe 60P - which counIs mainly þresenI
consumþIion - nor selI·reþorI measures which counI
mainly present happiness – provide an accurate
reIecIion oI Ihis balance. |usI because humans
suIIer Irom myoþic choice and Ind iI hard Io make
a sacriIce now even Ior Ihe sake oI someIhing
better later doesn’t justify taking a view of
prosperity based on more or less instantaneous
graIiIcaIion.


Vore IundamenIally, Io equaIe þrosþeriIy wiIh
happiness goes against our experience of what
it means to live well. People can be unhappy for
all sorts of reasons, some of them genetic, even
when things do go well. Equally, they may be
undernourished, poorly housed, with no prospect
of improvement and yet declare themselves
(some might say foolishly) completely content with
their lot.
Presperity as rapabiIities fer heurishing
Sen uses these distinctions to argue (with a nod to
ArisIoIle) Ior a Ihird conceþI oI Ihe living sIandard
based on the capabilities that people have to
flourish. The key questions we should be asking, he
insists, are to do with how well people are able to
function in any given context.
´Are Ihey well nourished` Are Ihey Iree Irom
avoidable morbidiIy` 0o Ihey live long`´ he asks.
´Can Ihey Iake þarI in Ihe liIe oI Ihe communiIy` Can
they appear in public without shame and without
Ieeling disgraced` Can Ihey Ind worIhwhile jobs`
Can Ihey keeþ Ihemselves warm` Can Ihey use
Iheir school educaIion` Can Ihey visiI Iriends and
relaIions iI Ihey choose`´
21

There is a clear resonance between Sen’s questions
and Ihe dimensions oI þrosþeriIy idenIiIed aI Ihe
beginning of this chapter.
22
In fact, the functionings
he cites in this extract – nutritional health, life
expectancy, participation in society – coincide closely
wiIh consIiIuenIs oI þrosþeriIy idenIiIed Irom Iime
immemorial in a wide range of writings.
In his later work, Sen stresses not so much the
functionings themselves – whether people actually
live long, have a worthwhile job or participate in
the community – as the capabilities or freedoms
they have to do so.
23
His point is that in a liberal
society, people should have the right to choose
whether or not to participate in society, to work in
paid employment, and perhaps even whether to
live a healthy life. It is the capability Io Iourish IhaI
is important.
NoneIheless, Ihere are some clear reasons Io reIain
the central importance of functionings themselves.
ln Ihe IrsI þlace, absIracI caþabiliIies are þreIIy
uninIormaIive. Any aIIemþI Io oþeraIionalise Ihis
idea of development ends up needing to specify
what the important functionings are. This point is
emþhasised in a recenI reþorI Io Ihe NeIherlands
LnvironmenIal AssessmenI Agency on Ihe IeasibiliIy
of a capabilities approach within public policy. Even
when it is the freedom to function that people value
most, argues the report, this is largely because the
functionings themselves are valued too.
24

There is another reason not to take the focus on
freedom too far. In a world of limits, certain kinds
of freedoms are either impossible or immoral. The
freedom endlessly to accumulate material goods is
one of them. Freedoms to achieve social recognition
at the expense of child labour in the supply chain, to
Ind meaningIul work aI Ihe exþense oI a collaþse
in biodiversity, or to participate in the life of the
community at the expense of future generations
may be others.
Bounded capabilities
This is the most important lesson that sustainability
brings to any attempt to conceptualise prosperity.
CaþabiliIies Ior Iourishing are a good sIarIing þoinI
Irom which Io deIne whaI iI means Io þrosþer. 8uI
Ihis vision needs Io be inIerþreIed careIully: noI as
a set of disembodied freedoms, but as a range of
‘bounded capabilities’ to live well – within certain
clearly deIned limiIs.
These limits are established in relation to two critical
IacIors. Ihe IrsI is Ihe IniIe naIure oI Ihe ecological
resources within which life on earth is possible.
Ihese resources include Ihe obvious maIerial ones:
fossil fuels, minerals, timber, water, land – and so on.
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 35
They also include the regenerative capacity of
ecosystems, the diversity of species and the integrity
of the atmosphere, the soils and the oceans.
None oI Ihese resources is inIniIe. Lach sIands
in a complex relationship to the web of life on
earth. We may not yet know exactly where all the
limits lie. But we know enough to be absolutely
sure that in most cases, even the current level of
economic activity is destroying ecological integrity
and threatening ecosystem functioning – perhaps
irreversibly. To ignore these natural bounds to
Iourishing is Io condemn our descendenIs - and
our fellow creatures – to an impoverished planet.
The second limiting factor on our capability to live
well is the scale of the global population. This is
simþle ariIhmeIic. wiIh a IniIe þie and any given
level of technology, there is only so much in the
way of resources and environmental space to go
around. The bigger the global population the faster
we hit the ecological buffers. The smaller the
population the lower the pressure on ecological
resources. This basic tenet of systems ecology is the
reality of life for every other species on the planet.
And Ior Ihose in Ihe þooresI naIions.
The point is that a fair and lasting prosperity
cannot be isolated from these material conditions.
Capabilities are bounded on the one hand by
the scale of the global population and on the
oIher by Ihe IniIe ecology oI Ihe þlaneI. ln Ihe
þresence oI Ihese ecological limiIs, Iourishing
itself becomes contingent on available resources,
on the entitlements of those who share the
planet with us, on the freedoms of future generations
and other species. Prosperity in this sense has
boIh inIra·generaIional and inIer·generaIional
dimensions. As Ihe wisdom IradiIions suggesI,
there is an irredeemably moral dimension to the
good life.
A þrosþerous socieIy can only be conceived as one
in which people everywhere have the capability to
Iourish in cerIain basic ways.
Deciding on those basic ‘entitlements’ is not a trivial
Iask. whaI does iI mean Ior humans Io Iourish`
What are the functionings that society should value
and þrovide Ior` how much Iourishing is susIainable
in IniIe world`
Sen has tended to stop short of clear prescriptions,
even though some are implicit in his writing.
Ihe þhilosoþher VarIha Nussbaum has gone
furthest in this direction. Her list of ‘central human
capabilities’ bears a striking resemblance to the
comþonenIs oI þrosþeriIy idenIiIed in Ihis chaþIer
and includes:
% life (being able to live to the end of a human
liIe oI normal lengIh), bodily healIh
% bodily integrity (to be secure against
violent assault)
% having opportunities for sexual satisfaction
and choice in matters of reproduction
% practical reason (being able to form a
conception of the good life)
% aIIliaIion (being able Io live wiIh and
toward others)
% play, and control over one’s environment.
25
Ultimately, as the Dutch report cited above recognises,
any such list needs to be negotiated in open dialogue
before it can be taken as the basis of policy. But in
practice, there is a surprisingly strong overlap between
the components in such lists and the constituents of
þrosþeriIy idenIiIed here.
Physical and mental health matter. Educational and
democratic entitlements count in many societies.
Trust, security and a sense of community are vital
to social wellbeing. Relationships, meaningful
employment, and the ability to participate in
the life of society appear to be important almost
everywhere. People suffer physically and mentally
when these things are absent. Society itself is
threatened when they decline.
The challenge for society is to create the conditions
in which these basic entitlements are possible.
This is likely to require a closer attention to the social,
psychological and material conditions of living – for
example, to people’s psychological wellbeing and
to the resilience of communities – than is familiar in
free market societies.
Crucially though, this doesn’t mean settling for a
vision oI þrosþeriIy based on curIailmenI and sacriIce.
Capabilities are inevitably bounded by material and
social conditions. Some ways of functioning may
even be forestalled completely, particularly where
they rely heavily on material throughput. But social
and psychological functionings are not in any case
best served by materialism, as we shall see more
36 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
clearly in ChaþIer 9. As Iim Kasser highlighIed in
his contribution to Redefining Prosperity, this new
vision of prosperity may serve us better than the
narrow materialistic one that has ensnared us.
Ihe þossibiliIy IhaI humans can Iourish, achieve
greaIer social cohesion, Ind higher levels oI
wellbeing and still reduce their material impact
on the environment is an intriguing one. It would
be foolish to think that it is easy to achieve – for
reasons that will be discussed in more detail in the
next chapter. But it should not be given up lightly.
It may well offer the best prospect we have for a
lasting prosperity.
William Baumol, Robert Litan and Carl Schramm
2ûû7
1
4
The Dilemma of Growth
“ One of the ‘paradoxes of prosperity’
is that people in rich countries don’t
realise how good things really are.”
38 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
Evidence for this would certainly need to be taken
seriously. Perhaps the growth model is, after all,
as good as it gets in terms of delivering prosperity.
Are we guilIy, as 8aumol and his colleagues claim in
the quote on the previous page, of not realising how
good Ihings really are under Iree·markeI caþiIalism`
This chapter explores that possibility.
It examines three closely related propositions
in deIence oI economic growIh. Ihe IrsI is IhaI
opulence – though not synonymous with prosperity
- is a necessary condiIion Ior Iourishing. Ihe second
is that economic growth is closely correlated with
certain basic entitlements – for health or education,
perhaps – that are essential to prosperity. The third
is that growth is functional in maintaining economic
and social stability.
Any oI Ihese þroþosiIions, iI suþþorIed, could IhreaIen
our prospects for achieving prosperity without growth
and would place us instead between the horns of a
rather uncomfortable dilemma. On the one hand,
conIinued growIh looks ecologically unsusIainable, on
the other, it appears essential for lasting prosperity.
Vaking þrogress againsI such an ´imþossibiliIy
theorem’ would be vital.
Material opulence as a condition
ef heurishing
AI IrsI sighI iI mighI seem odd Io reoþen Ihe
relationship between opulence and prosperity.
ChaþIer 3 disþosed oI any simþle linear relaIionshiþ
beIween maIerial Iow and Iourishing. Vore
isn’t always better, even in something as basic as
nutrition.
AdmiIIedly, our abiliIy Io Iourish declines raþidly
if we don’t have enough food to eat or adequate
shelIer. And Ihis moIivaIes a sIrong call Ior increasing
incomes in poorer nations. But in the advanced
economies, aside from some pernicious inequalities,
we are largely þasI Ihis þoinI. VaIerial needs are
broadly met and disposable incomes are increasingly
dedicaIed Io diIIerenI ends: leisure, social inIeracIion,
experience. Clearly though, this hasn’t diminished
our appetite for material consumption.
Why is it that material commodities continue to be
so important to us, long past the point at which
maIerial needs are meI` Are we really naIural·born
shoþþers` have we been geneIically þrogrammed,
as the psychologist William James believed, with an
´insIincI Ior acquisiIion´` whaI is iI abouI consumer
goods that continues to entrance us even beyond the
þoinI oI useIulness`
Ihe clue Io Ihe þuttle lies in our Iendency Io
imbue material things with social and psychological
meanings. A wealIh oI evidence Irom consumer
research and anthropology now supports this
þoinI. And Ihe insighI is devasIaIing. Consumer
goods provide a symbolic language in which we
communicate continually with each other, not just
abouI raw sIuII, buI abouI whaI really maIIers Io us:
family, friendship, sense of belonging, community,
identity, social status, meaning and purpose in life.
2

And crucially, Ihese social conversaIions þrovide,
in part, the means to participate in the life of
society. Prosperity itself, in other words, depends
on them. ‘The reality of the social world’, argues
sociologist Peter Berger, ‘hangs on the thin thread of
conversation.’
3
And Ihis conversaIion hangs in Iurn
on the language of material goods.
There’s a lovely illustration of the power of this
seductive relationship in a study led by consumer
researcher Russ Belk. He and his colleagues explored
the role of desire in consumer behaviour across three
different cultures. Commenting on what fashion
meanI Io Ihem, one oI 8elk´s resþondenIs remarked:
´No one´s gonna sþoI you across a crowded room and
say ¨wow! Nice þersonaliIy!¨´
4

Ihe goal oI Ihis resþondenI is immediaIely idenIiIable
as a basic human desire to be noticed, to be included,
Presperity is net just abeut inreme. 1hat murh is rIear. kising presperity is net the same
thing as economic growth. But this doesn’t in itself ensure that prosperity without growth is
possible. A distinct possibility remains that growth is functional for prosperity: that continued
economic growth is a necessary condition for a lasting prosperity. And that without growth
eur abiIity te heurish diminishes substantiaIIy.
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 39
Io be liked, Io Ind Iriendshiþ - þossibly more (as Ihe
singles ads þuI iI). All oI Ihese Ihings are IundamenIal
components of participating in the life of society, of
Iourishing.
It’s tempting to think that this is a predominantly
western (and relatively modern) phenomenon.
Belk’s study and numerous others suggest otherwise.
The objective of the consumer, quite generally,
according Io anIhroþologisI Vary 0ouglas, is ´Io helþ
creaIe Ihe social world and Ind a credible þlace in
it.’
5
The symbolic role of material commodities has
been idenIiIed, by anIhroþologisIs, in every single
society for which records exist.
It is of course abundantly true in consumer society.
VaIIer maIIers Io us. And noI jusI in maIerial ways.
But this is no longer unique to the West. ‘One of the
deIning IeaIures oI lndia´s middle classes aI Ihe Iurn
of the millennium,’ argues anthropologist Emma
Vawdsley, ´is Iheir aþþeIiIe Ior ´global´ culIure, and
their pursuit of ‘western’ lifestyles, possessions and
values.’
6
Very similar values and views are clearly
discernible in China, in LaIin America and even in
þarIs oI AIrica.
The consumer society is now, to all intents and
purposes, a global society. One in which, for sure,
there are still ‘islands of prosperity, oceans of poverty’.
But in which the ‘evocative power of things’
7

increasingly creates the social world and provides the
dominant arbiter of personal and societal progress.
ln shorI, Ihe maIerial and Ihe non·maIerial
dimensions of prosperity are inextricably intertwined
with each other through the language of goods.
Though it is essentially a social rather than a material
task, our ability to participate in the life of society
deþends on Ihis language. Anyone who has ever IelI
– or watched their kids feel – the enormous pressure
of the peer group to conform to the latest fashion
will understand how access to the life of society is
mediated by sheer stuff.
Little wonder then that people regard income as one
oI Ihe IacIors imþorIanI Io Iheir wellbeing (|igure 5).
8
Incomes after all provide the material means for
Iourishing.
Prosperity depends more on opulence, it would
seem, Ihan is obvious aI IrsI glance. 8uI Ihere is
an imþorIanI subIleIy in Ihis relaIionshiþ. And Ihis
subtlety provides a vital clue as to how we might
confront – and get beyond – our dependency on
material things.
The importance of income in wellbeing is largely
played out (within nations) through relative effects.
What matters – more than the absolute level of
income – is having more or less than those around
us.
9
This is particularly true in highly unequal
socieIies where income disþariIies signal signiIcanI
differences in social status. Income levels speak
direcIly oI sIaIus, and someIimes oI auIhoriIy,
power and class as well. But, in addition, as we now
see, income provides access to the ‘positional’ or
status goods that are so important in establishing
our social standing.
And Ihere is liIIle doubI IhaI aI Ihe individual level,
social þosiIion counIs. ´A þosiIive social ranking
produces an inner glow that is also matched with
a clear advantage in life expectation and health,’
argues economic hisIorian Avner 0IIer.

And Ihis
claim is backed up by persuasive evidence on the
pernicious health effects of income inequality.
healIhy liIe exþecIancy Ior Lnglish Iemales was 16
years higher for those in the top decile in the late
199ûs Ihan iI was Ior Ihose in Ihe boIIom decile.
11

The importance of social position is reinforced
by 0eIra´s recenI ground·breaking sIudy oI Ihe
disIribuIion oI subjecIive wellbeing in Ihe uK. |igure
7 shows reported satisfactions with different life
‘domains’ across different ‘social grades’. Those in
Ihe higher social grades Iend Io reþorI signiIcanIly
higher levels of satisfaction than those in the lower
social grades.
12

Being at or near the top of the pile matters, it seems,
both in terms of health and in terms of happiness or
subjective wellbeing.
AI Ihe socieIal level Ihough, Ihere is a clear danger
that this positional race doesn’t contribute much to
overall prosperity. ‘The stock of status, measured as
positive advantages, showed a sustained increase
in Ihe þosI·war years,´ acknowledges 0IIer. ´Vuch
oI Ihe þay·oII, however, was absorbed in þosiIional
competition.’
13

This reasoning suggests that, at the level of society
as a whole, income growth – and the associated
maIerial IhroughþuI - may be a ´tero·sum game´.
40 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
Relationships
Accommodation
Standard of living
Day to day activities
Health
Leisure
Control
Achievement of goals
Future financial security
Community
A B C D E
Figure 7: Wellbeing Inequalities in England (2007)
-15 -10 0 -5 5 15 10
A
s
p
e
c
t

o
f

L
i
f
e
Percentage point difference from overall average
Notes: Social grade is a classification based on occupation developed from the National Readership Survey
Examples of occupation in each grade include:
AB: doctor, solicitor, accountant, treacher, nurse, police oficer
C: Junior manager, student, clerical worker, foreman, plumber, bricklayer
D: Manual workers, shop workers, apprentices
E: Casual labourers, state pensioners, unemployed
Separate grades A and B and C1 and C2 have ben joined (to AB and C) due to very similar distributions
The results presented here show the difference between each group and the overall average presented on the previous graph
Figure 7 Wellbeing Inequalities in England (2007)
14
NoIes: Social grade is a classiIcaIion based on occuþaIion develoþed Irom Ihe NaIional keadershiþ Survey
Lxamþles oI occuþaIion in each grade include:
A8: docIor, soliciIor, accounIanI, Ieacher, nurse, þolice oIcer
C: |unior manager, sIudenI, clerical worker, Ioreman, þlumber, bricklayer
0: Vanual workers, shoþ workers, aþþrenIices
L: Casual labourers, sIaIe þensioners, unemþloyed
SeþaraIe grades A and 8 and C1 and C2 have been joined (as A8 and C) due Io very similar disIribuIions.
The results presented here show the difference between each group and the overall average.
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 41
The population as a whole gets richer. Some people
are better off than others and positions in society
may change. But overall this positional competition
adds little or nothing to the levels of wellbeing in
the nation. This is one of the arguments that has
been used to explain the life satisfaction paradox
(ChaþIer 3).
15

If it’s right it suggests the possibility that a different
form of social organisation – perhaps a more equal
society – in which social positioning is either less
important or signalled differently – could change
things. We would need to confront the social logic that
conspires to lock people into positional competition
(Chapter 6). We would also have to identify less
materialistic ways for people to participate in the
liIe oI socieIy (ChaþIer 9). 8uI in þrinciþle, Ihese
strategies could allow us to distinguish prosperity
from opulence and reduce our dependency on
material growth. In other words, this particular
aspect of the dilemma of growth may just turn out
to be avoidable.
But relative (or distributional) effects don’t exhaust
the relationship between income and human
Iourishing. Ihere remains a disIincI þossibiliIy
that rising levels of income are required in and
of themselves to establish and maintain absolute
levels of capability for functioning.
Income and basic entitlements
This is where the second proposition comes in.
The possibility that certain basic entitlements – such as
life expectancy, health and educational participation –
rely inherently on rising income, would cast a serious
doubI on our abiliIy Io Iourish wiIhouI growIh.
The following graphs test this proposition using
cross·counIry correlaIions beIween income and
cerIain key comþonenIs oI human Iourishing. Ihe
analysis uses data collected over several decades by
Ihe uniIed NaIions 0eveloþmenI Programme. Ihese
data in themselves can neither prove nor disprove a
causal link between income and prosperity. But they
provide a useful starting point in understanding how
imþorIanI 60P mighI be in human Iourishing.
|igure 8, Ior examþle, maþs liIe exþecIancy againsI
average annual income levels in 177 diIIerenI naIions.
Ihe þaIIern is similar Io Ihe one in |igure 6 (ChaþIer 3),
which looked at the relationship between life
satisfaction and income. But now the ‘dependent
variable’ is life expectancy rather than satisfaction.
The difference between the poorest and the richest
countries is striking, with life expectancies as low as
4û years in þarIs oI AIrica and almosI double IhaI
in many developed nations. But the advantage of
80
90
70
60
50
40
30
5000 0 10,000 15,000 35,000 30,000 20,000 25,000 50,000 45,000 40,000
Figure 8: Life expectancy at birth vs average annual income
L
i
f
e

e
x
p
e
c
t
a
n
c
y

a
t

b
i
r
t
h

(
y
e
a
r
s
)
GDP per capita (PPP $2005)
Swaziland
Mozambique
Botswana
South Africa
Gabon
Russian Federation
India
Cuba
Costa Rica
Chile
Malta
Bahrain
New Zealand
Japan
United Kingdom
Iceland
Ireland
Norway
United States
Figure 9: Infant mortality vs per capita income
I
n
f
a
n
t

m
o
r
t
a
l
i
t
y

(
p
e
r

1
0
0
0

l
i
v
e

b
i
r
t
h
s
)
160
140
120
100
180
80
60
40
40
0
5000 0 10,000 15,000 35,000 30,000 20,000 25,000 50,000 45,000 40,000
GDP per capita (PPP $2005)
Sierra Leone
Angola
Equatorial Guinea
Botswana
India
South Africa
Saudi Arabia
China
Qatar
New Zealand
United Kingdom
United States
Norway
Cuba Chile
Figure 8 Life expectancy at birth vs average annual income
16
42 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
being richer as a nation shows diminishing returns.
As income rises, Ihe addiIional beneIIs in Ierms oI
increased life expectancy are reduced.
Some low·income counIries have liIe exþecIancies
that are on a par with developed nations. Chile
(wiIh an average annual income oI S12,ûûû) has a
liIe exþecIancy oI 78.3 years, greaIer Ihan IhaI oI
Denmark (whose average income is almost three
Iimes higher aI S34,ûûû). 8uI iI is also þossible Io Ind
countries with incomes in the same range as Chile
(SouIh AIrica and 8oIswana, Ior insIance) where liIe
exþecIancy is 3û years lower.
A similar sIory emerges Irom Ihe daIa on inIanI morIaliIy
(|igure 9). ln sub·Saharan AIrica, 18% oI children die
beIore Iheir IIIh birIhday, whereas in 0LC0 counIries,
Ihe þroþorIion is û.6%. 8uI as incomes increase, Ihe
gains from growth again diminish quite rapidly. Infant
morIaliIy in Cuba is six deaIhs þer 1ûûû live birIhs, as
low as it is in the US – even though Cubans, with an
average þer caþiIa income oI S6,ûûû enjoy less Ihan
15% oI Ihe income enjoyed by Americans.
AI Ihe same Iime, iI is þossible Io Ind counIries
with an average income somewhat higher than
S6,ûûû þer caþiIa, whose inIanI morIaliIy raIes are
much worse Ihan Ihose in Cuba. LquaIorial 6uinea
is a striking example, with a per capita income of
S8,ûûû and inIanI morIaliIy oI 123 deaIhs þer 1ûûû
live births.
The ambivalent relationship between income and
health indicators is echoed in the relationship
between income and education. The Human
Development Report’s Education Index – based
on a composite of educational participation rates
– illustrates the same disparity between the very
poor and the very rich. It also shows the familiar
pattern of diminishing returns with respect to
income growIh (|igure 1û).
0nce again, iI is þossible Io Ind low income counIries
providing educational participation rates that are as
high as Ihe mosI develoþed naIions. KatakhsIan,
wiIh in average income oI less Ihan S8,ûûû, scores
higher on Ihe index Ihan |aþan, SwiIterland or Ihe
uS, counIries wiIh income levels Iour and Ive Iimes
higher. Lqually Ihough, iI isn´I hard Io Ind counIries
wiIh income levels oI S8,ûûû whose educaIional
þarIiciþaIion raIes are only Iwo·Ihirds oI Ihose in
most developed nations.
80
90
70
60
50
40
30
5000 0 10,000 15,000 35,000 30,000 20,000 25,000 50,000 45,000 40,000
Figure 8: Life expectancy at birth vs average annual income
L
i
f
e

e
x
p
e
c
t
a
n
c
y

a
t

b
i
r
t
h

(
y
e
a
r
s
)
GDP per capita (PPP $2005)
Swaziland
Mozambique
Botswana
South Africa
Gabon
Russian Federation
India
Cuba
Costa Rica
Chile
Malta
Bahrain
New Zealand
Japan
United Kingdom
Iceland
Ireland
Norway
United States
Figure 9: Infant mortality vs per capita income
I
n
f
a
n
t

m
o
r
t
a
l
i
t
y

(
p
e
r

1
0
0
0

l
i
v
e

b
i
r
t
h
s
)
160
140
120
100
180
80
60
40
40
0
5000 0 10,000 15,000 35,000 30,000 20,000 25,000 50,000 45,000 40,000
GDP per capita (PPP $2005)
Sierra Leone
Angola
Equatorial Guinea
Botswana
India
South Africa
Saudi Arabia
China
Qatar
New Zealand
United Kingdom
United States
Norway
Cuba Chile
Figure 9 Infant mortality vs per capita income
17

Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 43
Interestingly, there is no hard and fast rule here
on the relationship between income growth and
imþroved Iourishing. Ihe þooresI counIries cerIainly
suffer extraordinary deprivations in life expectancy,
infant mortality and educational participation.
8uI as incomes grow beyond abouI S15,ûûû þer
capita the returns to growth diminish substantially.
Some countries achieve remarkable levels of
Iourishing wiIh only a IracIion oI Ihe income
available to richer nations.
Vore exþloraIion oI Ihese relaIionshiþs is warranIed.
Understanding the structural dependencies between
income and human Iourishing is a viIal subjecI Ior
study.
19
One of the questions that needs answering
is how things change over time, within countries.
|igure 11 illusIraIes Ihe imþorIance oI Ihis quesIion
for changes in life expectancy.
Again Ihere is no single þaIIern. Ihree or Iour diIIerenI
modes of development emerge. One belongs to
Ihe develoþed naIions - exemþliIed in |igure 11
by Ihe uK and |aþan. ln Ihese counIries, Ihere is a
very strong but quite ‘shallow’ correlation between
income growth and increased life expectancy. In the
uK, Ior examþle, liIe exþecIancy has increased quiIe
gradually but very consistently over the last few
decades in spite of short periods of recession.

Japan offers an even more interesting example.
Ihe counIry was hiI quiIe severely during Ihe Asian
crisis in Ihe laIe 199ûs and suIIered a þrolonged
þeriod oI economic Iurbulence. And yeI liIe
expectancy subsequently increased faster than at
any time in the preceding two decades.
The ability to improve life expectancy despite a
faltering economy is also in evidence in another
grouþ oI counIries, exemþliIed by Chile and
ArgenIina in Ihe graþh. here, rises in liIe exþecIancy
appear much less dependent on income growth. In
ArgenIina, in þarIicular, economic ouIþuI has been
highly erratic over the last three decades, but the
gains in life expectancy have been substantial and
consistent.
|inally Ihough, Ihere are some counIries (exemþliIed
in |igure 11 by kussia and SouIh AIrica) which show
signiIcanI declines in liIe exþecIancy when Ihe
economy falters. In fact, almost all the former Soviet
bloc countries experienced reduced life expectancy
in Ihe þosI·SovieI era. ln kussia iIselI, liIe exþecIancy
1.00
1.20
0.80
0.60
0.40
0.20
0.00
5000 0 10,000 15,000 35,000 30,000 20,000 25,000 50,000 45,000 40,000
Figure 10: Participation in education vs income per capita
H
D
R

E
d
u
c
a
t
i
o
n

I
n
d
e
x
GDP per capita (PPP $2005)
United States
Norway
Hong Kong
United Kingdom
UAE
New Zealand
South Africa
Equatorial Guinea
Lesotho
Sierra Leone
Cuba
India
Chile
China
Figure 11: Changes in average life-expectancy and income over time
L
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e
x
p
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t
a
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c
y

a
t

b
i
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t
h
80
75
70
85
65
60
55
50
45
5000 0 10,000 15,000 25,000 20,000 35,000 30,000
GDP per capita (PPP $2005)
Chile
1975
1980
1985
1990
1995
2000
2003
1990
2000
1995
2003
Russia
1990
2000
1995
2003
1985
1975
1980
South Africa
1985
1990
1995
2000
2003
1975
1980
Argentina
1975
1980
1985
1990
1995
2000
2003
Japan
United Kingdom
y = 0.0005x + 64.982
R
2
= 0.9638
Figure 10 Participation in education vs income per capita
18
44 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
remained more or less consIanI beIween 197û and
1989 buI Iell by 6% Iollowing Ihe collaþse oI Ihe
Soviet Union. Perhaps most strikingly, this decline
continued, even after the economy started to
recover.
The same phenomenon – decline in spite of
economic recovery – is visible in the case of South
AIrica. here, Ihe conIexI and Ihe conIribuIing IacIors
are raIher diIIerenI. A sIriking IeaIure oI human
develoþmenI across AIrica since 199û is Ihe collaþse
in life expectancy irrespective of growth rates. This
is largely down Io Ihe devasIaIing imþacI oI Aids.
Clearly growth doesn’t guarantee improved prosperity,
even in such basic comþonenIs oI Iourishing as
life expectancy. Incremental improvements have
been possible in most developed nations, alongside
more or less continuous economic growth. But
there are also examples where life expectancy has
increased much faster than income and one or two
where it has increased even in the face of prolonged
or severe recession.
ln Cuba (noI shown in |igure 11), Ihe Iormal
economy (60P) more or less collaþsed aIIer Ihe
breakuþ oI Ihe SovieI union in 1989, þarIly because
of the sudden removal of subsidised Soviet oil.
But one recent study suggests that there were
signiIcanI healIh imþrovemenIs in Ihe aIIermaIh.
CaloriIc inIake was reduced by over a Ihird.
But obesity was halved and the percentage of
physically active adults more than doubled.
8eIween 1997 and 2ûû2, ´Ihere were declines in
deaIhs aIIribuIed Io diabeIes (51%), coronary hearI
disease (35%) [and| sIroke (2û%)´.
22

Income growth and economic stability
Ihis brings us on Io Ihe Ihird þroþosiIion idenIiIed
above: IhaI growIh is IuncIional in mainIaining
economic and social stability. It is clear from the
evidence here that collapsing economies do present
a risk of humanitarian loss. Economic stability or,
at the very least, some form of social resilience, is
important for prosperity.
Even so there are interesting differences between
countries faced with economic hardship. Some
counIries - noIably Cuba, |aþan, ArgenIina - have been
able to ride out quite severe economic turbulence
and yet maintain or even enhance national health.
Others have watched life expectancy tumble in the
face of economic recession.
1.00
1.20
0.80
0.60
0.40
0.20
0.00
5000 0 10,000 15,000 35,000 30,000 20,000 25,000 50,000 45,000 40,000
Figure 10: Participation in education vs income per capita
H
D
R

E
d
u
c
a
t
i
o
n

I
n
d
e
x
GDP per capita (PPP $2005)
United States
Norway
Hong Kong
United Kingdom
UAE
New Zealand
South Africa
Equatorial Guinea
Lesotho
Sierra Leone
Cuba
India
Chile
China
Figure 11: Changes in average life-expectancy and income over time
L
i
f
e

e
x
p
e
c
t
a
n
c
y

a
t

b
i
r
t
h
80
75
70
85
65
60
55
50
45
5000 0 10,000 15,000 25,000 20,000 35,000 30,000
GDP per capita (PPP $2005)
Chile
1975
1980
1985
1990
1995
2000
2003
1990
2000
1995
2003
Russia
1990
2000
1995
2003
1985
1975
1980
South Africa
1985
1990
1995
2000
2003
1975
1980
Argentina
1975
1980
1985
1990
1995
2000
2003
Japan
United Kingdom
y = 0.0005x + 64.982
R
2
= 0.9638
Figure 11 Changes in average life-expectancy and income over time
21
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 45
Some of the explanation for these differences must
lie in social sIrucIure. Ihe IransiIion oI ex·SovieI
states to a market economy was characterised by
very profound changes in social structure, not the
least of which was a collapse in state provision
of health and social care. Little surprise, in these
circumstances, that life expectancy faltered. In Cuba
by conIrasI, conIinuing sIaIe·led social þrovision was
almost certainly a contributing factor in the health
improvements that followed the economic collapse.
Humanitarian loss in the face of economic turbulence,
in other words, may be more dependent on social
structure than on the degree of economic instability
that is encountered. There are some interesting
þolicy lessons here (ChaþIer 11) Ior Ihe þrosþecI oI
prosperity without growth.
But the risk of humanitarian collapse is enough
to place something of a question mark over the
possibility that we can simply halt economic growth.
If halting growth leads to economic and social
collapse, then times look hard indeed. If it can be
achieved without collapse, prospects for maintaining
prosperity are considerably better.
Critical here is the question of whether a growing
economy is essential for economic stability. Is growth
IuncIional Ior sIabiliIy` 0o we need economic growIh
aIIer all simþly Io keeþ Ihe economy sIable`
The conventional answer is certainly that we do.
To see why, we need to explore a little further how
such economies work. A deIailed discussion oI Ihis is
deferred to Chapter 6. But the broad idea is simple
enough to convey.
VarkeI economies þlace a high emþhasis on
Iechnological eIIciency. ConIinuous imþrovemenIs in
technology mean that more output can be produced
for any given input of labour, capital and resources.
23

LIIciency imþrovemenI sIimulaIes demand by
driving down costs and contributes to a positive cycle
of expansion. But crucially it also means that fewer
people are needed to produce the same goods from
one year to the next.
As long as Ihe economy grows IasI enough Io oIIseI
this increase in ‘labour productivity’, there isn’t
a problem. But if it doesn’t, then increased labour
productivity means that someone loses their job.
24

If the economy slows for any reason – whether
Ihrough a decline in consumer conIdence, Ihrough
commodity price shocks, or through a managed
attempt to reduce consumption – then the systemic
trend towards improved labour productivity leads to
unemployment. This in its turn, leads to diminished
sþending þower, a loss oI consumer conIdence and
further reduces demand for consumer goods.
From an environmental point of view this may be
desirable if it leads to lower resource use and fewer
polluting emissions. But it also means that retail
falters and business revenues suffer. Incomes fall.
Investment is cut back. Unemployment rises further
and the economy begins to fall into a spiral of
recession.
kecession has a criIical imþacI on Ihe þublic Inances.
Social costs rise with higher unemployment. But tax
revenues decline as incomes fall and fewer goods
are sold. Lowering spending risks real cuts to public
services. Cutting spending affects people’s capabilities
Ior Iourishing - a direcI hiI on þrosþeriIy.
6overnmenIs musI borrow more noI jusI Io mainIain
þublic sþending buI Io Iry and re·sIimulaIe demand.
But in doing so, they inevitably increase the national
debt. Servicing this debt in a declining economy –
as we noIed in ChaþIer 2 - is þroblemaIic aI besI.
Just maintaining interest payments takes up a larger
proportion of the national income.
The best that can be hoped for here is that demand
does recover and it’s possible to begin paying off the
debt. This could take decades. It took Britain almost
half a century to pay off public debts accumulated
through the Second World War. The Institute for
Fiscal Studies has estimated that the ‘debt overhang’
Irom Ihe currenI crisis could lasI inIo Ihe 2û3ûs.
25

On the other hand, if the debt accumulates and the
economy fails to recover, the country is doomed to
bankruptcy.
Crucially, there is little resilience within this system.
Once the economy starts to falter, feedback
mechanisms that had once contributed to expansion
begin to work in the opposite direction, pushing the
economy further into recession. With a growing (and
aging) population these dangers are exacerbated.
Higher levels of growth are required to protect the same
level oI average income and Io þrovide suIIcienI
revenues for (increased) health and social costs.
46 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
In short, modern economies are driven towards
economic growth. For as long as the economy is
growing, positive feedback mechanisms tend to
push this system towards further growth. When
consumption growth falters the system is driven
towards a potentially damaging collapse with a
knock·on imþacI on human Iourishing. Peoþle´s jobs
and livelihoods suffer.
There is of course, something of an irony here. Because
at the end of the day the answer to the question of
wheIher growIh is IuncIional Ior sIabiliIy is Ihis: in
a growIh·based economy, growIh is IuncIional Ior
stability. The capitalist model has no easy route to
a sIeady·sIaIe þosiIion. lIs naIural dynamics þush iI
Iowards one oI Iwo sIaIes: exþansion or collaþse.
LaIer (ChaþIer 8) we exþlore Ihe þossibiliIies Ior
amending this conclusion. In the meantime, we
appear to have returned to the dilemma with
which this chapter started. Or at least to a more
precise incarnation of it. Put in its simplest form the
‘dilemma of growth’ can now be stated in terms of
Iwo þroþosiIions:
% 6rowIh is unsusIainable - aI leasI in iIs currenI
form. Burgeoning resource consumption and
rising environmental costs are compounding
profound disparities in social wellbeing
% ´0e·growIh´
ii
is unstable – at least under
present conditions. Declining consumer
demand leads to rising unemployment, falling
competitiveness and a spiral of recession.
Ihis dilemma looks aI IrsI like an imþossibiliIy
theorem for a lasting prosperity. But it cannot be
avoided and has to be taken seriously. The failure
to do so is the single biggest threat to sustainability
that we face.
ii De-growth (décroissance in the French) is an emerging term for (planned) reductions in economic output.
“ From 1981 to 2005 the global economy
more than doubled, but 60 percent of
the world’s ecosystems were either
degraded or over-used.”
5
The Myth of Decoupling
8QLWHG1DWLRQV(QYLURQPHQW3URJUDPPH
0cIober 2ûû8
1
48 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
It’s vital here to distinguish between ‘relative’ and
‘absolute’ decoupling. Relative decoupling refers
to a decline in the ecological intensity per unit of
economic output. In this situation, resource impacts
decline relaIive Io Ihe 60P. 8uI Ihey don´I necessarily
decline in absolute terms. Impacts may still increase,
buI do so aI a slower þace Ihan growIh in Ihe 60P.
The situation in which resource impacts decline
in absolute terms is called ‘absolute decoupling’.
Needless Io say, Ihis laIIer siIuaIion is essenIial iI
economic activity is to remain within ecological
limits. In the case of climate change, for instance,
absolute reductions in global carbon emissions of
5û·85% are required by 2û5û in order Io meeI Ihe
lPCC´s 45û þþm sIabilisaIion IargeI.
2

The aim of this chapter is to explore the evidence for
both relative and absolute decoupling. It concentrates
in þarIicular on Irends in Ihe consumþIion oI IniIe
resources and the emission of carbon. These
examples don’t exhaust the concerns associated
with a continually growing economy. But they are
already of immediate concern and illustrate clearly
the scale of the problem.
How much decoupling has been achieved in these
examþles` how much needs Io be achieved`
Is it really possible for a strategy of ‘growth with
decouþling´ Io deliver ever·increasing incomes Ior a
world of nine billion people and yet remain within
ecological limiIs` Ihese quesIions are cenIral Io Ihis
study.
Relative decoupling
Put very simply, relative decoupling is about doing
more wiIh less: more economic acIiviIy wiIh less
environmenIal damage, more goods and services
with fewer resource inputs and fewer emissions.
0ecouþling is abouI doing Ihings more eIIcienIly.
And since eIIciency is one oI Ihe Ihings IhaI
modern economies are good at, decoupling has a
familiar logic and a clear appeal as a solution to the
dilemma of growth.
Resource inputs represent a cost to producers. So the
þroII moIive should sIimulaIe a conIinuing search Ior
eIIciency imþrovemenI in indusIry Io reduce inþuI
costs. Some evidence supports this hypothesis. For
example, the amount of primary energy needed to
produce each unit of the world’s economic output
has fallen more or less continuously over most of the
last half century. The global ‘energy intensity’ is now
33% lower Ihan iI was in 197û.
3

These gains have been most evident in the advanced
economies. Energy intensities have declined three
Iimes IasIer in Ihe 0LC0 counIries over Ihe lasI 25
years Ihan Ihey have in non·0LC0 counIries.
4
Energy
inIensiIy in boIh Ihe uS and Ihe uK is some 4û%
lower Ioday Ihan iI was in 198û.
5

Outside the most advanced nations, the pattern
has been much less clear. Even in some southern
Luroþean counIries (6reece, Iurkey, PorIugal e.g.)
energy inIensiIy has increased in Ihe lasI IwenIy Ive
years. And in emerging economies and develoþing
nations, achievements have been very mixed.
Across Ihe Viddle LasI, energy inIensiIy more
Ihan doubled beIween 198û and 2ûû6, in lndia iI
increased aI IrsI buI has declined slowly since Ihe
þeak in 1993. ln China, energy inIensiIy Iell by over
7û% Io Ihe Iurn oI Ihe 21
st
Century but has now
begun to climb again.
6

Overall, however, energy intensities declined
signiIcanIly during Ihe lasI Ihree decades, across
the OECD countries in particular. The same is true of
maIerial inIensiIies more generally. |igure 12 shows
a measure oI maIerial inIensiIy Ior Ive advanced
naIions, including Ihe uK, over Ihe Inal quarIer oI
Ihe 2û
th
Century. The Figure shows clear evidence of
‘relative decoupling’.
NoI surþrisingly, imþroved resource eIIciency is also
leading Io declining emission inIensiIies. |igure 13
The conventional response to the dilemma of growth is to appeal to the concept of
'dereupIing´. Predurtien preresses are rerenhgured. 6eeds and servires are redesigned.
Economic output becomes progressively less dependent on material throughput. In this way,
it is hoped, the economy can continue to grow without breaching ecological limits – or running
out of resources.
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 49
1
9
7
5

=

1
0
0
Figure 12: Relative Decoupling in OECD countries 1975-2000
120
100
80
60
40
20
0
1995 1990 1985 1980 1975 2000
UK
Netherlands
Austria
Japan
Germany
Figure 13: CO
2
intensity of GDP across nations: 1980-2006
9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
2000 1995 1990 1985 1980 2005
k
g

C
O
2
/
$

a
t

2
0
0
0

m
a
r
k
e
t

p
r
i
c
e
s
China
India
Middle East
World
US
UK
Japan
Figure 12 Relative Decoupling in OECD countries 1975–2000
7
1
9
7
5

=

1
0
0
Figure 12: Relative Decoupling in OECD countries 1975-2000
120
100
80
60
40
20
0
1995 1990 1985 1980 1975 2000
UK
Netherlands
Austria
Japan
Germany
Figure 13: CO
2
intensity of GDP across nations: 1980-2006
9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
2000 1995 1990 1985 1980 2005
k
g

C
O
2
/
$

a
t

2
0
0
0

m
a
r
k
e
t

p
r
i
c
e
s
China
India
Middle East
World
US
UK
Japan
Figure 13 CO
2
intensity of GDP across nations: 1980–2006
7
shows Ihe changing carbon dioxide inIensiIy oI 60P
over Ihe lasI 25 years. Ihe global carbon inIensiIy
declined by almosI a quarIer Irom jusI over 1
kilogram of carbon dioxide per US dollar (kgCO
2
/S)
in 198û Io 77û grams oI carbon dioxide þer uS dollar
(gCO
2
/S) in 2ûû6.
Again, sIeady imþrovemenIs across Ihe 0LC0
countries were accompanied by a slightly more
uneven þaIIern across non·0LC0 counIries.
SigniIcanI growIh in carbon inIensiIy occurred
across Ihe Viddle LasI and during Ihe earlier sIages
of development in India. China witnessed some
50 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
striking improvements early on. But these have
been partly offset by increasing carbon intensity in
recent years. Worryingly, the declining global trend
in carbon intensity has also faltered in recent years,
even increasing slighIly since iIs low þoinI in 2ûûû.
Clearly, there is little room for complacency here.
Ihe eIIciency wiIh which Ihe global economy
uses fossil resources and generates carbon dioxide
emissions is improving in some places. But overall
we are making faltering progress at best.
To make matters worse, relative decoupling is
barely half the story. It measures only the resource
use (or emissions) per unit of economic output.
For decoupling to offer a way out of the dilemma
oI growIh, resource eIIciencies musI increase aI
leasI as IasI as economic ouIþuI does. And Ihey
must continue to improve as the economy grows,
if overall burdens aren’t to increase. To achieve
Ihis more diIIculI Iask, we need Io demonsIraIe
absolute decoupling. Evidence of this is much harder
Io Ind.
Absolute decoupling
Despite declining energy and carbon intensities
carbon dioxide emissions from fossil fuels have
increased by 8û% since 197û. Lmissions Ioday are
almosI 4û% higher Ihan Ihey were in 199û - Ihe
KyoIo base year - and since Ihe year 2ûûû Ihey have
been growing aI over 3% þer year (see |igure 14).
|igure 14 does illusIraIe some relaIive decouþling:
Ihe world 60P has risen IasIer Ihan carbon dioxide
emissions over the last eighteen years. But there
is no absoluIe decouþling here. And a surge in
world consumption of coal has increased the rate
of growth in carbon dioxide emissions since the
year 2ûûû.
What’s true for fossil resources and carbon emissions
is true for material throughputs more generally.
|igure 15 illusIraIes direcI maIerial consumþIion Ior
Ihe same Ive 0LC0 counIries shown in |igure 12.
Despite very clear evidence of relative decoupling in
Ihe earlier Igure, Ihere is Iar less evidence here oI
an absolute decline in material consumption.
The best that can be observed – in only a couple
of countries – is something of a stabilisation in
resource requirements, particularly since the late
198ûs. 8uI even Ihis Inding is noI enIirely Io be
IrusIed. Ihe þroblem is IhaI iI´s diIIculI Io þick
up all the resources embedded in traded goods.
The measure shown here – direct material
consumption – does its best to identify traded
Figure 15: Direct Material Consumption in OECD Countries: 1975-2000
Figure 14: Trends in Fossil Fuel Consumption and Related CO
2
: 1980-2007
160
140
120
100
80
60
40
20
0
1995 1990 1985 1980 1975 2000
1
9
7
5

=

1
0
0
250
200
150
100
50
0
1
9
9
0

=

1
0
0
2000 1995 1990 1985 1980 2005
Natural Gas
Oil
Combustion CO
2
World GDP
Coal
UK
Netherlands
Japan
Germany
Austria
Figure 14 Trends in Fossil Fuel Consumption and Related CO
2
: 1980–2007
9
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 51
Iows oI sþeciIc resources. 8uI iI misses ouI on Ihe
resources (and emissions) used to manufacture
Inished and semi·Inished þroducIs abroad.
This question is important precisely because of the
structure of modern developed economies, which
have typically tended to move progressively away
from domestic manufacturing. Unless the demand
for consumer goods also declines, more and more
Inished and semi·Inished goods need Io be
imþorIed Irom abroad. And since conceþIs like direcI
material consumption omit such accounts, Figure
15 underesIimaIes Ihe resource requiremenIs oI
developed economies.
Correcting this failing calls for more sophisticated
resource and economic models than are currently
available. In the case of carbon dioxide, however,
several recenI sIudies Ior Ihe uK have conIrmed
that national accounts systematically fail to account
for the ‘carbon trade balance’. In other words, there
are more (hidden) carbon emissions associated
wiIh uK consumþIion þaIIerns Ihan aþþear Irom Ihe
numbers we reþorI Io Ihe uniIed NaIions under Ihe
Climate Change Convention.
In fact, this difference is enough to undermine
Ihe þrogress made Iowards Ihe uK´s KyoIo
IargeIs. An aþþarenI reducIion in emissions oI 6%
beIween 199û and 2ûû4, as reþorIed under uN
|CCC guidelines is Iurned inIo an 11% increase in
emissions, once emissions embedded in trade are
taken into account.
11

wiIhouI more deIailed work, iI´s diIIculI Io know
whether this pattern is true more generally for
material resources. But given the trend away from
manuIacIuring, iI´s clearly wise Io view |igure 15
with some caution. There is an outside chance that
some stabilisation of resource consumption has
occurred. 8uI |igure 15 doesn´I þrovide a loI oI
conIdence in absoluIe decouþling, even wiIhin Ihe
advanced economies.
Ultimately, in any case, what count most in terms
of global limits are worldwide statistics. Both
climate change and resource scarcity are essentially
global issues. So Ihe Inal arbiIer on Ihe IeasibiliIy
of absolute decoupling – and the possibilities for
escaping the dilemma of growth – are worldwide
Irends. |igure 14 conIrmed a rising global Irend in
Iossil Iuels and carbon emissions. |igure 16 shows
the global trend in the extraction of another vital set
oI IniIe resources - meIal ores.
whaI´s sIriking Irom |igure 16 is noI jusI Ihe absence
of absolute decoupling. There is little evidence of
relative decoupling either. Some improved resource
Figure 15: Direct Material Consumption in OECD Countries: 1975-2000
Figure 14: Trends in Fossil Fuel Consumption and Related CO
2
: 1980-2007
160
140
120
100
80
60
40
20
0
1995 1990 1985 1980 1975 2000
1
9
7
5

=

1
0
0
250
200
150
100
50
0
1
9
9
0

=

1
0
0
2000 1995 1990 1985 1980 2005
Natural Gas
Oil
Combustion CO
2
World GDP
Coal
UK
Netherlands
Japan
Germany
Austria
Figure 15 Direct Material Consumption in OECD Countries: 1975–2000
10
52 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
eIIciency is evidenI in Ihe earlier years, buI Ihis
appears to have been eroded more recently.
Particularly notable is the increased consumption
of structural metals. Extraction of iron ore, bauxite,
copper and nickel is now rising faster than world
60P.
keasons Ior Ihis are noI þarIicularly hard Io Ind.
China´s hunger Ior iron ore is well·documenIed.
13

As Ihe emerging economies build uþ Iheir
infrastructures, the rising demand for structural
materials is one of the factors that put an upward
þressure on commodiIy þrices during 2ûû7 and
Ihe IrsI halI oI 2ûû8 (see ChaþIer 2, |igure 1). Ihe
imþacI on cerIain non·meIallic minerals is jusI as
striking. Worldwide cement production has more
Ihan doubled since 199û, surþassing growIh in world
60P by some 7û þercenIage þoinIs. 6lobal resource
inIensiIies (Ihe raIios oI resource use Io 60P), Iar
Irom declining, have increased signiIcanIly across
a range oI non·Iuel minerals. kesource eIIciency
is going in the wrong direction. Even relative
decoupling just isn’t happening.
It’s clear from this that history provides little support
Ior Ihe þlausibiliIy oI decouþling as a suIIcienI
solution to the dilemma of growth. But neither
does iI rule ouI Ihe þossibiliIy enIirely. A massive
Iechnological shiII, a signiIcanI þolicy eIIorI,
wholesale changes in þaIIerns oI consumer demand,
a huge international drive for technology transfer
to bring about substantial reductions in resource
inIensiIy righI across Ihe world: Ihese changes are
the least that will be needed to have a chance of
remaining within environmental limits and avoiding
an inevitable collapse in the resource base at some
point in the (not too distant) future.
The message here is not that decoupling is
unnecessary. On the contrary, absolute reductions
in throughput are essential. The question is, how
much is achievable` how much decouþling is
Iechnologically and economically viable` wiIh Ihe
right political will, could relative decoupling really
proceed fast enough to achieve real reductions in
emissions and throughput, and allow for continued
economic growIh` Ihese criIical quesIions remain
unanswered by those who propose decoupling as
Ihe soluIion Io Ihe dilemma oI growIh. Vore oIIen
than not, the crucial distinction between relative
and absolute decoupling isn’t even elucidated.
It’s far too easy to get lost in general declarations
oI þrinciþle: growing economies Iend Io become
more resource eIIcienI, eIIciency allows us Io
decouþle emissions Irom growIh, so Ihe besI way
Figure 17: Carbon Intensities Now and Required to Meet 450 ppm Target
Figure 16: Global Trends in Primary Metal Extraction: 1990-2007
250
200
150
100
50
0
1
9
9
0

=

1
0
0
C
a
r
b
o
n

I
n
t
e
n
s
i
t
y

g
C
O
2
/
$
1
9
9
0
1
9
9
3
1
9
9
2
1
9
9
1
1
9
9
4
1
9
9
7
1
9
9
6
1
9
9
5
1
9
9
8
2
0
0
1
2
0
0
0
1
9
9
9
2
0
0
2
2
0
0
5
2
0
0
7
2
0
0
6
2
0
0
4
2
0
0
3
500
450
400
350
300
250
200
150
100
50
2007 World
768
2007 UK 2007 Japan 2050 (Scen 1) 2050 (Scen 2) 2050 (Scen 3) 2050 (Scen 4)
0
800
750
700
650
600
550
World GDP
Copper
Nickel
Bauxite
Zinc
Iron Ore
Scenario 1: 9 billion people: trend income growth
Scenario 2: 11 billion people: trend income growth
Scenario 3: 9 billion people: incomes at equitable 2007 EU level
Scenario 4: 9 billion people: incomes at equitable 2007 EU level plus 2% growth
Now Required to meet 450 ppm target
347
244
36
30
14
6
Figure 16 Global Trends in Primary Metal Extraction: 1990–2007
12
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 53
to achieve targets is to keep growing the economy.
This argument is not at all uncommon in the tangled
debates about environmental quality and economic
growth.
It contains some partial truths – for example, that
some eIIciency imþrovemenIs occur in some
advanced economies.
14
It draws some support from
some limited evidence on air pollutants such as
sulphur dioxide and particulates. These emissions
someIimes show an inverIed·u shaþed relaIionshiþ
wiIh economic growIh: emissions grow in Ihe early
stage of growth but then peak and decline.
15

But this relationship only holds, according to
ecological economist Douglas Booth, for local, visible
environmental effects like smoke, river water quality
and acid pollutants. It isn’t uniformly true even for
Ihese þolluIanIs. And iI simþly doesn´I exisI aI all
for key indicators of environmental quality such as
carbon emissions, resource extraction, municipal
waste generation and species loss.
16

As an escaþe Irom Ihe dilemma oI growIh iI is
IundamenIally Iawed. Lver greaIer consumþIion
oI resources is a driver oI growIh. As indusIrial
ecologisI koberI Ayres has þoinIed ouI: ´consumþIion
(leading to investment and technological progress)
drives growth, just as growth and technological
progress drives consumption.’
17
Protagonists of
growth seldom compute the consequences of this
relationship.
The Arithmetic of Growth
AriIhmeIic is key here. A very simþle maIhemaIical
identity governs the relationship between relative
and absolute decoupling. It was put forward almost
forty years ago by Paul Ehrlich and John Holdren.
The Ehrlich equation tells us quite simply that the
impact (I) of human activity is the product of three
IacIors: Ihe site oI Ihe þoþulaIion (P), iIs level oI
aIIuence (A) exþressed as income þer þerson, and
a technology factor (T), which measures the impact
associaIed wiIh each dollar we sþend (8ox 3).
For as long as the T factor is going down, then we
are safe in the knowledge that we have relative
decoupling. But for absolute decoupling we need I
Io go down as well. And IhaI can only haþþen iI I
goes down fast enough to outrun the pace at which
þoþulaIion (P) and income þer caþiIa (A) go uþ.
0ver Ihe lasI Ive decades Ihis has been a Iough
ask. 8oIh aIIuence and þoþulaIion have gone uþ
substantially, each being about equally responsible
Ior Ihe overall Ive·Iold growIh in Ihe economy.
ln recenI years, Ihe aIIuence IacIor has exceeded
the population factor in driving growth. But both
are clearly important, as Ehrlich himself clearly
recognised.
18
And neiIher has þroved þarIicularly
IracIable Io þolicy. lncreasing aIIuence has been
seen as synonymous with improved wellbeing.
AdvocaIing limiIs Io þoþulaIion growIh has been
seen as contravening basic human liberties.
Ironically, both these preconceptions are wrong.
Increasing incomes don’t always guarantee
wellbeing and someIimes deIracI Irom iI. And
the fastest population growth has occurred in
the developing world – driven not by liberty but
by a lack of education and inadequate access to
contraception.
19

NoneIheless, Ihe inIracIabiliIy oI addressing boIh
population and income has tended to reinforce the
idea IhaI only Iechnology can save us. Knowing IhaI
eIIciency is key Io economic þrogress, iI is IemþIing
to place our faith in the possibility that we can push
relative decoupling fast enough that it leads in the
end to absolute decoupling. But just how feasible
is Ihis`
Ihere is a convenienI ´rule oI Ihumb´ Io Igure ouI
when relative decoupling will lead to absolute
decoupling. In a growing population with an
increasing average income, absolute decoupling
will occur when the rate of relative decoupling is
greater than the rates of increase in population and
income combined.


With this rule of thumb in mind, it’s instructive to
explore what’s happened historically (and why) to
global carbon dioxide emissions.
Carbon intensities have declined on average by
û.7% þer year since 199û. IhaI´s good, buI noI good
enough. PoþulaIion has increased aI a raIe oI 1.3%
and average per capita income has increased by
1.4% each year (in real Ierms) over Ihe same þeriod.
LIIciency hasn´I even comþensaIed Ior Ihe growIh
in population, let alone the growth in incomes.
Instead, carbon emissions have grown on average
by 1.3 - 1.4 - û.7 - 2% þer year, leading over 17 years
54 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
Io an almosI 4û% increase in emissions (8ox 3).
21
The same rule of thumb allows us a quick check
on the feasibility of decoupling carbon emissions
from growth in the future. The IPCC’s Fourth
AssessmenI reþorI suggesIs IhaI achieving a 45û
ppm stabilisation target means getting global
carbon dioxide emissions down Io below 4 billion
Ionnes þer annum by 2û5û or soon aIIer. Ihis would
be equivalent to reducing annual emissions at an
average raIe oI 4.9% þer year beIween now and
2û5û.
22
But income and global population are going in the
oþþosiIe direcIion. According Io Ihe uN´s mid·range
estimate, the world’s population is expected to reach
nine billion þeoþle by 2û5û - an average growIh oI
û.7% each year. under business as usual condiIions,
the decline in carbon intensity just about balances
the growth in population and carbon emissions
will end up growing at about the same rate as the
average income - 1.4% a year. lI mighI noI sound
much, buI by 2û5û, under Ihese assumþIions, carbon
emissions are 8û% higher than they are today.
NoI quiIe whaI Ihe lPCC had in mind.
Io achieve an average year·on·year reducIion in
emissions oI 4.9% wiIh û.7% þoþulaIion growIh
and 1.4% income growIh I has Io imþrove by
aþþroximaIely 4.9 - û.7 - 1.4 - 7% each year -
almost ten times faster than it is doing right now.
8y 2û5û Ihe average carbon conIenI oI economic
ouIþuI would need Io be less Ihan 4û gC0
2
/S, a
21·Iold imþrovemenI on Ihe currenI global average
(|igure 17, Scenario 1).
ln IacI, Ihings could geI even worse Ihan Ihis. AI Ihe
higher end oI Ihe uN´s þoþulaIion esIimaIes - in a
world oI almosI 11 billion þeoþle - business as usual
would more than double global carbon emissions
over Ioday´s level. Achieving Ihe 2û5û IargeI in
these circumstances would put even more pressure
on technological improvements, to drive the carbon
inIensiIy oI ouIþuI down Io less Ihan 3û gC0
2
/S
(|igure 17, Scenario 2).
23

Box 3: unravelling Ihe AriIhmeIic oI 6rowIh
Ihe Lhrlich equaIion sIaIes IhaI environmenIal (l) is a þroducI oI þoþulaIion (P) Iimes aIIuence or income level
(A) Iimes Ihe Iechnological inIensiIy (I) oI economic ouIþuI.
l - P x A x I
For carbon dioxide emissions from fuel combustion, for example, the total emissions are given by the product of
þoþulaIion (P) Iimes income (measured as dollars oI 60P/þerson) Iimes Ihe carbon inIensiIy oI economic acIiviIy
(measured as gCO
2
/S):
C - P x S/þerson x gC0
2
/S
using Ihis ariIhmeIic Ior Ihe year 2ûû7, when Ihe global þoþulaIion was abouI 6.6 billion, Ihe average income
level in consIanI 2ûûû dollars (aI markeI þrices) was S5,9ûû, and Ihe carbon inIensiIy was 76û gC0
2
/S, we Ind
IhaI Ihe IoIal carbon dioxide emissions C were:
6.6 x 5.9 x û.77 - 3û billion Ionnes oI C0
2
.
ln 199û, when Ihe þoþulaIion was only 5.3 billion and Ihe average income was S4,7ûû buI carbon inIensiIy was
86û gC0
2
/S, IoIal carbon dioxide emissions C were given by:
5.3 x 4.7 x û.87 - 21.7 billion Ionnes oI C0
2
.
Ihese numbers are conIrmed againsI Ihose reþorIed in Ihe Lnergy lnIormaIion AdminisIraIion´s International
Energy Annual. Ihe cumulaIive growIh in emissions beIween 199û (Ihe KyoIo base year) and 2ûû7 was 39%
(3û/21.7 - 1.39) wiIh an average growIh raIe in emissions (r
i
) oI almosI 2% (r
i
- (1.39)
1/17
- 1 - 1.96%).
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 55
NoIably, Ihis would sIill be a deeþly unequal world.
8usiness·as·usual income growIh is usually Iaken Io
mean a sIeady 2 or 3% growIh raIe in Ihe mosI
developed countries while the rest of the world
does its best to catch up – China and India leaping
ahead aI 5·1û% þer annum aI leasI Ior a while, wiIh
AIrica, SouIh America and þarIs oI Asia languishing
in the doldrums for decades to come. In most of
these scenarios, both the incomes and the carbon
footprints of the developed nations would be more
Ihan an order oI magniIude higher by 2û5û Ihan
those in the poorest nations.
If we were really serious about fairness and wanted
the world’s nine billion people all to enjoy an income
comþarable wiIh Lu ciIitens Ioday, Ihe economy
would need to grow 6 times between now and
2û5û, wiIh incomes growing aI an average raIe oI
3.6% a year. Achieving Ihe lPCC´s emission IargeI in
this world means pushing down the carbon intensity
oI ouIþuI by 9% every single year Ior Ihe nexI IorIy
or so years.
24
8y 2û5û, Ihe average carbon inIensiIy
would need Io be 55 Iimes lower Ihan iI is Ioday aI
only 14 gC0
2
/S (|igure 17, Scenario 3).
And Ihis scenario sIill hasn´I IacIored in income
growth in the developed nations. Imagine a scenario
in which incomes everywhere are commensurate
wiIh a 2% increase þer annum in Ihe currenI Lu
average income. The global economy grows almost
15 Iimes in Ihis scenario and carbon inIensiIy musI
Iall by over 11% every single year. 8y 2û5û Ihe
carbon content of each dollar has to be no more
than 6 gCO
2
/S. IhaI´s almosI 13û Iimes lower Ihan
Ihe average carbon inIensiIy Ioday (|igure 17,
Scenario 4).
8eyond 2û5û, oI course, iI growIh is Io conIinue,
so musI eIIciency imþrovemenIs. wiIh growIh aI
2% a year Irom 2û5û Io Ihe end oI Ihe cenIury, Ihe
economy in 21ûû is 4û Iimes Ihe site oI Ioday´s
economy. And Io all inIenIs and þurþoses, noIhing
Figure 17: Carbon Intensities Now and Required to Meet 450 ppm Target
Figure 16: Global Trends in Primary Metal Extraction: 1990-2007
250
200
150
100
50
0
1
9
9
0

=

1
0
0
C
a
r
b
o
n

I
n
t
e
n
s
i
t
y

g
C
O
2
/
$
1
9
9
0
1
9
9
3
1
9
9
2
1
9
9
1
1
9
9
4
1
9
9
7
1
9
9
6
1
9
9
5
1
9
9
8
2
0
0
1
2
0
0
0
1
9
9
9
2
0
0
2
2
0
0
5
2
0
0
7
2
0
0
6
2
0
0
4
2
0
0
3
500
450
400
350
300
250
200
150
100
50
2007 World
768
2007 UK 2007 Japan 2050 (Scen 1) 2050 (Scen 2) 2050 (Scen 3) 2050 (Scen 4)
0
800
750
700
650
600
550
World GDP
Copper
Nickel
Bauxite
Zinc
Iron Ore
Scenario 1: 9 billion people: trend income growth
Scenario 2: 11 billion people: trend income growth
Scenario 3: 9 billion people: incomes at equitable 2007 EU level
Scenario 4: 9 billion people: incomes at equitable 2007 EU level plus 2% growth
Now Required to meet 450 ppm target
347
244
36
30
14
6
Figure 17 Carbon Intensities Now and Required to Meet 450 ppm Target
25
56 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
less than a complete decarbonisation of every single
dollar will do Io achieve carbon IargeIs. Needless Io
say, these numbers look even worse, if the higher
uN þoþulaIion þrojecIions maIerialise. AlIhough
conversely, of course, more robust population
policies would reduce the pressure on technology.
Stark choices
Playing with numbers may seem like dancing angels
on the head of a pin. But simple arithmetic hides
sIark choices. Are we really commiIIed Io eradicaIing
þoverIy` Are we serious abouI reducing carbon
emissions` 0o we genuinely care abouI resource
scarciIy, deIoresIaIion, biodiversiIy loss`
26
Or are we so
blinded by conventional wisdom that we daren’t do
Ihe sums Ior Iear oI revealing Ihe IruIh`
One thing is clear. Business as usual is grossly
inadequaIe, as even Ihe lnIernaIional Lnergy Agency
– the world’s energy watchdog – now accepts. Their
‘Reference’ scenario has the demand for primary
energy growing by 45% by 2û3û, on·Irack Ior Ihe
8û% hike in carbon emissions alluded Io above.
Ihe lLA´s ´SIabilisaIion´ scenario reveals Ihe scale
of the challenge. ‘Our analysis shows that OECD
countries alone cannot put the world onto a
45ûþþm IrajecIory, even iI Ihey were Io reduce Iheir
emissions Io tero´, Ihe world Lnergy 0uIlook 2ûû8
admits.
27

The report also highlights the scale of investment
that is likely to be needed over the coming decades.
Stabilising carbon emissions (and addressing
þroblems oI energy securiIy) requires a whole·scale
transition in global energy systems. Technological
change is essential, with or without growth. Even a
smaller economy would Iace Ihis challenge: declining
fossil energy requirements and substantially reduced
carbon emissions are vital.
We can never entirely discount the possibility that
some massive technological breakthrough is just
round the corner. But it’s clear that early progress
towards carbon reduction will have to rely on
oþIions IhaI are already on Ihe Iable: enhanced
energy eIIciency, renewable energy and þerhaþs
carbon capture and storage.
28

Just how much decoupling could be achieved in this
way is an open question. The truth is, we haven’t yet
Iried IhaI hard Io achieve iI. As Paul Lkins þoinIed
out in his contribution to Redefining Prosperity,
current policies barely scratch the surface of what
could be done to deliver decoupling.
29
Substantial
early investment in low carbon technologies is
obviously essential.
The need for this kind of investment could transform
Ihe economics oI Ihe 21
st
Century. Its impact on
global growth is far from certain. The Stern Review
famously argued that ‘the annual costs of achieving
sIabilisaIion...are around 1% oI global 60P.´

But
the stabilisation target was a less punishing one
(55û þþm) Ihan is now believed Io be necessary.
Stern himself subsequently revised his cost estimate
Io 2% oI 60P on Ihe grounds IhaI a sIabilisaIion
IargeI oI 5ûû þþm was now needed because climaIe
change was proceeding faster than previously
anIiciþaIed. Ihe uK ClimaIe Change CommiIIee´s
IrsI reþorI þublished in 0ecember 2ûû8 came
uþ wiIh cosIs consisIenI wiIh SIern. AccounIancy
Irm PricewaIerhouseCooþers esIimaIed Ihe cosIs
oI achieving a 5û% reducIion in global carbon
emissions aI 3% oI global 60P.
31

Though clearly substantial, even these numbers may
underestimate the economic impact of addressing
climate change. ‘The easy compatibility between
economic growth and climate change, which lies at
the heart of the Stern Report, is an illusion,’ claims
energy economist Dieter Helm. Stern’s microeconomic
appraisals of cost suffer from serious ‘appraisal
optimism’, he suggests, assuming that wholesale
transformation of energy systems can be achieved
by scaling up marginal cost estimates.
32

helm also aIIacks Ihe macro·economics oI currenI
sIabilisaIion scenarios. NoI only could carbon
abatement policies interfere more seriously with
þroducIiviIy Ihan many macro·economic assessmenIs
suggest, but early climate change impacts could
Ihemselves reduce þoIenIial growIh. Assuming IhaI
economic growth simply rolls onwards in the face of
high mitigation and adaptation costs is untenable,
claims Helm.
33

Besides all this, none of the existing stabilisation
scenarios (including those in the Stern review)
deliver global income parity. Income growth in the
developed nations is taken as read. Parts of the
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 57
developing world are assumed to catch up a little
with the richer nations. But no attempt is made to
develop scenarios in which incomes are distributed
equally across nations. Unless growth in the richer
nations is curtailed or some kind of completely
unforeseen technological breakthrough happens,
the carbon implications of a truly shared prosperity
are even more daunting to contemplate.
Ihe IruIh is IhaI Ihere is as yeI no credible, socially·
jusI, ecologically·susIainable scenario oI conIinually
growing incomes for a world of nine billion people.
In this context, simplistic assumptions that
caþiIalism´s þroþensiIy Ior eIIciency will allow us
to stabilise the climate or protect against resource
scarcity are nothing short of delusional. Those who
promote decoupling as an escape route from the
dilemma of growth need to take a closer look at
the historical evidence – and at the basic arithmetic
of growth.
kesource eIIciency, renewable energy and reducIions
in material throughput all have a vital role to play in
ensuring the sustainability of economic activity. But
the analysis in this chapter suggests that it is entirely
fanciful to suppose that ‘deep’ emission and resource
cuts can be achieved without confronting the structure
of market economies.
58 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
The Economist
November 2ûû8
1
6
Confronting Structure
“ As every hunted animal knows, it is not
how fast you run that counts, but whether
you are slower than everyone else.”
60 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
Fear may not be all bad. The threat of imminent
collapse may have been the only force strong enough
Io bring so many counIries IogeIher in laIe 2ûû8,
with a pledge to ‘achieve needed reforms in the
world´s Inancial sysIems´. 0ecisiveness in Ihe Iace
oI Iear won 6ordon 8rown his inIernaIional þlaudiIs
during Ihe early þhase oI Inancial recovery.
And yeI Ihe sense oI a more IundamenIal, a more
pervasive anxiety underlying the modern economy
is an enduring one.
2
Could it really be the case, as
The Economist suggests, that we are still behaving
like hunIed animals, even in Ihe 21
st
Century, driven
by Ihe Ine disIincIion beIween þredaIor and þrey`
lI we are, iI would be good Io recognise iI. And Io
understand why. For without that understanding,
solutions to the dilemmas we face will inevitably
prove elusive.
AdmiIIedly, Ihe dilemma oI growIh isn´I helþing
much, looking as it does like an impossibility
theorem for lasting prosperity. Perhaps at some
instinctive level, we have always understood this.
Vaybe we´re haunIed by subconscious Iear IhaI Ihe
‘good life’ we aspire to is already deeply unfair and
can’t last forever. That realisation – even repressed
– might easily be enough to taint casual joy with
existential concern.
And oI course Ihe analysis in ChaþIer 5 doesn´I
allay those fears. It more or less closes down the
most obvious escape from the dilemma of growth.
LIIciency is a grand idea. And caþiIalism someIimes
delivers it. But even as the engine of growth delivers
productivity improvement, so it also drives forward
Ihe scale oI IhroughþuI. Nowhere is Ihere any
evidence IhaI eIIciency can ouIrun - and conIinue
to outrun – scale in the way it must do if growth is
to be compatible with sustainability.
There is still a possibility that we just haven’t tried
hard enough. With a massive policy effort and huge
technological advances, perhaps we could reduce
resource intensities the two or three orders of
magnitude necessary to allow growth to continue
- aI leasI Ior a while. And yeI, Ihe idea oI running
faster and faster to escape the damage we’re
already causing is itself a strategy that smacks of
þanic. So beIore we seIIle Ior iI, a liIIle reIecIion
may be in order.
Accordingly, Ihis chaþIer conIronIs Ihe sIrucIure
of modern economies head on. In particular, it
explores two interrelated features of economic life
that are central to the growth dynamic. On the one
hand, Ihe þroII moIive sIimulaIes newer, beIIer or
cheaper products and services through a continual
process of innovation and ‘creative destruction’.
AI Ihe same Iime, Ihe markeI Ior Ihese goods relies
on an expanding consumer demand, driven by a
complex social logic.
These two factors combine to drive ‘the engine of
growth’ on which modern economies depend and
lock us in to an ‘iron cage’ of consumerism.
3
It’s
essential to get a better handle on this twin dynamic,
not least so that we can identify the potential to
escape from it. The starting point is to unravel some
of the workings of the modern economy.
Economic structure
AI iIs ouIer IronIier, consumer caþiIalism is a
complex beast, generating whole new species of
Inancial derivaIives jusI Io keeþ iIselI aIoaI. AI iIs
hearI, iI is sIrikingly simþle (|igure 18).
ln broad Ierms, Irms emþloy labour (þeoþle) and
capital (buildings and machinery) to produce the
goods and services that households want and need.
Households (people) offer up their labour and
capital
iii
(savings) Io Irms in exchange Ior incomes.
Revenue from the sale of goods and services is what
allows Irms Io þrovide þeoþle wiIh incomes. Peoþle
spend some of this income on more consumer
goods. But some of it they save. These savings
are invesIed (direcIly or indirecIly) back inIo Irms.
A sense of anxiety pervades modern society. At times it tips over into visceral fear.
The economic crisis of 2008 was such a time. Financial institutions became almost paralysed
by fear. Banks refused to lend even to each other; consumers stopped spending because of it.
Governments displayed signs of being totally bewildered, both by the speed of change and
by the implications of failure.
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 61
Ihis, in a nuIshell, is Ihe ´circular Iow´ oI Ihe
economy.
4

Vissing Irom Ihis over·simþliIed þicIure oI Ihe
economy (and Irom |igure 18) are whaI´s called
the public sector (government), the foreign sector
(overseas Irms, households and governmenIs) and
Ihe Inancial secIor - which mediaIes Ihe Inancial
Iows oI Ihe circular economy.
All oI Ihese are crucial. ParIly because Ihey
introduce a whole new set of actors and a whole
new seI oI þossibiliIies: diIIerenI ways oI sþending
and producing, saving and investing. These offer
some þoIenIial (as we shall see in ChaþIer 8) Ior
reconIguring Ihe economy. 8uI Ihey also comþlicaIe
Ihe basic simþliciIy oI |igure 18 enormously.
ln one sense, Ihe Inancial crisis emerged þrecisely
out of the complexity generated by the evolution of
a global Inancial secIor. And as we saw in ChaþIer
2, IhaI comþlexiIy was in þarI Ihe resulI oI Irying
Io keeþing Ihe sysIem going. 6lobal crediI markeIs
facilitate one of the most fundamental features of
caþiIalism: Ihe dual role oI saving and invesImenI.
The basic functioning of this feature is pretty simple.
Households give over part of their income to
savings. These savings are invested – either directly
or through an intermediary (a bank, building society
or investment house, e.g.) in businesses to generate
þroIIs.
ProII is key Io Ihis sysIem. why would households
give Iheir savings Io Irms raIher Ihan simþly
Figure 19: A Low-Growth Scenario for Canada: Collapse
Figure 18: The ‘Engine of Growth’ in Market Economies
250
300
200
150
100
50
0
2
0
0
5

=

1
0
0
2030 2025 2020 2015 2010 2005 2035
Unemployment
Debt to GDP ratio
GHGs
HOUSEHOLDS
FIRMS
Goods, services, incomes INCREASING PRODUCTIVITY
Poverty
GDP per cap
C
R
E
D
I
T
Novelty,
price reduction
Investment
Consumer spending
Figure 18 The ‘Engine of Growth’ in Market Economies
iii Oddly for a system which borrows its name from it, the term ‘capital’ is confusing in the sheer variety of meanings given
to it within that system. Buildings and machinery are ‘capital goods’ sometimes called physical capital. Financial capital
is used to refer to reserves of money (savings for instance), which of course can be used to invest in capital goods. And
FRQIXVLQJO\WKHWHUPFDSLWDOLVDOVRXVHGWRUHIHUWRWKHDFFXPXODWLRQRIZHDOWKRUDVVHWVtZKLFKLQFOXGHERWKßQDQFLDO
and physical capital. In simple terms, capital simply means a stock of something. This broader meaning has been taken
(Porritt 2005, e.g.) as the basis for arguing that there are things called natural capital (stocks of resources, say), human
capital (stocks of skills) and social capital (stocks of community).
62 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
hanging on to them or spending the money on
consumer goods` 0nly because Ihey exþecI Io
receive a healthy ‘return’ on their capital at some
point in the future. This return is created out of the
sIream oI þroIIs Irom Ihe Irms Ihey invesI in.
|irms Ihemselves seek þroII Ior several reasons.
ln Ihe IrsI þlace, iI þrovides Ihem wiIh working
capital (cash) to invest in maintenance and
improvements themselves. Secondly, it’s needed to
pay off the company’s creditors – people who’ve lent
Ihe Irm money in exþecIaIion oI a reIurn. Ihirdly,
it’s used to pay dividends to shareholders – people
who’ve bought a share in the company.
A comþany IhaI shows good reIurns aIIracIs more
investment. The value of the company will rise
because people are prepared to pay more for shares
in it. When share values are rising, more people will
be keen to buy them. Creditors know they will get
their money back with interest. Shareholders know
that the value of their shares will rise. The company
knows IhaI iI has suIIcienI resources Io mainIain
its capital stock and invest in new processes and
technologies.
Ihis abiliIy Io re·invesI is viIal. AI a basic level, iI´s
needed to maintain quality. Without it, buildings
and equipment inevitably get run down.
5
Product
quality is lost. Sales decline. The company loses
its competitive position and risks going out of
business.
Investment is also needed continually to improve
eIIciency - in þarIicular labour þroducIiviIy. Ihe
role oI eIIciency in caþiIalism has already been
noIed (ChaþIer 5). Ihe driver Ior eIIciency is
essenIially Ihe þroII moIive: Ihe need Io increase
the difference between revenues from sales and
Ihe cosIs associaIed wiIh Ihe so·called IacIor inþuIs:
capital, labour and material resources.
CosI minimisaIion becomes a core Iask Ior any Irm.
8uI iI involves some inherenI IradeoIIs. AmongsI
these is that capital investment is needed, in addition
to its role in maintenance, to achieve cost reduction
in Ihe oIher Iwo IacIors: labour and maIerials.
6

SwiIching Io more energy eIIcienI aþþliances or
less labour intensive processes requires capital.
This continuing capital need both motivates the
search Ior low·cosI crediI and highlighIs Ihe
dangers of credit drying up. It also explains why
reducing caþiIal cosIs indeIniIely isn´I an oþIion.
7

When it comes to choosing which of the other two
factors to target, a lot depends on the relative price
of labour and materials. In a growing economy,
wages rise in real terms. Until very recently at least,
material costs have been falling in real terms. So in
practice, companies have invested preferentially in
technologies that reduce labour costs even if this
increases maIerial cosIs: an obvious counIer Io Ihe
Irend oI resource þroducIiviIy discussed in ChaþIer 5.
8
For a company, then, higher labour productivity
lowers the cost of its products and services. Foregoing
IhaI þossibiliIy runs Ihe risk oI Ihe comþany Inding
itself at a disadvantage compared with national and
international competitors. In this case, it would sell
Iewer goods, reþorI lower þroIIs Io iIs shareholders,
and risk caþiIal IighI Irom Ihe comþany. AI Ihe naIional
level, this dynamic plays out as the ability to compete
in international markets.
In short, the general trend in capitalism is towards
increasing labour productivity. Since this means
producing the same quantity of goods and services
with fewer people, the cycle creates a downward
pressure on employment that’s only relieved if
ouIþuI increases. AI Ihe naIional level, Ihis means
growing the economy. Labour productivity more
Ihan doubled in Ihe uK beIween 1976 and 2ûû5.
8uI Ihe 60P grew even IasIer (by 133%) and Ihis
allowed for the unemployment rate to fall by half a
percentage point over the period.
9

LIIciency drives growIh Iorwards. 8y reducing
labour (and resource) inþuIs, eIIciency brings down
the cost of goods over time. This has the effect of
stimulating demand and promoting growth. Far
from acting to reduce the throughput of goods,
technological progress serves to increase production
output by reducing factor costs.


The phenomenon of ‘rebound’ attests to this.
11

Voney saved Ihrough energy eIIciency, Ior
example, gets spent on other goods and services.
These goods themselves have energy costs that
oIIseI Ihe savings made Ihrough eIIciency, and
sometimes wipe them out entirely (a situation
described as ´backIre´). Sþending Ihe savings Irom
energy·eIIcienI lighIing (say) on a cheaþ shorI·haul
IighI is one sure·Ire reciþe Ior achieving Ihis.
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 63
Ihis somewhaI counIer·inIuiIive dynamic helþs
exþlain why simþlisIic aþþeals Io eIIciency
will never be suIIcienI Io achieve Ihe levels oI
decoupling required for sustainability. In short,
relative decoupling sometimes has the perverse
potential to decrease the chances of absolute
decoupling.
however, eIIciency alone doesn´I guaranIee success
in business. Vaking Ihe same Ihing more and more
eIIcienIly doesn´I work Ior a couþle oI reasons. Ihe
IrsI is IhaI Ihere are þhysical limiIs Io eIIciency
imþrovemenI in sþeciIc þrocesses. AI Ihe basic
level, these constraints are laid down by the laws
of thermodynamics.
12
The second is that failing to
diversify and innovate risks losing out to competitors
producing newer and more exciting products.
Ihe economisI |oseþh SchumþeIer was Ihe IrsI
to suggest that it is in fact novelty, the process
of innovation, that is vital in driving economic
growth.
13
Capitalism proceeds, he said, through a
þrocess oI ´creaIive desIrucIion´. New Iechnologies
and products continually emerge and overthrow
existing technologies and products. Ultimately,
this means that even successful companies cannot
survive simþly Ihrough cosI·minimisaIion.
14

The ability to adapt and to innovate – to design,
produce and market not just cheaper products
but newer and more exciting ones – is vital. Firms
who fail in this process risk their own survival.
The economy as a whole doesn’t care if individual
companies go to the wall. It does care if the process
of creative destruction stops, because without it,
economic activity eventually stops as well.
15

The role of the entrepreneur – as visionary – is
critical here. But so is the role of the investor. It is
only through the continuing cycle of investment
that creative destruction is possible. When credit
dries uþ, so does innovaIion. And when innovaIion
sIalls, according Io SchumþeIer, so does Ihe long·
term potential for growth itself.
AI Ihis þoinI, iI´s IemþIing Io wonder whaI Ihe
connecIion is beIween Ihis selI·þerþeIuaIing buI
somewhat abstract vision of creative capitalism, and
the needs and desires of ordinary human beings.
Ihe circular Iow oI þroducIion and consumþIion
may once have been a useful way of organising
human society to ensure that people’s material
needs are catered for. But what does this continual
cycle of creative destruction have to do with human
Iourishing` 0oes Ihe selI·þerþeIuaIing sysIem really
conIribuIe Io þrosþeriIy, in any meaningIul sense`
Isn’t there a point at which enough is enough and
we should simply stop producing and consuming so
much`
One of the things that prevents this happening,
clearly, is the structural reliance of the system itself
on continued growth. But proponents also point to
Ihe human beneIIs IhaI Ihis kind oI enIreþreneurshiþ
brings: advances in medical science, Ior examþle,
which have contributed to increased longevity
(ChaþIer 4), or Ihe sheer varieIy oI exþerience which
now contributes to our modern quality of life.
16

ln IacI, Ihere is someIhing even more deeþ·rooIed
aI þlay here, consþiring Io lock us Irmly inIo Ihe
cycle of growth. The continual production of novelty
would be oI liIIle value Io Irms iI Ihere were no
market for the consumption of novelty in households.
Recognising the existence, and understanding the
nature, of this demand is essential.
Social logic
It is perhaps not surprising to discover that the desire
for novelty is linked intimately to the symbolic role
that consumer goods play in our lives. It’s been
noIed already (ChaþIer 4) IhaI maIerial arIeIacIs
constitute a powerful ‘language of goods’ that we
use to communicate with each other – not just about
sIaIus, buI also abouI idenIiIy, social aIIliaIion, and
even – through giving and receiving gifts for example
– about our feelings for each other, our hopes for our
family, and our dreams of the good life.
17

This is not to deny that material goods are essential
Ior our basic needs: Iood, shelIer, þroIecIion. 0n
the contrary, this role is critical to our physiological
Iourishing: healIh, liIe exþecIancy, viIaliIy.
But stuff is not just stuff. Consumer artefacts play a
role in our lives that goes way beyond their material
IuncIionaliIy. VaIerial þrocesses and social needs
are intimately linked together through commodities.
VaIerial Ihings oIIer Ihe abiliIy Io IaciliIaIe our
þarIiciþaIion in Ihe liIe oI socieIy. And in so Iar as
they achieve this, they contribute to our prosperity
(ChaþIer 3).
64 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
One of the vital psychological processes here
is what consumer researcher Russ Belk called
cathexis: a þrocess oI aIIachmenI IhaI leads us Io
think of (and even feel) material possessions as
part of the ‘extended self’.
18
This process is evident
everywhere. Our relationships to our homes, our
cars, our bicycles, our favourite clothes, our books,
our CD or DVD collection, our photographs all have
this character.
Our attachments to material things can sometimes be
so strong that we even feel a sense of bereavement
and loss when they are taken from us. ‘Hollow
hands clasp ludicrous possessions because they are
links in the chain of life. Without them, we are truly
lost.’ claimed the marketing guru Ernest Dichter in
The Science of Desire.
19

Some oI Ihese aIIachmenIs are IeeIing. Ihey burn
with novelty momentarily and are extinguished as
suddenly when something else attracts our attention.
Others last a lifetime. Possessions sometimes offer
a sanctuary for our most treasured memories and
feelings. They allow us to identify what is sacred in
our lives and distinguish it from the mundane.
Ihis kind oI maIerialism, Iawed Ihough iI may be,
even offers some kind of substitute for religious
consolation. In a secular world, having something
to hope for is particularly important when things are
going badly. Retail therapy works for a reason.


NovelIy þlays an absoluIely cenIral role in all Ihis.
ln Ihe IrsI þlace, oI course, novelIy has always
carried inIormaIion abouI social sIaIus. As IhorsIein
Veblen pointed out over a century ago, ‘conspicuous
consumþIion´ þroceeds Ihrough novelIy. Vany oI
the latest consumer appliances and fashions are
accessible aI IrsI only Io Ihe rich. New þroducIs are
inherently expensive, because they are produced
on a small scale. They may even be launched at
premium prices deliberately to attract those who
can afford to pay for social distinction.
21

AIIer disIincIion comes emulaIion. Social comþarison
– keeping up with the Joneses – rapidly expands the
demand for successful products and facilitates mass
production, making once luxury goods accessible
Io Ihe many. And Ihe sheer wealIh and enormous
variety of material goods has a democratising
element to it. It allows more and more people to go
about inventing and reinventing their social identities
in the search for a credible place in society.
Arguably iI is þrecisely Ihis cornucoþia oI maIerial
goods and iIs role in Ihe conIinual re·invenIion oI
the self that distinguishes consumer society from
iIs þredecessors. VaIerial arIeIacIs were always
capable of carrying symbolic meaning. They were
often used to establish social position. Only in
modernity has this wealth of material artefacts
been so deeply implicated in so many social and
psychological processes.
According Io some commenIaIors, Ihe symbolic role
of goods is even appropriated in modern society
to explore deep existential questions about who
we are and whaI our lives are abouI. NovelIy is
seductive in its own right here. It offers variety and
exciIemenI, iI allows us Io dream and hoþe. lI helþs
us explore our dreams and aspirations for the ideal
life and escape the sometimes harsh reality of our
lives.
22

And iI is þrecisely because maIerial goods are Iawed
but somehow plausible proxies for our dreams and
aspirations, that consumer culture seems on the
surface to work so well. Consumer goods, suggests
anIhroþologisI 6ranI VcCracken, þrovide us wiIh a
tangible bridge to our highest ideals. They fail, of
course, to provide a genuine access to those ideals,
but in failing they leave open the need for future
bridges, and so stimulate our appetite for more
goods. Consumer culture perpetuates itself here
þrecisely because iI succeeds so well aI Iailure!
23

Again, iI is imþorIanI Io remember IhaI Ihis dynamic
doesn’t by any means exhaust our relationship to
material goods. Consumption is also vital to us in
simple material ways. It is as much about ordinary
everyday survival as it is about the continual
processes of emulation, status competition and
´selI·comþleIion´. 8uI iI is Ihis social dynamic, raIher
Ihan þhysiological Iourishing, which serves Io
explain why our desire for material goods appears
so insaIiable. And why novelIy maIIers Io us.
Novelty and anxiety
It’s tempting to dismiss such a system as pathological.
And in some senses iI clearly is. PsychologisI Philiþ
Cushman has argued that the extended self is
ultimately an ‘empty self’ which stands in continual
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 65
need oI ´being ¨Illed uþ¨ wiIh Iood, consumer
products, and celebrities’.
24
But it is also vital to recognise that this pathology is
not simply the result of some terminal quality in the
human psyche. We are not by nature helpless dupes,
Ioo laty or weak Io resisI Ihe þower oI maniþulaIive
advertisers. On the contrary, human creativity,
emotional intelligence and resilience in the face of
adversity are visible everywhere, even in the face of
an apparently pathological consumerism.
Rather, what emerges from this analysis is that
the empty self is itself a product of powerful social
Iorces and Ihe sþeciIc insIiIuIions oI modern
society. Individuals are at the mercy of social
comparison. Institutions are given over to the
pursuit of consumerism. The economy is dependent
on consumption for its very survival.
Perhaps the most telling point of all is the rather
Ioo þerIecI II beIween Ihe conIinual consumþIion
of novelty by households and the continuous
þroducIion oI novelIy in Irms. Ihe resIless desire
of the ‘empty self’ is the perfect complement for
the restless innovation of the entrepreneur. The
production of novelty through creative destruction
drives (and is driven by) the appetite for novelty in
consumers.
Iaken IogeIher Ihese Iwo selI·reinIorcing þrocesses
are exactly what is needed to drive growth forwards.
As Ihe ecological economisI 0ouglas 8ooIh remarks:
‘The novelty and status seeking consumer and the
monoþoly·seeking enIreþreneur blend IogeIher
Io Iorm Ihe underþinning oI long·run economic
growth.’
25

It’s perhaps not surprising that this restlessness
doesn’t necessarily deliver genuine social progress.
SomeIimes (ChaþIer 4) iI even undermines wellbeing
and conIribuIes Io social recession. And Ihere are
some þreIIy clear reasons Ior IhaI. AmongsI Ihem is
that this is a system driven by anxiety.
The extended self is motivated by the angst of
the empty self. Social comparison is driven by the
anxiety to be situated favourably in society. Creative
destruction is haunted by the fear of being left
behind in the competition for consumer markets.
Thrive or die is the maxim of the jungle. It’s equally
Irue in Ihe consumer socieIy. NaIure and sIrucIure
combine IogeIher here Io lock us Irmly inIo Ihe iron
cage of consumerism.
It’s an anxious, and ultimately a pathological system.
But at one level it works. The relentless pursuit of
novelty may undermine wellbeing. But the system
remains economically viable as long as liquidity is
preserved and consumption rises. It collapses when
either of these stalls.
These understandings provide us with our clearest
insight yet into the enormity of the challenge implied
in delivering a truly sustainable form of prosperity.
Perhaþs IrsI and IoremosI, IhaI challenge comþels
us to develop a different kind of economic structure
(ChaþIers 7 and 8).
8uI iI´s clear IhaI Ihis Iask isn´I suIIcienI. we also
have Io Ind a way Ihrough Ihe insIiIuIional and
social constraints that lock us into a failing system.
In particular, we need to identify opportunities for
change within society – changes in values, changes
in lifestyles, changes in social structure – that will free
us from the damaging social logic of consumerism
(ChaþIer 9 and 1û).
Only through such changes will it be possible
to get ourselves ‘unhooked’ from growth, free
ourselves Irom Ihe relenIless Iow oI novelIy IhaI
drives maIerial IhroughþuI and Ind insIead a
lasIing þrosþeriIy - Ihe þoIenIial Io Iourish, wiIhin
ecological and social limits.
66 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
Achim Steiner
October 2008
1
7
Keynesianism and the
‘Green New Deal’
“ The new, green economy would
provide a new engine of growth,
putting the world on the road to
prosperity again. This is about
growing the world economy in a
more intelligent, sustainable way.”
68 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
The reason for this consensus is obvious enough.
lI Iows immediaIely Irom Ihe sIrucIural reliance oI
the economy on growth to maintain full employment.
When spending slows down, unemployment looms
large. |irms Ind Ihemselves ouI oI business. Peoþle
Ind Ihemselves ouI oI a job. And a governmenI IhaI
Iails Io resþond aþþroþriaIely will soon Ind iIselI
ouI oI oIIce. ln Ihe shorI·Ierm, Ihe moral imþeraIive
to protect jobs and prevent any further collapse is
incontrovertible.
8uI whaI abouI Ihe long·Ierm vision` when Ihe
economy falters, the clarion call from every side
is to get the economy ‘back on the growth path’.
And Ihis call is noI jusI Io increase Ihe 60P. lI is,
Ior Ihe mosI þarI, Io sIimulaIe consumþIion growIh:
Io resIore consumer conIdence and sIimulaIe
high street spending. It is, in effect, a more or less
uniIed call Io re·insþire Ihe dynamics described in
Chapter 6. The dynamics that will continue to drive
unsustainable throughput.
Those inclined to question the consensus wisdom
are swiftly denounced as cynical revolutionaries
or modern day luddites. ‘We do not agree with
Ihe anIi·caþiIalisIs who see Ihe economic crisis
as a chance to impose their utopia, whether of a
socialisI or eco·IundamenIalisI kind,´ roared Ihe
lndeþendenI on Sunday laIe in 2ûû8. ´VosI oI us in
Ihis counIry enjoy long and IulIlling lives Ihanks Io
liberal caþiIalism: we have no desire Io live in a yurI
under a workers’ soviet.’
2
wiIh IhaI conIusingly·aIIired bogey·man looming
over us, kick·sIarIing consumer conIdence Io boosI
high sIreeI sþending looks like a no·brainer. And
internecine warfare is all saved for arguing over
how this is to be achieved.
Kick-starting the economy
Ihe whole þoinI abouI a circular economy (|igure 18)
is that there’s no simple answer to this question.
There are multiple points of intervention. But none
oI Ihem is risk Iree. Ihe Ihree main conIenders are:
to stimulate credit to businesses and consumers
(for example by cutting interest rates), to increase
people’s spending power (for example by cutting
taxes) or to increase public spending on jobs and
infrastructure.
Ihe IrsI oþIion more or less characIerises Ihe way in
which the consumer boom was built and protected
Ior so long IhroughouI Ihe 199ûs and early 2ûûûs.
There is a logic to it. Stimulating credit increases the
availabiliIy oI invesImenI caþiIal Io Irms and aI Ihe
same time reduces the cost of debt to consumers.
We’ve seen already how crucial both of these things
are in keeping consumption going.
But making credit easier and cheaper also played
a criIical role (ChaþIer 2) in creaIing Ihe global
Inancial crisis oI 2ûû8. Ihe danger Ior Ihe uK - and
for many other developed economies – is that we
are already at the limits of consumer indebtedness
and face a sharply rising public sector debt as well.
Pushing these any further stretches the boundaries
oI Inancial þrudence.
Reducing the interest rate also reduces the
incentive to save, at a point when the savings rate
has collaþsed Io virIually noIhing (|igure 2). Ihis
route appears to be an encouragement away from
economic þrudence by Irms and households.
Perversely, this may work in favour of recovery – at
least in the short term. One of the dangers of the
second option – putting more money in people’s
pockets – is that government doesn’t have control
over where it gets spent. People are more inclined
Io save during a recession. lI your Inancial securiIy
looks threatened, it’s not a bad idea to have
something put away for the future. Ironically, more
saving is the last thing that governments want in
these circumstances, in spite of widespread concern
over levels of consumer indebtedness.
ûne ef the mest striking features ef the gIebaI hnanriaI rrisis that emerged during 2008 was the
degree of consensus that the overriding priority was to re-invigorate economic growth. From
the International Monetary Fund to the United Nations Environment Programme, from political
parties across the political spectrum, and from within both liberal and coordinated market
economies, the call was for mechanisms that would ‘kick-start’ economic growth again.
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 69
Ihis is whaI economisI |ohn Vaynard Keynes called
the ‘paradox of thrift’. The normal rules of prudence
are turned on their head. It’s entirely rational for
each individual (or Irm) Io save a biI more in a crisis.
But it turns out to be bad for the economy – at least
with the system designed the way it is right now.
Increased saving reduces high street spending still
further, deepening and lengthening the recession.
3

Ihis leaves oþIion Ihree, a classic Keynesian þublic
sþending þrogramme. Ihe mosI well·known
examþle oI Ihis was |ranklin 0 koosevelI´s New 0eal
in Ihe 193ûs, imþlemenIed as Ihe world sIruggled Io
escaþe Ihe greaI 0eþression. Ihe New 0eal enIailed
a massive investment in public sector works. It may
noI have had Ihe shorI·Ierm eIIecI some claim Ior
it. It didn’t in fact achieve a full economic recovery
wiIhin koosevelI´s IrsI Iwo Ierms in oIIce. 8uI iIs
long·Ierm imþacI was enormous.
4

As Paul Krugman, winner oI Ihe 2ûû8 Nobel Prite in
economics, has þoinIed ouI: ´Ihe New 0eal Iamously
þlaced millions oI Americans on Ihe þublic þayroll
via Ihe works Progress AdminisIraIion [wPA|. Io
Ihis day we drive on wPA·builI roads and send our
children Io wPA·builI schools.´
5
NoI surþrisingly,
Ihere was a loI oI Ialk abouI Ihe New 0eal during
Ihe Inancial crisis. Krugman called Ior a Keynesian·
Iyþe sIimulus equivalenI Io 4% oI Ihe uS 60P.
6
Green New Deal
The most interesting variation on this theme was
Ihe call Ior a (global) 6reen New 0eal. lI Ihe þublic
secIor is going Io sþend money Io re·invigoraIe Ihe
economy, argued its advocates, wouldn’t it be as
well to spend it investing in the new technologies
that we know we are going to need to address the
environmenIal and resource challenges oI Ihe 21
st

CenIury`
‘Investments will soon be pouring back into the
economy,’ suggested Pavan Sukdhev, the Deutsche
8ank economisI leading research on uNLP´s 6reen
Economy Initiative. ‘The question is whether they
go inIo Ihe old exIracIive shorI·Ierm economy oI
yesterday, or a new green economy that will deal
with multiple challenges while generating multiple
economic oþþorIuniIies Ior Ihe þoor and Ihe well·
off alike.’
7

8y early 2ûû9, a sIrong inIernaIional consensus had
emerged in support of a very simple idea. Economic
recovery demands investment. Targeting that
invesImenI careIully Iowards energy securiIy, low·
carbon infrastructures and ecological protection offers
mulIiþle beneIIs. Ihese beneIIs include:
% freeing up resources for household spending
and productive investment by reducing
energy and material costs
% reducing our reliance on imports and our
exposure to the fragile geopolitics of
energy supply
% þroviding a much·needed boosI Io jobs in Ihe
expanding ‘environmental industries’ sector
8
% making progress towards the demanding
carbon emission reduction targets needed to
stabilise the global atmosphere
% protecting valuable ecological assets
and improving the quality of our living
environment for generations to come.
Consensus had also formed around the appropriate
IargeIs Ior a green sIimulus þackage. As Ihe uK
Prime VinisIer þoinIed ouI in a sþeech Io Ihe
world Lconomic |orum in 0avos early in 2ûû9, Ihe
´conIours oI a resilienI low·carbon recovery are
becoming clear’, not just from the proposals from
a wide variety of observers but from plans being
made on the ground in numerous countries.
0uring 2ûû8, Ihe uK·based 6reen New 0eal grouþ
(which includes representatives from business,
Ihe media and N60s) had suggesIed IhaI sIimulus
spending should be focused on the twin challenges
of climate change and energy security. The group put
Iorward þroþosals Ior a low·carbon energy sysIem
that would make ‘every building a power station’
and Ihe creaIion and Iraining oI ´a ¨carbon army¨ oI
workers to provide the human resources for a vast
environmental reconstruction programme.’
9
uNLP´s global 6reen New 0eal widened Ihe remiI
of spending to include investment in natural
inIrasIrucIure: susIainable agriculIure and ecosysIem
protection. Ecosystems already provide tens of
trillions of dollars worth of services to the world
economy.

So protecting and enhancing ecosystems
is vital to economic productivity in the future,
uNLP þoinIed ouI. Ihey also called Ior subsIanIial
investments in clean technologies, sustainable
agriculture and sustainable cities.
70 Prosperity without Growth? Sustainable Development Commission
The case for a stimulus focused on energy and
carbon is very strong. Re-capitalising the world’s
energy systems for a low carbon world will be a
major invesImenI challenge over Ihe nexI IIIy years.
The IEA has estimated that energy investment needs
between 2010 and 2030 will be in excess of $35
trillion.
11
Bringing forward some of this investment
and IargeIing iI sþeciIcally aI renewable energy,
low·carbon Iechnologies and energy eIIciency
could pay massive dividends later.
12
ln a reþorI þublished Iowards Ihe end oI 2ûû8,
Ihe 0euIsche 8ank idenIiIed a ´green sweeI sþoI´
Ior sIimulus sþending, consisIing oI invesImenI
in energy eIIcienI buildings, Ihe elecIriciIy grid,
renewable energy and þublic IransþorIaIion. ´0ne
of the reasons that the “green sweet spot” is an
attractive focus for an economic stimulus is the labor-
inIensiIy oI many oI iIs secIors,´ claimed Ihe 8ank.
13
A study by the University of Massachusetts Political
Economy Research Institute supports that view.
lI idenIiIed six þrioriIy areas Ior invesImenI:
reIroIIIing buildings, mass IransiI/IreighI rail, smarI
grid, wind þower, solar þower and nexI generaIion
biofuels. The authors calculated that spending $100
billion on these interventions over a two year period
would creaIe 2 million new jobs. 8y conIrasI, Ihe
same money directed at household spending would
generate only 1.7 million jobs and directed at the oil
indusIry Iewer Ihan 6ûû,ûûû jobs.
14
Strategies for job creation
lI reþlicable elsewhere, Ihese Indings þrovide
vital insights into the appropriate way to approach
economic recovery. Job creation is one of the key
aims of an economic stimulus programme. Not only
are jobs essential for economic recovery. Meaningful
employment is itself a key constituent in prosperity
(Chapter 3).
Understanding how best to protect employment is
viIal. Several sIraIegies are þossible, including Ihe
direcI creaIion oI þublic secIor jobs, Inancial suþþorI
Io boosI emþloymenI in sþeciIc secIors, or indirecI
support for jobs through measures to stimulate
demand.
Public sector employment was the route favoured
in the Roosevelt’s New Deal. Apart from the
obvious social beneII in þroviding jobs, þublic
sector employment seeks its return in several
ways. |irsIly, Ihere are Ihe beneIIs Io Ihe economy
from investment in productive infrastructure (road-
building, Ior examþle, in Ihe New 0eal). ln addiIion,
public sector jobs generate a part of what has been
called Ihe ´social wage´ - a reIurn Io households
Irom governmenI sþending in Ihe Iorm oI wages,
healIh and educaIion beneIIs and social services.
15

The stimulus packages to emerge from the 2008
crisis favoured a mixture of the other two strategies.
SþeciIc secIors received (or soughI) direcI suþþorI
from government in a number of different countries.
VosI obviously oI course, enormous sums oI money
were committed to the direct support of the
Inancial secIor. 8y Ihe end oI 2ûû8, an esIimaIed
$7 trillion had been spent globally in underwriting
Ioxic asseIs, recaþiIalising banks and aIIemþIing
Io resIore conIdence in Ihe Inancial secIor and
stimulate lending (Chapter 2).
Direct recovery packages were also sought (and
someIimes oIIered) in oIher secIors. VosI noIably,
the car industry received direct support in both
the UK and the US. The US government committed
over $23 billion to bail out the ailing giants GM and
Chrysler at the end of 2008.
16
Larly in 2ûû9, Ihe uK
Government promised to underwrite loans to the
car industry totalling £2.3 billion.
Perhaþs mosI bitarrely, reþresenIaIives Irom Ihe
US porn industry approached US Congress for
suþþorI, early in 2ûû9, Iollowing Ihe car indusIry
bailouI. ´Americans can do wiIhouI cars and such,
buI Ihey cannoI do wiIhouI sex,´ argued Larry |lynI,
the founder of Hustler magazine.
17
Surely more
oI a þubliciIy sIunI Ihan a serious claim, Ihe call
nonetheless highlights the profound mess created
by Ihe Inancial crisis, wiIh Ihe vulnerable and noI·
so-vulnerable alike lobbying for direct support in
the matter of their livelihoods.
8eyond direcI suþþorI Io sþeciIc secIors, broader
Iscal recovery þackages have also been esIablished
in many countries and at EU level. The employment
aims of these packages are achieved by attempting
Io ´kick·sIarI´ growIh Ihrough a mixIure oI Iax cuIs,
social spending and public investment.
|or examþle, Ihe uK Pre·8udgeI keþorI (P8k)
2ûû8 esIabloished a Iscal sIimulus worIh £2û
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 71
billion, including an esIimaIed £12.5 billion cuI in
Ihe VAI and £3 billion oI caþiIal sþending ´broughI
forward’.
18
In the US, the Obama administration brought in a
Iscal sIimulus þackage equivalenI Io 5% oI uS 60P
Ihrough Ihe American kecovery and keinvesImenI
AcI 2ûû9 (AkkA). Ihe S787 billion þackage comþrised
around S29û billion in Iax cuIs and almosI S5ûû
billion in ‘thoughtful and carefully targeted priority
invesImenIs´, iIs aim ´Io creaIe and save 3 Io 4
million jobs, jumpstart our economy, and begin the
þrocess oI IransIorming iI Ior Ihe 21
st
century’.
19
The potential for ‘green’ recovery
In principle, each of these different approaches to
economic recovery could contain a ‘green stimulus’
component. Public sector employment could be
directed explicitly at ‘green jobs’. Direct support for
Ihe Inancial secIor could be allied wiIh condiIions
or investment vehicles to ensure that lending is
preferentially targeted at sustainable investments.


Sectoral bailouts like those afforded to the car
industry could be made conditional on shifting
Iowards greener manuIacIuring and low·carbon
vehicles.
21

In practice little of this happened in the early stages
oI Ihe crisis. 8uI by early 2ûû9, Ihe conceþI oI a
green stimulus was evident in recovery packages
across the world in countries as varied as China, South
Korea, AusIralia and 0enmark, Ihe uK and Ihe uS.
ln Ihe uK, Ior insIance, a ´green sIimulus´ elemenI
was included in Ihe 2ûû8 Pre·8udgeI keþorI.
ln IoIal, Ihis only amounIed Io £535 million, less
Ihan 3% oI Ihe whole þackage, which was in iIs
Iurn only a liIIle over 1% oI Ihe 60P. £3ûû million oI
this was for accelerated replacement of new railway
carriages. A small comþonenI (£25 million) was Ior
Iood deIence and waIer inIrasIrucIure. 0nly abouI
£2ûû million (jusI over 1% oI Ihe IoIal þackage)
was Ior energy eIIciency (mosIly broughI Iorward
investment) in people’s homes.
8y comþarison Ihe uS AkkA exþliciIly idenIiIed
abouI S13û billion oI sþending (16% oI Ihe IoIal
sIimulus) in environmenIal invesImenI. Ihis Igure
included S32 billion invesImenI in Ihe elecIriciIy
grid, S22 billion on energy and carbon saving in
homes and a IurIher S31 billion in Ihe þublic esIaIe,
S19 billion in ecosysIem mainIenance and Iood
þroIecIion and S1û billion on þublic IransþorI.
There are good grounds to question the scope and
scale even oI Ihis relaIively ambiIious uS þlan. As
we noIed in ChaþIer 5, Ihe likely annual invesImenI
needed to achieve a low carbon society could be
as high as 3% oI 60P þer annum. |or Ihe uS, Ihis
would be equivalent to a green stimulus worth
around S4ûû billion, over Ihree Iimes Ihe site oI Ihe
environmenIal invesImenI ouIlined in Ihe AkkA.
ln Ihe case oI Ihe uK, Ihe equivalenI invesImenI
would be in Ihe region oI £45 billion a year,
massively higher than anything proposed so far
by Ihe uK governmenI.
22
The SDC has argued that
there is considerable scope for a much higher level
of green stimulus than is currently being considered
and has idenIiIed a range oI þossible invesImenI
targets.
23
Ihese include:
· an ambiIious 2û year þlan Io reIroII Ihe
existing housing stock to high energy
performance standards
· substantial investment in renewable energy
Io þuI Ihe uK on Irack Io meeIing iIs IargeI oI
15% renewables by 2û2û.
· the reinforcement of the electricity grid to
facilitate decentralised energy technologies,
support renewable energy companies and
improve control
· to reduce car use through a combination of
beIIer þublic IransþorI, invesImenI in walk·
abiliIy, cyclabiliIy and Ihe roll·ouI oI þersonal
travel planning to encourage a modal shift
· massive invesImenI in Ihe energy eIIciency
of the public estate with the aim of delivering
low carbon public services across the country.
Any recovery þackage raises Ihe quesIion oI how iI
is to be paid for. One of the interesting features of
green investment packages is that they offer the
þoIenIial Ior direcI Inancial reIurns Io Ihe economy.
Ihese reIurns Iake a varieIy oI Iorms. VosI obviously
they arise in the form of fuel and resource savings.
For instance, some simple measures to improve the
energy eIIciency oI Ihe domesIic housing sIock
have payback times of less than two years.
Some are in the form of lower social costs and more
eIIcienI services. |or insIance, Ihe uK 0eþarImenI
Ior IransþorI has esIimaIed IhaI each £1 sþenI in
reducing car use saves uþ Io £1û in Ihe economy
72 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
through a combination of fuel savings, reduced
congestion costs, and lower pollution levels.
Beyond such easy wins, there are still challenges
in raising the funds to invest in such measures,
particularly in a harsh economic climate. The
Deutsche Bank report argues that the best way to
fund a green investment programme is through
auctioning carbon permits under a cap and trade
scheme. In other words by raising a new form of
environmenIal IaxaIion. AI Ihe same Iime Ihe reþorI
accepts that the more likely option in the short term
is deIciI sþending.
This was certainly the working assumption in
most of the recovery packages put forward in the
immediaIe resþonse Io Ihe 2ûû8 crisis. Ihey were
based on deIciI sþending over Ihe shorI Ierm in Ihe
hoþe oI sIimulaIing suIIcienIly robusI growIh IhaI
national debt can be reduced again in the longer
Ierm. lI was esIimaIed IhaI Ihe cosI oI Ihe uK´s P8k
package could push the national debt to around
6û% oI 60P wiIhin a couþle oI years.
24
Paying this
oII would in iIselI be a long·Ierm commiImenI.
25

A IurIher oþIion would be Io Iund IuIure sþending
through ‘green bonds’. There is in any case more
likelihood that people will save during a recession.
Targetting that saving in funds which can achieve
positive returns from investment in green recovery
has a dual logic to it. On the one hand it provides a
differentiated savings product when the propensity
to save is high. On the other, it places investment
funds directly into green recovery.
Finally, the possibility of innovative service
structures which share the rewards from energy
savings between households and investors have a
clear rationale here. This ‘energy services model’
is usually assumed to proceed through private
sector energy service companies. But the case for
the public sector to reclaim some ownership in
energy·relaIed asseIs is also worIh considering.
There is a legitimate public claim on the return from
public investment funds whereever those funds are
directed. The energy sector case is at least as strong
as Ihe Inancial secIor case.
In summary however, the broad assumption behind
all these recovery packages is that they will be
successful in stimulating consumption growth again.
CrediI will Iow, consumers will sþend, business will
invest and innovate, productivity will return and the
wheels of the machine will start turning. This is the
logic oI Keynesianism.
26

Recovery here is taken to mean business as usual.
Kick sIarI Ihe circular Iow oI Ihe economy and waIch
it grow. The outcome (assuming it works) will be
thoroughly predictable. Business innovation (creative
destruction) and consumer demand (positional
sþending) will drive consumþIion Iorwards. And wiIh
employment depending on it, there’s no means of
anyone getting off the treadmill. We are right back
aI Ihe sIrucIural imþasse idenIiIed in ChaþIer 6.
Beyond recovery
Clearly, Ihe 6reen New 0eal advocaIes aren´I
þroþosing a reIurn Io Ihe sIaIus quo. Ihe uK grouþ
Ialks oI ´a huge IransIormaIional þrogramme´. uNLP
also calls for ‘transformational thinking’. But all
recovery initiatives proposed so far assume that the
ultimate goal of intervention is to restore economic
growIh. lI´s a diIIerenI kind oI growIh, Ior sure,
whaI Achim SIeiner, LxecuIive 0irecIor oI uNLP, calls
a ‘green engine of growth’. But growth nonetheless.
´Any þublic sþending should be IargeIed so IhaI
domesIic comþanies beneII, and Ihen Ihe wages
generated create further spending on consumer
goods and services,´ argues Ihe uK grouþ.
27
Some kind of green stimulus makes perfect sense,
both in protecting people’s jobs and in making the
transition to a low carbon economy. In circumstances
where we know that public sector spending is
needed to prevent the economy from collapsing,
it is absolutely vital to target that spending
þroþerly. Vassive invesImenI is required Io achieve
sustainability. The current crisis is exactly the right
Iime Io commiI Io IhaI invesImenI. And Ihe evidence
suggests that the employment and resource saving
beneIIs mighI be considerably beIIer Ihan Ior oIher
kinds of spending.
SIimulus measures which suþþorI Ihe leasI well·oII
are particularly to be welcomed. The poorest will
inevitably be hardest hit through the recession and
are already struggling with rising costs for food and
Iuel. lncome inequaliIy is higher in Ihe uK Ioday Ihan
iI was in Ihe mid·198ûs.
28
Some modest progress has
been made in recent years, but we do not yet live
in the ‘strong, healthy and just society’ promised
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 73
in Ihe uK´s much·lauded SusIainable 0eveloþmenI
principles.
An unequal socieIy is an anxious socieIy, one given
too readily to ‘positional consumption’ that adds little
Io overall haþþiness buI conIribuIes signiIcanIly Io
unsusIainable resource IhroughþuI. A 6reen New
Deal worthy of the name would signal clearly to the
þosI·crisis world IhaI we are serious abouI IghIing
climate change, preventing resource scarcity, and
creating a fairer society.
And yeI, iI is diIIculI Io escaþe Ihe conclusion IhaI
in the longer term, we’re going to need something
more than this. Returning the economy to a
condition of continual consumption growth is the
deIaulI assumþIion oI Keynesianism. 8uI, Ior all
the reasons highlighted in preceding chapters, this
condition remains as unsustainable as ever.
There is no consistent vision of an economy founded
on consumption growth that delivers absolute
decouþling. And Ihe sysIemic drivers oI growIh þush
us relentlessly towards ever more unsustainable
resource IhroughþuI. A diIIerenI way oI ensuring
stability and maintaining employment is essential.
A diIIerenI kind oI economic sIrucIure is needed
Ior an ecologically·consIrained world. lI is Io Ihis
possibility that we now turn.
74 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
Douglas Booth
2ûû4
1
8
Macro-economics
for Sustainability
“ Under existing macro-economic
arrangements, growth is the only
real answer to unemployment –
society is hooked on growth.”
76 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
0I course, oIher Ihings aren´I equal. And Ihe
dominant attempt to escape the dilemma relies
precisely on this fact. Things change as economies
grow. 0ne oI Ihese Ihings is Iechnological eIIciency.
lI is now widely acceþIed IhaI Iechnological eIIciency
is both an outcome from, and a fundamental driver
of, economic growth.
Proponents use this feature of capitalism to
suggest that growth is not only compatible with
environmenIal limiIs buI necessary Ior iI. 6rowIh
induces Iechnological eIIciency as well as increases
in scale. All IhaI´s needed Io achieve environmenIal
goals is Ior eIIciency Io ouIrun (and conIinue Io
outrun) scale.
But historical evidence for the success of this strategy
is unconvincing (ChaþIer 5). 6lobal emissions and
resource use are sIill rising. AþþarenI declines in
carbon emissions in counIries like Ihe uK Iurn ouI
on closer inspection to be due to accounting errors
and cross·boundary Irades. Vuch oI Ihe growIh IhaI
is desperately needed in developing countries is
inherenIly maIerial in naIure. And rebound eIIecIs
from technological change push consumption even
higher. ln shorI, eIIciency hasn´I ouIrun scale and
shows no signs of doing so.
That doesn’t mean such a transition is impossible.
On the contrary, we’ve already seen how little effort
has Iruly been dedicaIed Iowards achieving iI. And
how the current economic crisis presents a unique
window oI oþþorIuniIy Io reconIgure our economies
and invest in a sustainable future.
But it’s abundantly clear that a different kind of
macroeconomics is going to be needed. One in
which sIabiliIy no longer relies on ever·increasing
consumption growth. One in which economic
activity remains within ecological scale. Though
Ihese are unIamiliar goals Ior macro·economisIs,
the aim of this chapter is to show that they are not
only meaningful, but achievable.
Changing the ‘Engine of Growth’
First, it’s worth exploring whether a different ‘engine
oI growIh´ would helþ us here, as Achim SIeiner
suggests. Similar proposals have been voiced for
some years by ecological economists. Pointing out
IhaI ´ever greaIer consumþIion oI resources is [in
iIselI| a driver oI growIh´ in Ihe currenI þaradigm,
American academic koberI Ayres argues IhaI ´in
effect, a new growth engine is needed, based
on non·þolluIing energy sources and selling non·
material services, not polluting products’.
2

Similar visions for business models based on
þroducI·service sysIems have been þuI Iorward
elsewhere. Ihe uK 8usiness IaskIorce on SusIainable
Consumption and Production highlighted the
potential for such models to reduce the requirement
for personal ownership, improve the utilisation of
capital resources and lower the material intensity of
the economy.
3

This is still essentially an appeal to decoupling.
6rowIh conIinues, while resource IhroughþuI
declines. But here at least is something in the way
of a blueprint for what such an economy might
look like. It gives us more idea what people are
buying and what businesses are selling in this new
economy. Its founding concept is the production
and sale oI de·maIerialised ´services´, raIher Ihan
material products.
It’s vital to note that this cannot simply be the
´service·based economies´ IhaI have characIerised
development in advanced economies. For the most
part, that has been achieved (as we saw in Chapter
5) by reducing manuIacIuring, conIinuing Io imþorI
consumption goods from abroad and expanding the
Inancial secIor Io þay Ior iI.
Nor can iI look much like anyIhing IhaI þasses Ior
service sector activity in modern economies at the
present. When the impacts attributable to these
are computed properly, most of them turn out to
Put bluntly, the dilemma of growth has us caught between the desire to maintain economic
stability and the need to reduce resource use and emissions. This dilemma arises because
environmental impacts ‘scale with’ economic output: the more economic output there is, the
greater the environmental impact – all other things being equal.
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 77
be at least as resource hungry as the manufacturing
sectors. The recreation and leisure sector ought
Io be a þrime candidaIe Ior de·maIerialisaIion in
principle. In practice, it’s responsible for around
25% oI all energy and carbon emissions aIIribuIable
Io uK consumers.
4

So what exactly constitutes productive economic
acIiviIy in Ihis economy` lI isn´I immediaIely clear.
Selling ‘energy services’, certainly, rather than
energy supplies.
5
Selling mobility rather than cars.
kecycling, re·using, leasing, maybe. Yoga lessons,
þerhaþs, hairdressing, gardening: so long as Ihese
aren’t carried out using buildings, don’t involve the
latest fashion and you don’t need a car to get to
them. The humble broom would need to be preferred
Io Ihe diabolical ´leaI·blower´, Ior insIance.
Ihe IundamenIal quesIion is Ihis: can you really
make enough money from these activities to keep
an economy growing`
6
And Ihe IruIh is we jusI
don’t know. We have never at any point in history
lived in such an economy. That doesn’t mean we
couldn’t. But it sounds at the moment suspiciously
like something the Independent on Sunday would
insIanIly dismiss as a yurI·based economy - wiIh
increasingly expensive yurts.
The dynamics described in Chapter 6 just don’t seem
amenable to moderation of the kind envisaged.
Social logic, questions of scale, and the laws of
Ihermodynamics are sIill signiIcanI sIumbling
blocks to the changes hoped for by those with
well·meaning inIenIions Ior conIinued growIh wiIh
drastic reductions in material intensity.
‘The idea of economic growth overcoming physical
limiIs by angeliting 60P is equivalenI Io overcoming
physical limits to population growth by reducing the
throughput intensity or metabolism of human beings,’
wrote ecological economist, Herman Daly, over thirty
years ago. ‘First pygmies, then Tom Thumbs, then
big molecules, then pure spirits. Indeed, it would be
necessary for us to become angels in order to subsist
on angelited 60P.´
7

On the other hand, doing without growth doesn’t
look aIIracIive eiIher. Vodern economies are builI
explicitly around consumption growth. Politicians
and economists may differ in their prescriptions for
kick·sIarIing growIh in Ihe evenI oI a recession. 8uI
all of them assume a return to high street spending
is whaI we´re aIIer. AþarI Irom anyIhing else, in Ihe
conventional view, structural stability relies on it.
And yeI Ihere´s sIill someIhing odd abouI our
persistent refusal to countenance anything but
growIh aI all cosIs. AIIer all, |ohn SIuarI Vill, one
of the founding fathers of economics, recognised
both the necessity and the desirability of moving
eventually towards a ‘stationary state of capital and
wealth’, suggesting that it ‘implies no stationary
sIaIe oI human imþrovemenI´. And Ihough Keynes´
macro·economics was largely concerned wiIh Ihe
conditions of prudent growth, he also foresaw a
time when the ‘economic problem’ would be solved
and ‘we prefer to devote our further energies to
non·economic þurþoses´.
8
All Ihe more sIrange Ihen, IhaI virIually no aIIemþI
has been made to develop an economic model that
doesn´I rely on long·Ierm growIh. herman 0aly´s
þioneering work aI leasI deIned Ihe ecological
conditions of a steady state economy. For Daly,
these can be expressed in terms of a constant stock
of physical capital, capable of being maintained by
a low rate of material throughput that lies within
the regenerative and assimilative capacities of the
ecosystem.
9
What we still miss from this is the ability to establish
economic stability under these conditions. We
have no model Ior how common macro·economic
‘aggregates’ (production, consumption, investment,
trade, capital stock, public spending, labour, money
supply and so on) behave when capital doesn’t
accumulaIe. Nor do our models þroþerly accounI Ior
Ihe deþendency oI macro·economic aggregaIes on
ecological variables such as resource use, reserves,
emissions and ecological integrity.
ln shorI, Ihere is no macro·economics Ior
sustainability and there is an urgent need for one.
ln IacI, Ihis call - Ior a robusI macro·economics
of sustainability – is one of the most important
messages from the analysis in this study. The
following paragraphs explore the dimensions of this
call in more detail.
Macro-economic basics
The main parameters can be set out easily enough.
Ihe þrinciþal macro·economic aggregaIe - Ihe one
78 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
all Ihe Iuss is abouI, so Io sþeak - is Ihe 60P. wheIher
it deserves pride of place in a new macroeconomics
for sustainability is an open question to which we
return below. In the meantime, it’s useful to set out
brieIy some oI iIs economic characIerisIics.
There are three distinct ways of thinking about (and
calculaIing) Ihe 60P. ln one view, iI is Ihe sum oI
all Inal exþendiIures on goods and services in Ihe
economy.

In another it measures the total output
(or value added) of goods and services from all the
productive enterprises within the nation. In a third
view, it is the sum of all the incomes earned by
people living in the country.
11

The different calculations all come up with more
or less the same total. In fact, they can be thought
of, broadly speaking, as measuring the volume of
Ihe economic Iow (aI diIIerenI þoinIs) around Ihe
circular economy.
12

Ihe exþendiIure·based 60P, also called ´aggregaIe
demand’ is made up from private consumer
expenditure, public (government) expenditure,
gross invesImenI in Ixed caþiIal and neI exþorIs.
13

The economy is said to be in equilibrium when the
aggregate demand matches the aggregate supply
(sometimes called the national income).
ln convenIional macro·economics, Ihe naIional
income is estimated through a ‘production function’,
which tells us how much (in monetary terms) an
economy is capable of producing with any given
inþuI oI Ihe IacIors oI þroducIion. VosI oIIen (as
we saw in Chapter 6) the factors considered to
drive the national income are capital, labour and
Iechnological eIIciency.
14

Ecological economists argue that this form of
production function is unsatisfactory because it
takes no explicit account of material resources and
carries an implicit assumption that it’s possible to
subsIiIuIe diIIerenI IacIors oI þroducIion indeIniIely.
One way of rectifying this would be to include
energy (or other material resources) explicitly
within the production function and also to constrain
substitution possibilities.
15
8uI Ihe convenIional macro·economic IormulaIion
contains no explicit reference to the material or
ecological basis for the economy at all. Clearly both
consumer goods and capital goods do embody
material resources. So to some extent this is inherent
in both the demand side and the supply side (in
the production function). But these are measured
only in monetary terms and don’t usually carry any
exþliciI reIerence Io Ihe maIerial Iows needed Io
create them.
A more general criIicism oI Ihe 60P is iIs Iailure Io
account properly for changes in the asset base, even
when iI comes Io Inancial asseIs. 6ross Ixed caþiIal
investment is measured. But depreciation of capital
sIocks goes unaccounIed Ior and Ihe 60P is almosI
completely blind to the levels of indebtedness
idenIiIed in ChaþIer 2.
16

No aIIenIion is þaid in Ihe 60P Io Ihe cosIs
associated with the degradation of natural capital
from economic activity, either through the impacts
of environmental emissions or through the depletion
oI naIural resources. And, by conIrasI, Ihere are all
kinds oI Ihings which are included in Ihe 60P - Ihe
costs of congestion, oil spills, and clearing up after
car accidents, for example – that should not really
be counted as additional to human wellbeing.
These kinds of perversities have been the focus
Ior long·sIanding criIiques oI convenIional macro·
economics by ecological economists and others.
Numerous suggesIions have been made Ior
supplementing or adjusting the natural accounts
to rectify the situation. For instance, there is a
strong argument in favour of including some
accounI oI Ihe Iow oI services þrovided by Ihe
naIural environmenI and Ior subIracIing so·called
‘defensive’ expenditures.
17

We return to these policy suggestions in Chapter
11. Ihe main aim here is Io exþlore Ihe þrinciþal
macroeconomic variables and understand their
relaIionshiþs Io each oIher. A key elemenI in Ihose
relationships is the balance between supply and
demand, and the importance of this balance for
labour employment.
As we´ve already seen (ChaþIer 6), when demand
Ialls, revenues Io Irms are reduced and Ihis leads
to job losses and reduced investment. Reduced
investment leads to a lower capital stock which,
together with a lower labour input, in turn reduces
the productive capability of the economy. Output
falls and with less money in the economy, public
revenues also Iall, debI is more diIIculI Io service and
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 79
the system has a tendency to become unstable.
8uI does iI have Io work like Ihis` ls iI þossible
Io conIgure Ihe convenIional macro·economic
variables in such a way as to reduce the imperative
Ior growIh and yeI mainIain economic sIabiliIy`
One potential avenue of exploration is to attempt
a stabilisation of economic output by altering the
role or relative importance of key variables (such as
consumption, investment, public spending and so
on) wiIhin Ihe basic macro·economic model.
In search of the low-growth economy
AsIonishingly, Ihere is almosI no aIIemþI aI Ihis Iask
in the literature at all. The most notable exception
is a study carried out by Canadian economist, Peter
Victor, which was presented and discussed in detail
at two workshops held by the SDC during the course
of the Redefining Prosperity project.
18
The study used an interactive systems model to
explore the potential for achieving a stable, but
non·growing economy. Ihe model is calibraIed
againsI sIaIisIical daIa relaIing Io Ihe key macro·
economic variables in Ihe Canadian economy:
output, consumption, public spending, investment,
employment, trade and so on. On the basis of these,
and sþeciIc assumþIions abouI Ihe IuIure, VicIor´s
model estimates the national income, computes
Ihe Iscal balance and Iracks Ihe naIional debI over
a 3û year þeriod Io 2û35. Ihe model also keeþs
an account of unemployment, greenhouse gas
emissions, and poverty levels.
19

By changing key input variables – particularly those
which are known to be drivers of growth, such as
labour participation and investment rates – the model
can be used to develop different scenarios for the
future of the Canadian economy. It can also illustrate
the environmental and social implications of those
scenarios. |igure 19 shows one such aIIemþI.

This scenario certainly achieves a stabilisation in the
60P. under business as usual, income levels mighI
be exþecIed Io grow by uþ Io 8û% over 3û years.
ln |igure 19, income þer þerson is barely 1û%
higher in 2û35 Ihan iI was in 2ûû5. 6reenhouse
gas emissions come down slightly, mainly because
output falls. But this reduction falls considerably
shorI oI whaI mighI be needed Ior a 45û þþm
stabilisation scenario.
What’s more worrying is that income stabilisation
has only been achieved at the cost of spiralling
unemployment, rising poverty and escalating public
sector debt. In short, this scenario represents the
unpalatable form of social (and economic) collapse
that politicians fear the most.
Figure 19 A Low-Growth Scenario for Canada: Collapse
Figure 19: A Low-Growth Scenario for Canada: Collapse
Figure 18: The ‘Engine of Growth’ in Market Economies
250
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2030 2025 2020 2015 2010 2005 2035
Unemployment
Debt to GDP ratio
GHGs
HOUSEHOLDS
FIRMS
Goods, services, incomes INCREASING PRODUCTIVITY
Poverty
GDP per cap
C
R
E
D
I
T
Novelty,
price reduction
Investment
Consumer spending
80 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
|igure 2û illusIraIes a more successIul aIIemþI Io
stabilise the economy. This time income is stabilised
aI a higher level. 60P þer caþiIa is around 7û%
higher in 2û35 Ihan iI was in 2ûû5. 8uI mosI oI Ihe
growIh occurs in Ihe IrsI 2û years oI Ihe scenario.
As economic sIabilisaIion comes inIo eIIecI, income
growIh is gradually reduced Irom 1.8% a year Io less
Ihan û.1% a year. 0uring Ihe Inal years, Ihe naIional
income is effectively stabilised.
NoIably Ihough, Ihis has been achieved wiIhouI
compromising wider economic and social resilience.
Unemployment and poverty have both been halved.
Ihe debI Io 60P raIio has been slashed by 75%.
Ihough iI Ialls some way shorI oI achieving a 45û
þþm sIabilisaIion IargeI, Canada has achieved (25
years Ioo laIe!) iIs ´IoronIo IargeI´ oI a 2û% cuI in
greenhouse gas emissions.


The difference in outcome in the two scenarios is
striking. But what kinds of assumptions and policy
interventions distinguish the ‘Collapse’ scenario in
|igure 19 Irom Ihe ´kesilience´ scenario in |igure
2û` how is Ihe collaþse shown in |igure 19 averIed
in |igure 2û`
Ihe mosI inIuenIial IacIors are changes Io invesImenI
and Ihe sIrucIure oI Ihe labour markeI. NeI business
investment is reduced in the Resilience scenario, and
there has been a shift in investment from private
to public goods, implemented through changes in
taxation and public spending. The labour force has
been stabilised, partly through demographic change
and partly through policies aimed at stabilising the
overall population.
Perhaps most importantly, unemployment is
avoided in the Resilience scenario by reducing both
the total and the average number of working hours.
Labour þroducIiviIy is assumed Io increase. And Ihis
normally leads, through the logic discussed already
(Chapter 6), to a reduction in the available work.
But here unemployment is averted by sharing the
work more equally across the available workforce.
This is an important outcome. It is possible to avoid
the damaging unemployment that follows from
recession by sharing work more equally amongst
the population.
Reducing the working week is the simplest and
most often cited structural solution to the challenge
oI mainIaining Iull emþloymenI wiIh non·increasing
ouIþuI. And Ihere is some þrecedenI Ior iI, Ior
example, from labour policies in certain European
nations.
21
But it’s worth noting that there are some
other more radical suggestions for reorganising
work to ensure equity and to encourage creative
participation in society. These include the introduction
oI a basic (or ciIiten´s) income.
22

Figure 20 A Low Growth Scenario for Canada: Resilience
Figure 20: A Low Growth Scenario for Canada: Resilience
Figure 21: Trust and Belonging in 22 European Nations
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300
200
150
100
50
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2
0
0
5

=

1
0
0
2030 2025 2020 2015 2010 2005 2035
Debt to GDP ratio
GHGs
Poverty
GDP per cap
Key
0.0 7.0 4.0 10.0
Unemployment
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 81
One of the strengths of Peter Victor’s model is that
it looks and behaves remarkably like a conventional
macro·economy. ln IacI, aggregaIe demand is sIill
dominated by consumption (although not driven
by consumption growth). Consumer expenditure is
close Io 6û% oI 60P in boIh Ihe base year (2ûû4)
and Ihe Inal year (2û35). however, Ihe balance
between other demand side variables is changed.
SþeciIcally, business invesImenI Ialls Irom jusI
under 2û% oI 60P in 2ûû4 Io only 12% in 2û35.
Public spending and net exports both rise.
23

In other words, what Victor demonstrates is that
there may be more room than commonly supposed,
even within the conventional framework, to
stabilise economic output. This is not to suggest that
such changes are easy to implement.
24
Achieving
reduced working hours, for example, requires careful
policy and only tends to succeed under certain
conditions. ‘One of the fundamental preconditions
Ior Ihe working Iime þolicy þursued in 6ermany and
0enmark´ wriIes sociologisI 6erhard 8osch, ´was a
stable and relatively equal earning distribution.’
25

The same may be said for policies which restructure
investment or shift taxation.
But the point here is that – even within a relatively
convenIional macro·economic Iramework - diIIerenI
conIguraIions oI Ihe key variables are þossible.
And Ihese conIguraIions deliver diIIerenI ouIcomes.
When our goal is both to achieve economic stability
and remain within ecological and resource limits, this
is an absoluIely criIical Inding.
AnoIher oI Ihe conIribuIions Io Redefining Prosperity
illustrates the same point. Using a hypothetical
simulation model, Italian economists Simone
d´Alessandro and Iommaso LuttaIi exþlored Ihe
challenge associated with the transition from fossil
fuels to renewable energy.
26

As already noIed (ChaþIer 7) Ihis IransiIion will
require substantial new investment.
27
But there’s
a balance to be struck. If we invest too slowly,
we run out of resources before alternatives are in
place. Fuel prices soar and economies crash. If we
invest too fast, there’s a risk of slowing down the
economy to the extent that the resources required
for further investment aren’t available. The upshot,
according Io d´Alessandro and his colleagues, is
that there is a narrow ‘sustainability window’
through which the economy must pass if it is
successIully Io make Ihe IransiIion Io a non·Iossil
world.
Crucially though, this ‘sustainability window’ is
widened if the balance between consumption and
invesImenI in Ihe economy is changed. SþeciIcally,
if the savings ratio is increased and more of the
national income is allocated to investment, the
IexibiliIy Io achieve Ihe IransiIion is higher,
according to this analysis.
28

Beyond the consumption-driven economy
Again, Ihis is a really imþorIanI insighI. Ihe deIaulI
assumption is that consumption is not just the
primary purpose but the principal driver of growth.
Investment is crucial too. But its role is largely seen
as being to stimulate the innovation necessary to
increase consumþIion Iows in Ihe IuIure. Public
sector spending is often regarded as a ‘necessary
evil’ – there to correct for failures in the market and
þrovide a basic saIeIy neI Ior Ihe leasI well·oII.
It’s easy to see how we’ve ended up with this
very sþeciIc and raIher narrow vision oI Ihe
macro·economy: aI IrsI because oI Ihe close
correspondence between consumption growth
and Ihe living sIandard, and Ihen laIer because oI
sIrucIural and social lock·in (ChaþIer 6).
But the vision has failed. Consumption growth
is damaging the basis for future wellbeing and
isn´I even well·aligned wiIh currenI wellbeing.
lnvesImenI is needed now more Ihan ever. NoI Io
stimulate ever higher levels of consumption in the
future, but to build new infrastructures, to effect
the transition to renewable energy and to deliver
key environmenIal and social goals. And Ihe þublic
sector, far from being a ‘distortion’ of the free
market, has an absolutely crucial role to play in the
transition.
Ihe sIaIe has clearly emerged as a viIal ´IrsI resorI´
when markets fail, as they did spectacularly during
2ûû8. 8uI, as Ihe analysis in Ihis chaþIer shows,
the public sector also has an active role to play
in þroIecIing macro·economic sIabiliIy, delivering
þublic goods, invesIing in and managing long·Ierm
inIrasIrucIure asseIs, and co·creaIing Ihe climaIe Ior
susIainable consumþIion (ChaþIer 1û).
29

82 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
In short, the assumptions embedded in the
convenIional macro·economics sIand in urgenI
need oI revision. And Ihe þoIenIial Io exþlore Ihis
possibility clearly exists. Promisingly, we can already
make a decent guess at some of the characteristics
oI a new macro·economics Ior susIainabiliIy.
Ihe IundamenIal macro·economic variables will
still pertain. People will still spend and they will
still save. Enterprise will still produce goods and
services. 6overnmenI will sIill raise revenues and
spend them in the public interest. Both private
and public sector will both still invest in stocks of
physical, human and social capital.
8uI new macro·economic variables will need Io
be brought explicitly into play. These will almost
cerIainly include variables Io reIecI Ihe energy and
resource dependency of the economy. They may also
include variables Io reIecI Ihe value oI environmenIal
services or stocks of natural capital.


And Ihere are likely Io be key diIIerences even in
the way that conventional variables play out. The
balance between consumption and investment,
the balance between public and private sector, the
role of different sectors, the nature of productivity
imþrovemenI, Ihe condiIions oI þroIIabiliIy. All oI
these are likely to be up for renegotiation.
Investment is certainly going to play an absolutely
vital role. If debt is to be kept under control this
suggests that a different savings ratio will be
needed. And IhaI a diIIerenI balance beIween
consumption and investment in the aggregate
demand function is likely. In addition, the level and
nature of this investment almost certainly calls for a
different balance between public and private sector
investment.
It’s worth exploring this last point further. The
traditional function of investment (Chapter 6) is
framed around labour productivity. This role is
likely to diminish in importance. Innovation will
still be vital, but it will need to be targeted more
careIully Iowards susIainabiliIy goals. SþeciIcally,
investments will need to focus on resource
productivity, renewable energy, clean technology,
green business, climate adaptation and ecosystem
maintenance and protection. These are some of
the things to emerge from the consensus around a
global 6reen New 0eal (ChaþIer 7).
What we don’t yet know is how to make the nature
and scale oI Ihis invesImenI work. Keynesianism
assumes that investment has a ‘multiplier’ effect
because it stimulates further consumption.
31
This is
Irue oI convenIionally·Iocused business invesImenI.
But the nature and scale of investment for
sustainability is very different.
Investment in resource productivity won’t always
bring preferential returns unless the relative price
of labour and materials changes substantially.
Some investments in renewable energy will only
bring returns over much longer time frames than
IradiIional Inancial markeIs exþecI. And invesImenIs
in ecosystem protection and maintenance might
noI bring convenIional Inancial reIurns aI all, even
though they are protecting vital ecosystem services
for the future and may also be contributing to
employment.
Simplistic prescriptions in which investment
contributes to future productivity won’t work
here. The nature and conditions of investment will
Ihemselves have Io change. lnvesImenI in long·
term infrastructures and public goods will have
Io be judged againsI diIIerenI criIeria. Aþþendix
2 skeIches Ihe ouIline Ior a new macro·economic
investment framework that builds on these points.
ParIicular aIIenIion is drawn in Aþþendix 2 Io Ihe
challenge of matching supply with demand under
these new conditions. Investments in ecosystem
maintenance (for example) contribute to aggregate
demand, but make no direct contribution to
aggregate supply – at least under the assumptions
of a conventional production function. They may be
viIal in þroIecIing environmenIal inIegriIy. And Ihis
is in its turn vital for sustaining production at all over
Ihe long·Ierm. 8uI in Ihe shorI·Ierm, Ihey aþþear
to ‘soak up’ income without increasing economic
output.
32

ln a convenIional growIh·based economy Ihis is
problematic. In a sustainable economy this kind
of investment needs to be seen as an essential
comþonenI oI macro·economic sIrucIure. And yeI,
at the moment, the tools to analyse this dynamic
properly don’t exist, even if the political will to
implement such a strategy were in place. We return
Io Ihe þolicy imþlicaIions oI Ihis in ChaþIer 11.
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 83
In the meantime, the aim of this chapter has been to
show IhaI a new macro·economics Ior susIainabiliIy
is not only essential, but possible. The starting point
must be to relax our presumption of perpetual
consumption growth as the only possible basis for
stability and to identify clearly the conditions that
deIne a susIainable economy.
These conditions will still include a strong
requirement for economic stability. Or perhaps
‘resilience’ would be a better word for what is
required here. A susIainable economy musI be
capable of resisting the exogenous shocks and avoid
the internal contradictions which have caused chaos
in the last year.
But the requirement for resilience will need to be
augmented by conditions that address distributional
equity, impose sustainable levels of resource
throughput, and provide for the protection of critical
natural capital.
ln oþeraIional Ierms, Ihis new macro·economy will
require enhanced investment in public infrastructures,
in sustainable technologies and in ecosystem
maintenance. It is likely to demand a different
balance between public and private goods. It will
require us to reframe our concepts of productivity
and þroIIabiliIy. Above all, a new macro·economics
for sustainability will be ecologically and socially
literate, ending the folly of separating economy
from society and environment.
84 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
Flourishing –
within limits
“ We must bring back into society a deeper sense of
the purpose of living. The unhappiness in so many
lives ought to tell us that success alone is not
enough. Material success has brought us to
a strange spiritual and moral bankruptcy.”
9
Ben Okri
October 2008
1
86 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
Prosperity is not synonymous with material wealth.
And Ihe requiremenIs oI þrosþeriIy go beyond
material sustenance. Rather, prosperity has to do
wiIh our abiliIy Io Iourish: þhysically, þsychologically
and socially. Beyond sheer subsistence or survival,
prosperity hangs on our ability to participate
meaningfully in the life of society.
This task is as much social and psychological as it
is material. But the appealing idea that (once our
maIerial needs are saIisIed) we could do away wiIh
maIerial Ihings Iounders on a simþle buI þowerIul
IacI: maIerial goods þrovide a viIal language Ihrough
which we communicate with each other about the
Ihings IhaI really maIIer: Iamily, idenIiIy, Iriendshiþ,
community, purpose in life.
Ihere is clearly a þuttle here. lI þarIiciþaIion is really
what matters, and material goods provide a language
to facilitate that, then richer societies ought to show
more evidence of it. In fact, the opposite appears to
be the case. Robert Putnam’s groundbreaking book
Bowling Alone provided extensive evidence of the
collaþse oI communiIy across Ihe uSA.
2

Social Recession
Vodern wesIern socieIy aþþears Io be in Ihe griþ oI
a ‘social recession’. There is a surprising agreement
on this from across the political spectrum. Jonathan
kuIherIord (Irom Ihe þoliIical leII) and |esse Norman
(from the political right) both presented evidence
on it to Redefining Prosperity. Rutherford pointed
to rising rates of anxiety and clinical depression,
increased alcoholism and binge drinking, and a
decline in morale aI work. Norman highlighIed
the breakdown of community, a loss of trust across
society and rising political apathy.
3
The two authors disagree on the causes of social
recession. For Rutherford, the main culprit is the
increasing commoditisation of public goods and
the rising social inequalities that are engendered
by caþiIalism iIselI. |or Norman iI is Ihe over·
bearing inIuence oI ´big´ governmenI in þeoþle´s
lives. Their prescriptions for solving the problem
differ accordingly. But on the existence of a social
recession there is much less disagreement.
The extent of this phenomenon clearly differs across
different nations. Data from a recent module in the
European Social Survey designed to measure social
wellbeing illusIraIe Ihis þoinI. |igure 21 shows Ihe
different levels of trust and belonging experienced
by resþondenIs across 22 Luroþean naIions. Ihose
wiIh Ihe highesI scores (e.g. Norway) exþerience
far greater levels of trust and belonging than those
wiIh lower scores (e.g. Ihe uK).
It’s commonly agreed that some at least of the
reasons for the breakdown in trust lie in the erosion
oI geograþhical communiIy. A sIudy by SheIIeld
universiIy Ior Ihe 88C conIrms Ihis Irend in Ihe uK.
Using an index to measure geographical community
in different BBC regions, the study revealed a
remarkable change in British society since the early
197ûs. lncomes doubled on average over Ihe 3û
year þeriod. 8uI Ihe SheIIeld ´loneliness index´
4

increased in every single region measured. In fact,
according to one of the report’s authors ‘even the
weakesI communiIies in 1971 were sIronger Ihan
any community now’.
5
The increasing number of people living on their
own has a number of different causes, including a
subsIanIial hike in Ihe divorce raIe beIween 1971
and 2ûû1.
6
The study’s authors link the changes
over time largely to mobility. ‘Increased wealth and
improved access to transport has made it easier
for people to move for work, for retirement, for
schools, for a new life’, reports the BBC. They might
also have mentioned that the mobility of labour is
one of the requirements for higher productivity in
the growth economy.
7

In other words, some degree of responsibility for the
change appears to be attributable to growth itself.
As evidence Ior Iourishing iI doesn´I look good.
And iI becomes even more þuttling why rich
societies continue to pursue material growth.
Fixing the economy is only part of the problem. Addressing the social logic of consumerism
is also vital. This task is far from simple – mainly because of the way in which material goods
are so deeply implicated in the fabric of our lives.
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 87
A Life without Shame
Interestingly, Sen came close to addressing this
þuttle in his early work on Ihe ´living sIandard´.
There he argued that the material requirements for
þhysiological Iourishing Iend Io be Iairly similar in
all socieIies. AIIer all, Ihe basic human meIabolism
doesn’t change so much across the species. Crucially,
however, Sen claimed that the material requirements
associated with social and psychological capabilities
can vary widely between different societies.
his argumenI harks back Io Adam SmiIh´s insighI on
Ihe imþorIance oI shame in social liIe. ´A linen shirI,
for example, is, strictly speaking, not a necessary
of life,’ wrote Smith in The Wealth of Nations. ‘But
in the present times, through the greater part of
Europe, a creditable day labourer would be ashamed
to appear in public without a linen shirt, the want of
which would be supposed to denote that disgraceful
degree of poverty which, it is presumed, no body
can well fall into without extreme bad conduct.’
9

Sen broadens this argument to a wider range of
goods, and a deeþer sense oI Iourishing. Io lead
a ‘life without shame,’ he claimed in The Living
Standard, ‘to be able to visit and entertain one’s
friends, to keep track of what is going on and what
others are talking about, and so on, requires a more
expensive bundle of goods and services in a society
that is generally richer and in which most people
already have, say, means oI IransþorI, aIIuenI
clothing, radios or television sets, and so on.’ In
short, he suggested, ‘the same absolute level of
capabilities may thus have a greater relative need
for incomes (and commodities)’.


Putting aside for a moment the fact that higher
incomes have – in the same token – been partly
resþonsible Ior diminished Iourishing, Ihere is an
Figure 21 Trust and Belonging in 22 European Nations
8
Figure 20: A Low Growth Scenario for Canada: Resilience
Figure 21: Trust and Belonging in 22 European Nations
250
300
200
150
100
50
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5

=

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0
2030 2025 2020 2015 2010 2005 2035
Debt to GDP ratio
GHGs
Poverty
GDP per cap
Key
0.0 7.0 4.0 10.0
Unemployment
88 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
even more striking point to be noted here. If we take
for granted the importance of material commodities
for social functioning, there is never any point at
which we will be able to claim that enough is
enough. This is the logic of Sen’s argument. The
baseline for social functioning is always the current
level oI commodiIies. And Ihe avoidance oI shame
- a key IeaIure oI social Iourishing - will drive
material demand forward relentlessly.
This is in effect a different framing of the social
logic explored in Chapter 6. But the social trap is
now even clearer. AI Ihe individual level iI makes
perfect sense to avoid shame. It is essential to
social (and þsychological) Iourishing. 8uI Ihe
mechanism for doing so in the consumer society is
inherenIly Iawed. AI Ihe socieIal level iI can only
lead Io IragmenIaIion and anomie. And in doing so
it undermines the best intentions of the individual
as well. It looks suspiciously like the language of
goods jusI isn´I doing iIs job þroþerly. All IhaI´s leII
is an undigniIed scraþ Io Iry and ensure IhaI we´re
somewhere near the top of the pile.
VosI worrying oI all is IhaI Ihere is no escaþe Irom
this social trap within the existing paradigm. While
social þrogress deþends on Ihe selI·reinIorcing cycle
of novelty and anxiety, the problem can only get
worse. VaIerial IhroughþuI will ineviIably grow. And
Ihe þrosþecIs Ior Iourishing wiIhin ecological limiIs
evaporate. Prosperity itself – in any meaningful
sense oI Ihe word - is under IhreaI. NoI Irom Ihe
current economic recession, but from the continuing
surge of materialism, and from the economic model
that perpetuates it.
Alternative hedonism
Change is essenIial. And some mandaIe Ior Ihis
change already exisIs. Ihere is cross·þarIy concern
over Ihe social recession. And alarm aI evidence like
Ihe SheIIeld sIudy. PoliIicians sIruggle Ior soluIions.
Small scale initiatives aimed at addressing the
pernicious impacts of social recession are springing
up across the country, led by local authorities or
community groups.
11

Ihe þhilosoþher KaIe Soþer þoinIs Io a growing
appetite for ‘alternative hedonism’ – sources
of satisfaction that lie outside the conventional
market. In her contribution to Redefining Prosperity
she describes a widespread disenchantment with
modern life – what she refers to as a ‘structure of
feeling’ – that consumer society has passed some
kind of critical point, where materialism is now
actively detracting from human wellbeing.
12

Anxious Io escaþe Ihe work and sþend cycle, we
are suffering from a ‘fatigue with the clutter and
waste of modern life’ and yearn for certain forms
of human interaction that have been eroded. We
would welcome interventions to correct the balance,
according Io Soþer. A shiII Iowards alIernaIive
hedonism would lead to a more ecologically
sustainable life that is also more satisfying and
would leave us happier.
13
Some statistical evidence supports this view.
PsychologisI Iim Kasser has highlighIed whaI he calls
the high price of materialism. In his contribution to
Redefining Prosperity, he shows how materialistic
values such as þoþulariIy, image and Inancial
success are psychologically opposed to ‘intrinsic’
values like selI·acceþIance, aIIliaIion, a sense oI
belonging in the community.
14

Lven more sIriking is Kasser´s evidence IhaI þeoþle
with higher intrinsic values are both happier and
have higher levels of environmental responsibility
Ihan Ihose wiIh maIerialisIic values. Ihis Inding is
extraordinary because it suggests there really is a kind
oI double or Iriþle dividend in a less maIerialisIic liIe:
people are both happier and live more sustainably
when they favour intrinsic goals that embed them
in family and community. Flourishing within limits is
a real possibility, according to this evidence.
It’s a possibility that has already been explored to
some exIenI Irom wiIhin modern socieIy. AgainsI Ihe
surge of consumerism, there are already those who
have resisted the exhortation to ‘go out shopping’,
preferring instead to devote time to less materialistic
pursuits (gardening, walking, enjoying music or
reading, for example) or to the care of others. Some
people (up to a quarter of the sample in a recent
study) have even accepted a lower income so that
they could achieve these goals.
15

Beyond this ‘quiet revolution’, there have also been
a series of more radical initiatives aimed at living
a simpler and more sustainable life.
16
‘Voluntary
simplicity’ is at one level an entire philosophy
for life. It draws extensively on the teachings of
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 89
Ihe lndian culIural leader VahaIma 6andhi who
encouraged people to ‘live simply, that others might
simþly live´. ln 1936, a sIudenI oI 6andhi´s described
voluntary simplicity in terms of an ‘avoidance of
exterior clutter’ and the ‘deliberate organisation of
life for a purpose’.
17

Former Stanford scientist Duane Elgin picked up this
theme of a way of life that is ‘outwardly simple,
yet inwardly rich’ as the basis for revisioning human
progress.
18
Vore recenIly, þsychologisI Vihalyi
CsikstenImihalyi has oIIered a scienIiIc basis Ior
the hypothesis that our lives can be more satisfying
when engaged in activities which are both purposive
and materially light.
19

Some oI Ihese so·called ´inIenIional´ iniIiaIives,
such as the Findhorn community in northern
Scotland, emerged initially as spiritual communities,
attempting to create space in which it was possible
to reclaim the contemplative dimension of our lives
that used to be captured by religious institutions.
|indhorn´s characIer as an eco·village develoþed
more recently, building on principles of justice and
respect for nature.


AnoIher modern examþle is Plum Village, Ihe
‘mindfulness’ community established by the exiled
VieInamese monk Ihich NhaI hahn in Ihe 0ordogne
area of France, which now provides a retreat for
over 2,ûûû þeoþle. Ihese iniIiaIives are modern
equivalents of more traditional religious communities
like Ihose oI Ihe Amish in NorIh America or Ihe
network of Buddhist monasteries in Thailand – in
which every young male is expected to spend some
time before going out into professional life.
21
NoI all neIworks have Ihis exþliciI sþiriIual characIer.
The Simplicity Forum, for example, launched in
NorIh America in 2ûû1, is a loose secular neIwork
of ‘simplicity leaders’ who are committed to
‘achieving and honoring simple, just and sustainable
ways of life.’ Downshifting Downunder is an even
more recent initiative, launched off the back of an
international conference on downshifting held in
Sydney during 2ûû5, iIs aim is Io ´caIalyte and co·
ordinaIe a downshiIIing movemenI in AusIralia IhaI
will signiIcanIly imþacI susIainabiliIy and social
capital’.
22
The downshifting movement now has a surprising
degree of allegiance across a number of developed
economies. A recenI survey on downshiIIing in
AusIralia Iound IhaI 23% oI resþondenIs had
engaged in some Iorm oI downshiIIing in Ihe Ive
years þrior Io Ihe sIudy. A sIaggering 83% IelI IhaI
AusIralians are Ioo maIerialisIic. An earlier sIudy in
Ihe uS Iound IhaI 28% had Iaken some sIeþs Io
simþliIy and 62% exþressed a willingness Io do so.
Very similar results have been found in Europe.
23

Research on the success of these initiatives is quite
limiIed. 8uI Ihe Indings Irom sIudies IhaI do exisI
are inIeresIing. ln Ihe IrsI þlace, Ihe evidence
conIrms IhaI ´simþliIers´ aþþear Io be haþþier.
Consuming less, voluntarily, can improve subjective
wellbeing – completely contrary to the conventional
model.
24

AI Ihe same Iime, inIenIional communiIies remain
marginal. The spiritual basis for them doesn’t appeal
to everyone, and the secular versions seem less
resistant to the incursions of consumerism. Some of
Ihese iniIiaIives deþend heavily on having suIIcienI
personal assets to provide the economic security
needed to pursue a simpler lifestyle.
Vore imþorIanIly, even Ihose in Ihe vanguard oI
social change Iurn ouI Io be haunIed by conIicI
– internal and external.
25
LxIernal conIicIs arise
because people are trying to live quite literally
in opposition to the structures and values that
dominate society. In the normal course of events,
these structures and values shape and constrain how
þeoþle behave. Ihey have a þroIound inIuence on
how easy or hard it is to behave sustainably.
26

The role of structural change
Examples of the perverse effect of dominant
sIrucIures are legion: þrivaIe IransþorI is incenIivised
over þublic IransþorI, moIorisIs are þrioriIised
over þedesIrians, energy suþþly is subsidised and
protected, while demand management is often
chaoIic and exþensive, wasIe disþosal is cheaþ,
economically and behaviourally, recycling demands
Iime and eIIorI: ´bring cenIres´ are Iew and Iar
beIween and oIIen overIowing wiIh wasIe.
Equally important are the subtle but damaging
signals sent by government, regulatory frameworks,
Inancial insIiIuIions, Ihe media, and our educaIion
sysIems: business salaries are higher Ihan Ihose
90 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
in Ihe þublic secIor, þarIicularly aI Ihe Ioþ, nurses
and those in the caring professions are consistently
lower þaid, þrivaIe invesImenI is wriIIen down
aI high discounI raIes making long·Ierm cosIs
invisible, success is counIed in Ierms oI maIerial
sIaIus (salary, house site eIc), children are broughI
up as a ‘shopping generation’ – hooked on brand,
celebrity and status.
27
Policy and media messages about the recession
underline Ihis þoinI. 0þening Ihe huge new wesIIeld
Shoþþing CenIre in whiIe CiIy in 0cIober 2ûû8,
London Vayor 8oris |ohnson sþoke oI þersuading
people to come out and spend their money, despite
the credit crunch. Londoners had made a ‘prudent
decision to give Thursday morning a miss and come
shopping’, he said of the huge crowds who attended
the opening.
28
Little wonder that people trying to live more
susIainably Ind Ihemselves in conIicI. Ihese kinds
of asymmetry represent a culture of consumption
IhaI sends all Ihe wrong signals, þenalising þro·
environmental behaviour, and making it all but
imþossible even Ior highly·moIivaIed þeoþle Io acI
susIainably wiIhouI þersonal sacriIce.
It’s really important to take this evidence seriously.
As laboraIories Ior social change, inIenIional
households and communities are vital in pointing
Io Ihe þossibiliIies Ior Iourishing wiIhin ecological
limits. But they are also critical in highlighting the
limits of voluntarism.
Simplistic exhortations for people to resist
consumerism are destined to failure. Particularly
when Ihe messages Iowing Irom governmenI are
so painfully inconsistent. People readily identify
this inconsistency and perceive it as hypocrisy.
Or something worse. Under current conditions,
it’s tantamount to asking people to give up key
capabilities and freedoms as social beings. Far from
being irrational to resist these demands, it would be
irrational not to, in our society.
Several lessons Iow Irom Ihis. Ihe IrsI is Ihe obvious
need for government to get its message straight.
Urging people to Act on CO
2
, to insulate their homes,
turn down their thermostat, put on a jumper, drive
a little less, walk a little more, holiday at home, buy
locally produced goods (and so on) will either go
unheard or be rejected as manipulation for as long
as all the messages about high street consumption
point in the opposite direction.
29

Equally, it’s clear that changing the social logic of
consumption cannot simply be relegated to the
realm of individual choice. In spite of a growing
desire for change, it’s almost impossible for people
to simply choose sustainable lifestyles, however
much Ihey´d like Io. Lven highly·moIivaIed
individuals exþerience conIicI as Ihey aIIemþI Io
escaþe consumerism. And Ihe chances oI exIending
this behaviour across society are negligible without
changes in the social structure.
Conversely, of course, social structures can and do
shift people’s values and behaviours. Structural
changes of two kinds must lie at the heart of any
strategy to address the social logic of consumerism.
Ihe IrsI will be Io dismanIle or correcI Ihe þerverse
incentives for unsustainable (and unproductive)
status competition. The second must be to establish
new structures that provide capabilities for people
Io Iourish, and þarIicularly Io þarIiciþaIe Iully in Ihe
life of society, in less materialistic ways.
What this second avenue means in practice is
something that requires a more detailed exploration
than is possible here. It will certainly require
a keener þolicy aIIenIion Io whaI Iourishing
means, particularly when it comes to questions of
community, social participation and psychological
Iourishing. 8uI Ihese ouIcomes cannoI be delivered
in instrumental, ad hoc ways. Policy must pay closer
attention to the structural causes of social alienation
and anomie. It must have the goal of providing
caþabiliIies Ior Iourishing aI iIs hearI.
This idea has some resonances with the concept of
a service·based economy (ChaþIer 8). SþeciIcally,
the strategy suggested here replaces the centrality
oI maIerial commodiIies as Ihe basis Ior þroIIabiliIy
with the idea of an economy designed explicitly
around delivering the capabilities for human
Iourishing.
Vore Ihan Ihis, oI course, Ihese caþabiliIies will
have to be delivered with considerably less material
input. We will need to call on the creativity of the
entrepreneur in a different way than in the past.
Social innovation is going to be vital in achieving
change. But so too is a closer attention to the
question of limits. Creating continuity and cohesion
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 91
must be balanced against stimulating change.
A core elemenI in Ihis sIraIegy musI be Ihe reducIion
of social inequality. Unproductive status competition
increases material throughput and creates distress.
In his book Affluenza, clinical psychologist Oliver
James presents evidence that more unequal societies
systematically report higher levels of distress than
more equal societies.

A key þoinI oI inIuence here will lie in Ihe sIrucIure
of wages. This balance has consistently rewarded
competitive and materialistic outcomes even when
these are socially detrimental – as the lessons from
Ihe Inancial crisis made clear. keducing Ihe huge
income disparities that result from this would send
a powerful signal about what is valued in society.
8eIIer recogniIion Ior Ihose engaged in child·care,
care for the elderly or disabled and volunteer work
would shift the balance of incentives away from
status competition and towards a more cooperative,
and potentially more altruistic society.
Increased investment in public goods and social
inIrasIrucIure is anoIher viIal þoinI oI inIuence.
Ihis has already been idenIiIed as an essenIial
comþonenI in Ihe macro·economics oI susIainabiliIy
(ChaþIer 8). ln addiIion Io iIs role in ensuring
economic resilience, it sends a powerful signal
about the balance between private interests and
the public good.
In summary, we are faced with an unavoidable
challenge. A limiIed Iorm oI Iourishing Ihrough
material success has kept our economies going
for half a century or more. But it is completely
unsustainable and is now undermining the
conditions for a shared prosperity. This materialistic
vision of prosperity has to be dismantled.
The idea of an economy whose task is to provide
caþabiliIies Ior Iourishing wiIhin ecological limiIs
offers the most credible vision to put in its place.
But this can only happen through changes that
support social behaviours and reduce the structural
incentives to unproductive status competition.
The rewards from these changes are likely to be
signiIcanI. A less maIerialisIic socieIy will be a
haþþier one. A more equal socieIy will be a less
anxious one. 6reaIer aIIenIion Io communiIy and
to participation in the life of society will reduce
the loneliness and anomie that has undermined
wellbeing in the modern economy. Enhanced
investment in public goods will provide lasting
returns to the nation’s prosperity.
92 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
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0cIober 2ûû8
1
10
Governance
for Prosperity
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94 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
Iwo sþeciIc comþonenIs oI change have been
idenIiIed. Ihe IrsI (ChaþIer 8) is Ihe need Io
develoþ a new macro·economics Ior susIainabiliIy.
Ihis new macro·economics will have Io become
more ecologically literate. It will also need to reduce
the structural reliance on consumption growth and
Ind a diIIerenI mechanism Io achieve underlying
stability.
The existing mechanism, in any case, has failed us.
A resilienI economy - caþable oI resisIing exIernal
shocks, maintaining people’s livelihoods, and living
within our ecological means – is the goal we should
be aiming for here.
The second component of change lies in shifting the
social logic oI consumerism (ChaþIer 9). Ihis change
has to proceed through the provision of real, credible
alIernaIives Ihrough which þeoþle can Iourish.
And Ihese alIernaIives musI go beyond making basic
systems of provision (in food, housing and transport,
for example) more sustainable. They must also
provide capabilities for people to participate fully in
the life of society, without recourse to unsustainable
material accumulation and unproductive status
competition.
Vaking Ihese changes may well be Ihe biggesI
challenge ever faced by human society. Inevitably it
raises the question of governance – in the broadest
sense of the word. How is a shared prosperity to be
achieved in a þluralisIic socieIy` how is Ihe inIeresI
of the individual to be balanced against the common
good` whaI are Ihe mechanisms Ior achieving Ihis
balance` Ihese are some oI Ihe quesIions raised
by Ihis challenge. SþeciIcally, oI course, such
changes raise questions about the nature and role
of government itself.
The role of government
Debates over whether we need more state or less
sIaIe have been Iercely IoughI aI Iimes and have
complex roots in history.
2
But some striking shifts
in this debate occurred as a result of the economic
recession. Ihe Inancial crisis oI 2ûû8 rewroIe Ihe
boundary between the public and the private sector
and changed þroIoundly Ihe landscaþe oI 21
st

Century politics.
ParI·naIionalisaIion oI Inancial secIor insIiIuIions was
an almost shocking turn of events, particularly from
a free market perspective in which government is
broadly seen as a disIorIion oI Ihe markeI. And yeI
there was little disagreement anywhere about the role
of the state in times of crisis. On the contrary, the only
possible response when the economy failed was for
governmenIs Io inIervene. Lven Ihe die·hards agreed
on this. ‘Finance is inherently unstable,’ acknowledged
The Economist in the early days of the crisis. ‘So the
state has to play a big role in making it safer by lending
in a crisis in return for regulation and oversight.’
3

Extending this responsibility to the task of
building a credible and robust macroeconomics
for sustainability seems entirely reasonable. It is
admittedly a more complex task than anything
Iaced in convenIional macro·economics, in þarI
because iI has Io deþarI Irom Ihe well·worn Iormula
oI laisset·Iaire consumþIion growIh as Ihe basis Ior
sIabiliIy, and in þarI because iI requires a closer
attention to key ecological variables. For these
reasons, progress will depend on engaging a wider
community of advice than conventional approaches
do. But the responsibility for taking it forwards lies
unequivocally with government.
8eyond Ihis quiIe sþeciIc resþonsibiliIy, Ihere are
vital questions about the role of government – and
the mechanisms for governance – in a much broader
sense. Where, for example, does responsibility lie
Ior Ihe oIher key Iask idenIiIed here: redressing
Ihe social logic oI consumerism` Policy·makers
are (perhaps rightly) uncomfortable with the idea
IhaI Ihey have a role in inIuencing þeoþle´s values
and aspirations. But the truth is that governments
intervene constantly in the social context, whether
they like it or not.
Arhieving a Iasting presperity reIies en previding rapabiIities fer peepIe te heurish · within
certain limits. Those limits are established not by us, but by the ecology and resources of a
hnite pIanet. unbeunded freedem te expand eur materiaI appetites just isn´t sustainabIe.
Change is essential.
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 95
A myriad diIIerenI signals are senI ouI, Ior examþle,
by the way in which education is structured, by the
importance accorded to economic indicators, by
public sector performance indicators, by procurement
policies, by the impact of planning guidelines on
þublic and social sþaces, by Ihe inIuence oI wage
þolicy on Ihe work·liIe balance, by Ihe imþacI oI
employment policy on economic mobility (and
hence on family structure and stability), by the
effect of trading standards on consumer behaviour,
by the degree of regulation of advertising and the
media, and by the support offered to community
initiatives and faith groups.
ln all Ihese arenas, þolicy shaþes and co·creaIes Ihe
social world. So the idea that it is not only legitimate
but possible for the state to intervene in changing
the social logic of consumerism is far less problematic
Ihan is oIIen þorIrayed. A criIical Iask is Io idenIiIy
(and correct) those aspects of this complex social
structure which provide perverse incentives in favour
of a materialistic individualism and undermine the
potential for a shared prosperity.
AI one level, Ihis Iask is as old as Ihe hills. lI is,
in part at least, the task of balancing individual
freedoms against the social good. It relies crucially
on being able to make prudent choices – both at
the individual and at the social level – between the
present and the future. In fact, rampant individualism
which seeks shorI·Ierm maIerial graIiIcaIion ends
up undermining prosperity – not just for society as a
whole, but at the individual level as well.
0xIord economic hisIorian Avner 0IIer addresses
exactly this problem in The Challenge of Affluence.
4

Left to our own devices, argues Offer, individual
choices tend to be irredeemably myopic. We favour
today too much over tomorrow, in ways which, to an
economist, appear entirely inexplicable under any
rational rate of discounting of the future. Economists
call this the problem of ‘hyperbolic’ discounting. It’s
not unfamiliar in itself. Offer’s unique contribution is
to suggest that this fallibility has (or has in the past
had) a social solution.
Io þrevenI ourselves Irom Irading away our long·
Ierm wellbeing Ior Ihe sake oI shorI·Ierm þleasures,
society has evolved a whole set of ‘commitment
devices´: social and insIiIuIional mechanisms which
moderate the balance of choice away from the
present and in favour of the future.
Savings accounts, marriage, norms for social
behaviour, governmenI iIselI in some sense: all
these can be regarded as commitment devices.
Vechanisms which make iI a liIIle easier Ior us Io
curtail our appetite for immediate arousal and protect
our own IuIure inIeresIs. And indeed - alIhough Ihis
is less obvious in Offer’s exposition – the interests of
affected others, including future generations.
Ihe Irouble is, as 0IIer demonsIraIes, aIIuence iIselI
is eroding and undermining these commitment
devices. The increase in family breakdown and the
decline in IrusI have already been noIed (ChaþIer 9).
Parenthood has come under attack in developed
counIries. Ihe Inancial crisis is in þarI a þroducI
oI Ihe erosion oI economic commiImenI. And Ihe
hollowing ouI oI governmenI has leII us ill·þreþared
to deal with the ‘crisis of commitment’.
5

Strikingly, Offer places a key responsibility for this
erosion on the relentless pursuit of novelty in
modern society. This dynamic has been addressed
already in sIrucIural Ierms (ChaþIer 6). NovelIy
keeps us buying more stuff. Buying more stuff
keeps the economy going. The end result is a society
‘locked in’ to consumption growth by forces outside
the control of individuals.
Physical infrastructure and social architecture
conspire against us. Lured by our evolutionary
roots, bombarded with persuasion, and seduced
by novelIy: we are like children in Ihe sweeI shoþ,
knowing IhaI sugar is bad Ior us, unable Io resisI
the temptation.
These insights are damning for the prospects
oI laisset·Iaire individualism being a suIIcienI
governance mechanism for a lasting prosperity.
Left to our own individual devices, it seems, there
is not much hope that people will spontaneously
behave susIainably. As evoluIionary biologisI kichard
Dawkins has concluded, sustainability just ‘doesn’t
come naturally’ to us.
SeIhshness and aItruism
AI Ihe same Iime iI is misIaken Io assume IhaI
human moIivaIions are all selIsh. LvoluIion doesn´I
preclude moral, social and altruistic behaviours.
On the contrary, social behaviours evolved in humans
precisely because they offer selective advantages
96 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
Io Ihe sþecies. All oI us are Iorn Io some exIenI
beIween selIshness and alIruism.
Ihe þsychologisI Shalom SchwarIt and his
colleagues have formalised this insight in terms of
underlying human values. Using a scale that has
now been IesIed in over 5û counIries, SchwarIt
suggests that our values are structured around two
disIincI Iensions wiIhin Ihe þsychological make·
up of human beings. One is the tension between
selIshness (selI·enhancemenI, in SchwarIt´s
scheme) and alIruism (selI·Iranscendence) noIed
above. The other is between openness to change
and conservation – or in other words between
novelty and the maintenance of tradition.
6

SchwarIt þrovided an evoluIionary exþlanaIion Ior
Ihese Iensions. As socieIy evolved in grouþs, þeoþle
were caught between the needs of the individual
and Ihe needs oI Ihe grouþ. And as Ihey sIruggled
for survival in sometimes hostile environments,
people were caught between the need to adapt and
to innovate and the need for stability. In other words,
both individualism and the pursuit of novelty have
played an adaptive role in our common survival. But
so have altruism and conservation or tradition.
The important point here is that each society strikes
Ihe balance beIween alIruism and selIshness (and
also between novelty and tradition) in different
places.
7
And where Ihis balance is sIruck deþends
crucially on social structure. When technologies,
inIrasIrucIures, insIiIuIions, social norms reward selI·
enhancemenI and novelIy, Ihen selIsh sensaIion·
seeking behaviours prevail over more considered,
altruistic ones. Where social structures favour
alIruism and IradiIion, selI·Iranscending behaviours
are rewarded and selIsh behaviour may even be
penalised.
8
Ihis Inding suggesIs IhaI we musI ask searching
questions about the balance of the institutions
that characterise modern society. Do they promote
comþeIiIion or cooþeraIion` 0o Ihey reward selI·
serving behaviour or þeoþle who sacriIce Iheir own
gain Io serve oIhers` whaI signals do governmenI,
schools, the media, religious and community
insIiIuIions send ouI Io þeoþle` which behaviours are
supported by public investments and infrastructures
and which are discouraged`
Increasingly, it seems, the institutions of consumer
society are designed to favour a particularly
materialistic individualism and to encourage the
relentless pursuit of consumer novelty.
6overnmenI þlays a crucial role in Ihis, þarIly
because it bears a responsibility for the stability of
Ihe macro·economy. Ihe individualisIic þursuiI oI
novelty is a key requirement in consumption growth
and economic stability depends on consumption
growth. Little surprise then that the drift of policy is
in these directions. The erosion of commitment, in
Offer’s terms, is a structural requirement for growth
as well as a sIrucIural consequence oI aIIuence.
Varieties of capitalism
This drift has not been uniform across all nations.
Harvard historian Peter Hall and Oxford economist
David Soskice have made an extensive study of the
different ‘varieties of capitalism’. They distinguish
two main types of capitalism across the advanced
naIions. Liberal markeI economies (sþeciIcally Ihe
uK, Ihe uSA, Canada and AusIralia) led Ihe march
towards competition and deregulation, particularly
during Ihe 198ûs and 199ûs. CoordinaIed markeI
economies (such as |aþan, 6ermany, AusIria and
the Scandinavian countries) depend more heavily
on sIraIegic inIeracIions beIween Irms - raIher Ihan
competition – to coordinate economic behaviour.
9

There are some clear differences between the
different kinds of economy. For example, inequality
tends to be higher in liberalised market economies
Ihan in coordinaIed markeI economies. And iI is
mainly in the liberalised market economies that
savings rates have fallen so dramatically in recent
years and consumer debI has soared. ln 6ermany,
the government has had the opposite problem
over Ihe lasI decade, Inding iI hard Io þersuade iIs
ciIitens Io save less and consume more.
Some other interesting differences emerge. Figure
22 shows Ihe indexed unemþloymenI raIes during
Ihe run·uþ Io Ihe economic crisis in Iwo liberalised
markeI economies (Ihe uK and Ihe uS) and Iwo
coordinaIed markeI economies (6ermany and
Denmark). Though starting from a much higher
base, unemþloymenI in 6ermany Iell by almosI
2û% over Ihe þeriod Irom mid·2ûû7 Io Ihe end oI
2ûû8.

In Denmark, where unemployment was
already low, Ihe Iall was even greaIer (35%) over
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 97
Ihe þeriod. ln Ihe uK, by conIrasI, unemþloymenI
rose by 11% in Ihe lasI halI oI 2ûû8, while Ihe uS
saw unemployment increase by over a third since
|uly 2ûû7.
Recent work suggests that the different varieties
of capitalism also perform differently in relation to
ecological impacts, opportunities for skills training
and various aspects of social capital.
12
Iim Kasser
and his colleagues show that people in liberalised
market economies tend to have higher per capita
carbon emissions, higher infant mortality, higher
teenage pregnancies and a greater percentage of
people reporting that they ‘feel like an outsider’.
13

NoI all Ihese Indings are reþlicaIed consisIenIly across
all liberalised market economies and all coordinated
market economies.
14
Indeed there is some suggestion
that the distinctions between liberalised and coordinated
market economies are not as profound as they were
Ihrough Ihe 198ûs and 199ûs when hall and Soskice
carried out their analysis.
lronically, as we saw in ChaþIer 2, 6ermany suIIered
more during Ihe early monIhs oI Ihe Inancial crisis
from building its economy on exports, than the
uK did Irom building iIs economy on domesIic
consumption. Both economies, ultimately, were
predicated on a materialistic consumerism fuelled
by debI. And iI´s Ioo early Io Iell which one will
emerge stronger in the end. In a recent article for the
Huffington Post, PeIer hall argues IhaI 6ermany´s
domestic prudence and strong manufacturing base
will make it more resilient in long run.
15

But the truth is that none of the varieties of capitalism
is immune from the increasingly global recession.
All oI Ihem are Io a greaIer or lesser exIenI bound
up in the pursuit of economic growth. Differences
in social and economic organisation are differences
in degree rather than fundamental differences in
kind. And a key elemenI in Ihe þoliIical economy
of all capitalist nations appears to be the role of
government in protecting and stimulating economic
growth.
1he renhirted state
6overnance mechanisms emerged in human socieIy
to protect social behaviours.
16
The principal role of
governmenI is Io ensure IhaI long·Ierm þublic goods
are noI undermined by shorI·Ierm þrivaIe inIeresIs.
It seems ironic then, that governments across
the world – and in particular in the liberal market
economies – have been so active in championing
the pursuit of individual freedoms, often elevating
consumer sovereignty above social goals and
Figure 22: Unemployment Rates in Four OECD Countries 2007-8
10
14
8
6
4
2
0
U
n
e
m
p
l
o
y
m
e
n
t

r
a
t
e

%
Sep 08 Jul 08 May 08 Mar 08 Jan 08 Nov 07 Sept 07 Jul 07 May 07 Mar 07 Jan 07
12
Nov 08
Germany
Denmark
UK
USA
Figure 22 Unemployment Rates in Four OECD Countries 2007–8
11
98 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
actively encouraging the expansion of the market
into different areas of people’s lives.
It is particularly odd to see this tendency going hand
in hand with the desire to protect social and ecological
goals. lI´s noIable Ior examþle IhaI Ihe uK, one oI
Ihe mosI Iercely liberal markeI economies, has also
been a vociferous champion of sustainability, social
jusIice and climaIe change þolicy. Ihe uK´s 2ûû5
Sustainable Development Strategy received wide
sþread inIernaIional þraise. lIs 2ûû8 ClimaIe Change
AcI is a world·leading þiece oI legislaIion.
Ihere is a real sense here oI þolicy·makers sIruggling
with competing goals. On the one hand government
is bound to the pursuit of economic growth. On the
oIher, iI Inds iIselI having Io inIervene Io þroIecI Ihe
common good from the incursions of the market.
Ihe sIaIe iIselI aþþears deeþly conIicIed, sIriving
on the one hand to encourage consumer freedoms
that lead to growth and on the other to protect
social goods and defend ecological limits.
17
Ihe reason Ior Ihis conIicI is clear once we recognise
Ihe criIical role IhaI growIh þlays in macro·economic
stability. With a vital responsibility to protect jobs
and to ensure stability, the state is bound (under
current conditions) to prioritise economic growth.
And iI is locked inIo Ihis Iask, even as iI seeks Io
promote sustainability and the common good.
6overnmenI iIselI, in oIher words, is caughI in Ihe
dilemma of growth.
Overcoming this dilemma is absolutely vital. The
lessons from this study make it clear that without
strong leadership, change will be impossible.
Individuals are too exposed to social signals and
status competition. Businesses operate under market
condiIions. A IransiIion Irom narrow selI·inIeresI
to social behaviours, or from relentless novelty to
a considered conservation of things that matter,
can only proceed through changes in underlying
structure. Changes that strengthen commitment
and encourage social behaviour. And Ihese changes
require governments to act.
The trouble is that the thrust of policy over the
last half century – particularly in the liberalised
market economies – has been going in almost
exacIly Ihe oþþosiIe direcIion. 6overnmenIs have
systematically promoted materialistic individualism
and encouraged the pursuit of consumer novelty.
This trend has been perpetrated, mostly deliberately,
under the assumption that this form of consumerism
serves economic growth, protects jobs and maintains
sIabiliIy. And as a resulI, Ihe sIaIe has become
caught up in a belief that growth should trump all
other policy goals.
But this narrow pursuit of growth represents a
horrible distortion of the common good and of our
underlying human values. It also undermines the
legiIimaIe role oI governmenI iIselI. AI Ihe end oI
the day, the state is society’s commitment device,
par excellence, and the principal agent in protecting
our shared þrosþeriIy. A new vision oI governance
that embraces this role is critical.
Of course, such a vision requires a democratic
mandate. ‘Political change comes from leadership
and þoþular mobilisaIion. And you need boIh oI
Ihem,´ argued uK ClimaIe Change SecreIary Ld
Viliband in 0ecember 2ûû8.
18
AuIhoriIarianism is
damaging to human wellbeing in its own right.
19

And in any case iI is unlikely Io succeed in modern
þluralisIic socieIies. 6overnance Ior þrosþeriIy musI
engage acIively wiIh ciIitens boIh in esIablishing
the mandate and delivering the change.
But this doesn’t absolve government from its own
vital responsibility in ensuring a lasting prosperity.
The role of government is to provide the capabilities
Ior iIs ciIitens Io Iourish - wiIhin ecological limiIs.
The analysis here suggests that, at this point in
time, that responsibility entails shifting the balance
of existing institutions and structures away from
materialistic individualism and providing instead
real opportunities for people to pursue intrinsic
goals of family, friendship and community.
unIorIunaIely, Ior as long as macro·economic
stability depends on economic growth, there will
be a tendency for governments to support social
sIrucIures IhaI reinIorce maIerialisIic, novelIy·
seeking individualism.
But it doesn’t have to be like this. Freeing the
macro·economy Irom Ihe sIrucIural requiremenI
for consumption growth will simultaneously free
government to play its proper role in delivering
social and environmental goods and protecting
long·Ierm inIeresIs. Ihe same goal IhaI was
idenIiIed as essenIial Ior a macro·economics
of sustainability is essential to a governance for
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 99
þrosþeriIy. Ihe conIicIed sIaIe is iIselI a casualIy oI
an unsusIainable macroeconomics. And in rescuing
Ihe macro·economy iI has a chance oI rescuing
itself.
In summary, it emerges that governments must
now engage urgenIly in several inIerrelaIed Iasks:
1) develoþ and aþþly a robusI macro·economics
for sustainability
2) redress the damaging and unsustainable
social logic of consumerism
3) establish and impose meaningful resource
and environmental limits on economic
activity.
The precise policy directions implied by these goals
must ultimately be a matter for public discourse and
it lies beyond the scope of this study to address them
in deIail. 8uI in Ihe Inal chaþIer, some þoIenIial
policy directions are suggested under each of these
themes.
100 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
Barack Obama
February 2008
1
11
Steps towards a
Sustainable Economy
“ In the end, this economic agenda won’t just require new money.
It will require a new spirit of cooperation… We will be called
XSRQWRWDNHSDUWLQDVKDUHGVDFULßFHDQGVKDUHGSURVSHULW\r
102 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
This extraordinary ramping up of global economic
activity is without historical precedent. It appears
Io be IoIally aI odds wiIh our scienIiIc knowledge
oI Ihe IniIe resource base and Ihe Iragile ecology
on which we deþend Ior survival. And iI has
already been accompanied by the degradation of
an esIimaIed 6û% oI Ihe world´s ecosysIems.
For the most part, we tend to avoid the stark
reality of these numbers. The default assumption is
IhaI - Inancial crises aside - growIh will conIinue
indeIniIely. NoI jusI Ior Ihe þooresI counIries,
where a better quality of life is essential, but even
for the richest nations where material wealth adds
little further to people’s quality of life and may even
threaten the foundations of our wellbeing.
The reasons for this collective blindness are easy
enough Io Ind. Ihe modern economy is sIrucIurally
reliant on economic growth for its stability.
When growth falters, as it has done recently,
politicians panic. Businesses struggle to survive.
People lose their jobs and sometimes their homes.
A sþiral oI recession looms. quesIioning growIh
is deemed to be the act of lunatics, idealists and
revolutionaries.
In short, society is faced with a profound dilemma.
To resist growth is to risk economic and social collapse.
To pursue it is to endanger the ecosystems on which
we deþend Ior long·Ierm survival.
For the most part, this dilemma goes unrecognised in
mainstream policy or in public debate. When reality
begins to impinge on the collective consciousness,
the best suggestion to hand is that we can somehow
‘decouple’ growth from its material impacts.
Never mind IhaI decouþling isn´I haþþening. Never
mind that no such economy has ever existed.
Never mind IhaI all our insIiIuIions and incenIive
structures continually point in the opposite
direction. The dilemma, once recognised, looms so
dangerously over our future that we are desperate
to believe in miracles. Technology will save us.
Capitalism is good at technology. So let’s just keep
the show on the road and hope for the best.
We can’t entirely dismiss the potential for
technological breakthroughs. In fact we already
have at our disposal a range of technologies that
could begin to deliver effective change. But the idea
that these will emerge spontaneously by giving free
reign to the competitive market is patently false.
This delusional strategy has reached its limits. We
stand in urgent need of a clearer vision, more honest
þolicy·making, someIhing more robusI in Ihe way
of a strategy with which to confront the dilemma
of growth.
The starting place must be to confront the structures
that keep us in damaging denial. The analysis in this
study suggests that nature and structure conspire
together here. The endless creativity of capitalism
and our own relentless striving for social status have
locked us inIo an iron cage oI consumerism. AIIuence
itself has betrayed us.
AIIuence breeds - and indeed relies on - Ihe
continual production and consumption of consumer
novelty. But relentless novelty seeds social anxiety
and weakens our abiliIy Io þroIecI long·Ierm social
goals. In doing so it ends up undermining our own
wellbeing and IhaI oI oIhers. And somewhere along
the way, we lose the sense of shared prosperity that
we soughI in Ihe IrsI þlace.
For at the end of the day, prosperity goes beyond
IeeIing maIerial þleasures. lI Iranscends maIerial
concerns. It resides in the quality of our lives and in
the health and happiness of our families. It is present
in the strength of our relationships and our trust in
the community. It is evidenced by our satisfaction at
work and our sense of shared meaning and purpose.
It hangs on our potential to participate fully in the
life of society. Prosperity consists in our ability to
Iourish as human beings - wiIhin Ihe ecological
limiIs oI a IniIe þlaneI.
fer the Iast hve derades the pursuit ef grewth has been the singIe mest impertant peIiry
geaI arress the werId. 1he gIebaI erenemy is aImest hve times the size it was haIf a rentury
age. If it rentinues te grew at the same rate the erenemy wiII be 80 times that size by the
year 2100.
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 103
Delivering these goals is not an entirely unfamiliar
Iask Io þolicy·makers. 6overnmenIs care abouI
healIh þrovision. And Ihe recenI Iocus on wellbeing
has extended that concern to psychological health.
AI Ihe same Iime Ihese goals Ioo oIIen Iake second
place to economic growth. The role of the state
is too narrowly framed by a misguided vision of
unbounded consumer Ireedoms. 6overnance iIselI
stands in urgent need of renewal.
But the current economic crisis presents a unique
opportunity to invest in change. To sweep away
Ihe shorI·Ierm Ihinking IhaI has þlagued socieIy Ior
decades. Io reþlace iI wiIh considered þolicy·making
capable of addressing the enormous challenge of
delivering a lasting prosperity.
The policy demands of this task are considerable.
Specifying them with any degree of precision
is beyond the scope of this or any other single
document. First and foremost, they call for a
concerted and committed effort on the part of
government to establish a detailed set of viable and
effective policies for a sustainable economy. This is
a challenge that governments can no longer afford
to ignore. Beyond that need, it is possible to identify
a range of broad policy recommendations on which
the transition to a sustainable economy could be
built.
In the following paragraphs, these recommendations
are grouþed inIo Ihree main Ihemes IhaI Iow
direcIly Irom Ihe analysis in Ihis reþorI. SþeciIcally
Ihese Ihemes are:
% 8uilding a macro·economics Ior susIainabiliIy
% ProIecIing caþabiliIies Ior social Iourishing,
and
% Respecting ecological limits
Inevitably, there is some overlap between these
groupings. Undoubtedly there are things missing
Irom Ihe range oI þolicies suggesIed here. NoI all oI
Ihem can be achieved immediaIely. NoI all oI Ihem
can be achieved unilaterally. But taken together they
offer the foundation from which to build meaningful
and lasting change.
Building a Sustainable Macro-Economy
A macro·economy þredicaIed on conIinual exþansion oI debI·driven maIerialisIic consumþIion
is unsusIainable ecologically, þroblemaIic socially, and unsIable economically (ChaþIers 2, 5, 6).
Ihe Iime is now riþe Io develoþ a new macro·economics Ior susIainabiliIy (ChaþIers 7 8 8) IhaI
does not rely for its stability on relentless growth and expanding material throughput. This theme
includes Iour sþeciIc þolicy areas Io helþ achieve Ihis goal.
resource or emission caþs, and 3) evaluaIing Ihe
impact of changes in natural assets and ecosystem
functioning on economic stability.
Examples/precedents: Canadian Low6row model,
climaIe·economy models (cI. lPCC, SIern keview),
Cambridge LconomeIrics´ V0V·L3 model, Ihe Lu´s
ILL8 sIudy, Ihe Villennium LcosysIem AssessmenI.
2
1
Developing macro-economic capability
There is an urgent need to develop the capabilities
required Io build a new macro·economics Ior
sustainability. This will include developing tools to
exþlore diIIerenI conIguraIions oI Ihe key macro·
economic variables and to map the interactions
between these and ecological variables. Particular
challenges include 1) exþloring Ihe invesImenI
demands associaIed wiIh a susIainable economy,
2) invesIigaIing Ihe economic imþlicaIions oI sIricI
12 STEPS TO A SUSTAINABLE ECONOMY
A
104 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
2
Investing in jebs, assets and infrastrurtures
Investment in jobs, assets and infrastructures
emerges as a key component – not just of economic
recovery – but of a new macroeconomics for
susIainabiliIy. IargeIs Ior Ihis include: þublic secIor
jobs in building and mainIaining þublic asseIs,
investments in renewable energy, public transport
inIrasIrucIure, and þublic sþaces, reIroIIIing
Ihe exisIing building sIock wiIh energy· and
carbon·saving measures, invesIing in ecosysIem
mainIenance and þroIecIion, and þroviding Iscal
support and training for green businesses, clean
Iechnologies and resource eIIciency.
Examples/precedents: Ihe American kecovery and
keinvesImenI AcI (AkkA), uK Pre·8udgeI keþorI
´green sIimulus´, uNLP´s global 6reen New 0eal,
0euIsche 8ank ´6reen lnvesImenI´, S0C SusIainable
New 0eal.
3
Inrreasing hnanriaI and hsraI prudenre
0ebI·driven maIerialisIic consumþIion has þroþþed
up economic growth for over a decade. But
mainIaining iI has desIabilised Ihe macro·economy
and contributed to the global economic crisis.
A new era oI Inancial and Iscal þrudence needs Io
be ushered in Io: reIorm Ihe regulaIion oI naIional
and inIernaIional Inancial markeIs, increase þublic
conIrol oI Ihe money suþþly, incenIivise domesIic
savings, for example through secure (green) national
or communiIy·based bonds, ouIlaw unscruþulous
and desIabilising markeI þracIices (such as shorI·
selling), and þrovide greaIer þroIecIion againsI
consumer debt.
Examples/precedents: 62û sIaIemenI on regulaIion
oI Inance and currency markeIs (Nov 2ûû8),
Iobin Iax, 0bama AdminisIraIion þlan Io þroIecI
borrowers.
4
Improving macro-economic accounting
The shortfalls of conventional output or
consumþIion·based measures oI Ihe 60P are now
well·esIablished. Ihere is an urgenI need Io develoþ
more robust measures of economic wellbeing that
correct for the most obvious drawbacks in using
Ihe 60P. Ihese new measures will need: Io accounI
more sysIemaIically Ior changes in Ihe asseI base,
to incorporate welfare losses from inequality in the
disIribuIion oI incomes, Io adjusI Ior Ihe deþleIion
of material resources and other forms of natural
capital, to account for the social costs of carbon
emissions and other external environmental and
social cosIs, and Io correcI Ior þosiIional consumþIion
and defensive expenditures.
Examples/precedents: longstanding critiques in the
economic liIeraIure, Ihe world 8ank´s AdjusIed NeI
Savings measure, k0A þolicies on kegional·lSLw,
Sen/SIigliIt recommendaIions Irom Ihe |rench
Commission on Ihe VeasuremenI oI Lconomic
Performance and Social Progress.
B
Protecting Capabilities for Flourishing
The social logic that locks people into materialistic consumerism as the basis for participating in
the life of society is extremely powerful, but detrimental ecologically and psychologically (Chapters
4·6). An essenIial þrerequisiIe Ior a lasIing þrosþeriIy is Io Iree þeoþle Irom Ihis damaging dynamic
and þrovide oþþorIuniIies Ior susIainable and IulIlling lives (ChaþIer 9). we oIIer Ive þolicy areas
to help achieve this task.
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 105
5
Sharing the work and improving the
work-life balance
3
ln a declining or non·increasing economy, working
Iime þolicies are essenIial Ior Iwo main reasons: 1)
Io achieve macro·economic sIabiliIy, 2) Io þroIecI
people’s jobs and livelihoods. But in addition,
reduced working hours can increase Iourishing by
imþroving Ihe work·liIe balance. SþeciIc þolicies
need Io include: reducIions in working hours,
greaIer choice Ior emþloyees on working Iime,
measures Io combaI discriminaIion againsI þarI·
time work as regards grading, promotion, training,
securiIy oI emþloymenI, raIe oI þay and so on,
beIIer incenIives Io emþloyees (and IexibiliIy Ior
employers) for family time, parental leave, and
sabbatical breaks.
Examples/precedents: |rench, 6erman and 0anish
work·Iime þolicies, IuC 6reen and 0ecenI work
seminar.
4


6
Tackling systemic inequality
Systemic income inequalities drive positional
consumption, increase anxiety, undermine social
capital and expose lower income households to
higher morbidity and lower life satisfaction. Too
liIIle has been done Io reverse Ihe long·Ierm
trend towards income inequality. But redistributive
mechanisms and þolicies are well·esIablished
and could include: revised income Iax sIrucIures,
minimum and maximum income levels, imþroved
access Io good qualiIy educaIion, anIi·discriminaIion
legislaIion, imþlemenIing anIi·crime measures and
imþroving Ihe local environmenI in deþrived areas,
addressing the impact of immigration on urban and
rural poverty.
Examples/precedents: proposals for higher income
Iax on higher raIe earners in P8k û8, resIricIions
on bonuses in Ihe Inancial secIor, 0bama ´shared
þrosþeriIy´ þlan, hisIory oI redisIribuIive IaxaIion, in
many countries.
7
Measuring prosperity
The suggestion that prosperity is not adequately
captured by conventional measures of economic
output or consumption leaves open the need to
deIne an aþþroþriaIe measuremenI Iramework Ior
a lasIing þrosþeriIy. SþeciIcally Ihis would enIail Ihe
assessmenI oI þeoþle´s caþabiliIies Ior Iourishing in
different sections of the population and across the
nation as a whole. Developing national accounts of
wellbeing (or oI Iourishing) could þroceed Ihrough
the measurement of outcome variables such as
healthy life expectancy, educational participation,
social wellbeing, trust in the community, social
caþiIal and so on. A IurIher requiremenI here is Io
adjust existing economic measurement frameworks
to account systematically for ecological and social
factors.
Examples/precedents: 0eIra S0 indicaIor No 68,
0uIch caþabiliIies index, neI´s naIional wellbeing
accounIs, Ihe 6overnmenI Lconomic Service þrojecI
on susIainabiliIy and 6reen 8ook.
8
Strengthening human and social capital
Understanding that prosperity consists in part in
our capabilities to participate in the life of society
demands that attention is paid to the underlying
human and social resources required for this task.
Creating resilient social communities is particularly
imþorIanI in Ihe Iace oI economic shocks. SþeciIc
þolicies are needed Io: creaIe and þroIecI shared
þublic sþaces, sIrengIhen communiIy·based
susIainabiliIy iniIiaIives, reduce geograþhical
labour mobiliIy, þrovide Iraining Ior green jobs,
oIIer beIIer access Io liIelong learning and skills,
place more responsibility for planning in the hands
oI local communiIies, and þroIecI þublic service
broadcasting, museum funding, public libraries,
parks and green spaces.
Examples/precedents: CabineI 0IIce sIudy on social
caþiIal, |oresighI sIudy on wellbeing and inIellecIual
caþiIal, IransiIion Iown movemenI, LnvironmenIal
AcIion |und, Young |oundaIion´s Local wellbeing
ProjecI, Ihe ´CaþiIal 6rowIh´ þrojecI.
106 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
9
Reversing the culture of consumerism
The culture of consumerism has developed in part
aI leasI as a means oI þroIecIing consumþIion·
driven economic growth. But it has had damaging
psychological and social impacts on people’s
wellbeing. There is a need systematically to
dismantle incentives towards materialistic
consumption and unproductive status competition.
Ihis recommendaIion will require: sIronger
regulaIion in relaIion Io Ihe commercial media,
enhanced suþþorI Ior þublic secIor broadcasIing,
more effective trading standards and stronger
consumer protection – particularly on questions
of product durability, sustainability and fair trade.
0Iher measures mighI include: banning adverIising
Io children, Ihe esIablishmenI oI commercial·Iree
tones and Iimes, and a Iunded righI oI reþly Io
advertisers’ claims.
Examples/precedents: Scandinavian advertising
þolicies, þublic IransþorI ´quieI tones´, 8ratil´s Lei
Cuidade Limpa.
C
Respecting Ecological Limits
Ihe maIerial þroIigacy oI consumer socieIy is deþleIing key naIural resources and þlacing
unsusIainable burdens on Ihe þlaneI´s ecosysIems (ChaþIer 5). LsIablishing clear resource and
environmenIal limiIs and inIegraIing Ihese limiIs inIo boIh economic IuncIioning (ChaþIer 8 and
Aþþendix 2) and social IuncIioning (ChaþIer 9) is essenIial. Ihe Iollowing Ihree þolicy suggesIions
contribute to that task.
10
Impesing rIearIy dehned reseurre/emissiens raps
A lasIing þrosþeriIy requires a much closer aIIenIion Io
the ecological limits of economic activity. Identifying
and imposing strict resource and emission caps is
vital for a sustainable economy. The contraction
and convergence model develoþed Ior climaIe·
related emissions should be applied more generally.
Declining caps on throughput should be established
Ior all non·renewable resources. SusIainable yields
should be idenIiIed Ior renewable resources. LimiIs
should be established for per capita emissions and
wastes. Effective mechanisms for imposing caps on
Ihese maIerial Iows should be seI in þlace. 0nce
established, these limits need to be built into the
macro·economic Irameworks develoþed in 1 above.
Example/precedent: uK climaIe change budgeIs, Ihe
Suþþlier 0bligaIion, raIioning - þosI·war and Cuba,
conIracIion 8 convergence þroþosals, KyoIo and þosI·
KyoIo negoIiaIions, conceþI oI ecological sþace.
11
Fiscal Reform for Sustainability
The argument for an ecological tax reform – a shift
in the burden of taxation from economic goods (e.g.
incomes) to ecological bads (e.g. pollution) – has
been broadly accepted for at least a decade and
has been implemented in varying degrees across
Europe. But progress towards this goal has been
þainIully slow. ln Ihe uK Ihe þroþorIion oI IaxaIion
Irom green Iaxes is now lower Ihan iI was in 1997.
There’s an urgent need to achieve an order of
magniIude sIeþ·change in Ihe sIrucIure oI IaxaIion.
A susIained eIIorI by governmenI is now required
to design appropriate mechanisms for shifting the
burden of taxation from incomes onto resources and
emissions.
Example/precedent: uK 6overnmenI 1997 SIaIemenI
oI lnIenI on LnvironmenIal IaxaIion, 0anish, 6erman
exþerience in Lcological Iax keIorms, Ihe uK 6reen
|iscal Commission (reþorIing 2ûû9).
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 107
12
Promoting Technology Transfer and Ecosystem
Protection
A key moIivaIion Ior redeIning Ihe basis oI
prosperity in advanced economies is to make room
Ior much·needed growIh in þoorer naIions. 8uI as
these economies expand there will also be an urgent
need to ensure that development is sustainable and
remains within ecological limits. International policy
will be required to establish a global technology fund
Io invesI in renewable energy, energy eIIciency,
carbon reduction, and the protection of ‘carbon
sinks’ (e.g. forests) and biodiversity in developing
counIries. Ihis could be Iunded Ihrough a carbon/
resource levy (payable by importers) on imports
from developing countries, or through a Tobin tax
on international currency transfers.
Example/precedent: 6lobal LnvironmenIal |aciliIy,
Clean 0eveloþmenI Vechanism, 0eveloþmenI Aid
IargeIs, Iunding þrovisions oI Ihe uN 8iodiversiIy
Convention.
ln summary, Ihese 12 sIeþs oIIer Ihe IoundaIions
for a comprehensive policy programme to make the
transition to a sustainable economy. There is a unique
opportunity here for government to demonstrate
economic leadership and champion international
action on sustainability. But it’s also essential to
develoþ Inancial and ecological þrudence aI home.
And we musI also begin Io redress Ihe þerverse
incentives and damaging social logic that lock us into
unproductive status competition and materialistic
consumerism.
Above all, Ihere is an urgenI need Io develoþ a
new ecologically·liIeraIe macro·economics caþable
of offering meaningful guidance for a lasting
þrosþeriIy: a þrosþeriIy IhaI Ior now aI leasI will
have Io do wiIhouI growIh, and may evenIually be
able to replace it altogether.
108 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
Prosperity without Growth? represents the
culminaIion oI an exIensive inquiry by Ihe uK
Sustainable Development Commission into the
relationship between sustainability and economic
growIh. IhaI inquiry was launched in 2ûû3,
when the Commission published its landmark
report – Redefining Prosperity – which challenged
6overnmenI ´IundamenIally Io reIhink Ihe
dominance of economic growth as the driving force
in the modern political economy, and to be far
more rigorous in distinguishing between the kind
of economic growth that is compatible with the
transition to a genuinely sustainable society and the
kind that absolutely isn’t’.
1

That earlier report summarised evidence of a
´mismaIch´ beIween economic growIh, environ·
mental sustainability and human wellbeing, and
called on politicians, policy experts, commentators,
business þeoþle, religious leaders and N60s Io ´þuI
Ihese issues on Iheir musI·geI·Io·griþs·wiIh agenda,
rather than defer them endlessly as tomorrow’s
issues´. Ihe Commission iIselI kick·sIarIed IhaI
process with a series of stakeholder workshops
(held during Ihe laIIer þarI oI 2ûû3) Io discuss Ihe
reþorI´s Indings.
0uring 2ûû4 and early 2ûû5, S0C worked closely
wiIh governmenI Io renew Ihe uK SusIainable
Development Strategy. In particular, the Commission
itself led the engagement process that resulted in
Ihe Ive SusIainable 0eveloþmenI ´þrinciþles´. A key
element in these principles is the recognition that
– rather than being an end in itself – a ‘sustainable
economy’ should be regarded as the means to
reaching the more fundamental goal of a ‘strong,
healthy and just society’ that is ‘living within
environmental limits’.
2

Following the launch of the new Strategy,
Ihe Commission helþed 6overnmenI meeI iIs
commitment in Securing the Future to explore the
concept of wellbeing and develop new wellbeing
indicaIors Ior Ihe uK. ln þarIicular, S0C convened a
web·based consulIaIion involving several hundred
respondents to explore people’s perceptions of
the relationship between wellbeing and economic
progress.
3

A key Inding Irom Ihe consulIaIion was IhaI Ihe
conventional measure of economic output – the
6ross 0omesIic ProducI (60P) - is widely regarded
as an inadequate measure of sustainable wellbeing,
and that there is a need to ‘open out political
space’ within which to address the shortcomings of
conventional approaches to prosperity.
In the spirit of ‘opening out space’, SDC launched a
new þrogramme oI work on þrosþeriIy during 2ûû7.
The programme involved a series of workshops –
held beIween November 2ûû7 and Aþril 2ûû8. Ihe
workshops entailed intensive discussions based
around inviIed ´Ihink·þieces´ on diIIerenI asþecIs
oI þrosþeriIy Irom senior academics, þolicy·makers,
business and N60s. Ihe essays and Ihe workshoþs
were organised around four related themes.
% Visions of Prosperity: idenIiIed a varieIy oI
different perspectives (historical, economic,
psychological, religious) on the meaning and
interpretation of prosperity
% Economy ‘Lite’: examined inIernaIional
evidence concerning the feasibility of
‘decoupling’ economic progress from material
throughput and environmental impact
% Confronting Structure: addressed the
structural drivers associated with continued
economic growth and explored the
impediments to a ‘stationary state economy’
% Living Well: exþlored Ihe links beIween
prosperity, economic progress and the
recent surge of policy and media interest in
happiness and wellbeing.
It is intended to publish the seminar contributions as
an edited collection.
4
In the meantime, draft versions
of these papers can be found on the SDC website
aI: www.sd·commission.org.uk/þages/redeIning·
prosperity.html. Together with ‘background’ reports
prepared by SDC staff (and interns) and the extensive
literature on growth and sustainability, these essays
provide a part of the ‘evidence base’ from which
this study has drawn.
Appendix 1
The SDC Redefining Prosperity Project
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 109
However, this report is not intended to be a
commentary on the Redefining Prosperity workshops.
Nor can iI really do jusIice Io Ihe wealIh oI inþuI and
advice that we received from those who attended
the workshops and contributed thinkpieces to them.
Rather, Prosperity without Growth? aims to convey
a coherent position on questions of sustainability
and economic growIh, and Io oIIer some clear
recommendaIions Io þolicy·makers sIruggling Io Iake
concrete steps towards a sustainable economy.
110 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
This annex addresses the broad goal of developing
a macro·economics Ior susIainabiliIy (ChaþIer
8). LxþliciIly, iI seIs ouI some oI Ihe IeaIures oI a
þoIenIial macro·economic simulaIion model Ior Ihe
uK IhaI would be caþable oI IesIing Ihe relaIionshiþ
between the economy and the demands of
susIainabiliIy. SþeciIc aims oI such a model would
be:
% Io IesI Ihe sIabiliIy oI diIIerenI macro·
economies under exogenously deIned carbon
emission and energy resource constraints
% Io exþlore Ihe þoIenIial Ior macro·economies
with high investment to consumption ratios
% Io exþlore Ihe þoIenIial Ior macro·economies
with high public sector expenditure and
investment
% Io exþlore Ihe sIabiliIy oI macro·economies
with low or no consumption growth
% Io exþlore Ihe sIabiliIy oI macro·economies
with low or no aggregate demand growth.
Ihe raIionale Ior exþloring diIIerenI invesImenI·Io·
consumþIion raIios and diIIerenI þublic·Io·þrivaIe
raIios Iollows Irom Ihe discussion in ChaþIer 8. ln Ihe
IrsI case, iI is assumed IhaI changes in invesImenI
structure are a prerequisite for sustainability. In
particular, there will be a need to shift investment
substantially towards resource productivity, energy
eIIciency, and low carbon (e.g. renewable)
technologies. Secondly, some of this investment
may need to be led by the public sector – because of
the nature of the required projects. This requirement
is discussed in more detail below.
Model Development
A simþle aþþroach Io develoþing a macro·economic
simulaIion Ior Ihe uK economy would be Io Iake
a broadly Keynesian model in which an aggregaIe
demand (AD) IuncIion oI Ihe Iorm:
1) AD Ł C + G + I + X
¯

(where C - þrivaIe consumþIion, G - governmenI
expenditure, I - invesImenI and X
¯
- neI exþorIs) is
coupled with some form of production function. The
simplest (and commonest) such production function
is a Iwo·IacIor Cobb·0ouglas IuncIion oI Ihe Iorm:
2) Y Ł Y (K,L) = a.K
Į
.L
(1·Į

where K is capital, L is labour, a is an eIIciency IacIor
and û < Į < 1 . Ihe IundamenIal macro·economic
idenIiIy is Ihen given by Ihe equaIion:
1

3) Y (K,L) = C + G + I + X
¯

This form of production function has been subject to
Iwo main criIicisms by ecological economisIs: IrsI,
that it includes no explicit reference to material
resources, and second, IhaI iI assumes þerIecI
substitutability between factors. For these reasons,
we may want to adopt a production function that has
explicit reference to (say) energy resources (E):
4) Y Ł Y (K,E,L)

where the energy variable E Ł E (F,R) accounts
separately for fossil resources F and renewable
resources R, and the level of renewable resources
R in any given year is a function of investment I
R
in
renewables capacity.
5) R
t
Ł R
t
(R
t–1
,I
R
t–1
)
We may also want to use a production function
where the elasticity of substitution is constant
buI less Ihan 1. Ihe general Iorm oI Ihree IacIor
constant elasticity of substitution (CES) production
IuncIion is given by:
6) Y Ł a.(ĮK
P
+

ȕL
ȡ
+

ȖE
ȡ
)
1/ȡ

where a is an eIIciency IacIor, Į +

ȕ + Ȗ = 1

and ȡ = (s – 1)/s where s is the elasticity
of substitution.
Finally, we might want the production function
to be able to ‘pick out’ improvements in resource
productivity, separately from total factor productivity.
Our initial requirements for a suitable production
IuncIion are IhereIore as Iollows:
% includes explicit account of energy resources
% allows for incomplete substitutability
between factors
Appendix 2
Towards a Sustainable Macro-Economy
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 111
% accounts for resource productivity
improvements.
AddiIionally, we are likely Io wanI our model Io
reIecI Ihe more deIailed accounI oI invesImenI
structure that lies at the heart of our exploration
of alternative macroeconomic structures. In fact,
this feature of our model could be regarded as the
single most important innovation over conventional
macro·economic models and is worIh seIIing ouI in
more detail here.
SþeciIcally, we wanI Io disIinguish beIween diIIerenI
Iorms oI invesImenI in Iwo disIincI ´dimensions´: 1)
the target Ior invesImenI and 2) Ihe conditions of
investment.
Firstly, we are likely to want to identify different
technological targets for investment. For instance,
we might want to separate investment dedicated
to reducing the demand for resources from
conventional business investments aimed at the
recapitalisation of productive capacity. Energy
demand·reducing invesImenIs Ihemselves could be
of two main types, some devoted to improvements
in energy eIIciency, some devoIed Io subsIiIuIion oI
renewables (say) Ior Iossil·Iuelled Iechnologies. we
may also want to consider investments dedicated
Io imþroving ecosysIem IuncIioning, or invesImenIs
targeted at climate adaptation.
Our second ‘dimension’ of investment structure
follows on from this consideration of investment
demands in diIIerenI caIegories. SþeciIcally, we
need to identify different conditions of investment.
For example, investment focused on technological
eIIciency mighI well be viewed sIraighIIorwardly
as a conventional business sector investment.
However, investment in ecosystem function or
adaptation might more realistically be envisaged as
requiring signiIcanI þublic invesImenI. Somewhere
between these extremes we might want to consider
categories of infrastructure investment which
typically require some public sector involvement.
The Severn Tidal Barrage may be one potential
investment in this category.
Perhaþs Ihe mosI signiIcanI diIIerence beIween
different investment conditions is the required rate
(and þeriod) oI Inancial reIurn. whereas Iyþically,
models of this kind would assume a single rate of
return consistent with current commercial conditions,
a part of the hypothetical exercise set out here
would be to explore the potential for different kinds
of investment conditions, which might be more
suiIed Io Ihe long·Ierm þublic secIor invesImenIs
needed to mitigate or adapt to climate change or to
restore ecosystem integrity. Taken together, these
two dimensions suggest a ‘matrix’ of investment
Iyþes, someIhing like Ihe Iollowing:
2

Business
sector –
commercial
rate of
return
3XEOLF
sector
– quasi
commercial
3XEOLF
sector –
social rate
of return
Energy
HIßFLHQF\
I
E
B
I
E
P
I
E
S

Renewable
supply
I
R
B
I
R
P
I
R
S

Other
capacity
I
O
B
I
O
P
I
O
S

Climate
adaptation
I
A
B
I
A
P
I
A
S

Ecosystem
maintenance
I
M
B
I
M
P
I
M
S

Iable 1: 3RWHQWLDO,QYHVWPHQW'LPHQVLRQVLQWKH0RGHO
The next consideration in developing a model
along the lines outlined here would be to connect
these different investment types to the production
function. In principle, investments should add to
capital stocks, and the augmented capital stocks
will then lead – via the production function – to
increased output. In practice, however, connections
between our different types of investment and the
production function might be of different kinds. For
examþle, energy eIIciency invesImenIs mighI lead
sþeciIcally Io changes in Ihe eIIciency IacIor in Ihe
production function.
Investments in ecosystem maintenance may have
no direct impact on the production function at all.
Ihey are ´non·þroducIive´ in convenIional economic
terms – whatever their importance for sustainability.
On the other hand, they ‘soak up’ income and have
to be included in the model.
Investments in renewable energy (as indicated
above) might contribute directly to the E factor
in the production function. Some may be less
productive (in conventional terms) than others. The
Tidal Barrage is an example of such an investment
112 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
- iIs value is diIIculI Io caþIure aI commercial raIes
of return, in part because of the longevity of the
investment.
This is not to denigrate these relatively ‘unproductive’
investments. They may be essential to reduce carbon
emissions, to protect ecosystems or to guarantee
long·Ierm energy securiIy. Ihe þoinI is IhaI we
need to be able to distinguish different categories
oI invesImenI in Ierms oI Ihree key þarameIers:
1) Iheir conIribuIion Io emission limiIs or resource
caþs, 2) Iheir conIribuIion Io aggregaIe demand,
and 3) Iheir imþacI on Ihe þroducIive caþaciIy
oI Ihe economy. while 1) and 2) are relaIively
sIraighIIorward Io handle exogenously, 3) requires
us to establish (within the model) a relationship
between the schedule of investments determined
by Iable 1 and Ihe þroducIion IuncIion.
AI Ihe momenI, iI isn´I enIirely clear how Ihis is Io be
achieved. Several possibilities exist. One would be to
assume that different forms of investment augment
different categories of capital, each of which has
a diIIerenI þroducIiviIy IacIor. AnoIher would be
Io seþaraIe ouI (energy) resources sþeciIcally in
the production function and relate investment
to changes in the availability of those resources.
A IurIher avenue would be Io aggregaIe caþiIal inIo
(say) two categories in the production function,
with different productivity assumptions associated
with each.
Broadly speaking, the development of an
appropriate production function emerges as one of
the key tasks inherent in taking this work forward.
0ne oI Ihe diIIculIies in achieving Ihis lies in Ihe
calibration of the model. It isn’t clear that we have
enough econometric data, for example, to estimate
productivities separately for each of the capital
sIocks imþlied by Iable 1. Ihis may noI necessarily
matter for a simulation model, but at some level we
will want to ensure that business as usual can be
calibrated consistently with current trends.
A IurIher asþecI IhaI would need Io be develoþed
in the model is the ability to map the carbon
emission and/or resource imþlicaIions oI diIIerenI
levels and compositions of aggregate demand. The
most immediate way to take this forward would
be to expand or disaggregate the subcategories
oI Ihe aggregaIe demand IuncIion (C, 6, l, X)
and Io use an LnvironmenIal lnþuI·0uIþuI (Ll0)
model
3
Io aIIribuIe Ihe carbon emissions and/or
energy resource requirements associated with the
different demand categories using known carbon
intensities. In principle, this attribution exercise
could also be used to develop different scenarios
wiIh diIIerenI carbon/resource imþlicaIions, subjecI
to some obvious caveats about the limitations of
the underlying EIO data.
4

In summary, this brief overview serves to establish
Ihe ouIlines Ior a macro·economic model IhaI could
be used to explore further some of the arguments
made in this study. In particular, the enhanced
capability to explore different targets of, and
conditions for, investment is key. It will be essential
in understanding how to build a different kind of
macro·economics, one in which sIabiliIy is no longer
predicated on increasing consumption growth, but
emerges through strategic investment in jobs, social
infrastructures, sustainable technologies and the
maintenance and protection of ecosystems.
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 113
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122 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
Endnotes
1 Introduction
1 9.2 billion þeoþle is Ihe mid·range þrojecIion
Ior global þoþulaIion by 2û5û according Io
Ihe uniIed NaIions 0eþarImenI oI Lconomic
and Social AIIairs laIesI þrojecIions (uN
2ûû7). Ihe lower end oI Ihe range is 7.8
billion while Ihe higher end is 1û.8 billion.
2 uN0P 2ûû5. Ihe richesI 2û% by comþarison
earn 74% oI Ihe world´s income.
3 ‘Be moderate in prosperity, prudent in
adversity’, advised Periander, the ruler
oI CorinIh in 6ûû8C, ´ProsþeriIy Iries Ihe
IorIunaIe, adversiIy Ihe greaI,´ claimed kose
Kennedy, moIher oI ||K and k|K.
4 For useful summaries of these impacts see
Ior examþle 8rown 2ûû8 (ChaþIer 2·6), VicIor
2ûû8a, VcKibben 2ûû7 (ChaþIer 1), NorIhcoII
2ûû7, VonbioI 2ûû6, PorriII 2ûû5 (ChaþIer
3), 8ooIh 2ûû4 (ChaþIers 4 8 5), SIern 2ûû7,
Lynas 2ûû4, lLA 2ûû8, 6N0 2ûû8 and lIP0LS
2ûû8 amongsI many oIhers, including oI
course the SDC’s own report on Redefining
Prosperity (S0C 2ûû3) and Ihe very useIul
Villennium LcosysIem AssessmenI (VLA
2ûû5),
5 The most widely cited statistic from Stern’s
inIuenIial reþorI on Ihe economics oI climaIe
change (SIern 2ûû7) is IhaI an annual
invesImenI oI 1% oI global 60P could averI
an estimated cost from climate change of
25% oI global 60P.
6 Ihe 62û grouþ warned oI Ihe IhreaI oI rising
oil prices to global economic stability as early
as 2ûû5 (www.indeþendenI.co.uk/news/
business/news/g2û·warns·oI·oil·þrice·
IhreaI·Io·global·economic·sIabiliIy·511293.
hIml). Ihe Iears þeaked in |uly 2ûû8 when
oil þrices reached S147 a barrel. Ihough Ihey
fell sharply in the following months, the long
term concern is widely acknowledged. See for
examþle Ihe lLA´s world Lnergy 0uIlook (lLA
2ûû8) and Ihe reþorI oI Ihe lndusIry IaskIorce
on Peak Oil and Energy Security (ITPOES
2ûû8).
7 On income inequality in developed nations
see 0LC0 2ûû8, on global disþariIies see
uN0P 2ûû5. 0n Ihe eIIecIs oI income
inequaliIy see VarmoI 2ûû5, wilkinson 2ûû5.
VarmoI and wilkinson 2ûû5.
8 See Ior examþle: Layard 2ûû5, neI 2ûû6,
haidI 2ûû7, Abdallah eI al 2ûû8. 0n ´social
recession´ see kuIherIord 2ûû8, Norman
2ûû7. 0n wellbeing and inequaliIy see
|ackson 2ûû8a.
9 This evocative phrase comes from the Indian
ecologisI Vadhav 6adjil (6adjil and 6uha
1995)
10 Soros 2ûû8, þ159.
11 See hIIþ://news.bbc.co.uk/1/hi/
business/7493298.sIm
12 VicIor 2ûû8a8b.
2 The Age of Irresponsibility
1 Iaken Irom a sþeech by Ihe uK Prime
VinisIer Io Ihe uniIed NaIions in New York,
|riday 26
th
SeþIember 2ûû8. See: www.
II.com/cms/s/û/42cc6û4û·8bea·11dd·8a4c·
ûûûû779Id18c.hIml
2 0n lV| þredicIion, see world Lconomic
0uIlook (lV| 2ûû8), þ xiv, Ior 0LC0
see hIIþ://news.bbc.co.uk/1/hi/
business/743û616.sIm , on ´Inancial
markeIs´ see Soros 2ûû8, on ´sIagIaIion´
see hIIþ://news.bbc.co.uk/1/hi/
business/127516.sIm , on Iood rioIs see
(Ior examþle) hIIþ://news.bbc.co.uk/1/hi/
world/73847û1.sIm
3 koberI PesIon, ´Ihe £5,ûûû bn bailouI´. 88C
0nline: www.bbc.co.uk/blogs/IhereþorIers/
roberIþesIon/2ûû8/1û/Ihe_5ûûûbn_bailouI.
html
4 Source data are from The Economist dollar·
based Commodity Price Index (accessed at
www.economist.com)
5 See Ior examþle: www.guardian.co.uk/
business/2ûû8/dec/17/goldmansachs·
executivesalaries
6 In Varieties of Capitalism Peter Hall and David
Soskice (2ûû1) deIne Iwo main Iyþes oI
caþiIalisI economy in Ihe develoþed world:
‘liberal market economies’ and ‘coordinated
market economies’. It’s instructive up to a
þoinI Io reIecI on some oI Ihe diIIerences
between these economies in approaching
recession. we revisiI Ihis þoinI in ChaþIer 1û.
7 VosI recenI sIaIisIics on uK consumer debI
taken from ‘Debt Facts and Figures – Compiled
1
st
|ebruary 2ûû9´ þublished by CrediI AcIion.
0nline aI: www.crediIacIion.org.uk/debI·
statistics.html
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 123
8 Source daIa are Irom Ihe 0IIce Ior NaIional
Statistics (accessed at www.statistics.gov.uk).
9 Formally known as the public sector net debt,
Ihe naIional debI measures Ihe ´Inancial
liabilities issued by the public sector less its
holdings oI liquid Inancial asseIs, such as
bank deþosiIs´. (See Ior examþle Ihe 0NS
IacIsheeI on 6overnmenI and Public SecIor
0ebI Veasures. 0nline aI: www.sIaIisIics.gov.
uk/abouI/meIhodology_by_Iheme/þublic_
secIor_accounIs/downloads/debI_hisIory.þdI
10 On rising inequality and increasing relative
þoverIy in Ihe uK - and in oIher develoþed
naIions - see 0LC0 2ûû8. Ihe reþorI noIes
that ‘The gap between rich and poor and the
number of people below the poverty line
have both grown over the past two decades.
Ihe increase is widesþread, aIIecIing Ihree·
quarters of OECD countries. The scale of the
change is moderaIe buI signiIcanI.´ ln Ihe
IrsI Ive years oI Ihe 21
st
century, however,
the report reveals that income inequality fell
in Ihe uK.
11 Pre·8udgeI keþorI 2ûû8 (hVI 2ûû8, þ 19û).
12 Source daIa Ior 1993·2ûû7 are Irom Ihe 0IIce
Ior NaIional SIaIisIics (accessed aI www.
sIaIisIics.gov.uk). 0aIa Ior 2ûû8 are esIimaIed
on Ihe basis oI NaIional SIaIisIics daIa Io end
SeþI 2ûû8 (online aI: www.sIaIisIics.gov.
uk/cci/nuggeI.asþ`id-2û6) wiIh an addiIion
oI £37bn made Ior þublic money already
contributed to the most recent bank bailout.
hisIorical daIa beIore 1993 are available Irom
Iable 826 in Ihe 2ûûû Pre·8udgeI keþorI
available aI www.hm·Ireasury.gov.uk/4124.
htm
13 See Ihe ClA world |acIbook. 0nline aI:
hIIþs://www.cia.gov/library/þublicaIions/
Ihe·world·IacIbook/rankorder/2û79rank.hIml
See also lV| daIa available online aI: www.
sIaIisIics.gov.uk/lV|
14 See The Economist, Race to the Bottom,
|ebruary 13
th
2ûû9. 0nline aI: www.
economisI.com/daily/news/disþlaysIory.
cIm`sIory_id-13129949
15 Soros 2ûû8, þ 81 eI seq.
16 See 6reensþan 2ûû8.
17 ln þarIicular, 6reensþan himselI and several
other free market economists believed
IhaI selI·inIeresI would resIrain Inancial
insIiIuIions Irom Iaking excessive risks!
18 The Economist, A shorI hisIory oI modern
Inance, 18
th
0cIober 2ûû8, þ98.
19 Barack Obama (amongst others) has offered
a convincing historical perspective on this
trend. See, for example, the speech at Cooper
union, New York on Varch 27
th
2ûû8. 0nline
aI: www.barackobama.com/2ûû8/û3/27/
remarks_oI_senaIor_barack_obam_54.þhþ
20 Citibank quote is from the Financial Times July
1û, 2ûû7.
21 Citigroup had to be rescued by the US
governmenI on 23
rd
November 2ûû8, wiIh an
injecIion oI S2û billion and Ihe underwriIing
oI more Ihan S3ûû billion in risky asseIs.
22 |I.com 28/1û/2ûû8 ´world will SIruggle Io
VeeI 0il 0emand´. 0nline aI: www.II.com/
cms/s/û/e5e78778·a53I·11dd·b4I5·
ûûûû77bû7658.hIml
3 kedehning Presperity
1 From Zia Sardar’s ‘thinkpiece’ for the
Sustainable Development Commission
(Sardar 2ûû7).
2 See in þarIicular Ihe ´Ihink·þiece´
contributions to the SDC project from Tim
Kasser (2ûû7), |ohn 0´Neill (2ûû8), Avner
0IIer (2ûû7), hilde kaþþ (2ûû7), lia Sardar
(2ûû7) and KaIe Soþer (2ûû8). 0nline
aI: www.sd·commission.org.uk/þages/
redeIning·þrosþeriIy.hIml
3 Ihere are sIrong resonances here wiIh Vary
0ouglas´ (1976) undersIanding oI consumers
as attempting to ‘create the social world and
Ind a crediIable þlace in iI´, and also wiIh
Peter Townsend’s groundbreaking analysis
of poverty, in which he argued that people
can be said to be poor when their resources
are ‘so seriously below those commanded
by the average individual or family that they
are, in effect, excluded from ordinary living
patterns, customs and activities’ (Townsend
1979, þ 31). kaIher Ihan being abouI money
or material possessions as such, Townsend
claimed, poverty is about the inability to
participate actively in society.
4 Sardar 2ûû7.
5 8rown and 6arver 2ûû8.
6 See Ior examþle Layard 2ûû5, 0olan eI al
2ûû6 8 2ûû8, |ackson 2ûû8a.
7 |rom a þoll underIaken Ior Ihe 88C by 6IK
N0P during 0cIober 2ûû5. kesulIs available
aI: hIIþ://news.bbc.co.uk/nol/shared/bsþ/
hi/þdIs/29_û3_û6_haþþiness_gIkþoll.þdI
8 The Living Standard (Sen 1984) was originally
published in Oxford Economic Papers, an
economics journal, but is usefully reproduced
(Sen 1998) along wiIh excerþIs Irom some oI
Sen’s later essays on the subject in Crocker
and Linden (1998). See also Sen 1985, 1999.
124 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
9 AcIually Ihere is some disagreemenI as Io
whether the concept of utility is about the
‘satisfactions’ received from commodities or
Ihe desires Ior Ihem (Sen 1998, 29û), buI Ihis
distinction need not concern us here.
10 Ihis disIincIion led Ihe economisI Kelvin
LancasIer (1966) Io develoþ a soþhisIicaIed
theory of ‘attributes’ which attempted to
geI round Ihe diIIculIy IhaI commodiIies
are not the same as satisfactions. There is
also an extensive and useful discussion of
the relationship between satisfaction and
material commodities in modern needs
Iheories, see Ior examþle: 0oyal and 6ough
1991, Vax NeeI 1991, Lkins and Vax NeeI
1992, |ackson eI al 2ûû4.
11 For a discussion of trends over time in the
uK see |ackson and Varks 1999, |ackson and
PaþaIhanasoþoulou 2ûû8.
12 See Anderson 1991 Ior a concise analysis oI
Ihe limiIaIions oI 60P and a discussion oI
alternative economic indicators. See Jackson
and Vc8ride 2ûû5 (e.g.) Ior a survey oI Ihe
literature on adjusted economic indicators –
or green 60P. Vore recenIly, Ihis issue has
been addressed in deþIh by Ihe Sen/SIigliIt
Commission on Ihe VeasuremenI oI Lconomic
Performance and Social Progress set up by
PresidenI Sarkoty and due Io reþorI shorIly
(CVLPSP 2ûû8).
13 Defensive expenditures are those incurred
as a result of the need to ‘defend’ against
activity elsewhere in the economy. The costs
of car accidents and cleaning up oil spills have
this character. Positional expenditures can be
seen as a special case, in which expenditures
– on positional goods – are necessary
mainly to defend our social position. Though
these expenditures makes sense at an
individual level it is perverse to count them
cumulatively as an addition to wellbeing.
14 Data on each of these countries can be
found in Ruut Veenhoven’s ‘World Happiness
0aIabase´ available on Ihe web aI: www2.
eur.nl/Isw/research/haþþiness.
15 Source: worldwaIch lnsIiIuIe, SIaIe oI Ihe
world 2ûû8, |ig 4.1 kedrawn Irom daIa in
lngleharI and Klingeman 2ûûû.
16 See 0rmerod 2ûû8, 0´Neill 2ûû8.
17 Kahnemann and Sugden 2ûû5.
18 Statisticians say the two scales have different
‘orders of integration’. For a more detailed
discussion oI Ihis issue see 0rmerod 2ûû8.
19 0IIer 2ûû7, 2ûû6.
20 AlIhough Ihis insighI inIo a þarIicular human
frailty does have interesting lessons for
government policy which I shall return to
later.
21 Sen 1998, þ 295.
22 And also wiIh Iownsend´s (1979) conceþI oI
poverty.
23 In Development as Freedom (Sen 1999) Ior
example, he argues explicitly that freedom is
both the means and the end of development.
24 kobeyns and van der Veen 2ûû7.
25 Nussbaum 2ûû6.
4 The Dilemma of Growth
1 8aumol eI al 2ûû7, þ 23.
2 For more insight on the symbolic role of
consumer goods see (eg): 8auman 2ûû7,
0ouglas and lsherwood 1996, 0iIImar 1992,
8audrillard, | 1998, VcCracken 199û. 0n iIs
relevance for sustainable consumption see
|ackson in þarIicular 2ûû5a8b, 2ûû6b, 2ûû8b.
3 8erger 1969.
4 8elk eI al 2ûû3.
5 0ouglas 2ûû6.
6 For a more detailed exploration of Indian
attitudes to the environment, see for
examþle Vawdsley, L 2ûû4.
7 As anIhroþologisI 6ranI VcCracken (199û)
describes it.
8 Support for the relevance of income as a
factor in wellbeing also emerged from Defra’s
recenI wellbeing survey (0eIra 2ûû7). Ihough
noI Ihe mosI imþorIanI inIuence, income
clearly emerged as a contributing factor in
the survey.
9 Evidence of the importance of relative income
was IrsI highlighIed by kichard LasIerlin
(1972). |or more recenI conIrmaIion see
LasIerlin 1995, 0olan eI al 2ûû6 8 2ûû8.
10 0IIer 2ûû6.
11 Data from the Health Survey for England,
Vadhavi 8ajekal, NaIional CenIre Ior Social
kesearch, ciIed in VarmoI 2ûû5. See also
wilkinson 2ûû5, VarmoI and wilkinson 2ûû5.
12 The most notable exception to the rule that
higher social grades show higher satisfaction
is in the domain of community, where the
lower social grades profess themselves more
saIisIed on average Ihan Ihe higher grades.
13 0IIer 2ûû6, oþ ciI. Some have used Ihis
argument to explain the life satisfaction
þaradox menIioned in ChaþIer 3.
14 Source 0eIra 2ûû7, 0eIra, Personal
Communication.
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 125
15 See Ior examþle Layard 2ûû5, neI 2ûû6,
|ames 2ûû7.
16 Data are taken from statistics compiled for
the Human Development Report, available
online aI Ihe uN0P websiIe: hIIþ://hdr.undþ.
org/en/sIaIisIics/
17 Data are taken from statistics compiled for
the Human Development Report, available
online aI Ihe uN0P websiIe: hIIþ://hdr.undþ.
org/en/sIaIisIics/
18 Data are taken from statistics compiled for
the Human Development Report, available
online aI Ihe uN0P websiIe: hIIþ://hdr.undþ.
org/en/sIaIisIics/
19 There are some notable recent attempts to
develoþ Ihis Ield oI sIudy, in þarIicular hans
kosling´s inIeracIive 6APVlN0Lk þrojecI.
Online at www.gapminder.org
20 There is a strong correlation (the R
2
value
on Ihe graþh) beIween þer caþiIa 60P
and liIe exþecIancy, buI a relaIively weak
deþendency (Ihe x·coeIIcienI) on income
growth.
21 Data are taken from statistics compiled for
the Human Development Report, available
online aI Ihe uN0P websiIe: hIIþ://hdr.undþ.
org/en/sIaIisIics/
22 |ranco eI al 2ûû7, 1374.
23 In the conventional model, resources are
often excluded from the equation and the
main dependencies are thought to be on
labour, capital and technological innovation.
24 For more detail on (and critique of) this
underlying model see Ior examþle: 8ooIh
2ûû4, Common and SIagl 2ûû5, Ayres 2ûû8,
VicIor 2ûû8b.
25 l|S 2ûû9.
5 The Myth of Decoupling
1 uNLP Press kelease on Ihe launch oI Ihe
6reen Lconomy lniIiaIive, London, 22
nd

0cIober 2ûû8.
2 lPCC 2ûû7, Iable SPV.6.
3 lPCC 2ûû7 þ4.
4 See |igure 25 in LlA 2ûû8.
5 0aIa Irom Iable L16 in Ihe International
Energy Annual 2006 (LlA 2ûû8).
6 0aIa Irom Iable L16 in Ihe International
Energy Annual 2006 (LlA 2ûû8).
7 Veasured as 0irecI VaIerial ConsumþIion
(0VC) þer uniI oI 60P, indexed Io 1975.
0aIa Ior AusIria, 6ermany, |aþan and Ihe
NeIherlands Iaken Irom wkl 2ûûû, Annex 2.
PoinIs Ior 1997·2ûûû esIimaIed using linear
exIraþolaIions (over Ihe þeriod 1975·1996).
0aIa Ior Ihe uK Irom Sheerin 2ûû2. 0VC
takes domestically extracted resources, adds
in resource imports and subtracts resource
exports. It doesn’t account for the resources
´embedded´ in Inished and semi·Inished
goods.
8 Source data for individual nations taken
Irom LlA 2ûû8, Iable h16C02, ´world Carbon
Dioxide Emissions from the Combustion and
Flaring of Fossil Fuels per Thousand Dollars
oI 6ross 0omesIic ProducI using VarkeI
Exchange Rates.’ World carbon intensity
is calculated using total emissions data in
Iable h1C02 in Ihe LlA daIabase and world
60P daIa (aI consIanI 2ûûû þrices, markeI
exchange raIes) Iaken Irom lV| (2ûû8) daIa
available online aI: www.imI.org/exIernal/
þubs/II/weo/2ûû8/û2/weodaIa/index.asþx
9 Source daIa Ior Ihe þeriod 198û·2ûû6 Ior
Iossil Iuels Iaken Irom LlA 2ûû8, Iable
1.8, daIa Ior 2ûû7 esIimaIed using linear
exIraþolaIion over Ihe þeriod 2ûûû·2ûû6.
Data for CO
2
emissions Iaken Irom LlA 2ûû8,
Iable h1C02.
10 Source daIa as Ior |igure 12, noIe 6, exceþI
IhaI linear exIraþolaIions Ior 6ermany are
based on a shorIer þeriod: 1991·1996.
11 These numbers are taken from Druckman
and |ackson 2ûû8, based on resulIs Irom
Ihe Surrey LnvironmenIal LiIesIyle VAþþing
(SLLVA) Iramework. Similar resulIs Ior Ihe
uK have been reþorIed Irom oIher sIudies
including Carbon IrusI 2ûû6, |ackson eI al
2ûû6, |ackson eI al 2ûû7, 0eIra 2ûû8, helm
2ûû8a.
12 Source daIa Irom Ihe uS 6eological Survey
SIaIisIical Summaries. 0nline since 2ûûû aI
hIIþ://minerals.usgs.gov/minerals/þubs/
commodiIy/sIaIisIical_summary/index.
hIml#myb Available Irom Ihe uS 8ureau oI
Vines daIa archive Ior earlier years: hIIþ://
minerals.usgs.gov/minerals/þubs/usbmmyb.
html
13 See Ior examþle: ´0igging Ior vicIory´, The
Economist, 15
th
Nov 2ûû8, þ69.
14 lI´s also Irue IhaI eIIciency (Iechnological
progress) is itself a driver of economic
growth. The problem of ‘rebound’ is discussed
further in Chapter 6.
15 This relationship is sometimes called the
LnvironmenIal KutneIs Curve aIIer Ihe
126 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
economisI Simon KutneIs who þroþosed IhaI
a similar inverIed u·shaþed relaIionshiþ exisIs
between incomes and income inequality.
Lvidence oI Ihe income KutneIs curve is
also diIIculI Io Ind (0LC0 2ûû8). |or more
discussion oI Ihe LnvironmenIal KutneIs
Curve hyþoIhesis, see (eg) 6rossman and
Krueger 1995, |ackson 1996, koIhman 1998.
16 8ooIh 2ûû4, þage 73 eI seq.
17 Ayres 2ûû8, þ292.
18 See Lhrlich 1968.
19 See Ior examþle: APP6 2ûû7.
20 lI Iollows Irom Ihe lPAI equaIion IhaI Ihe
average annual growth in emissions r
i
over
any given þeriod saIisIes Ihe equaIion: 1-r
i

- (1-r
p
) x (1-r
a
) x (1-r
t
), where r
p
is the
average population growth rate, r
a
is the
average growth in per capita income and r
t

is the average growth (or decline) in carbon
inIensiIy. VulIiþlying ouI Ihe IacIors on Ihe
right hand side of the equation gives the
aþþroximaIe ´rule oI Ihumb´: r
i
# r
p
- r
a
- r
t
.
This approximation works very well for small
percentage changes (a few per cent per
annum). It needs more care in application
when the rates of change exceed this. It
can also be shown that when per capita
income and population rates are positive, the
estimated technology improvement rate is
always slightly higher than the actual rate. So
the rule of thumb provides a robust indication
oI a suIIcienI raIe oI imþrovemenI Io achieve
target reductions.
21 The error term in calculating the technological
improvement rate using the rule of thumb in
Ihis case is less Ihan û.ûû1%. kaIes oI change
for r
a
were calculaIed using world 60P daIa
(aI consIanI 2ûûû þrices, markeI exchange
raIes) Iaken Irom lV| (2ûû8), available
online aI: www.imI.org/exIernal/þubs/II/
weo/2ûû8/û2/weodaIa/index.asþx
22 lPCC esIimaIes (Iable SPV.6) IhaI Io sIabilise
aImosþheric carbon aI beIween 445 and
49ûþþm (resulIing in an esIimaIe global
IemþeraIure 2 Io 2.4
o
C above Ihe þre·
industrial average) emissions would need to
þeak beIore 2û15, wiIh 5û · 85% reducIions
on 2ûûû levels by 2û5û. Ihe equivalenI
(pro rata) target range for carbon dioxide
emissions in 2û5û would be somewhere
beIween 3,56û and 11,88û VIC0
2
. Here it
is assumed that global emissions today are
around 3û,ûûû VIC0
2
and that we would
want to achieve something towards the
lower end oI IhaI range, say 4,ûûû VIC0
2

partly because the target is to get down to
the lower end of the range of atmospheric
concentrations, and partly because we might
need reductions in CO
2
to do more work,
particularly at the margin, than reductions in
other greenhouse gases.
23 Ihe uN low, middle and high esIimaIes Ior
þoþulaIion in 2û5û are 7.8 billion, 9.2 billion
and 1û.8 billion (uN 2ûû7).
24 Ihe rule oI Ihumb here gives: 4.9 - û.7 - 3.6
- 9.2%, buI Ihe error Ierm is slighIly larger
(û.4%). Ihe acIual value is a liIIle over 8.8%.
25 Source: calculaIions Ior Ihis sIudy, using daIa
Irom LlA 2ûû8, lV| 2ûû8 , uN 2ûû7 and
IargeIs Irom lPCC 2ûû7.
26 Though the numbers here refer to carbon
emissions, the same basic arithmetic applies
when considering IniIe resource IhroughþuIs,
scarce forestry resources or biodiversity
impacts.
27 lLA 2ûû8. LxecuIive summary available online
aI: www.iea.org/wL02ûû8
28 Nuclear þower could cerIainly be added Io
this theoretical list. But even if the issues
around waste disposal and decommissioning
could adequately be addressed, its
contribution would be severely limited by
resource constraints in the context of a
continually expanding global demand (SDC
2ûû6b).
29 Lkins 2ûû8. See also Lkins 2ûûû, |ackson
1996, von weitsacker eI al 1996.
30 SIern 2ûû7, þxvi.
31 See Ihe ClimaIe Change CommiIIee´s IrsI
reþorI (CCC 2ûû8). 0n SIern´s revised esIimaIe
see: ´CosI oI Iackling global climaIe change
doubles, warns SIern´, 6uardian 26
th
June
2ûû8, online aI: www.guardian.co.uk/
environmenI/2ûû8/jun/26/climaIechange.
scienceofclimatechange For PwC estimate
see ´Iime Ior deeds noI words´ 6uardian 3
rd

|uly 2ûû8, online aI: www.guardian.co.uk/
environmenI/2ûû8/jul/û3/carbonemissions.
climatechange
32 helm 2ûû8b, 225·8. See also Nordhaus 2ûû7.
33 A criIical issue here is Ihe exIenI Io which
climate change investments do or do not
enhance economic productivity. Whilst
investments which improve resource
productivity (for example) may offer positive
returns, and investments in renewables
could be cosI·saving, þarIicularly as Iossil
fuel costs rise, enhanced early investments
in renewables, in CCS and in ecosystem
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 127
protection may not always be productive in
a narrow economic sense (see ChaþIer 8 and
Aþþendix 1).
6 The Iron Cage of Consumerism
1 Extract from ‘Pack behaviour’ an article about
the vulnerability of banking giant Santander,
The Economist, Nov 15
th
2ûû8, þ96.
2 Numerous commenIaIors over Ihe course
of the last century or more have picked up
on this anxiety, both as an epidemiological
fact and as a systemic aspect of modern life.
NoIable conIribuIions include: Alain de 8oIIon
2ûû4, Lmile 0urkheim 19û3, |red hirsch
1977, 0liver |ames 1998, 2ûû7, Kierkegaard
1844, |onaIhon kuIherIord 2ûû8, Iibor
SciIovski 1976.
3 Ihe Ierm ´iron cage´ was IrsI coined by Vax
weber (1958) in The Protestant Ethic and the
Spirit of Capitalism to refer to the bureaucracy
that he saw emerging as a constraint on
individual freedoms in capitalism. But there
are also elements in Weber’s work where
he uses the same concept to characterise
consumerism itself as the following quote
shows: ´ln 8axIer´s view, Ihe care Ior exIernal
goods should only lie on the shoulders of the
“saint like a light cloak, which can be thrown
aside aI any momenI¨. 8uI IaIe decreed IhaI
the cloak should become an iron cage.’ (op
ciI, þ181). Ihis Iheme has been þicked uþ
and applied to consumerism more explicitly
by sociologisI 6eorge kiIter (2ûû4).
4 For a more formal exposition of the basic
economics here see for example Begg et al
2ûû3, AnderIon 2ûûû, hall and Paþell 2ûû5.
For its relevance to the environment see
|acobs 1991, 0aly 1996, 8ooIh 2ûû4, VicIor
2ûû8b.
5 This is probably the one place where the
standard economic model pays any attention
to the physical reality of keeping activity
going. The gradual degradation of capital
goods is foreseen explicitly by the laws of
thermodynamics.
6 It’s important to note that capital is not the
only requiremenI here. VanagemenI þracIice,
organisational changes and training are also
criIicial in increasing þroducIiviIy in Ihe Irm
(|reeman and Shaw 2ûû9, eg).
7 The commonest way to increase capital
productivity has been to increase the capital
utilisation factor, making sure that machinery
and buildings are fully utilised, for example
through continuous batch processing and
other process design changes (see for
examþle LienIt and kea 2ûû1, keay eI al
2ûû8).
8 For an exploration of national trends in labour
productivity and their impact on growth see
Vaddison 2ûû7, þ 3û4 eI seq. |or a discussion
on þroducIiviIy aI Irm level see |reeman
and Shaw (2ûû9) and Ior uK Irms see 0ulIon
1996.
9 Numbers ciIed in VicIor 2ûû8a.
10 The hypothesis that technological change is
a key driver of growth is a key component
oI Ihe so·called Solow·Swan growIh model.
ProducIion ouIþuI deþends on Ihree so·called
´IacIors oI þroducIion´: labour, caþiIal and
materials. Early growth theories suggested
that growth could be predicted mainly on the
basis of how much labour and capital was
available. But these models failed to account
for the ‘residual’ growth after expansions in
capital and labour had been factored in. In
1956, economisIs koberI Solow and Irevor
Swan independently argued that this residual
could be explained by technological progress
(Solow 1956, Swan 1956).
11 See Sorrell 2ûû7 Ior an in·deþIh discussion oI
the rebound effect.
12 See |ackson 1996, ChaþIer 1 Ior a more
deIailed discussion oI Ihis þoinI, see also
6eorgescu·koegen 1972, 0aly 1996.
13 See SchumþeIer 1934, 195û, 1954. |or
more detailed discussion of the relevance
of Schumpeter’s work in this debate see
kuIherIord 2ûû8, wall 2ûû8, 8ouder 2ûû8,
8ooIh 2ûû4.
14 CarloIa Peret describes how creaIive
destruction has given rise to successive
‘epochs of capitalism’. Each technological
revolution ‘brings with it, not only a full
revamping of the productive structure, but
eventually a transformation of the institutions
of governance, of society, and even of
ideology and culIure´ (Peret 2ûû1: 25).
15 For an extensive recent treatment of creative
innovation as the ‘origin of wealth’ see
8einhocker 2ûû7.
16 Lewis and 8ridger 2ûû1, eg.
17 For more empirical evidence see, eg
CtsikstenImihalyi and kochberg·halIon 1981.
18 8elk 1988.
19 0ichIer 1964.
20 See 8elk eI al 1989, |ackson and Peþþer
2ûû9, ArmsIrong and |ackson 2ûû8, ArndI eI
al 2ûû4, eg.
128 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
21 Veblen 1898, hirsch 1977. See also 8ourdieu
1984, 8audrillard 197û.
22 Camþbell 2ûû4, 2ûû5.
23 VcCracken 199û, ChaþIer 7.
24 Cushman 199û, þ599.
25 8ooIh 2ûû4, ChaþIer 2.
7 Keynesianism and the Green New Deal
1 Achim SIeiner, LxecuIive 0irecIor oI uNLP
commenIing on Ihe launch oI uNLP´s 6reen
Economy Initiative in the Independent on
Sunday, 12
th
0cIober 2ûû8.
2 ‘The green lining to this chaos’, leading article
in the Independent on Sunday, 12
th
October
2ûû8.
3 Ihis is why Ihe uK 6overnmenI oþIed Ior
a reducIion in VAI raIher Ihan in income
Iax in Ihe Iscal sIimulus þackage seI ouI in
Ihe 2ûû8 Pre·8udgeI keþorI (hVI 2ûû8).
Increases in income tax are more likely to be
put away as savings than reductions in tax on
consumables. Even so, the Treasury estimated
IhaI uþ Io a halI oI Ihe £12.5 billion sIimulus
Ihrough reduced VAI mighI end uþ as a
reduction in credit card bills rather than an
increase in spending.
4 ln a deIniIive sIudy oI 193ûs Iscal þolicy, uS
economist Cary Brown argues that this was
largely because the federal public spending
stimulus was undermined by spending cuts
and tax hikes at local and state level.
5 Paul Krugman, ´|ranklin 0elano 0bama`´,
New York Iimes November 1û
th
2ûû8.
6 ‘Finding a way out of the Economic Crisis’,
14
th
November 2ûû8. 88C reþorIer Nick
Robinson’s newslog and interview with Paul
Krugman is online aI: www.bbc.co.uk/blogs/
nickrobinson/2ûû8/11/Inding_a_way_ouI_
oI_Ihe_economic_crisis.hIml
7 CiIed in ´6lobal 6reen New 0eal - uNLP 6reen
Economy Initiative’. Press Release at London
Launch, 22
nd
0cIober 2ûû8. 0nline aI: www.
uneþ.org/0ocumenIs.VulIilingual/0eIaulI.as
þ`0ocumenIl0-5488ArIiclel0-59578l-en
8 6lobally, environmenIal indusIries are worIh
S4 Irillion dollars already and are likely Io
exþand by aI leasI 5û% in Ihe nexI decade.
9 6N0 2ûû8, þ3.
10 ln a þaþer þublished in 1997, ecological
economisIs koberI CosIanta and his
colleagues estimated that the value of global
ecosysIem services amounIed Io around S33
Irillion þer year. AI Ihe Iime, Ihe global 60P
was only S18 Irillion þer year (CosIanta eI al
1997).
11 world Lnergy 0uIlook 2ûû8 www.iea.
org/IexIbase/nþsum/wL02ûû8SuV.
pdf Reference scenario (business as usual)
invesImenI is S26 Irillion. Achieving a 55û
þþm sIabilisaIion would cosI S4.1 Irillion
more IhaI Ihis, and achieving a 45û þþm
sIabilisaIion would be add anoIher S5.1
trillion to this cost.
12 Nicholas SIern´s (2ûû7) review on Ihe
economics of climate change, famously
argued IhaI Ior as liIIle as 1% oI 60P we
could save ourselves cosIs as high as 25% oI
60P laIer on.
13 08 2ûû9, þ4.
14 PLkl 2ûû8, þ1û.
15 See 6ough 1979, ChaþIer 6 and Aþþendix
A.2.
16 See eg, The Guardian, 3û
th
December
2ûû8. 0nline aI: www.guardian.co.uk/
business/2ûû8/dec/3û/general·moIors·
gmac
17 ´uS Porn lndusIry seeks mulIi·billion dollar
bailout’. Telegraph, 8
th
|anuary 2ûû9. 0nline
aI: www.Ielegraþh.co.uk/news/newsIoþics/
howabouIIhaI/4165û49/uS·þorn·indusIry·
seeks·mulIi·billion·dollar·bailouI.hIml
18 ´|acing 6lobal Challenges: suþþorIing þeoþle
Ihrough diIIculI Iimes´. Pre·8udgeI keþorI
2ûû8. London: hV Ireasury.
19 Ihe American kecovery and keinvesImenI
AcI oI 2ûû9 - 0iscussion 0raII. 0nline aI:
hIIþ://aþþroþriaIions.house.gov/þdI/
kecoverykeþorIû1·15·û9.þdI
20 This could include the establishment of ‘green
bonds’ to promote sustainable investment,
as proposed by Climate Change Capital and
others.
21 8oIh Ihe uS and Ihe uK car indusIry suþþorI
þackages have elemenIs oI Ihis. £1 billion
oI Ihe uK þackage is Ior invesImenI in Ihe
development of green vehicles. See for
examþle: hIIþ://news.bbc.co.uk/1/hi/
uk_þoliIics/7853149.sIm
22 The scale of the investment needs to achieve
uK carbon reducIion IargeIs was sþelled
ouI in Ihe ClimaIe Change CommiIIee´s IrsI
reþorI (CCC 2ûû8) þublished in Ihe same
week as the PBR.
23 S0C 2ûû9.
24 hVI 2ûû8.
25 l|S 2ûû9.
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 129
26 Ihough mosI þeoþle associaIe Keynes´ name
with using public sector money to stimulate
economic demand in times of crisis, his
inIuence on Ioday´s macroeconomics runs
much deeper than that and provides the basis
for the idea that high street spending is the
key Io economic sIabiliIy. As |ames Ahiakþor
(2ûû1) þoinIs ouI: ´|undamenIal Io Keynes´s
development of the multiplier concept.. is the
view IhaI insuIIcienI consumþIion sþending
is the principal limitation on the growth
of aggregate demand, hence, income and
employment creation.’
27 6N0 2ûû8, þ27.
28 0LC0 2ûû8.
8 Macroeconomics for Sustainability
1 8ooIh 2ûû4, þ153.
2 Ayres 2ûû8, 292.
3 8Lkk 2ûû8. See also |ackson 1996.
4 |ackson eI al 2ûû7, 0ruckman and |ackson
2ûû8.
5 This idea has a long pedigree (Jackson and
|acobs 1991, e.g.), and was Ihe moIivaIion Ior
Ihe uK 6overnmenI´s call in Ihe 2ûû6 Lnergy
White paper for a ‘Supplier Obligation’ – a
mechanism for capping carbon emissions
associated with sales from energy suppliers.
6 AcIually Ihere´s anoIher IundamenIal
question here which is, even if you can,
should you make money from all these
Ihings` 0oes Ihe increasing commercialisaIion
of the simpler, more creative bits of our
lives change the nature of the activities
Ihemselves Ior Ihe worse` Ihere are cerIainly
some who argue that it does. Jonathan
kuIherIord´s (2ûû8) Ihinkþiece Ior Ihe S0C
cites Paulo Virno’s argument that post–Fordist
economic activity is focused on the ‘life of the
mind’.
7 0aly 1972, þ119.
8 Vill 1857, ciIed in 0aly 1996, ChaþIer 1.
Keynes 193û.
9 0aly 1973.
10 To make the sums add up, the expenditure
meIhod oI accounIing Ior 60P also includes
net exports (i.e. exports minus imports) of
traded goods.
11 Ihe naIional accounIs (where 60P is
computed annually) tend to ‘force’ an
equilibrium beIween Ihe diIIerenI 60P
measures by making adjustments for stocks
and invenIories held by Irms. Ihis is also oI
course the practical means by which supply
and demand are balanced. If demand falls
below supply in a given year, companies
hold more in stocks and set these off against
future demand. If demand rises above supply
they draw down stocks and build them up
next year.
12 This is illustrated in slightly more complexity
in Aþþendix 2.
13 NeI exþorIs are Ihe sum oI exþorIs minus
imþorIs. NoIe IhaI Ihe Iows conIribuIing
Io 60P
1
as shown in Aþþendix 2 omiI neI
exports, since the diagram doesn’t show the
foreign sector.
14 This form of production function is called a
Cobb·0ouglas þroducIion IuncIion.
15 Ihe d´Alessandro model discussed laIer in Ihe
chapter has this form. For other attempts see
Ayres and van den 8ergh 2ûû5, Common and
SIagl 2ûû5, ChaþIers 6 and 7.
16 This is one of the reasons why it was so easy
noI Io see Ihe Inancial crisis oI 2ûû8 coming.
6rowIh in Ihe 60P was sIronger Ihan IorecasI
Ior 2ûû6 and 2ûû7.
17 See Common and SIagl 2ûû5, 0aly 1996,
Lkins 2ûûû, CosIanta 1991, Lawn 1999. |or
an overview see |ackson and Vc8ride 2ûû5.
See also the interim report of President
Sarkoty´s newly esIablished Commission on
Ihe VeasuremenI oI Lconomic PerIormance
and Social Progress (CVLPSP 2ûû8).
18 The model is described in more detail in a
Ihink·þiece he þreþared Ior us (VicIor 2ûû8a)
and in his recenI book (VicIor 2ûû8b).
19 PoverIy is Iracked using Ihe uniIed NaIion´s
Human Poverty Index. The model simulates
the ability to affect this index through
redistributive policies and through health
spending. The model also contains a forestry
submodel, which looks at changes in
forestation. Since this is less relevant for the
uK, iI is noI discussed IurIher here.
20 Ihe IoronIo AgreemenI signed in 1989 was
an inIormal þrecursor Io Ihe KyoIo ProIocol. lI
set a target for reducing carbon emissions in
develoþed counIries by 2û% beIore 2ûû5. NoI
a single signatory achieved the target.
21 See Ior examþle 8osch 2ûûû, hayden 1999,
6olden and |igarI 2ûûû.
22 6ort 1999, Lord 2ûû7, e.g.
23 |or comþarison, uK consumþIion was 64%
oI 60P in 2ûû7. Public sþending was 2û%,
gross invesImenI was 18% and neI exþorIs
were ·3%.
24 France has now more or less abandoned its
35·hour week þolicy (8ouder 2ûû8).
130 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
25 8osch 2ûûû, þ 185.
26 See d´Alessandro eI al 2ûû8. A key IeaIure
of this model is the production function
which includes explicit reference to both
energy resources and the capital stock. It also
assumes non·subsIiIuIabiliIy beIween Ihese
two.
27 See ChaþIer 5 and lLA 2ûû8.
28 As wiIh all modelling exercises, iI is wise
to view the results of these studies with
caution. Both models have some limitations.
Ihe main limiIaIion oI Ihe d´Alessandro
study is that it is not calibrated against
historical data. For this reason, the exact
site oI Ihe ´susIainabiliIy window´ is diIIculI
to ascertain. The Victor study is calibrated
against Canadian econometric data, but
also has some limitations, principally the
absence of a monetary sector in the model.
‘For simplicity it is assumed that the Bank of
Canada, Canada’s central bank, regulates the
money suþþly Io keeþ inIaIion aI or near Ihe
IargeI level oI 2% þer year.´ VicIor (2ûû8a,
ChaþIer 3).
29 ln addiIion, as we show in ChaþIer 1û, Ihe
state is an absolutely vital ‘commitment
device’ for achieving sustainability.
30 See CosIanta eI al 1997, uNLP 2ûû8, 0eIra
2ûû7.
31 Ihis claim is made exþliciIly in Ihe uK 6N0
6rouþ reþorI (6N0 2ûû8, þ27).
32 Interestingly, this problem has the same
basic structure as the problem of funding
public sector spending in a welfare economy.
Investment in social goods may less
þroducIive in Ihe shorI·Ierm and makes
no direct contribution in a conventional
production function (except perhaps in
maintaining the labour supply), but is
nonetheless essential for social welfare and
indeed Ihe Ior Ihe long·Ierm susIainabiliIy
oI Ihe economy (6ough 1979, see esþecially
ChaþIer 6 and Aþþendix A.2).
9 Flourishing – within limits
1 Ben Okri, ‘Our false oracles have failed. We
need a new vision to live by.’ The Times, 3û
th

0cIober 2ûû8.
2 PuInam 2ûû1.
3 kuIherIord 2ûû8. Norman eI al 2ûû7.
Jonathan Rutherford is from the leftwing
IhinkIank Comþass, |esse Norman Irom Ihe
rightwing thinktank Policy Exchange.
4 Strictly, speaking this is an index of
‘aloneness’ rather than ‘loneliness’. But as an
indicator of the degree of fragmentation of
communities it is a useful tool.
5 0orling eI al 2ûû8. Vark LasIon´s 88C reþorI
(including ProI 0orling´s quoIe) is aI hIIþ://
news.bbc.co.uk/1/hi/uk/7755641.sIm Ihe
index measures a weighted average of the
numbers oI non·married adulIs, one·þerson
households, recent inhabitants (people who
have moved to their current address within
the last year) and people renting privately.
6 Increased divorce rates have themselves been
linked to declining social integration. See
(e.g.) ShelIon 1987.
7 0n mobiliIy and labour þroducIiviIy, see: ´Lack
of labour mobility hurts EU productivity’. New
Europe 697. 3û
th
SeþIember 2ûû6. 0nline aI:
www.neuroþe.eu/arIicles/6545û.þhþ
8 See neI 2ûû9.
9 SmiIh 1937 (1776) þ 821.
10 Sen 1998 (1984), þ 298.
11 See for example the groundbreaking work
of the Young Foundation’s Local Wellbeing
þrojecI. www.youngIoundaIion.org.uk/
home/Ihemes/local·wellbeing
12 Soþer 2ûû8.
13 See also 8unIing 2ûû5 on work·liIe balance.
14 Kasser 2ûû7, 2ûû2.
15 See hamilIon 2ûû3.
16 On downshifting and voluntary simplicity see
LItioni (2ûû6), Llgin (1991), hamilIon (2ûû3),
Schor (1998), wachIel (1983) amongsI many
oIhers, Ior a deIailed examinaIion oI Ihe
pros and cons of the idea of living better
by consuming less see |ackson (2ûû5b), Ior
social þsychological evidence see Kasser
(2ûû7, 2ûû2).
17 kichard 6regg (6andhi´s sIudenI) originally
published his paper on ‘Voluntary Simplicity’
in the Indian Journal Visva Bharati Quarterly.
18 Llgin 1981.
19 CsikstenImihalyi 2ûûû, 2ûû3.
20 See Ihe |indhorn |oundaIion 2ûû6 Vision
in AcIion. Annual keþorI 2ûû6 available
online aI: www.Indhorn.org/abouI_us/
annualreþorIû6.þdI
21 On Plum Village see www.plumvillage.org
22 0n Ihe SimþliciIy |orum, see: www.
simþliciIyIorum.org/index.hIml on
0ownshiIIing 0ownunder see: hIIþ://
downshiIIing.naIuralinnovaIion.org/index.
html
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 131
23 AusIralian daIa Irom hamilIon and Vail
2ûû3. uS daIa Irom Ihe Verck |amily |und
þoll (1995), See also huneke 2ûû5, hamilIon
2ûû3, Schor 1998.
24 See Kasser 2ûû7, 8rown and Kasser 2ûû5,
6aIersleben eI al 2ûû8.
25 See Ior examþle: ArmsIrong and |ackson
2ûû8, 8edIord 2ûû7, Lvans and Abrahamse
2ûû8, Peþþer eI al 2ûû9, hobson 2ûû6.
26 |ackson 2ûû5b. S0C 2ûû6c.
27 On wage disparities see, for example Bradley
2ûû6. 0n discounIed long·Ierm cosIs see
SIern 2ûû7. 0n signalling sIaIus see Schor
1998, 8unIing 2ûû5. 0n Ihe ´shoþþing
generaIion´ see: NCC 2ûû6.
28 ‘Enormous shopping complex opens’. BBC
news, 3û
th
SeþIember 2ûû8. 0nline aI:
hIIþ://news.bbc.co.uk/1/hi/england/
london/76992û9.sIm
29 0I course iI is diIIculI Ior governmenI Io
do this, while economic stability relies on
increasing consumþIion! 6overnmenI iIselI is
deeþly conIicIed here and can only resolve
this by addressing the macroeconomics of
sustainability.
30 |ames 2ûû7, Aþþendix 1 and 2.
10 Governance for Prosperity
1 |rom an arIicle Ior Ihe huIIngIon PosI by
Peter Hall – Professor of European Studies
aI harvard and co·auIhor oI VarieIies oI
CaþiIalism. 0nline aI: www.huIIngIonþosI.
com/2ûû8/1û/13/global·economic·crisis·
li_n_134393.hIml
2 This question was evident for example in the
clash during one of the Redefining Prosperity
workshops between Jonathan Rutherford
(from the political left) arguing for more
sIaIe and |esse Norman (Irom Ihe þoliIical
right) arguing for less state. For a useful – and
still relevant – discussion of the ambivalent
political economy of the welfare state see
6ough 1979.
3 ´kedesigning global Inance´, The Economist
leader, November 15
th
2ûû8, þ13.
4 See 0IIer 2ûû6.
5 0n þarenIhood, see 0IIer 2ûû6, ChaþIer 14,
on savings raIes see ´Saving in Ihe world:
SIylited |acIs´. washingIon 0C: world 8ank,
available online aI: www.worldbank.org/
research/þrojecIs/savings/savinwld.hIm
0n consumer debI, see: CrediI Card lndusIry
|acIs and Personal 0ebI SIaIisIics (2ûû6·
2ûû7), online aI: www.crediIcards.com/
sIaIisIics/crediI·card·indusIry·IacIs·and·
þersonal·debI·sIaIisIics.þhþ
6 SchwarIt 2ûû6, 1999.
7 It also strikes the balance between novelty
and tradition differently.
8 Ihis Inding was IrsI demonsIraIed Iormally
by Ihe game IheorisI koberI Axelrod (1984).
9 See hall and Soskice 2ûû1. Ihe auIhors
also idenIiIed a grouþ oI counIries which
clustered together in a form they called
VediIerranean caþiIalism.
10 AbsoluIe levels oI unemþloymenI in 6ermany
are considerably higher Ihan in Ihe uK,
and have been since 6erman reuniIcaIion,
although they have been coming down
steadily over the last decade.
11 0aIa Ior uSA, 6ermany and 0enmark Irom
Ihe lL0 online sIaIisIical daIabase aI: hIIþ://
laborsIa.ilo.org/ Ihe uK daIa on Ihe lL0
database (as in several other international
daIabases) is woeIully ouI·oI·daIe. Irends
Ior Ihe uK are calculaIed using Labour |orce
SIaIisIics. 0nline aI: www.sIaIisIics.gov.uk/
SIAI8ASL
12 See e.g. LsIevet·Abe eI al 2ûû1, Culþeþþer
2ûû1.
13 See Kasser´s þresenIaIion Io a kLS0LVL
seminar aI Ihe universiIy oI Surrey, November
2ûû7. 0nline aI: www.surrey.ac.uk/kLS0LVL
14 For example, the unemployment rate in
Canada (a liberalised market economy) has
fallen slightly, at least until the end of the
period while unemployment in Sweden (a
coordinated market economy) has risen by
almost a quarter.
15 0nline aI: www.huIIngIonþosI.
com/2ûû8/1û/13/global·economic·crisis·
li_n_134393.hIml
16 For background on the evolution of social
behaviours see wrighI 1994, Sober and
wilson 1998, Axelrod 1984 .
17 This tension is what the historian Polanyi
(1942) called Ihe ´double movemenI´ oI
society.
18 ‘People power vital to climate deal’.
6uardian, 8
th
0ecember 2ûû8. 0nline aI:
www.guardian.co.uk/environmenI/2ûû8/
dec/û8/ed·miliband·climaIe·þoliIics·
environment
19 See Ior examþle, 0oyal and 6ough 1991,
helliwell 2ûû3, Layard 2ûû5.
132 ProsþeriIy wiIhouI 6rowIh` Sustainable Development Commission
11 Transition to a sustainable economy
1 From a speech on ‘shared prosperity’ that
Obama made in Janesville, Wisconsin,
|ebruary 13
th
2ûû8. www.barackobama.
com/2ûû8/û2/13/remarks_oI_senaIor_
barack_obam_5û.þhþ
2 See, eg, www.camecon.com/suiIe_
economic_models/mdme3.hIm
3 Sharing Ihe work is also an essenIial þre·
requisiIe Ior building a susIainable macro·
economy (see ChaþIer 8).
4 See Ior insIance: IuC Seminar reþorI. 0nline
aI: www.Iuc.org.uk/Ihe_Iuc/Iuc·15673·Iû.
cIm`regional-8/
Appendix 1
The SDC Redefining Prosperity Prejert
1 Redefining Prosperity (S0C 2ûû3) is
available on Ihe S0C websiIe: www.sd·
commission.org.uk
2 Securing the Future (0eIra 2ûû5) is
available on Ihe 6overnmenI´s susIainable
develoþmenI websiIe: www.susIainable_
development.gov.uk
3 A reþorI on Ihis work - Redefining Progress
(S0C 2ûû6a) - is also available on Ihe S0C
websiIe: www.sd·commission.org.uk
4 |ackson and Anderson 2ûû9.
Appendix 2
Towards a Sustainable Macro-Economy
1 Ihis is similar Io Ihe basic Iorm oI Ihe macro·
economic model in PeIer VicIor´s (2ûû8a)
study of the Canadian economy, although he
does not constrain the production function
indices Io sum Io 1.
2 Investment is shown in the table in each
target and condition dimension. In practice, it
is most likely that some targets (ecosystem
maintenance eg) will only be undertaken
under sþeciIc condiIions (e.g. þublic secIor,
social).
3 For example, the Surrey Environmental
LiIesIyle Vaþþing (SLLVA) Iramework is an
environmenIal inþuI·ouIþuI model IhaI can
be used to attribute the carbon emissions
(and/or resources) associaIed wiIh diIIerenI
Inal demand caIegories (0ruckman eI al
2ûû8, 0ruckman and |ackson 2ûû8, |ackson eI
al 2ûû7).
4 Ihe þauciIy oI basic uK l0 sIaIisIics is now
well·known. 0IIcial analyIical Iables Ior
Ihe uK have noI been þroduced since 1995,
in spite of a commitment by the Labour
6overnmenI Io þroduce Ihem annually Irom
2ûûû, and a requiremenI in Lu legislaIion
to submit updated analytical tables to
LurosIaI on aI leasI a Ive·yearly basis. Like
Ihe absence oI uþ·Io·daIe unemþloymenI
statistics in the ILO database, this failure of
Ihe uK 6overnmenI Io Iake essenIial social
and environmental indicators seriously is
positively embarrassing given its claims for
international leadership in sustainability.
Sustainable Development Commission ProsþeriIy wiIhouI 6rowIh` 133
Published by the Sustainable Development Commission © Varch 2ûû9
ArI 0irecIion Andy Long, Design 3RVLWLYH and Andy Long
Photography © Jerome Dutton (Cover and þages 15, 19, 29, 37, 67, 85, 93)
Andy Long © SDC (þages 47, 59, 75)
© Marcus Lyon/BioRegional (þage 1û1)

Prosperity without growth?
The transition to a sustainable economy

Professor Tim Jackson Economics Commissioner Sustainable Development Commission

Peter Victor. For all these things. my thanks are due to the SDC Secretariat for their boundless expertise and enthusiasm throughout the whose wealth of intellectual experience and unswerving personal support have been indispensable at every turn. my profound thanks. Their research is evident in the evidence base on which this report draws and I’m as grateful for their continuing intellectual which keeps RESOLVE going. The work has also inevitably drawn on my role as Director of the Research group on Lifestyles. In particular. Finally. attending workshops. offering critical commentary and reviewing various drafts of this document. David Woodward and Dimitri Zenghelis. Though written as an individually authored thinkpiece. Values and Environment (RESOLVE) at the University of Surrey.Acknowledgements This report was written in my capacity as Economics Commissioner for the Sustainable Development Commission at the invitation of the Chair. Special thanks are owed to all those who contributed directly to the Redefining Prosperity workshops. Waheed Saleem and Becky Willis – have been generous with their time. Jonathon Porritt. enthusiastic and talented team of people carrying out research in areas relevant to this report. this study builds on work from right across the Commission. it draws extensively from the work programme on Redefining Prosperity which has Hugh Raven. in Spencer. contributed extensively throughout the study and has been unreservedly supportive of my own work in this area for many years. Derek Wall. who provided the initial inspiration. Tim O’Riordan. . where I am lucky enough to work with a committed.

Contents Summary 1 Introduction 2 The Age of Irresponsiblity 3 4 The Dilemma of Growth 5 The Myth of Decoupling 6 Confronting Structure 7 Keynesianism and the ‘Green New Deal’ 8 Macro-economics for Sustainability 9 Flourishing – within limits 10 11 Steps towards a Sustainable Economy Appendix 1 Appendix 2 6 15 19 29 37 47 59 67 75 85 93 101 .

.

Foreword Every society clings to a myth by which it lives. But the current economic crisis presents us with a unique opportunity to invest in change. It hangs on our potential to participate fully in the life of society. It is evidenced by our satisfaction at work and our sense of shared meaning and purpose. end of the era of cheap oil. The reasons for this collective blindness are easy reliant on economic growth for its stability. March 2009 . To replace it with considered policy capable of addressing the enormous challenge of delivering a lasting prosperity. But we also stand in urgent need of a renewed sense This extraordinary ramping up of global economic activity has no historical precedent. The concept of governance itself stands in urgent need of renewal. To sweep society for decades. Protecting people’s jobs – and creating new ones – is absolutely essential. and hollowed out by a misguided vision of unbounded consumer freedoms. Tim Jackson Economics Commissioner Sustainable Development Commission. It has failed. It is the most urgent task of our times. It transcends material concerns. Delivering these goals may seem an unfamiliar or even incongruous task to policy in the modern age. The half a century ago. as human beings – within the ecological limits of create the conditions under which this is possible. It is present in the strength of our relationships and our trust in the community. to provide economic stability and secure people’s livelihoods. in its own terms. The role of government has been framed so narrowly by material aims. It has failed the two billion people the fragile ecological systems on which we depend for survival. the prospect (beyond the recent bubble) of steadily rising commodity prices. we avoid the stark reality of these numbers. prosperity goes beyond material pleasures. a return to business as usual is not an option. in desperate need of renewal. idealists and revolutionaries. spectacularly. Businesses struggle to survive. In these circumstances. but even for the richest nations where the cornucopia of material wealth adds little to happiness and is beginning to threaten the foundations of our wellbeing. People lose recession looms. But question it we must. Economic recovery is vital. If it continues to grow at the momentous challenge of stabilising concentrations these tasks with an economy that is fundamentally broken. The myth of growth has failed us. For at the end of the day. It’s totally at resource base and the fragile ecology on which accompanied by the degradation of an estimated For the most part. It resides in the quality of our lives and in the health and happiness of our families. Ours decades the pursuit of growth has been the single most important policy goal across the world. When growth falters – as it has done recently – politicians panic. The default assumption is that a better quality of life is undeniably needed. Questioning growth is deemed to be the act of lunatics. Prosperity for the few founded on ecological destruction and persistent social injustice is no foundation for a civilised society.

Its aim is not just to analyse the dynamics of an emerging ecological crisis that is likely to dwarf the existing economic crisis. That at least is the conventional wisdom. These are issues that can no longer be relegated to the next generation or the next electoral cycle. growth let much of the world’s population down. while The Age of Irresponsibility Recession throws this question into sharp relief. be less than a decade away. Higher incomes should mean better choices. Fairness (or the lack of it) is just one of several reasons to question the conventional formula for the resource implications associated with it. Wealth trickled up to the lucky few. But also to put forward the transition to a sustainable economy. In short. On the contrary. They demand attention now. collapsing biodiversity and global inequality have moved inexorably to the forefront of the international policy agenda over the last decade. the two things are intimately related. The growth imperative has shaped the architecture of the modern economy. This may seem an inopportune moment to question growth. urgent global income. Inequality is higher in the OECD a world constrained by ecological limits. this crisis These are some of the questions that prompted this report. this report challenges the assumption of continued economic expansion in rich countries need of economic development. an improved quality of life for us all. But things haven’t always turned out that way. It motivated stood at least partly responsible for the loosening of regulations and the proliferation of unstable was deliberately courted as an essential mechanism to stimulate consumption growth. countries were stagnant in real terms long before the recession. In the last quarter of a century the global economy has doubled. fuel security. richer lives. examination of the relationship between prosperity and growth. These impacts are already unsustainable. It is not. It acknowledges at the outset that poorer nations stand in 6 Prosperity without Growth? Sustainable Development Commission . Far from raising the living standard for those who most needed it. The market was not undone by rogue individuals or the turning of a blind eye by incompetent regulators. But what about a world in which nine billion people all aspire to the level sustainability – let alone the ecological sustainability – of the global economy. the result of isolated malpractice or simple failures of vigilance. boundaries between market and state and forced is already inconceivable. They belong in a long tradition of serious argues. It was undone by growth itself.Summary Economic growth is supposed to deliver prosperity. change.

sanctioned widely and with one of economic growth. The Dilemma of Growth Having this vision to hand doesn’t ensure that prosperity without growth is possible. is false in general. the possibility that humans can intriguing one. mechanism for preventing collapse. to contribute useful work. It’s perverse to talk about things going well where there is inadequate food and shelter (as is the case for billions in the developing world). Though formally distinct from rising prosperity. If there was irresponsibility it was systematic. In short. perhaps – that are essential to prosperity. Responses which aim to restore the status quo. Prosperity has vital social and psychological dimensions. Capabilities are bounded on the one hand by the scale of the global of the planet. any food at all is a blessing. But the idea that growth can deliver us from the crisis is also deeply problematic. an important component of prosperity is the ability to participate meaningfully in the life of society. market economies have placed a high emphasis on labour productivity. simply return us to a condition of freedoms. of more with better. as human wellbeing is replete with insights here.This model was always unstable ecologically. but as a range of ‘bounded capabilities’ from these material conditions. and to have a sense of belonging and trust in the community. There is evidence in support of each of these important symbolic role in our lives. in particular in poorer communities. To do well is in part about the ability to give and receive love. particularly if you’re tempted to eat it. But it is also plain to see that the simple equation of quantity with quality. to enjoy the respect of your peers. even a little extra might be considered a burden. even if they succeed in the short term. The age of irresponsibility is not about casual oversight or individual greed. There is some statistical correlation between economic growth and resilience – the ability to protect jobs and livelihoods and avoid collapse in the face of external shocks – really does matter. To ignore these natural bounds to fellow creatures – to an impoverished planet. allowing us to participate in the life of society. This view of prosperity has much in common The second is that economic growth is closely correlated with certain basic ‘entitlements’ – for health or education. there remains the possibility that continued economic growth is a necessary condition for a lasting underlying vision of a prosperity built on continual material impact on the environment. It offers the best prospect we have for a lasting prosperity. It has now proven itself unstable economically. The third is that growth is functional in maintaining economic and social stability. Basic capabilities are threatened when economies collapse. But crucially this also means that fewer people are needed to produce the same goods from one year to the next. Prosperity has undeniable material dimensions. In fact. It would be foolish to think that it is easy to achieve. Conversely. In particular. The failure of this strategy is disastrous in all sorts across the world. of prosperity go way beyond material sustenance. But it should not be given up lightly. stuffed with overwhelming choice. Sustainable Development Commission Prosperity without Growth? 7 . Continuous improvements in technology mean that more output can be produced for any given input of labour. When you’ve had no food for months and the harvest has failed again.

but they do so more slowly than the in absolute terms is called ‘absolute decoupling’.offset labour productivity there isn’t a problem. bauxite. Substantial economic investment will be needed to achieve anything close to these improvements. cement) has economies build up physical infrastructures. socially just. simplistic assumptions that to stabilise the climate and protect against resource scarcity are nothing short of delusional. Those who promote decoupling as an escape route from the dilemma of growth need to take a closer look at the historical evidence – and at the basic arithmetic of growth. People lose their jobs. Resource productivity in the use of some structural materials (iron ore. leading to accelerating resource throughput. The scale of improvement required is daunting. the ecological implications of a truly shared prosperity become even more daunting to contemplate. ecologically sustainable scenario of continually growing incomes for a world of nine billion people. This evidence leads to an uncomfortable and looks like an impossibility theorem for a lasting prosperity. Relative decoupling refers to a situation where may still rise. Unless growth in the richer nations is curtailed. But ignoring the implications won’t make them go away. The truth is that there is as yet no credible. between ‘relative’ and ‘absolute’ decoupling. In this context. There are rising global trends in a number of other resources – a range of different metals and several in some cases. carbon intensities (for example) would have to fall on average by to prevent collapse. Lord Stern has argued that stabilising atmospheric require even higher levels of investment. global carbon intensity would need to be only six The Myth of Decoupling The conventional response to the dilemma of growth with continually declining material throughput. public spending is curtailed and the ability to service base year). even relative decoupling isn’t happening. The energy required to produce a unit of economic output declined by a third in the last thirty years. for one kilo per dollar of economic activity to just under Evidence for overall reductions in resource throughput (absolute decoupling) is much harder intensity noted above were offset by increases in the scale of economic activity over the same scenarios to achieve an equitable distribution of incomes across nations. With less money in the economy. than it is today. The failure to take the dilemma of growth seriously may be the single biggest threat to sustainability that we face. output falls. decoupling has a familiar logic and a clear appeal as a solution to the dilemma of growth. capitalist economies are supposed to be good at. But if the economy doesn’t grow. Prosperity without Growth? Sustainable Development Commission 8 . economic activity is to remain within ecological limits. Evidence for declining resource intensities (relative decoupling) is relatively easy to identify. Factor material and process substitution and ecological protection and the sheer scale of investment 1 De-growth (décroissance in the French) is an emerging term for (planned) reductions in economic output. there is a downward pressure on employment. In a world of nine billion people. all aspiring to a the average EU income today.

novelty has always carried important information about status. to innovate – to design. of this demand is essential. a ‘green stimulus’ is an eminently sensible response to the economic crisis. Chapter 7 summarises some of the more interesting variations on this theme. is what drives economic growth forwards.The ‘Iron Cage’ of Consumerism In the face of the evidence. Institutions are skewed towards the pursuit of a materialistic consumerism. But the continual production of novelty would be consumption of novelty in households. and ultimately a pathological system. Since this condition is unsustainable. In particular. it is Sustainable Development Commission Prosperity without Growth? 9 . Chapter 6 exposes two interrelated features of modern economic production and consumption of novelty. The economy itself is dependent on consumption growth for its very economy to a condition of continuing consumption growth. It collapses when either of these stalls. The predominant spending and tax cuts to stimulate consumer demand. for a variety of reasons. It’s an anxious. Targeting that investment infrastructures and ecological protection offers freeing up resources for household spending and productive investment by reducing energy and material costs reducing our reliance on imports and our exposure to the fragile geopolitics of energy supply employment in the expanding ‘environmental industries’ sector making progress towards demanding global carbon reduction targets protecting valuable ecological assets and improving the quality of our living environment for generations to come. It offers jobs and economic recovery in the short term. In short. Recognising the existence. it is fanciful to suppose that ‘deep’ resource and emission cuts can be achieved without confronting the nature and structure of market economies. and our dreams of the good life. The restless desire of the consumer is the perfect complement for the restless innovation of the entrepreneur. according to the economist Joseph Schumpeter. The ‘language of goods’ allows us to communicate with each other – most obviously about social status. But it also allows us to explore our aspirations for ourselves and our family. Perhaps the most telling point of all is the Policy responses to the economic crisis are more or to how this should be achieved. better or cheaper products and services. survival. energy security and technological innovation in the medium term. but also about and receiving gifts for example – about our feelings for each other. The ‘iron cage of consumerism’ is a system in which no one is free. Firms who fail in this process risk their own survival. relentless pursuit of novelty creates an anxiety that can undermine social wellbeing. The system remains economically viable as long as liquidity is preserved and consumption rises. This process of ‘creative destruction’. It is intimately linked to the symbolic role that material goods play in our lives. Individuals are at the mercy of social comparison. Firms must innovate or die. of novelty in households. Economic recovery demands investment. and a sustainable future for our children in the long term. produce and market not just cheaper products but newer and more exciting ones – is vital. Taken together what is needed to drive growth forwards. and understanding the nature. But at one level it works. It highlights in particular the emerging international consensus around a very simple idea. Keynesianism and the Green New Deal by producers for newer.

capable of being maintained by a low rate of material throughput that lies within the regenerative and assimilative capacities of the ecosystem. But crucially. One of these suggests that it is possible. The role of investment is particularly crucial. It will have to be ecologically and socially literate. to stabilise economic output. The starting point must be to identify economy. under certain assumptions. sustainability must abandon the presumption of growth in material consumption as the basis for economic stability. there will be important differences in the way that the conventional The balance between consumption and investment. even within a fairly conventional time policies in this model. sustainable technologies and ecological maintenance and protection. establish sustainable levels of resource throughput and emissions. Larger 10 Prosperity without Growth? Sustainable Development Commission . but possible. In short there is an urgent need for one. These investments will operate differently from have to be judged and managed accordingly. or to the care of others. economic model in which these conditions can be achieved. the nature of productivity improvements.protecting both people’s jobs and their capabilities be supplemented by conditions that ensure distributional equity. to their family. and provide for the protection of critical natural capital. It shows that there may only be a narrow ‘sustainability window’ through which the economy can pass if it is to make this transition successfully. terms of a constant stock of physical capital. There is no clear model for achieving do any of the existing models account fully for the variables such as resources and emissions. This task is far from simple – mainly because of the way in which material goods are so deeply implicated in the fabric of our lives. to prevent rising unemployment. In operational terms. creativity and meaning that lie outside the realm of the market. this window is widened if more of the national income is allocated to savings and investment. These conditions will still include a strong requirement for economic stability as the basis for Flourishing – within Limits Fixing the economy is only part of the problem. call in more detail. Macroeconomics for Sustainability There is something odd about the modern refusal to countenance anything but growth at all costs. with consumerism and rising concern over the ‘social recession’ have prompted a number of initiatives aimed at improving wellbeing and pursuing an ‘alternative hedonism’ – sources of identity. vital. Early would have to stop. already those who have resisted the exhortation to ‘go out shopping’. preferring instead to devote their time to less materialistic pursuits. economic implications of a shift away from fossil fuels. ending the folly of separating economy from society and environment. Small scale ‘intentional’ communities (like the Findhorn community in Scotland or Plum Village in France) are exploring the art of the possible. It presents results from two of sustainability. economics for sustainability is not only essential. Sustainability will need enhanced investment in public infrastructures. the split between the public and the private sector spending.

buy locally produced food (and so on) will either go unheard or be rejected as manipulation for as long as all the messages about high street consumption point in the other direction. Sustainable Development Commission Prosperity without Growth? 11 . structural requirement for growth will simultaneously free government to play its proper role in delivering interests. The second must be to establish new structures that provide capabilities meaningfully and creatively in the life of society – in less materialistic ways. it has a role in ‘securing the future’ – protecting In this context. penalising ‘good’ environmental choices and making it all but impossible. This drift is not entirely uniform across all countries. walk a little more. the state is society’s commitment device. These initiatives don’t appeal to everyone. simplistic exhortations for people to resist consumerism are destined to failure. giving us clues about the potential for more mainstream social change. It also undermines the unproductive status competition. quite literally. hand. holiday at home. How is a shared prosperity to be achieved in a individual to be balanced against the common Particular questions arise about the role of economic stability. even for Governance for Prosperity of governance – in the broadest sense of the word. par excellence. Flourishing within limits is a real possibility. different ‘varieties of capitalism’ place more or less varieties have a structural requirement for growth. in opposition to the structures and values that dominate society. government has an essential role to play in protecting the ‘commitment devices’ that prevent myopic choice History suggests a cultural drift within government towards supporting and encouraging a materialistic and individualistic consumerism. turn down the thermostat. that’s needed to boost high street sales. For example. On the other hand. according to this evidence. For this reason. But they do provide an invaluable learning ground. structural change must lie at the heart of any strategy to address the social logic of depends on economic growth. For better or worse. It explores why people may turn out both to be happier and to live more sustainably when they favour intrinsic goals that embed them in family and community rather than extrinsic ones which tie them into display and social status. drive a little less. and rely directly or indirectly (eg in export markets) on consumerism to achieve this. The advantages in terms of prosperity are likely public goods will provide lasting returns to the nation’s prosperity.social movements (such as the ‘transition town’ movement) are mobilising people’s desire to live more sustainably. Urging people to insulate their homes. government will have an incentive to support social structures that undermine commitment and reinforce materialistic. put on a jumper. The narrow pursuit of growth represents a horrible distortion of the common good and of underlying human values. those at the forefront of social live. These structures represent a culture of consumption that sends all the wrong signals. and the principal agent in protecting that embraces this role is urgently needed. the day.

But there is now a unique opportunity for government – by pursuing these steps – to demonstrate economic leadership and at the same time to champion international action on sustainability. But many of them sit within longer and deeper debates about sustainability. analysis in this report. progress towards sustainability remains could take now to effect the transition to a sustainable respecting ecological limits. ecological taxation and social wellbeing. coherent foundation for these policies and help strengthen the hand of government in taking them forward. in spite of its best of governance – is essential. no longer predicated on relentless consumption economies of the Western world. For at the moment. of them connect closely with existing concerns of government – for example over resource scarcity. prosperity without and ecological necessity. climate change targets. This process must start by developing also begin to redress the perverse incentives and damaging social logic that lock us into unproductive status competition.The Transition to a Sustainable Economy efforts. 12 Prosperity without Growth? Sustainable Development Commission .

6. Tackling systemic inequality Respecting Ecological Limits the planet’s ecosystems. There is an urgent need to establish clear resource and environmental limits on economic activity and develop policies to achieve them. For further details see pages 103-107 Sustainable Development Commission Prosperity without Growth? 13 .Box 1: Building a Sustainable Macro-Economy Protecting Capabilities for Flourishing The social logic that locks people into materialistic consumerism is extremely powerful. Three policy suggestions contribute to that task. but detrimental ecologically address this challenge.

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1 Introduction “I think all of us here today would acknowledge that we’ve lost that sense of shared prosperity.” Barack Obama March 20081 .

Rising prosperity is not the same thing as economic growth. impoverishing both present and future generations.7 Finally. But prosperity is not synonymous with income or wealth. The broad aim of this report is to explore that relationship – between prosperity and sustainability – in more detail. The continuing disparities between rich and poorer nations are unacceptable from a humanitarian point of view and generate rising social The concept of economic prosperity – and the elision of rising prosperity with economic growth – is a modern construction. the continued pursuit of economic growth (beyond a certain point at least) does not appear to advance and may even impede human happiness. our friends and our community are in dire straits. There is also a sense in which individual prosperity is curtailed in the presence of social calamity. Perhaps most relevant here. depletion of oil and the chronic loss of biodiversity are a few of these material concerns. Sustainable Development Commission 16 . It’s understood that this sense of things going well includes some notion of continuity. But as Sir high when the crunch comes. the material implications of economic growth lead to a whole. prosperity commentators believe it could be even sooner. it can detract from it in various ways. oil price hikes have already shown they have the potential to destabilise the global economy and threaten basic securities. This response has an appealing address the plight of the one billion people across the price of a small cappuccino in Starbucks. It is a construction that has come under considerable criticism. On the contrary. and the costs of economic growth are unevenly distributed. with a rising population that is expected to exceed One response – perhaps the most familiar one – is to cast prosperity in economic terms and to recommend a continual rise in national (and global) economic output. Though prices fell sharply in the following months. Wanting things to go well is a common human concern. i Peak oil is the term used to describe the point at which global oil output reaches a peak. Fears a barrel. Until quite recently. Economic growth. That things are going well for us personally is of little consolation if our family. Early investment in the transition to a low carbon society is vital to avoid economic collapse later on. claim its critics. with a corresponding increase in people’s incomes.6 Beyond these ecological concerns lie social ones.i we can probably keep the economy going for a while even as we head towards the cliff. In both these senses – of caring about the future and of caring about others – prosperity has something in common with the concept of sustainability. Climate change. doesn’t always increase our prosperity.in the Latin) our hopes and expectations (speres). Talk of a growing ‘social recession’ in advanced economies has accompanied the relative economic success of the last decade. In the second case.Prosperity is about things going well for us – in accordance with (pro. Particular urgency pertains to the twin challenges of climate change and ‘peak oil’. tomorrow. the threat of peak oil hasn’t gone away. before entering a terminal decline. the depletion of natural resources and the degradation of the environment. There is a natural tendency to be at least partly concerned about the future.

But there are several reasons not to postpone this inquiry until the economy looks brighter. not by disaster’. To invest in renewable technologies that will reduce both carbon Clearly such a prospect is problematic in the poorest countries. But some of them may even get worse. Speaking on problems of climate change. But if the current economic crisis really does indicate (as some predict) the end of an era of easy growth. Restructuring is inevitable. If economic growth and rising prosperity are not the same thing. the central question addressed in this report is undiminished. In short. this report challenges the assumption of continued economic expansion in rich countries and without Some would say it’s ironic to be asking such questions when economic stability is itself under threat and the world struggles with global recession. To invest in the jobs and skills that these tasks demand. It is not the aim of this study to dwell on them in detail. should we not perhaps think about doing without growth. Perhaps most telling of all is the clear window of opportunity – and overwhelming imperative – that now exists for change. resource depletion. Some may get better. has argued that our overriding challenge is to build economies which are ‘slower by design. a more equitable form of In short. In the face of economic collapse. Targeting these interventions towards sustainability makes obvious sense. one of the contributors to the SDC’s Redefining Prosperity project. at least The second is that the current state of the economy and the concerns of this report are not unrelated. Rather the intention is to turn the relationship between rising prosperity and economic growth on its head. This interrelatedness has not gone unnoticed amongst world leaders. Prosperity without growth is a very useful trick to have up your sleeve when the economy is going down the pan. still characterised by ‘islands of prosperity’ within ‘oceans of poverty’. Sustainable Development Commission 17 . growth – climate change. Raising deep. Public investment is essential. for example – are unlikely to go away. soaring food prices and development as ‘deeply interconnected’ crises that need to be addressed simultaneously. commodity prices in the relationship between growth and prosperity. temporarily. That at any rate is the intention of the following pages. The economist Peter Victor. are a legitimate focus for our continued hopes and a more sustainable. social literature on sustainability (and on happiness). there is no better time to make progress towards a more sustainable society. and since growth can damage both people and planet. ‘That is not what to dig deeper into the global credit crisis. structural questions about the nature of prosperity in this climate might seem inopportune if not insensitive. then the concerns of this report are doubly relevant. just because growth slows down in the advanced economies. create a fairer world. It has haunted debates on sustainable development may be the best possible time to make some clear progress in answering it. governments have an undisputed duty to intervene. But the conditions of living in environmental limits.These three related arguments – ecological. To initiate the transition to a sustainable economy. social recession. Whatever the state of the economy.

18 Sustainable Development Commission .

And where there has been irresponsibility.” Gordon Brown . we must now clearly say: the age of irresponsibility must be ended.2 The Age of Irresponsibility “This has been an age of global prosperity. It has also been an era of global turbulence.

Why regulators bring down monolithic institutions. margins and reducing discretionary spending. Commerce would have failed en masse. Some highlighted the unmanageability of the ‘credit default swaps’ used to parcel up ‘toxic debts’ and hide them from the greedy speculators and unscrupulous investors intent on making a killing at the expense of vulnerable institutions. In short. Homes would have been lost. in this view. The most prominent villain was taken to be subprime lending in the US housing market. nations. Why loans were offered to people who couldn’t afford to pay them off. It was excused on the grounds that the alternative was simply unthinkable. in the context of the huge disparities in outweigh the costs and scrutinises the assumption that growth is essential for prosperity. underwrite threatened savings and recapitalise failing banks. Those who resisted the US’s reading through Congress appeared oblivious to 20 Sustainable Development Commission . across the world had committed a staggering $7 In search of villains The causes of the crisis were complex. Entire nations would have been bankrupted.The conventional formula for achieving prosperity relies on the pursuit of economic growth. Investment has stalled and unemployment is rising countries) are faced with the prospect of a deep and markets will suffer for some considerable time to Political response to the crisis provides us with some failure of vision with failure of responsibility. Higher incomes will increase wellbeing and lead to prosperity for all. those responsible for the crisis at the expense of the taxpayer. it asks: is it possible to have prosperity without growth? This question was thrown into sharp relief during the course of writing the report. entire economies. led to a massive and completely unpredictable global recession. Livelihoods would have been destroyed. Why unsecured debt had become so dominant a force in the turned a blind eye or actively encouraged this ‘age of irresponsibility’. The banking crisis disaster and shook the dominant economic model between market and state and forced us to confront social or environmental – sustainability of the global economy. The humanitarian cost of failing to save the banking system would have been enormous. It questions whether economic growth is still a legitimate goal for rich countries like the UK. This report challenges that formula. risky assets.

dollar bailout by the US government. these became widely accepted as inevitable and necessary responses to the crisis. The capping of executive remuneration was ‘performance related’. In the language of the media. In fact. There was even a grudging acceptance of the need to cap executive in the face of huge public outcry over the bonus culture than through recognition of a point of principle. governments around the world tried to do. by the time the World on the basis that shares would be sold back to the private sector as soon as reasonably possible. But the harsh reality was that politicians had no choice but to intervene in the protection of the banking sector. In Chapter 7 we explore some of these ‘stimulus packages’ in more detail. justifying these on the basis that they helped to ‘attract and motivate’ the best people. The appropriate goal of policy at that point in time was savers. to encourage investors. Wall the modern economy hangs on the health of the to its survival would have been unthinkable. This prompted a further round of economic recovery consumer spending. protect jobs. They were only partially successful – halting an immediate slide into chaos but failing to avert the prospect of a deep recession across the world. designed to facilitate the restoration Figure 1 Global Commodity Prices: Jan 2003 – Feb 20094 500 450 400 350 Jan 2003 = 100 300 250 200 150 100 50 0 Jan 2003 JUL 2003 Jan 2004 JUL 2004 Jan 2005 Jul 2005 Jan 2006 Jul 2006 Jan 2007 Jul 2007 Jan 2008 Jul 2008 Jan 2009 Food Oil Metals Figure 1: Global Commodity Prices: Jan 2003 – Feb 2009 Sustainable Development Commission 21 .understandable indignation over the unjustness of the solution. and stimulate economic growth again. It was abundantly clear. to assist debtors. huge executive bonuses were still interventions.

Extraordinary though some of these interventions were. it is generally agreed that the unprecedented was fuelled by a massive expansion of credit and Figure 1: Global Commodity Prices: Jan 2003 – Feb 2009 Figure 2 UK Consumer Debt and Household Savings 1993–20088 12% Personal debt 10% Savings as % of disposable income 100% Personal debt as % of GDP 120% 8% 80% 6% 60% 4% Household savings ratio 2% 40% 20% 0% 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 -2% 0% -20% Figure 2: UK Consumer Debt and Household Savings 1993-2008 Jan 2009 . on the other hand. By pumping equity into the banks and restoring was the rise and rise of consumer indebtedness. Their ultimate goal was to protect the pursuit of economic growth. The savings rate questions it. Indeed it’s a feature of the system of debt that for one part of the global economy to be highly indebted. 350 Jan 2003 = 100 300 the single most dominant feature of an economic 250 and political system that led the world to the brink of 200 disaster. Over the course of more than a decade consumer debt served as a deliberate mechanism for freeing personal spending from wage income and allowing consumption to drive the dynamics of growth.6 the US were particularly vulnerable to the problem. Though the rate of growth slowed down – Jul 2006 Jul 2007 Jan 2007 Jan 2008 Jul 2008 the cumulative personal debt still stood at almost year running. had The labyrinth of debt In fact. Renewed growth was the 450 400 dynamic. with the former typically showing higher levels of consumer indebtedness than the latter. Throughout the crisis. the savers were Metals largely in the emerging economies.7 Savings. The growth imperative has shaped the architecture of the modern economy. Their declared aim was clear. this has 500 continue at all costs. Food It stood at least partly responsible for the loosening 100 the50 proliferation of unmanageable (and unstable) 0 JUL 2003 JUL 2004 Jul 2005 Jan 2003 Jan 2004 Jan 2005 Jan 2006 minutes. It motivated 150 Oil called ‘liberal’ and ‘coordinated’ market economies’. they were largely regarded as temporary free market economy. another part must be saving hard. During st Century.

Sustainable Development Commission 23 . For any given interest rate. National Debt The national (or public sector) debt is the money that government owes to the private sector. credit accounts and mortgages). Households. reducing the debt is only possible when the public sector runs a surplus (i. Particular pressure is placed on an economy unable to attract investors willing to support its spending and unable to liquidate its assets to compensate for this. Personal Debt house values collapse. these debts are quite different and have different policy implications. Liabilities are no longer balanced by assets. it spends less than it compromising public services – depends heavily on future government revenues increasing.g. External debt The total debt held outside the country by government. The sustainability of this debt depends on a complex mix of factors.Box 2: Debt in Perspective Lending and borrowing money is (in normal times at least) a fundamental feature of the modern economy (see Chapter 6).e. business and households is called the external debt. the form of both assets and liabilities (including the currency in which they are held) and the relative strength of domestic currency on the international market. a higher level of debt places a greater demand on people’s income to pay off the interest and stop the debt accumulating. When a government households. through interest accumulated on the debt. national debt and the gross external debt. Though all are concerned with money owed. This can happen in debt in a shrinking economy is a recipe for disaster. When this is compounded (as in a recession) growth – in this case growth in the housing market. through loans. The following paragraphs set out the key elements of each and their relevance for economic sustainability.g. companies and governments all participate both in lending (e. Financial debts (sometimes indeed the nation as a whole. including the extent to which it is balanced by external ‘assets’. through savings and investments) and in borrowing (e.

Far from delivering prosperity. the culture of ‘borrow and spend’ ends up detracting from it. This includes money saved by advantages. This can vary widely across nations. By the Inevitably. Figure 3 The UK Net Public Sector Debt: 1993–200812 60% Projected on basis PBR 2008 forecast UK Treasury ceiling on national debt 50% 40% % of GDP Includes the cost of financial sector interventions 30% Increase largely due to higher spending on health and education 20% 10% 0% 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Figure 3: The UK Net Public Sector Debt: 1993-2008 24 16 Sustainable Development Commission . This inevitably exposes the nation to the volatility of international markets. But when this strategy becomes unstable – result of the increased borrowing needed to protect the banks and fund economic recovery. It can be thought of as part of the ‘social the money a country borrows from outside its own boundaries.People are encouraged into debt by a complex mix of factors including (Chapter 6) the desire for social status and the drive to boost high street sales. that risk falls mainly on those who are most vulnerable already – the lower income groups growth. There are different kinds of indebtedness at is the national – or public sector – debt which measures how much government owes to the private sector. Public sector debt is not in itself a bad thing. It simply to the private sector. calculations had public sector borrowing rising whole.

the severity of the current crisis. Even those 0% retained strong manufacturing sectors. During the last quarter Figure 3: The UK Net Public Sector Debt: 1993-2008 Figure 4 Gross External Debt across Nations (2007/8)13 16 Absolute value of external debt ($ trillion) External debt as multiple of GDP 12 14 10 8 6 4 2 0 US UK Germany France Ireland Japan Norway China India Figure 4: Gross External Debt across Nations (2007/8) Sustainable Development Commission 25 . 40% % of GDP These external liabilities were set off – at least in part – by a higher than usual level of external 30% levels of consumer debt and the second highest level Includes the cost of external debt in the world were of financial sector not just accidental interventions policies to increase liquidity and boost spending. The Increase largely due to higher spending casualty on health and education 20% of the collapse. External debt varied 60% free market perspective but it was considerably more progressive than simply pumping in cash or purse. 10% for any country to escape this recession. largely avoided consumer debt and delivered 2009 public 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 strong 2010 the banks may have been suboptimal from a sector surpluses – suffered. On the contrary. By the 50% crisis was the extent to which economic policy over level of external debt in the world after the US. UK Treasury ceiling on national debt Projected on basis PBR 2008 forecast half times in the space of just two decades.Some countries may be better placed than others to weather this volatility.

’ stability and avoid recession.underlines the point that these interventions were liquidity were made with a view to expanding the Ironically. ‘When the music stops. Or even through the turning of a blind eye by less than vigilant regulators. The enemy within Securitisation of mortgage debts (for example) was championed at the highest level. In The Age of Turbulence defends the practice explicitly. But a strategy that ended up replacing public debt with private debt was always a risky one. In short. there were markets was championed under monetarism as the best way to stimulate demand. The commodity price ‘bubble’ that developed over seems likely that the very high prices attributed to markets hadn’t worked as expected. the market was not undone by isolated practices carried out by rogue individuals. In other words. in terms of liquidity. But this only 26 Sustainable Development Commission . It was undone by growth itself.’ The realisation that the credit crisis and the ensuing recession were part of a systemic failure in the current economic paradigm is reinforced by an understanding of the resource and environmental implications of economic growth. When credit collapsed and consumer spending slowed everywhere. ‘it is easy to forget that making it easier for households and businesses to get credit. you’ve got to get up and dance. these economies built their stability not on domestic consumption growth but on consumption growth abroad. deregulation contributed to economic growth. the message from this chapter is that the ‘age of irresponsibility’ is not about casual oversight or individual greed. The economic crisis is not a consequence of isolated malpractice in selected parts of the banking sector. and with one clear aim in growth. Loosening restraints on the Just how complicated and promoting the securitisation of debts through interventions. If there has been irresponsibility. arguing that ‘transferring risk away from… highly leveraged loan originators can be critical for economic stability. In The New Paradigm for Financial Markets Soros traces the emergence of what he calls a of economic policies to increase liquidity as a way of stimulating demand. ‘But as long as the music is playing. The monetarists may have been reacting against the levels of public dalliance in the banking sector. especially in a global environment. sanctioned from the top. things will be complicated. just before the bubble burst.’ the CEO of Citibank reportedly remarked. spearheaded by Reserve. We’re still dancing.’ Economist leader article. In fact. they achieved growth by exporting to countries like the US and spend rather than save. Unable to persuade their own consumers to spend rather than save. Their overriding aim was to promote economic growth. it has been much more systemic. the roots of the crisis lie at least in part in a concerted effort to free up credit for economic expansion across the world.

Environmental factors. The material and environmental impacts of growth were paramount in prompting this inquiry. But this was never sustainable in the trend in commodity prices that cannot entirely be explained away in these terms. The natural rate The truth is that we have failed to get our economies this reason. Sustainable Development Commission 27 . between food and biofuels clearly played a part in are intimately linked to accelerating environmental stocks. This blindness is as evident in our inability to protect natural resources and curtail ecological damage. declining water supplies and degraded soils. also played a key part and will inevitably continue to do so as the economy recovers. responses to the crisis which aim to restore the status quo are deeply misguided and doomed to failure. The term blindness to the limitations of the material world. Our ecological debts are as unstable as our the relentless pursuit of consumption growth.To protect economic growth we have been prepared to countenance – and have even courted – unwieldy capacity in the face of high demand. Concerns around peak oil and gas are already gathering momentum. resource and land scarcities. Prosperity today means nothing if it undermines the conditions on which prosperity Economic expansion in China and the emerging economies has accelerated the demand for fossil tomorrow is already here. these are necessary to deliver security and keep us from collapse.

28 Sustainable Development Commission .

” Redefining Prosperity . Prosperity can only be conceived as a condition that includes obligations and responsibilities to others.3 Zia Sardar November 20071 “The good life of the good person can only be fully realised in the good society.

‘as a condition that includes obligations and responsibilities to others’.6 In fact. To do well is in part about the ability to give and receive love. One of Sen’s concepts was characterised by the term opulence the term utility capabilities for flourishing. This doesn’t necessarily mean that prosperity is the same thing as happiness.’ he writes. 30 Sustainable Development Commission . there are some strong competing visions of prosperity. Redefining Prosperity from the study was that. There are differences between these approaches. Islamic commentator Zia Sardar makes this point very clearly in his contribution to Redefining Prosperity. to contribute useful work. But even secular understandings accept that the human psyche craves meaning and purpose in life. Perhaps the Sen. ‘Prosperity can only be conceived. these traditions suggest. The same principle is enshrined in the Quaker’s Moral Economy Project. when things go well and unhappy when they don’t. Some approaches suggest a ‘transcendental’ need in human beings. Some perspectives – particularly from the wisdom traditions – add in an important moral or ethical component to prosperity. there are at least three different candidates on offer here as concepts of prosperity. In short. It’s useful to distinguish carefully between them. Security in achieving these aims is also important. hangs on the prosperity of those around me. But the connection between the two provides a useful link into recent policy debates about happiness and subjective wellbeing. perspectives accept that prosperity has material dimensions. there is clearly some connection between prosperity and happiness. an important component of prosperity is the ability to participate freely in the life of society. and to have a sense of belonging and trust in the community. Something more is coherent notion of prosperity that doesn’t rely on default assumptions about consumption growth. beyond the narrow economic framing of the question. Some of others from economic history. who set out the distinctions very clearly in clear that something more than material security is vital social and psychological dimensions.The prevailing vision of prosperity as a continually expanding economic paradise has come unravelled. It is perverse to talk about things going well if you lack the basic material resources required nourished or materials for clothing and shelter. Some draw on religious or ‘wisdom’ traditions. as their’s does on mine. ecological degradation and the spectre of resource scarcity compound the problems system aren’t good enough. to enjoy the respect of your peers. There is an interesting overlap between components of prosperity and the factors that are known to and yet still to reduce their material impact on the environment. For the more religious perspectives this may entail belief in some higher power. Perhaps it worked better when economies were smaller and the world was less Climate change.

is false Pakistan Mexico Even economic Czech is not the same thing as satisfaction. even a little extra might be considered a burden. When with overwhelming choice. Opulence Spain China Ghana Chile Nigeria more with better. Rep Portugal Bangladesh Poland theory recognises India limitation. On the contrary. The more we have the better off we are. Dom. as many people have noted. corresponds to a conventional understanding that prosperity is about material satisfactions. any food at all is a blessing. of with Quantity is not the same thing as quality. Rather than focusing on the sheer South Africa volume of commodities available to us. 60 Macedonia Peru The sense that Azerbaijan can sometimes be less more Latvia provides the beginnings of an understanding of the Though it is easy enough to articulate this difference. version relates prosperity to the satisfactions which commodities provide.Figure 5 7 Work fulfilment 2% Community and Friends 5% Religious/spiritual life 6% Money and financial situation 7% Don’t know/other 1% A nice place to live 8% Partner/spouse and family relationships 47% Health 24% Prosperity as opulence Figure 5: Factors influencing subjective wellbeing (happiness) When you’ve had no food for months and the harvest has failed again. more of them provide no further joy at all. It also offers a strongLithuania humanitarian argument for Romania redistribution. in this view. Opulence refers to the ready availability and steady throughput 100 prosperity. this second Slovakia Hungary Croatia usually provides less additional satisfaction. is sated. Ireland Finland New Zealand Australia Britain Belgium N. say. Mean of Percent Happy and Percent Satisfied with Life as a Whole The logic 90 abundance as the basis for doing well of Puerto Rico nonsensical to describe as Sweden desirable orNorway satisfying. Once my appetite for strawberries. Sen’s in general. they may even make me feel ill. 40 Ukraine Russia Belarus Sustainable Development Commission Moldova 31 9000 9000 17000 21000 25000 30 1000 5000 . particularly if you’re tempted to eat it. Ireland Netherlands Iceland Denmark Switzerland United States material commodities to meet the necessities of life Prosperity as utility Italy Colombia Canada France South Korea Taiwan Japan was a priority. The ‘diminishing Republic this second characterisation of prosperity – as utility – Turkey Slovenia marginal 70 utility’ of goods (indeed of income itself) recognises this. Bulgaria Armenia 50 Georgia Estonia relate to satisfaction. But it is pretty straightforward to see Austria Venezuela 80 Philippines Brazil Uruguay that this simple equation of quantityArgentinaquality.

It is only after an income satisfaction score barely responds at all even to are practically impossible to answer. income levels. In the language of economics. marginal utility (measured here as subjective wellbeing) diminishes rapidly at higher income levels. the uses to which we put material commodities are social or psychological in nature rather than purely material. In this way. reported life satisfaction has remained more or less unchanged in most advanced economies over critics. There’s a particularly important complexity here. total spending is These data underline one of the key messages of this report. it measures the total spending through the economy. measure of wellbeing. at very low incomes there is a huge spread in terms of life satisfaction. changes in the asset base which affect our future consumption possibilities. satisfaction paradox is largely a malaise of the advanced economies. Today. than doubled. Increasingly. Denmark.as basic as food doesn’t follow a simple linear pattern in which more is always better. By contrast. But there is a strong case for the developed nations to make room for growth in poorer countries. It is in these poorer countries that growth really does make a difference. a sense of belonging. 32 Sustainable Development Commission . But the case is deeply problematic at best. In the immediate growth. In their contributions to Redefining Prosperity. Real income per head has tripled in the US themselves very happy has barely increased at all. but the general Broadly speaking. perhaps even meaning and a sense of hope (Chapter 6). Economics equivalent to the price people are prepared to pay for them in freely functioning markets. One or other – perhaps both – of these measures appears not to be doing its job properly. Obvious limitations include household or voluntary labour) or negative utilities (externalities) like pollution. There a wellbeing measure. can be turned on its head here. There is no case to abandon growth universally. It casts utility as the monetary value of market exchanges. experience. Some have argued that the underlying concept of utility as exchange value is itself fundamentally measure utility we can conclude that there is a problem somewhere. In richer countries the returns on further growth appear much more limited. Sweden. consumer goods and services increasingly furnish us with identity. Critics point to the ‘positional’ expenditures even though these don’t contribute additionally to wellbeing.

Here we come close to the crux of the matter. Whatever else we may satisfaction. Ireland Ireland New Zealand Netherlands Finland Sweden Australia Britain Italy 80 Brazil Argentina China Ghana Mexico Nigeria Dom. In one interpretation there is no limit to the satisfaction that humans can achieve. This was a point highlighted least) unbounded. equating prosperity with happiness as there are for not equating prosperity with exchange values. we appear to be no further forwards. It can (politicians hope) go on on the other hand is a bounded scale. The other is more circumspect in its view of the human psyche.Figure 5: Factors influencing subjective wellbeing (happiness) Figure 6 Happiness and average annual income15 100 Iceland Denmark Norway Belgium Canada France Austria Switzerland United States Mean of Percent Happy and Percent Satisfied with Life as a Whole 90 Puerto Rico Colombia N. 1995 dollars) fact that people are known to be inconsistent in assessments of their own happiness. it’s clear they are not measuring the same kind of utility. Figure 6: Happiness and average annual income that if you ‘add up’ people’s assessments of subjective wellbeing over time you don’t get the same answer as you would if you ‘take all things together’. Obviously the two measures presume fundamentally different concepts of utility. Rep Pakistan Bangladesh Poland India Turkey South Africa Croatia Philippines South Korea Taiwan Venezuela Uruguay Spain Chile Czech Portugal Republic Slovenia Japan 70 Slovakia Hungary 60 Macedonia Azerbaijan Peru Latvia Estonia Romania Bulgaria 50 Georgia Lithuania Armenia 40 Ukraine Russia Belarus Moldova 30 1000 5000 9000 9000 17000 21000 25000 GDP per person (Purchasing Power Parity. the overriding pursuit of immediate pleasure is a very good recipe for things not going well in the future. Even something simple like a change in the order of events can alter our assessment of how well things have gone overall. This may partly be because people adapt quickly to any given level of satisfaction and this changes their future valuations. You can only Sustainable Development Commission 33 . For one thing. prosperity.

Redefining Prosperity project. with no prospect of improvement and yet declare themselves (some might say foolishly) completely content with their lot. minerals. mainly present happiness – provide an accurate In his later work. Even when it is the freedom to function that people value most. and perhaps even whether to live a healthy life. this is largely because the functionings themselves are valued too. even when things do go well. There is another reason not to take the focus on freedom too far. are to do with how well people are able to function in any given context. His point is that in a liberal society. It is the capability is important. Equally. ‘True prosperity is a term security. fossil fuels. argues the report. they may be undernourished. the functionings he cites in this extract – nutritional health. land – and so on. people should have the right to choose whether or not to participate in society. timber. The freedom endlessly to accumulate material goods is one of them. happiness goes against our experience of what it means to live well. participation in society – coincide closely immemorial in a wide range of writings. water. certain kinds of freedoms are either impossible or immoral.’ he writes. but as a range of ‘bounded capabilities’ to live well – within certain These limits are established in relation to two critical resources within which life on earth is possible. to in biodiversity. Freedoms to achieve social recognition at the expense of child labour in the supply chain. poorly housed. There is a clear resonance between Sen’s questions beginning of this chapter. to work in paid employment. better later doesn’t justify taking a view of prosperity based on more or less instantaneous the central importance of functionings themselves. People can be unhappy for all sorts of reasons. have a worthwhile job or participate in the community – as the capabilities or freedoms they have to do so. idea of development ends up needing to specify what the important functionings are. Sen stresses not so much the functionings themselves – whether people actually live long. This point is of a capabilities approach within public policy. some of them genetic. or to participate in the life of the community at the expense of future generations may be others. In a world of limits. In fact. The key questions we should be asking. he insists. Bounded capabilities they appear in public without shame and without This is the most important lesson that sustainability brings to any attempt to conceptualise prosperity. Sen uses these distinctions to argue (with a nod to based on the capabilities that people have to flourish. 34 Sustainable Development Commission . a set of disembodied freedoms. life expectancy.

the diversity of species and the integrity of the atmosphere. Capabilities are bounded on the one hand by the scale of the global population and on the itself becomes contingent on available resources. To ignore these natural bounds to our fellow creatures – to an impoverished planet. there is a surprisingly strong overlap between the components in such lists and the constituents of The point is that a fair and lasting prosperity cannot be isolated from these material conditions. The smaller the population the lower the pressure on ecological resources. security and a sense of community are vital to social wellbeing. Society itself is threatened when they decline. on the entitlements of those who share the planet with us. psychological and material conditions of living – for example. any such list needs to be negotiated in open dialogue before it can be taken as the basis of policy. Her list of ‘central human capabilities’ bears a striking resemblance to the in a complex relationship to the web of life on earth. and the ability to participate in the life of society appear to be important almost everywhere. But social and psychological functionings are not in any case best served by materialism. even the current level of economic activity is destroying ecological integrity and threatening ecosystem functioning – perhaps irreversibly. there is only so much in the way of resources and environmental space to go around. The challenge for society is to create the conditions in which these basic entitlements are possible. This is level of technology. Crucially though. particularly where they rely heavily on material throughput. The bigger the global population the faster we hit the ecological buffers. Some ways of functioning may even be forestalled completely. the soils and the oceans. Trust. But we know enough to be absolutely sure that in most cases. as the Dutch report cited above recognises. Educational and democratic entitlements count in many societies. in which people everywhere have the capability to Deciding on those basic ‘entitlements’ is not a trivial What are the functionings that society should value Capabilities are inevitably bounded by material and social conditions. and control over one’s environment. Prosperity in this sense has Physical and mental health matter. This is likely to require a closer attention to the social. Relationships. Ultimately. The second limiting factor on our capability to live well is the scale of the global population. to people’s psychological wellbeing and to the resilience of communities – than is familiar in free market societies.They also include the regenerative capacity of ecosystems. life (being able to live to the end of a human bodily integrity (to be secure against violent assault) having opportunities for sexual satisfaction and choice in matters of reproduction practical reason (being able to form a conception of the good life) toward others) play. furthest in this direction. We may not yet know exactly where all the limits lie. People suffer physically and mentally when these things are absent. But in practice. as we shall see more Sustainable Development Commission 35 . this doesn’t mean settling for a there is an irredeemably moral dimension to the good life. on the freedoms of future generations and other species. even though some are implicit in his writing. meaningful employment. Sen has tended to stop short of clear prescriptions. This basic tenet of systems ecology is the reality of life for every other species on the planet.

wellbeing and still reduce their material impact on the environment is an intriguing one. this new vision of prosperity may serve us better than the narrow materialistic one that has ensnared us. 36 Sustainable Development Commission . But it should not be given up lightly.his contribution to Redefining Prosperity. It may well offer the best prospect we have for a lasting prosperity. It would be foolish to think that it is easy to achieve – for reasons that will be discussed in more detail in the next chapter.

Robert Litan and Carl Schramm .4 The Dilemma of Growth “One of the ‘paradoxes of prosperity’ is that people in rich countries don’t realise how good things really are.” William Baumol.

There’s a lovely illustration of the power of this seductive relationship in a study led by consumer researcher Russ Belk.’ on the language of material goods. friendship. to be included. not just family. Material opulence as a condition in part. in other words. of not realising how This chapter explores that possibility. Clearly though. this hasn’t diminished our appetite for material consumption. aside from some pernicious inequalities. And that without growth Evidence for this would certainly need to be taken seriously. But this doesn’t in itself ensure that prosperity without growth is possible. Commenting on what fashion relationship between opulence and prosperity. as a basic human desire to be noticed. if we don’t have enough food to eat or adequate incomes in poorer nations. meaning and purpose in life. But in the advanced economies. argues sociologist Peter Berger. On the one hand. It examines three closely related propositions broadly met and disposable incomes are increasingly experience. the other. Prosperity itself. after all. even in something as basic as nutrition. depends on them. social status. identity. He and his colleagues explored the role of desire in consumer behaviour across three different cultures. ‘The reality of the social world’. as good as it gets in terms of delivering prosperity. long past the point at which as the psychologist William James believed. isn’t always better. sense of belonging. Perhaps the growth model is.thing as economic growth. the quote on the previous page. with an opulence – though not synonymous with prosperity goods that continues to entrance us even beyond the is that economic growth is closely correlated with certain basic entitlements – for health or education. it appears essential for lasting prosperity. imbue material things with social and psychological research and anthropology now supports this our prospects for achieving prosperity without growth and would place us instead between the horns of a rather uncomfortable dilemma. ‘hangs on the thin thread of conversation. community. goods provide a symbolic language in which we communicate continually with each other. Why is it that material commodities continue to be so important to us. A distinct possibility remains that growth is functional for prosperity: that continued economic growth is a necessary condition for a lasting prosperity. perhaps – that are essential to prosperity. The third is that growth is functional in maintaining economic and social stability. the means to participate in the life of society. theorem’ would be vital. 38 Sustainable Development Commission .

’6 Very similar values and views are clearly produces an inner glow that is also matched with a clear advantage in life expectation and health. It is of course abundantly true in consumer society. for sure. ‘One of the of the millennium. income growth – and the associated Sustainable Development Commission 39 . Little wonder then that people regard income as one Incomes after all provide the material means for that this positional race doesn’t contribute much to overall prosperity. The importance of social position is reinforced 7 shows reported satisfactions with different life ‘domains’ across different ‘social grades’. ‘The stock of status.’ claim is backed up by persuasive evidence on the pernicious health effects of income inequality. income provides access to the ‘positional’ or status goods that are so important in establishing our social standing. measured as positive advantages.’ argues anthropologist Emma their pursuit of ‘western’ lifestyles.components of participating in the life of society. our ability to participate in the life of society – or watched their kids feel – the enormous pressure of the peer group to conform to the latest fashion will understand how access to the life of society is mediated by sheer stuff. it seems. power and class as well.’ Prosperity depends more on opulence. showed a sustained increase competition. both in terms of health and in terms of happiness or subjective wellbeing. Being at or near the top of the pile matters. quite generally. in addition. One in which. oceans of poverty’. Those in higher levels of satisfaction than those in the lower social grades. What matters – more than the absolute level of income – is having more or less than those around us. This is particularly true in highly unequal differences in social status. as we now see. to all intents and purposes.’ The symbolic role of material commodities has society for which records exist. But. But this is no longer unique to the West. possessions and values. at the level of society as a whole. a global society. The objective of the consumer. Belk’s study and numerous others suggest otherwise. of subtlety provides a vital clue as to how we might confront – and get beyond – our dependency on material things. it. years higher for those in the top decile in the late The consumer society is now. there are still ‘islands of prosperity. Income levels speak It’s tempting to think that this is a predominantly western (and relatively modern) phenomenon. dimensions of prosperity are inextricably intertwined with each other through the language of goods. But in which the ‘evocative power of things’7 increasingly creates the social world and provides the dominant arbiter of personal and societal progress. The importance of income in wellbeing is largely played out (within nations) through relative effects. Though it is essentially a social rather than a material task. it would This reasoning suggests that.

Figure 7 Wellbeing Inequalities in England (2007)14 AB C D E Relationships Accommodation Standard of living Day to day activities Aspect of Life Health Leisure Control Achievement of goals Future financial security Community -15 -10 -5 0 5 10 15 Percentage point difference from overall average Notes: Social grade is a classification based on occupation developed from the National Readership Survey Examples of occupation in each grade include: AB: doctor. accountant. foreman. solicitor. 40 Figure 7: Wellbeing Inequalities in England (2007) Sustainable Development Commission . state pensioners. apprentices E: Casual labourers. student. shop workers. police oficer C: Junior manager. clerical worker. treacher. plumber. nurse. unemployed Separate grades A and B and C1 and C2 have ben joined (to AB and C) due to very similar distributions The results presented here show the difference between each group and the overall average presented on the previous graph The results presented here show the difference between each group and the overall average. bricklayer D: Manual workers.

But relative (or distributional) effects don’t exhaust the relationship between income and human that rising levels of income are required in and of themselves to establish and maintain absolute levels of capability for functioning.000 40.000 35.000 45. In other words. But now the ‘dependent variable’ is life expectancy rather than satisfaction.000 GDP per capita (PPP $2005) Figure 8: Life expectancy at birth vs average annual income Sustainable Development Commission 41 . The following graphs test this proposition using analysis uses data collected over several decades by data in themselves can neither prove nor disprove a causal link between income and prosperity.000 15. The possibility that certain basic entitlements – such as life expectancy. Some people are better off than others and positions in society may change. this particular aspect of the dilemma of growth may just turn out to be avoidable.000 30. But they provide a useful starting point in understanding how which looked at the relationship between life satisfaction and income.000 20. with life expectancies as low as in many developed nations. We would also have to identify less materialistic ways for people to participate in the strategies could allow us to distinguish prosperity from opulence and reduce our dependency on material growth.The population as a whole gets richer.000 25. But the advantage of Figure 8 Life expectancy at birth vs average annual income16 90 Japan Iceland Ireland Bahrain United Kingdom Norway United States 80 Cuba Costa Rica Chile New Zealand Malta 70 Life expectancy at birth (years) India Russian Federation 60 Gabon 50 Mozambique South Africa Botswana 40 Swaziland 30 0 5000 10. health and educational participation – rely inherently on rising income. The difference between the poorest and the richest countries is striking. This is one of the arguments that has been used to explain the life satisfaction paradox Income and basic entitlements This is where the second proposition comes in. But overall this positional competition adds little or nothing to the levels of wellbeing in the nation. We would need to confront the social logic that conspires to lock people into positional competition (Chapter 6). would cast a serious If it’s right it suggests the possibility that a different form of social organisation – perhaps a more equal society – in which social positioning is either less important or signalled differently – could change things.000 50.

000 45. 80 Cuba New Zealand Malta Iceland Chile is a striking example.000 40.000 25.000 GDP per capita (PPP $2005) Figure 9: Infant mortality vs per capita income 42 Sustainable Development Commission . Japan 90 increased life expectancy are Rica Costa reduced.000 gains from growth again diminish quite rapidly. It also shows the familiar pattern of diminishing returns with respect to 30 0 5000 10.000 45. Infant capita (PPP $2005) GDP per low as it is inFigureUSLifeeven though birth vs average an the 8: – expectancy at Cubans. with a perNorway income of capita Ireland live births. The Human Development Report’s Education Index – based on a composite of educational participation rates – illustrates the same disparity between the very poor and the very rich.000 50.000 are as 25.000 20. Figure 9 Infant mortality vs per capita income17 180 160 140 120 100 Botswana Equatorial Guinea Sierra Leone Angola Infant mortality (per 1000 live births) 80 60 40 China India South Africa 40 0 0 Cuba Chile Saudi Arabia New Zealand Qatar United Kingdom United States Norway 5000 10. with annual income with an average income somewhat higher than most developed nations. United Kingdom United States Bahrain that are on a par with developed nations.000 15.being richer as a nation shows diminishing returns.000 15. Chile 70 Life expectancy at birth (years) India Russian Federation 60 Denmark (whose average income is almost three Gabon countries with incomes in the same range as Chile South Africa 50 Mozambique Botswana 40 Swaziland The ambivalent relationship between income and health indicators is echoed in the relationship between income and education.000 40.000 35.000 providing educational participation rates that50.000 35.000 20.000 30.000 30.

20 0. for changes in life expectancy.20 1.000 45.80 HDR Education Index 0.000 15. modes of development emerge.000 25. infant mortality and educational participation. Some countries achieve remarkable levels of available to richer nations. gradually but very consistently over the last few decades in spite of short periods of recession. In highly erratic over the last three decades.40 Sierra Leone 0.00 India New Zealand Cuba Chile United Kingdom Norway United States Hong Kong China UAE South Africa 0. appear much less dependent on income growth. within countries.60 Equatorial Guinea Lesotho 0. almost all the former Soviet bloc countries experienced reduced life expectancy Figure 10 Participation in education vs income per capita18 1. One belongs to very strong but quite ‘shallow’ correlation between income growth and increased life expectancy.000 35.000 GDP per capita (PPP $2005) Figure 10: Participation in education vs income per capita Sustainable Development Commission 43 . capita the returns to growth diminish substantially. Japan offers an even more interesting example.Interestingly.000 30. expectancy subsequently increased faster than at any time in the preceding two decades. The ability to improve life expectancy despite a faltering economy is also in evidence in another Understanding the structural dependencies between study. but the gains in life expectancy have been substantial and consistent.000 40. In fact.000 20. One of the questions that needs answering is how things change over time.000 50.00 0 5000 10. In the economy falters. there is no hard and fast rule here on the relationship between income growth and suffer extraordinary deprivations in life expectancy.

this decline continued. economic and social stability.0005x + 64. Some or severe recession. India even after the economy started to China recover. It is clear from the evidence here that collapsing economies do present life0.20 1. This 0.000 40. Figure 11 Changes in average life-expectancy and income over time21 85 2003 80 Chile 75 Life expectancy at birth 1985 1995 1990 1990 1985 1990 2003 2000 2003 1995 1980 1975 2003 1990 2000 1980 1975 Japan 1985 1990 1995 2000 United Kingdom y = 0. been possible in 5000 developed nations.000 GDP per capita (PPP $2005) Figure 11: Changes in average life-expectancy and income over time 44 Sustainable Development Commission .000least.20 Clearly growth doesn’t guarantee improved prosperity.9638 70 65 60 55 50 1975 1980 1995 Russia 2000 1995 Argentina 1985 1980 South Africa 2000 1975 2003 45 0 5000 10.000 50.000 at very 0 15.982 R2 = 0.1.000 25.000 20. But capitaimportant for prosperity.000 45. of the sudden removal of subsidised Soviet oil. Economic stability or.40 Income growth and economic stability Sierra Leone in life expectancy irrespective of growth rates. alongside 25. GDP per (PPP $2005) there are also examples where life expectancy has increased much faster than income andvs income per capitaEven so there are interesting differences between Figure 10: Participation in education one or two where it has increased even in the face of prolonged countries faced with economic hardship. Others have watched life expectancy tumble in the face of economic recession.000 35.00 expectancy. UAE The same phenomenon – decline in spite of economic recovery – is visible in the case of South 0.000 35.00 New Zealand Cuba Chile But one recent study suggests that there were United Kingdom Norway United States Soviet Union. Incremental improvements have a risk of humanitarian loss.80 HDR Education Index Hong Kong But obesity was halved and the percentage of physically active adults more than doubled. able to ride out quite severe economic turbulence and yet maintain or even enhance national health. 0.000 more or less continuous economic growth.000 15.60 Equatorial Guinea Lesotho South Africa 0. is most 10. some form of social resilience.000 30.000the 30. Perhaps most strikingly.000 20.

not the least of which was a collapse in state provision of health and social care. But the broad idea is simple enough to convey. Is growth If the economy slows for any reason – whether commodity price shocks. this increase in ‘labour productivity’. feedback mechanisms that had once contributed to expansion begin to work in the opposite direction. there isn’t a problem. there is little resilience within this system. pushing the economy further into recession. the country is doomed to bankruptcy. If halting growth leads to economic and social collapse. Crucially. in these circumstances. Incomes fall. But tax revenues decline as incomes fall and fewer goods are sold. Investment is cut back. leads to diminished further reduces demand for consumer goods. driving down costs and contributes to a positive cycle of expansion. Social costs rise with higher unemployment. prospects for maintaining prosperity are considerably better. With a growing (and aging) population these dangers are exacerbated. If it can be achieved without collapse. Lowering spending risks real cuts to public services. Higher levels of growth are required to protect the same revenues for (increased) health and social costs. To see why. or through a managed attempt to reduce consumption – then the systemic trend towards improved labour productivity leads to unemployment. Cutting spending affects people’s capabilities But in doing so. in other words. In Cuba almost certainly a contributing factor in the health improvements that followed the economic collapse. Unemployment rises further and the economy begins to fall into a spiral of recession. But crucially it also means that fewer people are needed to produce the same goods from one year to the next. that life expectancy faltered. technology mean that more output can be produced for any given input of labour. Critical here is the question of whether a growing economy is essential for economic stability. they inevitably increase the national debt. we need to explore a little further how deferred to Chapter 6. then times look hard indeed. This could take decades. then increased labour productivity means that someone loses their job. But the risk of humanitarian collapse is enough to place something of a question mark over the possibility that we can simply halt economic growth. if the debt accumulates and the economy fails to recover. may be more dependent on social structure than on the degree of economic instability that is encountered. From an environmental point of view this may be desirable if it leads to lower resource use and fewer polluting emissions. The best that can be hoped for here is that demand does recover and it’s possible to begin paying off the debt. Servicing this debt in a declining economy – Just maintaining interest payments takes up a larger proportion of the national income. Humanitarian loss in the face of economic turbulence.Some of the explanation for these differences must states to a market economy was characterised by very profound changes in social structure. But it also means that retail falters and business revenues suffer. There are some interesting prosperity without growth. But if it doesn’t. Once the economy starts to falter. The Institute for Fiscal Studies has estimated that the ‘debt overhang’ On the other hand. This in its turn. Little surprise. capital and resources. The conventional answer is certainly that we do. It took Britain almost half a century to pay off public debts accumulated through the Second World War. Sustainable Development Commission 45 .

falling competitiveness and a spiral of recession. we appear to have returned to the dilemma with which this chapter started. There is of course. something of an irony here. ii stability. Because at the end of the day the answer to the question of form. Or at least to a more precise incarnation of it. But it cannot be avoided and has to be taken seriously. Burgeoning resource consumption and rising environmental costs are compounding profound disparities in social wellbeing is unstable – at least under present conditions. Put in its simplest form the ‘dilemma of growth’ can now be stated in terms of ii De-growth (décroissance in the French) is an emerging term for (planned) reductions in economic output. For as long as the economy is growing. The capitalist model has no easy route to theorem for a lasting prosperity. amending this conclusion. positive feedback mechanisms tend to push this system towards further growth. 46 Sustainable Development Commission . The failure to do so is the single biggest threat to sustainability that we face. modern economies are driven towards economic growth. When consumption growth falters the system is driven towards a potentially damaging collapse with a and livelihoods suffer.In short. Declining consumer demand leads to rising unemployment. In the meantime.

5 The Myth of Decoupling “From 1981 to 2005 the global economy more than doubled. but 60 percent of the world’s ecosystems were either degraded or over-used.” .

So the The situation in which resource impacts decline in absolute terms is called ‘absolute decoupling’. th modern economies are good at. The same is true of with fewer resource inputs and fewer emissions. How much decoupling has been achieved in these Is it really possible for a strategy of ‘growth with world of nine billion people and yet remain within begun to climb again. But they are already of immediate concern and illustrate clearly the scale of the problem. In this situation. decoupling has a 48 Sustainable Development Commission . the amount of primary energy needed to produce each unit of the world’s economic output has fallen more or less continuously over most of the last half century. economic activity is to remain within ecological limits. energy intensities declined 6 st Outside the most advanced nations. costs. In the case of climate change. Resource inputs represent a cost to producers. however. Energy intensities have declined three Energy The aim of this chapter is to explore the evidence for both relative and absolute decoupling. the economy can continue to grow without breaching ecological limits – or running out of resources. for instance. It’s vital here to distinguish between ‘relative’ and ‘absolute’ decoupling. It concentrates resources and the emission of carbon. For example. These examples don’t exhaust the concerns associated with a continually growing economy. achievements have been very mixed. Some evidence supports this hypothesis. it is hoped. resource impacts decline in absolute terms. Impacts may still increase. Century but has now Relative decoupling Put very simply. Overall.The conventional response to the dilemma of growth is to appeal to the concept of Economic output becomes progressively less dependent on material throughput. In this way. absolute reductions in global carbon emissions of These gains have been most evident in the advanced economies. The Figure shows clear evidence of ‘relative decoupling’. Century. the pattern has been much less clear. The global ‘energy intensity’ is now familiar logic and a clear appeal as a solution to the dilemma of growth. relative decoupling is about doing the OECD countries in particular. study. Relative decoupling refers to a decline in the ecological intensity per unit of economic output. Even in some southern nations.

00 0.00 4.00 9.00 kg CO2kg CO22000 market prices /$ at /$ at 2000 market prices 8.00 3.00 5.00 7.00 6.00 8.00 5.00 4.00 2.00 2.00 Sustainable Development Commission China China US UK India World Middle East Japan US UK India World Middle East Japan 1985 1990 1995 2000 2005 1980 1985 1990 Figure 13: CO2 intensity of GDP across nations: 1980-2006 1995 2000 2005 49 Figure 13: CO2 intensity of GDP across nations: 1980-2006 .00 1. China witnessed some Figure 13 CO2 intensity of GDP across nations: 1980–20067 9.00 3.00 1.00 7.Figure 12 Relative Decoupling in OECD countries 1975–20007 120 120 Japan Japan 100 100 Austria Austria 80 80 1975 100 1975 == 100 60 60 Germany Germany Netherlands Netherlands UK 40 40 20 20 0 0 1975 UK 1975 1980 1980 1985 1985 1990 1990 1995 1995 2000 2000 Figure 12: Relative Decoupling in OECD countries 1975-2000 Figure 12: Relative Decoupling in OECD countries 1975-2000 countries were accompanied by a slightly more kilogram of carbon dioxide per US dollar (kgCO (gCO of development in India.00 1980 0.00 6.

It measures only the resource use (or emissions) per unit of economic output. To make matters worse. For decoupling to offer a way out of the dilemma world consumption of coal has increased the rate of growth in carbon dioxide emissions since the What’s true for fossil resources and carbon emissions is true for material throughputs more generally. Despite very clear evidence of relative decoupling in must continue to improve as the economy grows. But there uses fossil resources and generates carbon dioxide emissions is improving in some places. particularly since the late Absolute decoupling Despite declining energy and carbon intensities carbon dioxide emissions from fossil fuels have up all the resources embedded in traded goods. emissions over the last eighteen years. Evidence of this is much harder an absolute decline in material consumption. But these have been partly offset by increasing carbon intensity in recent years. Clearly.striking improvements early on. the declining global trend in carbon intensity has also faltered in recent years. there is little room for complacency here. But overall we are making faltering progress at best. To achieve absolute decoupling. if overall burdens aren’t to increase. The measure shown here – direct material consumption – does its best to identify traded Figure 14 Trends in Fossil Fuel Consumption and Related CO2: 1980–20079 250 200 Natural Gas 150 Coal World GDP 1990 = 100 100 Combustion CO2 Oil 50 0 1980 1985 1990 1995 2000 2005 50 Figure 14: Trends in Fossil Fuel Consumption and Related CO2: 1980-2007 Sustainable Development Commission . Worryingly. The best that can be observed – in only a couple of countries – is something of a stabilisation in resource requirements. relative decoupling is barely half the story.

Some improved resource Sustainable Development Commission 51 . In other words. what count most in terms of global limits are worldwide statistics. This question is important precisely because of the structure of modern developed economies. There is an outside chance that some stabilisation of resource consumption has material consumption omit such accounts. more and more whether this pattern is true more generally for material resources. there are more (hidden) carbon emissions associated advanced economies. Correcting this failing calls for more sophisticated resource and economic models than are currently available. In fact.2 Figure 15 Direct Material Consumption in OECD Countries: 1975–200010 160 140 Austria 120 100 1975 = 100 80 60 40 20 0 1975 1980 1985 Japan Germany UK Netherlands 1990 1995 2000 Figure 15: Direct Material Consumption in OECD Countries: 1975-2000 resources (and emissions) used to manufacture emissions. In the case of carbon dioxide. Unless the demand for consumer goods also declines. Both climate change and resource scarcity are essentially of absolute decoupling – and the possibilities for escaping the dilemma of growth – are worldwide the global trend in the extraction of another vital set Climate Change Convention. that national accounts systematically fail to account for the ‘carbon trade balance’. in any case. Ultimately. But given the trend away from with some caution. Figure developed economies. this difference is enough to undermine of absolute decoupling. once emissions embedded in trade are taken into account. which have typically tended to move progressively away from domestic manufacturing. however. There is little evidence of relative decoupling either.

and allow for continued unanswered by those who propose decoupling as than not. Extraction of iron ore. the crucial distinction between relative and absolute decoupling isn’t even elucidated. how 450 striking. could relative decoupling really proceed fast enough to achieve real reductions in emissions and throughput.Figure 16 Global Trends in Primary Metal Extraction: 1990–200712 250 200 Copper Nickel 1990 = 100 150 World GDP 100 Bauxite 50 Iron Ore Zinc 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 6 2007 Figure 16: Global Trends in Primary Metal Extraction: 1990-2007 appears to have been eroded more recently. the rising demand for structural people: incomes at equitable 2007 EU level decoupling is The message here is not that 550 materials is one of the factors thatScenario 4: 9 billion people: incomes at equitable contrary. Particularly notable is the increased consumption 800 768 of structural metals. It’s far too easy to get lost in general declarations 36 30 is going in the wrong direction. bauxite. But neither 50 0 2007 World 2007 UK Now 2007 Japan 14 2050 (Scen 1) 2050 (Scen 2) 2050 (Scen 3) 2050 (Scen 4) Sustainable Development Commission 52 Required to meet 450 ppm target . It’s clear from this that history provides little support 100 150 solution to the dilemma of growth. copper750 nickel is now rising faster than world and 700 650 600 Carbon Intensity gCO2/$ a huge international drive for technology transfer to bring about substantial reductions in resource the least that will be needed to have a chance of remaining within environmental limits and avoiding an inevitable collapse in the resource base at some point in income growth Scenario 1: 9 billion people: trendthe (not too distant) future. Scenario 2: 11 billion people: trend income growth Scenario 3: 9 billion infrastructures. Even relative 200 decoupling just isn’t happening. Worldwide cement production has more 400 350 300 250 244 347 right political will. absolute reductions put an upward unnecessary. The question is. On the 2007 EU level plus 2% growth 500 in throughput are essential.

according to ecological economist Douglas Booth. seen as contravening basic human liberties.’ Protagonists of growth seldom compute the consequences of this relationship. which measures the impact and average per capita income has increased by For as long as the T factor is going down. river water quality and acid pollutants. seen as synonymous with improved wellbeing. It contains some partial truths – for example. It was put forward almost forty years ago by Paul Ehrlich and John Holdren. With this rule of thumb in mind. stage of growth but then peak and decline. resource extraction. as Ehrlich himself clearly recognised. visible environmental effects like smoke. carbon emissions have grown on average Sustainable Development Commission 53 . It isn’t uniformly true even for for key indicators of environmental quality such as carbon emissions. Increasing incomes don’t always guarantee the fastest population growth has occurred in the developing world – driven not by liberty but by a lack of education and inadequate access to contraception. just as growth and technological progress drives consumption. Carbon intensities have declined on average by a technology factor (T). In a growing population with an increasing average income. municipal waste generation and species loss. both these preconceptions are wrong. These emissions substantially. that advanced economies. This argument is not at all uncommon in the tangled debates about environmental quality and economic growth. But this relationship only holds. for local. then we are safe in the knowledge that we have relative decoupling. But both are clearly important. population and income has tended to reinforce the (leading to investment and technological progress) drives growth. Ironically. The Ehrlich equation tells us quite simply that the impact (I) of human activity is the product of three when relative decoupling will lead to absolute decoupling. Instead. each being about equally responsible the population factor in driving growth. But just how feasible The Arithmetic of Growth identity governs the relationship between relative and absolute decoupling.to achieve targets is to keep growing the economy. let alone the growth in incomes. absolute decoupling will occur when the rate of relative decoupling is greater than the rates of increase in population and income combined. But for absolute decoupling we need I goes down fast enough to outrun the pace at which in population. It draws some support from some limited evidence on air pollutants such as sulphur dioxide and particulates. to place our faith in the possibility that we can push relative decoupling fast enough that it leads in the end to absolute decoupling. it’s instructive to explore what’s happened historically (and why) to global carbon dioxide emissions.

The IPCC’s Fourth ppm stabilisation target means getting global almost ten times faster than it is doing right now. International Energy Annual i i higher than they are today. . the total emissions are given by the product of (measured as gCO . The same rule of thumb allows us a quick check on the feasibility of decoupling carbon emissions from growth in the future. be equivalent to reducing annual emissions at an But income and global population are going in the estimate. for example. to drive the carbon 54 Sustainable Development Commission .Box 3: For carbon dioxide emissions from fuel combustion. the world’s population is expected to reach would more than double global carbon emissions the decline in carbon intensity just about balances the growth in population and carbon emissions will end up growing at about the same rate as the these circumstances would put even more pressure on technological improvements.

carbon content of each dollar has to be no more Iron Ore than 6 gCO If we were really serious about fairness and wanted 50 the world’s nine billion people all to enjoy an income would need to grow 6 times between now and 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 6 2007 this world means pushing down the carbon intensity Figure 16: Global Trends in Primary Metal Extraction: 1990-2007 Figure 17 Carbon Intensities Now and Required to Meet 450 ppm Target25 800 750 700 650 600 Carbon Intensity gCO2/$ 550 500 450 400 350 300 250 200 150 100 50 0 2007 World 2007 UK Now 2007 Japan 2050 (Scen 1) 2050 (Scen 2) 2050 (Scen 3) 2050 (Scen 4) Required to meet 450 ppm target 36 30 14 244 347 Scenario 1: 9 billion people: trend income growth Scenario 2: 11 billion people: trend income growth Scenario 3: 9 billion people: incomes at equitable 2007 EU level Scenario 4: 9 billion people: incomes at equitable 2007 EU level plus 2% growth 768 Sustainable Figure 17: Carbon Intensities Now and Required to Meet 450 ppm Target Development Commission 55 . The global economy grows almost Zinc Copper those in the poorest nations. both the incomes and the carbon footprints of the developed nations would be more 100 Bauxite growth in the developed nations. developed countries while the rest of the world 200 does its best to catch up – China and India leaping 1990 = 100 150 in the doldrums for decades to come.250 or so years. Imagine a scenario Nickel in which incomes everywhere are commensurate average income. InWorld GDP most of these scenarios.

less than a complete decarbonisation of every single say, these numbers look even worse, if the higher conversely, of course, more robust population policies would reduce the pressure on technology.

way is an open question. The truth is, we haven’t yet out in his contribution to Redefining Prosperity, current policies barely scratch the surface of what could be done to deliver decoupling. Substantial early investment in low carbon technologies is obviously essential. The need for this kind of investment could transform st Century. Its impact on global growth is far from certain. The Stern Review famously argued that ‘the annual costs of achieving But the stabilisation target was a less punishing one

Stark choices
Playing with numbers may seem like dancing angels on the head of a pin. But simple arithmetic hides

Or are we so blinded by conventional wisdom that we daren’t do

Stern himself subsequently revised his cost estimate

One thing is clear. Business as usual is grossly – the world’s energy watchdog – now accepts. Their ‘Reference’ scenario has the demand for primary

change was proceeding faster than previously

of the challenge. ‘Our analysis shows that OECD countries alone cannot put the world onto a

admits. The report also highlights the scale of investment that is likely to be needed over the coming decades. Stabilising carbon emissions (and addressing transition in global energy systems. Technological change is essential, with or without growth. Even a fossil energy requirements and substantially reduced carbon emissions are vital. We can never entirely discount the possibility that some massive technological breakthrough is just round the corner. But it’s clear that early progress towards carbon reduction will have to rely on

Though clearly substantial, even these numbers may underestimate the economic impact of addressing climate change. ‘The easy compatibility between economic growth and climate change, which lies at the heart of the Stern Report, is an illusion,’ claims energy economist Dieter Helm. Stern’s microeconomic appraisals of cost suffer from serious ‘appraisal optimism’, he suggests, assuming that wholesale transformation of energy systems can be achieved by scaling up marginal cost estimates.

abatement policies interfere more seriously with suggest, but early climate change impacts could economic growth simply rolls onwards in the face of high mitigation and adaptation costs is untenable, claims Helm. Besides all this, none of the existing stabilisation scenarios (including those in the Stern review) deliver global income parity. Income growth in the developed nations is taken as read. Parts of the

carbon capture and storage. Just how much decoupling could be achieved in this

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developing world are assumed to catch up a little with the richer nations. But no attempt is made to develop scenarios in which incomes are distributed equally across nations. Unless growth in the richer nations is curtailed or some kind of completely unforeseen technological breakthrough happens, the carbon implications of a truly shared prosperity are even more daunting to contemplate.

to stabilise the climate or protect against resource scarcity are nothing short of delusional. Those who promote decoupling as an escape route from the dilemma of growth need to take a closer look at the historical evidence – and at the basic arithmetic of growth.

growing incomes for a world of nine billion people. In this context, simplistic assumptions that

in material throughput all have a vital role to play in ensuring the sustainability of economic activity. But the analysis in this chapter suggests that it is entirely fanciful to suppose that ‘deep’ emission and resource cuts can be achieved without confronting the structure of market economies.

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6 “As every hunted animal knows. but whether you are slower than everyone else. it is not how fast you run that counts.” The Economist Confronting Structure .

A sense of anxiety pervades modern society. solutions to the dilemmas we face will inevitably prove elusive. Households (people) offer up their labour and capitaliii Revenue from the sale of goods and services is what spend some of this income on more consumer goods. Financial institutions became almost paralysed by fear. Perhaps at some instinctive level. Economic structure allay those fears. The starting point is to unravel some of the workings of the modern economy. on an expanding consumer demand. perhaps we could reduce resource intensities the two or three orders of capital (buildings and machinery) to produce the goods and services that households want and need. Fear may not be all bad. Governments displayed signs of being totally bewildered. not least so that we can identify the potential to escape from it. The threat of imminent collapse may have been the only force strong enough with a pledge to ‘achieve needed reforms in the magnitude necessary to allow growth to continue faster and faster to escape the damage we’re already causing is itself a strategy that smacks of may be in order. Could it really be the case. ‘good life’ we aspire to is already deeply unfair and can’t last forever. understand why. There is still a possibility that we just haven’t tried hard enough. much. driven of modern economies head on. that we are still behaving st Century. consumers stopped spending because of it. At times it tips over into visceral fear. But some of it they save. it explores two interrelated features of economic life that are central to the growth dynamic. both by the speed of change and by the implications of failure. In particular. On the one cheaper products and services through a continual process of innovation and ‘creative destruction’. as The Economist suggests. These savings 60 Sustainable Development Commission . These two factors combine to drive ‘the engine of growth’ on which modern economies depend and lock us in to an ‘iron cage’ of consumerism. Banks refused to lend even to each other. delivers it. generating whole new species of to outrun – scale in the way it must do if growth is to be compatible with sustainability. For without that understanding. It more or less closes down the most obvious escape from the dilemma of growth. That realisation – even repressed – might easily be enough to taint casual joy with existential concern. With a massive policy effort and huge technological advances. pervasive anxiety underlying the modern economy is an enduring one. driven by a complex social logic. so it also drives forward complex beast. The economic crisis of 2008 was such a time. It’s essential to get a better handle on this twin dynamic. we have always understood this. looking as it does like an impossibility theorem for lasting prosperity. But even as the engine of growth delivers productivity improvement.

Debt to GDP ratio 0 2005 Sustainable Development Commission 2010 2015 2020 2025 2030 2035 61 . e. This broader meaning has been taken 50 GHGs (Porritt 2005.Figure 18 The ‘Engine of Growth’ in Market Economies FIRMS Novelty. say). These savings are invested – either directly or through an intermediary (a bank. saving and investing.) as the basis for arguing that there are things called natural capital (stocks of resources. Financial capital 100 is used to refer to reserves of money (savings for instance). which of course can be used to invest in capital goods. building society or investment house. capital simply means a stock of something.g. human capital (stocks of skills) and social capital (stocks of community). the foreign sector facilitate one of the most fundamental features of 300 introduce a whole new set of actors and a whole 250 and producing. the term ‘capital’ is confusing in the sheer variety of meanings given to it within that system. services. incomes CRE DIT Investment HOUSEHOLDS Figure 18: The ‘Engine of Growth’ in Market Economies economy.) in businesses to generate 150 GDP per cap iii Oddly for a system which borrows its name from it. These offer 200 2005 = 100 The basic functioning of this feature is pretty simple. In simple terms. price reduction Consumer spending INCREASING PRODUCTIVITY Goods. Unemployment Households give over part of their income to Poverty savings. out of the complexity generated by the evolution of the public sector (government). e.g. And and physical capital. Buildings and machinery are ‘capital goods’ sometimes called physical capital.

Labour productivity more needed to maintain quality. the general trend in capitalism is towards increasing labour productivity. the cost of goods over time. Foregoing itself at a disadvantage compared with national and international competitors. When share values are rising.hanging on to them or spending the money on receive a healthy ‘return’ on their capital at some point in the future. These goods themselves have energy costs that sometimes wipe them out entirely (a situation less labour intensive processes requires capital. Far from acting to reduce the throughput of goods. It also explains why 62 Sustainable Development Commission . This return is created out of the 7 capital (cash) to invest in maintenance and improvements themselves. Investment is also needed continually to improve allowed for the unemployment rate to fall by half a percentage point over the period. When it comes to choosing which of the other two factors to target. This has the effect of stimulating demand and promoting growth. more people will be keen to buy them. these is that capital investment is needed. in addition to its role in maintenance. In a growing economy. a lot depends on the relative price of labour and materials. technological progress serves to increase production output by reducing factor costs. wages rise in real terms. In this case. material costs have been falling in real terms. Creditors know they will get their money back with interest. The value of the company will rise because people are prepared to pay more for shares in it. companies have invested preferentially in technologies that reduce labour costs even if this For a company. So in practice. then. gets spent on other goods and services. In short. The phenomenon of ‘rebound’ attests to this. Until very recently at least. higher labour productivity lowers the cost of its products and services. the difference between revenues from sales and capital. level. buildings and equipment inevitably get run down. it’s needed to pay off the company’s creditors – people who’ve lent it’s used to pay dividends to shareholders – people who’ve bought a share in the company. to achieve cost reduction 6 example. labour and material resources. Sales decline. Since this means producing the same quantity of goods and services with fewer people. it would sell investment. this dynamic plays out as the ability to compete in international markets. The company its capital stock and invest in new processes and technologies. This continuing capital need both motivates the dangers of credit drying up. the cycle creates a downward pressure on employment that’s only relieved if growing the economy. Shareholders know that the value of their shares will rise. Without it. Secondly. Product quality is lost. The company loses its competitive position and risks going out of business.

Social logic The ability to adapt and to innovate – to design. and understanding the nature. The continual production of novelty market for the consumption of novelty in households. But proponents also point to level. relative decoupling sometimes has the perverse potential to decrease the chances of absolute decoupling. Isn’t there a point at which enough is enough and we should simply stop producing and consuming so One of the things that prevents this happening. produce and market not just cheaper products but newer and more exciting ones – is vital. because without it. through a and products continually emerge and overthrow existing technologies and products. that is vital in driving economic growth. In short. It does care if the process of creative destruction stops. The economy as a whole doesn’t care if individual companies go to the wall. It is only through the continuing cycle of investment that creative destruction is possible. Consumer artefacts play a role in our lives that goes way beyond their material somewhat abstract vision of creative capitalism. they achieve this. our hopes for our family. and the needs and desires of ordinary human beings. This is not to deny that material goods are essential the contrary. and our dreams of the good life. of this demand is essential. clearly. But stuff is not just stuff. is the structural reliance of the system itself on continued growth. The second is that failing to diversify and innovate risks losing out to competitors producing newer and more exciting products. this means that even successful companies cannot cycle of growth. Capitalism proceeds. may once have been a useful way of organising human society to ensure that people’s material are intimately linked together through commodities. these constraints are laid down by the laws of thermodynamics. When credit It is perhaps not surprising to discover that the desire for novelty is linked intimately to the symbolic role that consumer goods play in our lives. this role is critical to our physiological term potential for growth itself. economic activity eventually stops as well. to suggest that it is in fact novelty. But what does this continual cycle of creative destruction have to do with human decoupling required for sustainability. they contribute to our prosperity Sustainable Development Commission 63 . Firms who fail in this process risk their own survival. he said. the process of innovation. It’s been constitute a powerful ‘language of goods’ that we use to communicate with each other – not just about even – through giving and receiving gifts for example – about our feelings for each other. which have contributed to increased longevity now contributes to our modern quality of life. The role of the entrepreneur – as visionary – is critical here. But so is the role of the investor. Ultimately.needs are catered for. Recognising the existence.

our books. Cushman has argued that the extended self is ultimately an ‘empty self’ which stands in continual 64 Sustainable Development Commission . making once luxury goods accessible variety of material goods has a democratising element to it.One of the vital psychological processes here is what consumer researcher Russ Belk called cathexis think of (and even feel) material possessions as part of the ‘extended self’. It is as much about ordinary everyday survival as it is about the continual processes of emulation. It allows more and more people to go about inventing and reinventing their social identities Novelty and anxiety It’s tempting to dismiss such a system as pathological. suggests tangible bridge to our highest ideals. Others last a lifetime. we are truly lost. They were often used to establish social position. They may even be launched at premium prices deliberately to attract those who can afford to pay for social distinction. Veblen pointed out over a century ago. our bicycles. in the search for a credible place in society. with novelty momentarily and are extinguished as suddenly when something else attracts our attention. but in failing they leave open the need for future bridges. but somehow plausible proxies for our dreams and aspirations. of course. to provide a genuine access to those ideals. Without them. because they are produced on a small scale. They allow us to identify what is sacred in our lives and distinguish it from the mundane. our photographs all have this character. that consumer culture seems on the surface to work so well. Our attachments to material things can sometimes be so strong that we even feel a sense of bereavement and loss when they are taken from us. of goods is even appropriated in modern society to explore deep existential questions about who seductive in its own right here. our cars. Our relationships to our homes. They fail. having something to hope for is particularly important when things are going badly. Only in modernity has this wealth of material artefacts been so deeply implicated in so many social and psychological processes. and so stimulate our appetite for more goods. Retail therapy works for a reason. Consumer goods. Consumer culture perpetuates itself here even offers some kind of substitute for religious consolation. ‘Hollow hands clasp ludicrous possessions because they are links in the chain of life. ‘conspicuous the latest consumer appliances and fashions are inherently expensive. our CD or DVD collection. It offers variety and us explore our dreams and aspirations for the ideal life and escape the sometimes harsh reality of our lives. This process is evident everywhere. In a secular world. doesn’t by any means exhaust our relationship to material goods. status competition and explain why our desire for material goods appears – keeping up with the Joneses – rapidly expands the demand for successful products and facilitates mass production. the self that distinguishes consumer society from capable of carrying symbolic meaning. Possessions sometimes offer a sanctuary for our most treasured memories and feelings. Consumption is also vital to us in simple material ways. our favourite clothes.’ claimed the marketing guru Ernest Dichter in The Science of Desire.

emotional intelligence and resilience in the face of adversity are visible everywhere. But the system remains economically viable as long as liquidity is preserved and consumption rises. social constraints that lock us into a failing system. It collapses when either of these stalls. Institutions are given over to the pursuit of consumerism. changes in social structure – that will free us from the damaging social logic of consumerism are exactly what is needed to drive growth forwards. In particular.’ It’s perhaps not surprising that this restlessness doesn’t necessarily deliver genuine social progress. Creative destruction is haunted by the fear of being left behind in the competition for consumer markets. what emerges from this analysis is that the empty self is itself a product of powerful social society. ecological and social limits. But at one level it works. advertisers. changes in lifestyles. we need to identify opportunities for change within society – changes in values. us to develop a different kind of economic structure of novelty by households and the continuous of the ‘empty self’ is the perfect complement for the restless innovation of the entrepreneur. Thrive or die is the maxim of the jungle.products. Perhaps the most telling point of all is the rather The extended self is motivated by the angst of the empty self. Social comparison is driven by the anxiety to be situated favourably in society. But it is also vital to recognise that this pathology is not simply the result of some terminal quality in the human psyche. human creativity. On the contrary. It’s an anxious. that this is a system driven by anxiety. and ultimately a pathological system. The economy is dependent on consumption for its very survival. Individuals are at the mercy of social comparison. free growth. It’s equally cage of consumerism. ‘The novelty and status seeking consumer and the Only through such changes will it be possible to get ourselves ‘unhooked’ from growth. We are not by nature helpless dupes. and celebrities’. Sustainable Development Commission 65 . Rather. The relentless pursuit of novelty may undermine wellbeing. These understandings provide us with our clearest insight yet into the enormity of the challenge implied in delivering a truly sustainable form of prosperity. The production of novelty through creative destruction drives (and is driven by) the appetite for novelty in consumers. even in the face of an apparently pathological consumerism.

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sustainable way.7 Keynesianism and the ‘Green New Deal’ “The new.” Achim Steiner October 20081 . putting the world on the road to prosperity again. green economy would provide a new engine of growth. This is about growing the world economy in a more intelligent.

Stimulating credit increases the economy falters. and from within both liberal and coordinated market economies. to protect jobs and prevent any further collapse is incontrovertible. unemployment looms There are multiple points of intervention. more saving is the last thing that governments want in these circumstances. the clarion call from every side is to get the economy ‘back on the growth path’. When spending slows down. the call was for mechanisms that would ‘kick-start’ economic growth again. Kick-starting the economy is that there’s no simple answer to this question. the economy on growth to maintain full employment. From the International Monetary Fund to the United Nations Environment Programme. to increase people’s spending power (for example by cutting taxes) or to increase public spending on jobs and infrastructure. Those inclined to question the consensus wisdom are swiftly denounced as cynical revolutionaries or modern day luddites. it’s not a bad idea to have something put away for the future.degree of consensus that the overriding priority was to re-invigorate economic growth. The dynamics that will continue to drive unsustainable throughput. in spite of widespread concern over levels of consumer indebtedness. 68 Sustainable Development Commission . One of the dangers of the second option – putting more money in people’s pockets – is that government doesn’t have control over where it gets spent. whether of a for many other developed economies – is that we are already at the limits of consumer indebtedness and face a sharply rising public sector debt as well. People are more inclined looks threatened. But making credit easier and cheaper also played high street spending. Ironically.’ Perversely. But none to stimulate credit to businesses and consumers (for example by cutting interest rates). from political parties across the political spectrum. this may work in favour of recovery – at least in the short term. a more or less Chapter 6. The reason for this consensus is obvious enough. in effect. ‘We do not agree with as a chance to impose their utopia. We’ve seen already how crucial both of these things are in keeping consumption going. Pushing these any further stretches the boundaries Reducing the interest rate also reduces the incentive to save. which the consumer boom was built and protected There is a logic to it. It is. same time reduces the cost of debt to consumers. internecine warfare is all saved for arguing over how this is to be achieved. at a point when the savings rate route appears to be an encouragement away from under a workers’ soviet.

the ‘paradox of thrift’. ‘The question is whether they yesterday.’ economy. So protecting and enhancing ecosystems is vital to economic productivity in the future.’7 of spending to include investment in natural protection. Consensus had also formed around the appropriate a massive investment in public sector works.’ suggested Pavan Sukdhev. wouldn’t it be as well to spend it investing in the new technologies that we know we are going to need to address the st ‘Investments will soon be pouring back into the economy. not just from the proposals from a wide variety of observers but from plans being made on the ground in numerous countries. Sustainable Development Commission 69 . The normal rules of prudence are turned on their head. spending should be focused on the twin challenges of climate change and energy security. It may it. argued its advocates. Increased saving reduces high street spending still further. the Deutsche Economy Initiative. sustainable agriculture and sustainable cities. Targeting that carbon infrastructures and ecological protection offers freeing up resources for household spending and productive investment by reducing energy and material costs reducing our reliance on imports and our exposure to the fragile geopolitics of energy supply expanding ‘environmental industries’ sector making progress towards the demanding carbon emission reduction targets needed to stabilise the global atmosphere protecting valuable ecological assets and improving the quality of our living environment for generations to come. Economic recovery demands investment. deepening and lengthening the recession. or a new green economy that will deal with multiple challenges while generating multiple off alike. The group put that would make ‘every building a power station’ workers to provide the human resources for a vast environmental reconstruction programme. It’s entirely rational for But it turns out to be bad for the economy – at least with the system designed the way it is right now. Green New Deal The most interesting variation on this theme was (which includes representatives from business. emerged in support of a very simple idea. Ecosystems already provide tens of trillions of dollars worth of services to the world economy. It didn’t in fact achieve a full economic recovery 6 becoming clear’. investments in clean technologies.

Not only are jobs essential for economic recovery.17 Surely more nonetheless highlights the profound mess created so-vulnerable alike lobbying for direct support in the matter of their livelihoods. from government in a number of different countries.The case for a stimulus focused on energy and carbon is very strong. The employment aims of these packages are achieved by attempting support for jobs through measures to stimulate demand. Understanding how best to protect employment is the founder of Hustler magazine. 12 The stimulus packages to emerge from the 2008 crisis favoured a mixture of the other two strategies. biofuels. The authors calculated that spending $100 billion on these interventions over a two year period same money directed at household spending would generate only 1. were committed to the direct support of the of the reasons that the “green sweet spot” is an attractive focus for an economic stimulus is the labor13 $7 trillion had been spent globally in underwriting A study by the University of Massachusetts Political Economy Research Institute supports that view. stimulate lending (Chapter 2). Direct recovery packages were also sought (and the car industry received direct support in both the UK and the US.7 million jobs and directed at the oil 14 US porn industry approached US Congress for Strategies for job creation vital insights into the appropriate way to approach economic recovery. Public sector employment was the route favoured in the Roosevelt’s New Deal.16 Government promised to underwrite loans to the car industry totalling £2. Apart from the social spending and public investment. Meaningful employment is itself a key constituent in prosperity (Chapter 3). The US government committed over $23 billion to bail out the ailing giants GM and Chrysler at the end of 2008.11 Bringing forward some of this investment sector employment seeks its return in several from investment in productive infrastructure (roadpublic sector jobs generate a part of what has been 15 could pay massive dividends later. Job creation is one of the key aims of an economic stimulus programme. Re-capitalising the world’s energy systems for a low carbon world will be a The IEA has estimated that energy investment needs between 2010 and 2030 will be in excess of $35 trillion. in many countries and at EU level. 70 Prosperity without Growth? Sustainable Development Commission .3 billion.

Some are in the form of lower social costs and more Sustainable Development Commission 71 . and begin the st century’. In the US. jumpstart our economy. One of the interesting features of green investment packages is that they offer the they arise in the form of fuel and resource savings. Public sector employment could be directed explicitly at ‘green jobs’. For instance.forward’. In practice little of this happened in the early stages green stimulus was evident in recovery packages across the world in countries as varied as China. South massively higher than anything proposed so far The SDC has argued that there is considerable scope for a much higher level of green stimulus than is currently being considered targets. each of these different approaches to economic recovery could contain a ‘green stimulus’ component. support renewable energy companies and improve control to reduce car use through a combination of travel planning to encourage a modal shift of the public estate with the aim of delivering low carbon public services across the country. Direct support for or investment vehicles to ensure that lending is preferentially targeted at sustainable investments. have payback times of less than two years. this was for accelerated replacement of new railway is to be paid for. the Obama administration brought in a There are good grounds to question the scope and needed to achieve a low carbon society could be billion in ‘thoughtful and carefully targeted priority million jobs. would be equivalent to a green stimulus worth The potential for ‘green’ recovery In principle. existing housing stock to high energy performance standards substantial investment in renewable energy the reinforcement of the electricity grid to facilitate decentralised energy technologies. some simple measures to improve the investment) in people’s homes. Sectoral bailouts like those afforded to the car industry could be made conditional on shifting vehicles.

Targetting that saving in funds which can achieve positive returns from investment in green recovery has a dual logic to it. This ‘energy services model’ is usually assumed to proceed through private sector energy service companies. are particularly to be welcomed. We are right back This was certainly the working assumption in most of the recovery packages put forward in the Beyond recovery national debt can be reduced again in the longer package could push the national debt to around Paying this also calls for ‘transformational thinking’. Business innovation (creative destruction) and consumer demand (positional employment depending on it. it places investment funds directly into green recovery. On the other. productivity will return and the wheels of the machine will start turning. The outcome (assuming it works) will be thoroughly predictable. In other words by raising a new form of accepts that the more likely option in the short term invest and innovate. Finally. But the case for the public sector to reclaim some ownership in There is a legitimate public claim on the return from public investment funds whereever those funds are directed. through ‘green bonds’. it grow. healthy and just society’ promised In summary however. the broad assumption behind all these recovery packages is that they will be successful in stimulating consumption growth again. The current crisis is exactly the right suggests that the employment and resource saving kinds of spending.through a combination of fuel savings. The Deutsche Bank report argues that the best way to fund a green investment programme is through auctioning carbon permits under a cap and trade scheme. and lower pollution levels. 72 Sustainable Development Commission . both in protecting people’s jobs and in making the transition to a low carbon economy. On the one hand it provides a differentiated savings product when the propensity to save is high. but we do not yet live in the ‘strong. particularly in a harsh economic climate. But growth nonetheless. the possibility of innovative service structures which share the rewards from energy savings between households and investors have a clear rationale here. The energy sector case is at least as strong generated create further spending on consumer Some kind of green stimulus makes perfect sense. Beyond such easy wins. reduced congestion costs. it is absolutely vital to target that spending sustainability. In circumstances where we know that public sector spending is needed to prevent the economy from collapsing. There is in any case more likelihood that people will save during a recession. This is the Recovery here is taken to mean business as usual. The poorest will inevitably be hardest hit through the recession and are already struggling with rising costs for food and Some modest progress has been made in recent years. there’s no means of anyone getting off the treadmill. there are still challenges in raising the funds to invest in such measures. But all recovery initiatives proposed so far assume that the ultimate goal of intervention is to restore economic a ‘green engine of growth’.

this condition remains as unsustainable as ever. in the longer term. and creating a fairer society. preventing resource scarcity. stability and maintaining employment is essential. the reasons highlighted in preceding chapters. too readily to ‘positional consumption’ that adds little There is no consistent vision of an economy founded on consumption growth that delivers absolute Deal worthy of the name would signal clearly to the us relentlessly towards ever more unsustainable climate change.condition of continual consumption growth is the principles. Sustainable Development Commission 73 . we’re going to need something more than this. Returning the economy to a possibility that we now turn.

74 Sustainable Development Commission .

8

Macro-economics for Sustainability
“Under existing macro-economic arrangements, growth is the only real answer to unemployment – society is hooked on growth.”
Douglas Booth

Put bluntly, the dilemma of growth has us caught between the desire to maintain economic stability and the need to reduce resource use and emissions. This dilemma arises because environmental impacts ‘scale with’ economic output: the more economic output there is, the greater the environmental impact – all other things being equal.

Changing the ‘Engine of Growth’
dominant attempt to escape the dilemma relies precisely on this fact. Things change as economies First, it’s worth exploring whether a different ‘engine suggests. Similar proposals have been voiced for some years by ecological economists. Pointing out

is both an outcome from, and a fundamental driver of, economic growth. Proponents use this feature of capitalism to suggest that growth is not only compatible with

effect, a new growth engine is needed, based material services, not polluting products’. Similar visions for business models based on

outrun) scale. But historical evidence for the success of this strategy Consumption and Production highlighted the potential for such models to reduce the requirement for personal ownership, improve the utilisation of capital resources and lower the material intensity of the economy. This is still essentially an appeal to decoupling. declines. But here at least is something in the way of a blueprint for what such an economy might look like. It gives us more idea what people are buying and what businesses are selling in this new economy. Its founding concept is the production material products. how the current economic crisis presents a unique It’s vital to note that this cannot simply be the and invest in a sustainable future. But it’s abundantly clear that a different kind of macroeconomics is going to be needed. One in consumption growth. One in which economic activity remains within ecological scale. Though the aim of this chapter is to show that they are not only meaningful, but achievable. service sector activity in modern economies at the present. When the impacts attributable to these are computed properly, most of them turn out to development in advanced economies. For the most part, that has been achieved (as we saw in Chapter consumption goods from abroad and expanding the

on closer inspection to be due to accounting errors is desperately needed in developing countries is from technological change push consumption even shows no signs of doing so. That doesn’t mean such a transition is impossible. On the contrary, we’ve already seen how little effort

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be at least as resource hungry as the manufacturing sectors. The recreation and leisure sector ought principle. In practice, it’s responsible for around

conventional view, structural stability relies on it.

persistent refusal to countenance anything but of the founding fathers of economics, recognised both the necessity and the desirability of moving eventually towards a ‘stationary state of capital and wealth’, suggesting that it ‘implies no stationary

So what exactly constitutes productive economic Selling ‘energy services’, certainly, rather than energy supplies. Selling mobility rather than cars.

aren’t carried out using buildings, don’t involve the latest fashion and you don’t need a car to get to them. The humble broom would need to be preferred

conditions of prudent growth, he also foresaw a time when the ‘economic problem’ would be solved and ‘we prefer to devote our further energies to

has been made to develop an economic model that make enough money from these activities to keep
6

don’t know. We have never at any point in history lived in such an economy. That doesn’t mean we couldn’t. But it sounds at the moment suspiciously like something the Independent on Sunday would increasingly expensive yurts. The dynamics described in Chapter 6 just don’t seem amenable to moderation of the kind envisaged. Social logic, questions of scale, and the laws of blocks to the changes hoped for by those with drastic reductions in material intensity. ‘The idea of economic growth overcoming physical physical limits to population growth by reducing the throughput intensity or metabolism of human beings,’ wrote ecological economist, Herman Daly, over thirty years ago. ‘First pygmies, then Tom Thumbs, then big molecules, then pure spirits. Indeed, it would be necessary for us to become angels in order to subsist
7

conditions of a steady state economy. For Daly, these can be expressed in terms of a constant stock of physical capital, capable of being maintained by a low rate of material throughput that lies within the regenerative and assimilative capacities of the ecosystem. What we still miss from this is the ability to establish economic stability under these conditions. We ‘aggregates’ (production, consumption, investment, trade, capital stock, public spending, labour, money supply and so on) behave when capital doesn’t

ecological variables such as resource use, reserves, emissions and ecological integrity.

sustainability and there is an urgent need for one. of sustainability – is one of the most important messages from the analysis in this study. The following paragraphs explore the dimensions of this call in more detail.

On the other hand, doing without growth doesn’t explicitly around consumption growth. Politicians and economists may differ in their prescriptions for all of them assume a return to high street spending

Macro-economic basics
The main parameters can be set out easily enough.

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either through the impacts of environmental emissions or through the depletion demand’ is made up from private consumer expenditure. There are three distinct ways of thinking about (and account properly for changes in the asset base. The economy is said to be in equilibrium when the aggregate demand matches the aggregate supply (sometimes called the national income). The different calculations all come up with more or less the same total. Output falls and with less money in the economy. In another it measures the total output (or value added) of goods and services from all the productive enterprises within the nation. and clearing up after car accidents. We return to these policy suggestions in Chapter Ecological economists argue that this form of production function is unsatisfactory because it takes no explicit account of material resources and carries an implicit assumption that it’s possible to One way of rectifying this would be to include energy (or other material resources) explicitly within the production function and also to constrain substitution possibilities. for example – that should not really be counted as additional to human wellbeing. costs of congestion. Reduced investment leads to a lower capital stock which. as measuring the volume of circular economy. In the meantime. and the importance of this balance for labour employment. in turn reduces the productive capability of the economy. there is a strong argument in favour of including some investment is measured. supplementing or adjusting the natural accounts to rectify the situation. These kinds of perversities have been the focus economics by ecological economists and others. So to some extent this is inherent in both the demand side and the supply side (in the production function). together with a lower labour input. Clearly both consumer goods and capital goods do embody to job losses and reduced investment. even economy. In a third view. income is estimated through a ‘production function’. But depreciation of capital completely blind to the levels of indebtedness associated with the degradation of natural capital from economic activity. which tells us how much (in monetary terms) an economy is capable of producing with any given we saw in Chapter 6) the factors considered to drive the national income are capital. contains no explicit reference to the material or ecological basis for the economy at all. labour and ‘defensive’ expenditures. public 78 Sustainable Development Commission . broadly speaking. For instance.it deserves pride of place in a new macroeconomics for sustainability is an open question to which we return below. oil spills. it’s useful to set out material resources. it is the sum of all the incomes earned by people living in the country. But these are measured only in monetary terms and don’t usually carry any create them. they can be thought of. In fact. public (government) expenditure. macroeconomic variables and understand their relationships is the balance between supply and demand.

rising poverty and escalating public sector debt. services. In short. investment. What’s more worrying is that income stabilisation has only been achieved at the cost of spiralling unemployment. Figure 19 A Low-Growth Scenario for Canada: Collapse 300 Unemployment Poverty 250 200 2005 = 100 150 GDP per cap 100 50 Debt to GDP ratio 0 2005 2010 2015 2020 2025 GHGs 2030 2035 Sustainable Development Commission 79 Figure 19: A Low-Growth Scenario for Canada: Collapse . price reduction By changing key input variables – particularly those One potential avenue of exploration is to attempt Consumer spending which are known to be drivers of growth. trade and so on. investment. The most notable exception is a study carried out by Canadian economist. but gas emissions come down slightly. It can also illustrate the environmental and social implications of those In search of the low-growth economy Investment DI CRE T This scenario certainly achieves a stabilisation in the in the literature at all. and poverty levels. consumption. this scenario represents the unpalatable form of social (and economic) collapse that politicians fear the most. Figure 18: The ‘Engine of Growth’ in Market Economies output. such as a stabilisation of economic output by altering the labour participation and investment rates – the model role or relative importance of key variables (such as can consumption. employment.the system has a tendency to become unstable. The study used an interactive systems model to explore the potential for achieving a stable. public spending. mainly because output falls. public spending and PRODUCTIVITYbe used to develop different incomes for the Goods. scenarios INCREASING so future of the Canadian economy. computes variables in such a way as to reduce the imperative an account of unemployment. FIRMS model estimates the national income. But this reduction falls considerably stabilisation scenario. greenhouse gas Novelty. On the basis of these. emissions. Peter HOUSEHOLDS Victor. which was presented and discussed in detail at two workshops held by the SDC during the course of the Redefining Prosperity project.

Unemployment and poverty have both been halved. This is an important outcome. normally leads. through the logic discussed already (Chapter 6). implemented through changes in taxation and public spending. This time income is stabilised to public goods. Perhaps most importantly. compromising wider economic and social resilience. The difference in outcome in the two scenarios is striking. and there has been a shift in investment from private example. But it’s worth noting that there are some other more radical suggestions for reorganising work to ensure equity and to encourage creative participation in society. But here unemployment is averted by sharing the work more equally across the available workforce. greenhouse gas emissions. Reducing the working week is the simplest and most often cited structural solution to the challenge income is effectively stabilised.stabilise the economy. to a reduction in the available work. unemployment is avoided in the Resilience scenario by reducing both the total and the average number of working hours. from labour policies in certain European nations. It is possible to avoid the damaging unemployment that follows from recession by sharing work more equally amongst the population. The labour force has been stabilised. partly through demographic change and partly through policies aimed at stabilising the overall population. These include the introduction Figure 20 A Low Growth Scenario for Canada: Resilience 300 250 200 2005 = 100 GDP per cap 150 Poverty GHGs 100 Unemployment 50 Debt to GDP ratio 0 2005 2010 2015 2020 2025 2030 2035 Figure 20: A Low Growth Scenario for Canada: Resilience 80 Sustainable Development Commission . But what kinds of assumptions and policy interventions distinguish the ‘Collapse’ scenario in investment is reduced in the Resilience scenario.

this ‘sustainability window’ is widened if the balance between consumption and if the savings ratio is increased and more of the national income is allocated to investment. require substantial new investment. far from being a ‘distortion’ of the free market. we run out of resources before alternatives are in place. Public spending and net exports both rise. stimulate ever higher levels of consumption in the future. but to build new infrastructures. If we invest too slowly. But there’s a balance to be struck. has an absolutely crucial role to play in the transition. as they did spectacularly during the public sector also has an active role to play Sustainable Development Commission 81 . Crucially though. But its role is largely seen as being to stimulate the innovation necessary to sector spending is often regarded as a ‘necessary evil’ – there to correct for failures in the market and stable and relatively equal earning distribution. This is not to suggest that such changes are easy to implement. this But the vision has failed. But the point here is that – even within a relatively It’s easy to see how we’ve ended up with this correspondence between consumption growth When our goal is both to achieve economic stability and remain within ecological and resource limits. The upshot. Italian economists Simone challenge associated with the transition from fossil fuels to renewable energy. Consumer expenditure is world. that there is a narrow ‘sustainability window’ through which the economy must pass if it is when markets fail. requires careful policy and only tends to succeed under certain conditions. there’s a risk of slowing down the economy to the extent that the resources required for further investment aren’t available. between other demand side variables is changed. to stabilise economic output. for example. what Victor demonstrates is that there may be more room than commonly supposed. In other words. Using a hypothetical simulation model. ‘One of the fundamental preconditions Beyond the consumption-driven economy assumption is that consumption is not just the primary purpose but the principal driver of growth.One of the strengths of Peter Victor’s model is that it looks and behaves remarkably like a conventional dominated by consumption (although not driven by consumption growth). to effect the transition to renewable energy and to deliver sector. If we invest too fast. the according to this analysis.’ The same may be said for policies which restructure investment or shift taxation. even within the conventional framework. reduced working hours. Fuel prices soar and economies crash. Investment is crucial too. Consumption growth is damaging the basis for future wellbeing and Redefining Prosperity illustrates the same point.

clean technology. but it will need to be targeted more investments will need to focus on resource productivity. Promisingly. Enterprise will still produce goods and spend them in the public interest. This role is likely to diminish in importance. renewable energy. green business. The nature and conditions of investment will term infrastructures and public goods will have the way that conventional variables play out. Investment in resource productivity won’t always bring preferential returns unless the relative price of labour and materials changes substantially. we can already make a decent guess at some of the characteristics still pertain. This is But the nature and scale of investment for sustainability is very different. the role of different sectors. Both private and public sector will both still invest in stocks of physical. the assumptions embedded in the What we don’t yet know is how to make the nature assumes that investment has a ‘multiplier’ effect because it stimulates further consumption. It’s worth exploring this last point further. human and social capital. In addition. The balance between consumption and investment. Some investments in renewable energy will only bring returns over much longer time frames than in ecosystem protection and maintenance might be brought explicitly into play. problematic. The traditional function of investment (Chapter 6) is framed around labour productivity. We return 82 Sustainable Development Commission . These are some of the things to emerge from the consensus around a investment framework that builds on these points. Innovation will still be vital. Simplistic prescriptions in which investment contributes to future productivity won’t work here. challenge of matching supply with demand under these new conditions. though they are protecting vital ecosystem services for the future and may also be contributing to employment. but make no direct contribution to aggregate supply – at least under the assumptions of a conventional production function. the tools to analyse this dynamic properly don’t exist. People will still spend and they will still save. the nature of productivity these are likely to be up for renegotiation.In short. even if the political will to implement such a strategy were in place. They may be is in its turn vital for sustaining production at all over to ‘soak up’ income without increasing economic output. These will almost resource dependency of the economy. They may also services or stocks of natural capital. the level and nature of this investment almost certainly calls for a different balance between public and private sector investment. Investment is certainly going to play an absolutely vital role. the balance between public and private sector. climate adaptation and ecosystem maintenance and protection. possibility clearly exists. If debt is to be kept under control this suggests that a different savings ratio will be consumption and investment in the aggregate demand function is likely. Investments in ecosystem maintenance (for example) contribute to aggregate demand. In a sustainable economy this kind of investment needs to be seen as an essential at the moment.

Or perhaps ‘resilience’ would be a better word for what is capable of resisting the exogenous shocks and avoid the internal contradictions which have caused chaos in the last year. but possible. in sustainable technologies and in ecosystem maintenance. The starting point must be to relax our presumption of perpetual consumption growth as the only possible basis for stability and to identify clearly the conditions that But the requirement for resilience will need to be augmented by conditions that address distributional equity. It will require us to reframe our concepts of productivity for sustainability will be ecologically and socially literate. the aim of this chapter has been to is not only essential. These conditions will still include a strong requirement for economic stability. require enhanced investment in public infrastructures. Sustainable Development Commission 83 .In the meantime. impose sustainable levels of resource throughput. ending the folly of separating economy from society and environment. It is likely to demand a different balance between public and private goods. and provide for the protection of critical natural capital.

84 Sustainable Development Commission .

Flourishing – within limits 9 “We must bring back into society a deeper sense of the purpose of living. Material success has brought us to a strange spiritual and moral bankruptcy.” Ben Okri October 20081 . The unhappiness in so many lives ought to tell us that success alone is not enough.

then richer societies ought to show more evidence of it. including a The study’s authors link the changes over time largely to mobility. In fact. The increasing number of people living on their own has a number of different causes. Addressing the social logic of consumerism is also vital. They might also have mentioned that the mobility of labour is one of the requirements for higher productivity in the growth economy. for retirement. the main culprit is the increasing commoditisation of public goods and the rising social inequalities that are engendered In other words. according to one of the report’s authors ‘even the Social Recession any community now’. Rutherford pointed to rising rates of anxiety and clinical depression. societies continue to pursue material growth.7 6 a ‘social recession’. reports the BBC. 86 Sustainable Development Commission . and material goods provide a language to facilitate that. the opposite appears to be the case. prosperity hangs on our ability to participate meaningfully in the life of society. a loss of trust across society and rising political apathy. Jonathan (from the political right) both presented evidence on it to Redefining Prosperity. Rather. The extent of this phenomenon clearly differs across different nations. Their prescriptions for solving the problem differ accordingly. increased alcoholism and binge drinking. for schools. Prosperity is not synonymous with material wealth. But on the existence of a social recession there is much less disagreement. the study revealed a remarkable change in British society since the early increased in every single region measured. For Rutherford. purpose in life. for a new life’. ‘Increased wealth and improved access to transport has made it easier for people to move for work. Data from a recent module in the European Social Survey designed to measure social different levels of trust and belonging experienced far greater levels of trust and belonging than those which we communicate with each other about the community. Beyond sheer subsistence or survival. and a the breakdown of community. This task is as much social and psychological as it is material. But the appealing idea that (once our lives. material sustenance. The two authors disagree on the causes of social recession. some degree of responsibility for the change appears to be attributable to growth itself.Fixing the economy is only part of the problem. In fact. Robert Putnam’s groundbreaking book Bowling Alone provided extensive evidence of the Using an index to measure geographical community in different BBC regions. This task is far from simple – mainly because of the way in which material goods are so deeply implicated in the fabric of our lives. It’s commonly agreed that some at least of the reasons for the breakdown in trust lie in the erosion what matters. prosperity has to do and socially. There is a surprising agreement on this from across the political spectrum.

0 7. he suggested. ‘But in the present times. ‘the same absolute level of capabilities may thus have a greater relative need for incomes (and commodities)’.’ Sen broadens this argument to a wider range of Interestingly.0 4. Sen claimed that the material requirements associated with social and psychological capabilities can vary widely between different societies. a creditable day labourer would be ashamed to appear in public without a linen shirt. it is presumed.’ In short. requires a more expensive bundle of goods and services in a society that is generally richer and in which most people clothing. is.0 2005 2010 2015 2020 2025 2030 2035 Figure 20: A Low Growth Scenario for Canada: Resilience Figure 21 Trust and Belonging in 22 European Nations8 Key 0. ‘to be able to visit and entertain one’s friends. no body can well fall into without extreme bad conduct. Putting aside for a moment the fact that higher incomes have – in the same token – been partly doesn’t change so much across the species.0 10.’ wrote Smith in The Wealth of Nations. the want of which would be supposed to denote that disgraceful Sustainable Development Commission 87 . and so on.0 A Life without Shame Figure 21: Trust and Belonging in 22 European Nations degree of poverty which. and so on. not a necessary of life. Sen came close to addressing this There he argued that the material requirements for a ‘life without shame. Crucially. for example.’ he claimed in The Living Standard. through the greater part of Europe. however. strictly speaking. to keep track of what is going on and what others are talking about. radios or television sets.

But the social trap is perfect sense to avoid shame. Prosperity itself – in any meaningful current economic recession. If we take for granted the importance of material commodities for social functioning. but from the continuing surge of materialism. This is the logic of Sen’s argument.even more striking point to be noted here. there is never any point at which we will be able to claim that enough is enough. people are both happier and live more sustainably when they favour intrinsic goals that embed them in family and community. enjoying music or reading. hedonism would lead to a more ecologically sustainable life that is also more satisfying and would leave us happier. preferring instead to devote time to less materialistic pursuits (gardening. ‘Voluntary simplicity’ is at one level an entire philosophy for life. where materialism is now actively detracting from human wellbeing. walking. Beyond this ‘quiet revolution’. It is essential to mechanism for doing so in the consumer society is are suffering from a ‘fatigue with the clutter and waste of modern life’ and yearn for certain forms of human interaction that have been eroded. It’s a possibility that has already been explored to Alternative hedonism surge of consumerism. Some statistical evidence supports this view. led by local authorities or community groups. it undermines the best intentions of the individual as well. he shows how materialistic success are psychologically opposed to ‘intrinsic’ somewhere near the top of the pile. This is in effect a different framing of the social logic explored in Chapter 6. the problem can only get with higher intrinsic values are both happier and have higher levels of environmental responsibility extraordinary because it suggests there really is a kind evaporate. In her contribution to Redefining Prosperity 88 Sustainable Development Commission . and from the economic model that perpetuates it. Flourishing within limits is a real possibility. Some people (up to a quarter of the sample in a recent study) have even accepted a lower income so that they could achieve these goals. this social trap within the existing paradigm. It looks suspiciously like the language of the high price of materialism. The baseline for social functioning is always the current she describes a widespread disenchantment with modern life – what she refers to as a ‘structure of feeling’ – that consumer society has passed some kind of critical point. belonging in the community. We would welcome interventions to correct the balance. material demand forward relentlessly. for example) or to the care of others. While of novelty and anxiety. It draws extensively on the teachings of Small scale initiatives aimed at addressing the pernicious impacts of social recession are springing up across the country. appetite for ‘alternative hedonism’ – sources of satisfaction that lie outside the conventional market. In his contribution to Redefining Prosperity. according to this evidence. there have also been a series of more radical initiatives aimed at living a simpler and more sustainable life. there are already those who have resisted the exhortation to ‘go out shopping’.

Former Stanford scientist Duane Elgin picked up this theme of a way of life that is ‘outwardly simple. Very similar results have been found in Europe. voluntarily. The downshifting movement now has a surprising degree of allegiance across a number of developed Equally important are the subtle but damaging signals sent by government.encouraged people to ‘live simply. emerged initially as spiritual communities.’ Downshifting Downunder is an even more recent initiative. can improve subjective wellbeing – completely contrary to the conventional model. regulatory frameworks. which now provides a retreat for equivalents of more traditional religious communities network of Buddhist monasteries in Thailand – in which every young male is expected to spend some time before going out into professional life. for example. the hypothesis that our lives can be more satisfying when engaged in activities which are both purposive and materially light. launched in of ‘simplicity leaders’ who are committed to ‘achieving and honoring simple. building on principles of justice and respect for nature. In the normal course of events. Some of personal assets to provide the economic security needed to pursue a simpler lifestyle. attempting to create space in which it was possible to reclaim the contemplative dimension of our lives that used to be captured by religious institutions. these structures and values shape and constrain how how easy or hard it is to behave sustainably. and the secular versions seem less resistant to the incursions of consumerism. more recently. that others might voluntary simplicity in terms of an ‘avoidance of exterior clutter’ and the ‘deliberate organisation of life for a purpose’. The role of structural change The Simplicity Forum. yet inwardly rich’ as the basis for revisioning human progress. Research on the success of these initiatives is quite Consuming less. The spiritual basis for them doesn’t appeal to everyone. just and sustainable ways of life. marginal. because people are trying to live quite literally in opposition to the structures and values that dominate society. – internal and external. ‘mindfulness’ community established by the exiled area of France. launched off the back of an international conference on downshifting held in Examples of the perverse effect of dominant protected. Sustainable Development Commission 89 . while demand management is often capital’. such as the Findhorn community in northern Scotland.

it would be irrational not to. Equally. Under current conditions. however up as a ‘shopping generation’ – hooked on brand. particularly when it comes to questions of community. Creating continuity and cohesion 90 Sustainable Development Commission . Far from being irrational to resist these demands. turn down their thermostat. But they are also critical in highlighting the limits of voluntarism. Simplistic exhortations for people to resist consumerism are destined to failure. despite the credit crunch. celebrity and status. Particularly so painfully inconsistent. People readily identify this inconsistency and perceive it as hypocrisy. Little wonder that people trying to live more of asymmetry represent a culture of consumption environmental behaviour. he said of the huge crowds who attended the opening. Structural changes of two kinds must lie at the heart of any strategy to address the social logic of consumerism. We will need to call on the creativity of the entrepreneur in a different way than in the past. The second must be to establish new structures that provide capabilities for people life of society. households and communities are vital in pointing limits. and making it all but Conversely. buy locally produced goods (and so on) will either go unheard or be rejected as manipulation for as long have to be delivered with considerably less material input. social participation and psychological in instrumental.and those in the caring professions are consistently as all the messages about high street consumption point in the opposite direction. It will certainly require means. This idea has some resonances with the concept of the strategy suggested here replaces the centrality with the idea of an economy designed explicitly around delivering the capabilities for human need for government to get its message straight. It must have the goal of providing It’s really important to take this evidence seriously. Londoners had made a ‘prudent decision to give Thursday morning a miss and come shopping’. But so too is a closer attention to the question of limits. it’s almost impossible for people to simply choose sustainable lifestyles. Urging people to Act on CO2. Policy and media messages about the recession this behaviour across society are negligible without changes in the social structure. What this second avenue means in practice is something that requires a more detailed exploration than is possible here. drive a little less. incentives for unsustainable (and unproductive) status competition. it’s clear that changing the social logic of consumption cannot simply be relegated to the realm of individual choice. Or something worse. Policy must pay closer attention to the structural causes of social alienation and anomie. put on a jumper. people to come out and spend their money. in less materialistic ways. of course. social structures can and do shift people’s values and behaviours. to insulate their homes. in our society. Social innovation is going to be vital in achieving change. walk a little more. ad hoc ways. In spite of a growing desire for change. holiday at home. it’s tantamount to asking people to give up key capabilities and freedoms as social beings.

must be balanced against stimulating change. Sustainable Development Commission 91 . it sends a powerful signal about the balance between private interests and the public good. But this can only happen through changes that support social behaviours and reduce the structural incentives to unproductive status competition. Unproductive status competition increases material throughput and creates distress. This materialistic vision of prosperity has to be dismantled. economic resilience. of wages. and potentially more altruistic society. Increased investment in public goods and social to participation in the life of society will reduce the loneliness and anomie that has undermined wellbeing in the modern economy. The rewards from these changes are likely to be of social inequality. The idea of an economy whose task is to provide offers the most credible vision to put in its place. we are faced with an unavoidable material success has kept our economies going for half a century or more. But it is completely unsustainable and is now undermining the conditions for a shared prosperity. This balance has consistently rewarded competitive and materialistic outcomes even when these are socially detrimental – as the lessons from income disparities that result from this would send a powerful signal about what is valued in society. care for the elderly or disabled and volunteer work would shift the balance of incentives away from status competition and towards a more cooperative. Enhanced investment in public goods will provide lasting returns to the nation’s prosperity. In summary. In his book Affluenza. clinical psychologist Oliver James presents evidence that more unequal societies systematically report higher levels of distress than more equal societies.

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10 Governance for Prosperity .

without recourse to unsustainable material accumulation and unproductive status competition. ‘Finance is inherently unstable. does responsibility lie are (perhaps rightly) uncomfortable with the idea The role of government Debates over whether we need more state or less complex roots in history. The second component of change lies in shifting the has to proceed through the provision of real. ‘So the state has to play a big role in making it safer by lending in a crisis in return for regulation and oversight. for example) more sustainable. has failed us. challenge ever faced by human society. vital questions about the role of government – and the mechanisms for governance – in a much broader sense.’ acknowledged The Economist in the early days of the crisis. They must also provide capabilities for people to participate fully in the life of society. How is a shared prosperity to be of the individual to be balanced against the common attention to key ecological variables. whether they like it or not. On the contrary. Those limits are established not by us. changes raise questions about the nature and role of government itself. maintaining people’s livelihoods. 94 Sustainable Development Commission . credible Century politics. particularly from a free market perspective in which government is there was little disagreement anywhere about the role of the state in times of crisis. in any case. the only possible response when the economy failed was for on this. But the responsibility for taking it forwards lies unequivocally with government. but by the ecology and resources of a Change is essential. Inevitably it raises the question of governance – in the broadest sense of the word. housing and transport.certain limits.’ Extending this responsibility to the task of building a credible and robust macroeconomics for sustainability seems entirely reasonable. an almost shocking turn of events. and living within our ecological means – is the goal we should be aiming for here. shocks. progress will depend on engaging a wider community of advice than conventional approaches do. But the truth is that governments intervene constantly in the social context. The existing mechanism. But some striking shifts and aspirations. It is admittedly a more complex task than anything systems of provision (in food. in this debate occurred as a result of the economic boundary between the public and the private sector st more ecologically literate. for example. For these reasons. Where. It will also need to reduce the structural reliance on consumption growth and stability.

employment policy on economic mobility (and hence on family structure and stability). appear entirely inexplicable under any rational rate of discounting of the future. Left to our own individual devices. by the importance accorded to economic indicators.Savings accounts. by the impact of planning guidelines on these can be regarded as commitment devices. These insights are damning for the prospects governance mechanism for a lasting prosperity. The increase in family breakdown and the Parenthood has come under attack in developed social world. Buying more stuff keeps the economy going. and seduced in part at least. bombarded with persuasion. but at the individual level as well. individual choices tend to be irredeemably myopic. It relies crucially on being able to make prudent choices – both at the individual and at the social level – between the present and the future. social and altruistic behaviours. society has evolved a whole set of ‘commitment moderate the balance of choice away from the present and in favour of the future. is eroding and undermining these commitment devices. by the degree of regulation of advertising and the media. and by the support offered to community initiatives and faith groups. We favour today too much over tomorrow. The end result is a society ‘locked in’ to consumption growth by forces outside the control of individuals. curtail our appetite for immediate arousal and protect is less obvious in Offer’s exposition – the interests of affected others. argues Offer. Lured by our evolutionary roots. In fact. including future generations. Physical infrastructure and social architecture conspire against us. social behaviours evolved in humans precisely because they offer selective advantages Sustainable Development Commission 95 . by procurement policies. to deal with the ‘crisis of commitment’. preclude moral. exactly this problem in The Challenge of Affluence. to an economist. it seems. Strikingly. Left to our own devices. there is not much hope that people will spontaneously Dawkins has concluded. rampant individualism up undermining prosperity – not just for society as a whole. sustainability just ‘doesn’t come naturally’ to us. So the idea that it is not only legitimate but possible for the state to intervene in changing the social logic of consumerism is far less problematic (and correct) those aspects of this complex social structure which provide perverse incentives in favour of a materialistic individualism and undermine the potential for a shared prosperity. On the contrary. Offer’s unique contribution is to suggest that this fallibility has (or has in the past had) a social solution. marriage. It’s not unfamiliar in itself. norms for social by the way in which education is structured. by public sector performance indicators. Economists call this the problem of ‘hyperbolic’ discounting. in ways which. Offer places a key responsibility for this erosion on the relentless pursuit of novelty in modern society. the task of balancing individual freedoms against the social good. the temptation. This dynamic has been addressed keeps us buying more stuff. by the effect of trading standards on consumer behaviour.

In other words. the institutions of consumer 96 Sustainable Development Commission . colleagues have formalised this insight in terms of underlying human values.society are designed to favour a particularly materialistic individualism and to encourage the relentless pursuit of consumer novelty. One is the tension between because it bears a responsibility for the stability of novelty is a key requirement in consumption growth and economic stability depends on consumption growth. both individualism and the pursuit of novelty have played an adaptive role in our common survival. where unemployment was Increasingly. people were caught between the need to adapt and to innovate and the need for stability. is a structural requirement for growth above. altruistic ones. Using a scale that has suggests that our values are structured around two up of human beings. Where social structures favour penalised.7 crucially on social structure. But so have altruism and conservation or tradition. in Offer’s terms. The other is between openness to change and conservation – or in other words between novelty and the maintenance of tradition. Though starting from a much higher supported by public investments and infrastructures In Denmark. Figure schools. The important point here is that each society strikes also between novelty and tradition) in different places. When technologies. inequality tends to be higher in liberalised market economies mainly in the liberalised market economies that savings rates have fallen so dramatically in recent the government has had the opposite problem seeking behaviours prevail over more considered.6 Varieties of capitalism This drift has not been uniform across all nations. Little surprise then that the drift of policy is in these directions. the media. it seems. They distinguish two main types of capitalism across the advanced were caught between the needs of the individual for survival in sometimes hostile environments. towards competition and deregulation. There are some clear differences between the different kinds of economy. particularly the Scandinavian countries) depend more heavily competition – to coordinate economic behaviour. The erosion of commitment. questions about the balance of the institutions that characterise modern society. Do they promote Some other interesting differences emerge. For example. Harvard historian Peter Hall and Oxford economist David Soskice have made an extensive study of the different ‘varieties of capitalism’. religious and community Denmark).

In a recent article for the Huffington Post domestic prudence and strong manufacturing base will make it more resilient in long run. Differences in social and economic organisation are differences in degree rather than fundamental differences in of all capitalist nations appears to be the role of government in protecting and stimulating economic growth. than the consumption.Figure 22 Unemployment Rates in Four OECD Countries 2007–811 14 12 Germany 10 Unemployment rate % 8 6 4 2 0 Jan 07 Mar 07 May 07 Jul 07 Sept 07 Nov 07 Jan 08 Mar 08 May 08 Jul 08 Sep 08 Nov 08 UK USA Denmark Figure 22: Unemployment Rates in Four OECD Countries 2007-8 saw unemployment increase by over a third since emerge stronger in the end. often elevating consumer sovereignty above social goals and Sustainable Development Commission 97 . all liberalised market economies and all coordinated market economies. Recent work suggests that the different varieties of capitalism also perform differently in relation to ecological impacts. Indeed there is some suggestion that the distinctions between liberalised and coordinated market economies are not as profound as they were carried out their analysis. higher infant mortality. But the truth is that none of the varieties of capitalism is immune from the increasingly global recession. were predicated on a materialistic consumerism fuelled It seems ironic then. to protect social behaviours. Both economies. up in the pursuit of economic growth. higher teenage pregnancies and a greater percentage of people reporting that they ‘feel like an outsider’. opportunities for skills training and various aspects of social capital. that governments across the world – and in particular in the liberal market economies – have been so active in championing the pursuit of individual freedoms. ultimately. and his colleagues show that people in liberalised market economies tend to have higher per capita carbon emissions. The principal role of from building its economy on exports.

and the principal agent in protecting been a vociferous champion of sustainability. But this doesn’t absolve government from its own vital responsibility in ensuring a lasting prosperity. the state is society’s commitment device. Freeing the for consumption growth will simultaneously free government to play its proper role in delivering social and environmental goods and protecting of sustainability is essential to a governance for 98 Sustainable Development Commission .actively encouraging the expansion of the market into different areas of people’s lives. or from relentless novelty to a considered conservation of things that matter. on the one hand to encourage consumer freedoms that lead to growth and on the other to protect social goods and defend ecological limits. at this point in time. change will be impossible. mostly deliberately. ‘Political change comes from leadership damaging to human wellbeing in its own right. stability. On the one hand government is bound to the pursuit of economic growth. the mandate and delivering the change. Overcoming this dilemma is absolutely vital. can only proceed through changes in underlying structure. Changes that strengthen commitment require governments to act. On the common good from the incursions of the market. such a vision requires a democratic mandate. Of course. promote sustainability and the common good. friendship and community. But this narrow pursuit of growth represents a horrible distortion of the common good and of our underlying human values. It is particularly odd to see this tendency going hand in hand with the desire to protect social and ecological This trend has been perpetrated. that responsibility entails shifting the balance of existing institutions and structures away from materialistic individualism and providing instead real opportunities for people to pursue intrinsic goals of family. social Sustainable Development Strategy received wide with competing goals. that embraces this role is critical. there will be a tendency for governments to support social seeking individualism. under the assumption that this form of consumerism serves economic growth. the state is bound (under current conditions) to prioritise economic growth. The lessons from this study make it clear that without strong leadership. With a vital responsibility to protect jobs and to ensure stability. It also undermines the the day. dilemma of growth. protects jobs and maintains caught up in a belief that growth should trump all other policy goals. The role of government is to provide the capabilities The analysis here suggests that. But it doesn’t have to be like this. The trouble is that the thrust of policy over the last half century – particularly in the liberalised market economies – has been going in almost systematically promoted materialistic individualism and encouraged the pursuit of consumer novelty. Individuals are too exposed to social signals and status competition. Businesses operate under market to social behaviours. par excellence. stability depends on economic growth.

it emerges that governments must 1 for sustainability 2) redress the damaging and unsustainable social logic of consumerism 3) establish and impose meaningful resource and environmental limits on economic activity. Sustainable Development Commission 99 . policy directions are suggested under each of these themes.The precise policy directions implied by these goals must ultimately be a matter for public discourse and it lies beyond the scope of this study to address them itself. In summary.

100 Sustainable Development Commission .

11 Steps towards a Sustainable Economy “In the end. It will require a new spirit of cooperation… We will be called Barack Obama February 20081 . this economic agenda won’t just require new money.

When reality begins to impinge on the collective consciousness. Prosperity consists in our ability to mind that no such economy has ever existed. more honest already been accompanied by the degradation of For the most part. This delusional strategy has reached its limits. prosperity goes beyond concerns. For at the end of the day. But the idea that these will emerge spontaneously by giving free reign to the competitive market is patently false. To resist growth is to risk economic and social collapse. once recognised. we tend to avoid the stark reality of these numbers. In doing so it ends up undermining our own the way. People lose their jobs and sometimes their homes. The default assumption is where a better quality of life is essential.year 2100. idealists and revolutionaries. The starting place must be to confront the structures that keep us in damaging denial. To pursue it is to endanger the ecosystems on which of a strategy with which to confront the dilemma of growth. In short. But relentless novelty seeds social anxiety goals. society is faced with a profound dilemma. It is present in the strength of our relationships and our trust in the community. but even for the richest nations where material wealth adds little further to people’s quality of life and may even threaten the foundations of our wellbeing. politicians panic. as it has done recently. It resides in the quality of our lives and in the health and happiness of our families. The endless creativity of capitalism and our own relentless striving for social status have itself has betrayed us. 102 Sustainable Development Commission . We can’t entirely dismiss the potential for technological breakthroughs. Technology will save us. The reasons for this collective blindness are easy reliant on economic growth for its stability. So let’s just keep the show on the road and hope for the best. structures continually point in the opposite direction. When growth falters. Businesses struggle to survive. It appears Capitalism is good at technology. the best suggestion to hand is that we can somehow ‘decouple’ growth from its material impacts. is deemed to be the act of lunatics. this dilemma goes unrecognised in mainstream policy or in public debate. This extraordinary ramping up of global economic activity is without historical precedent. It hangs on our potential to participate fully in the life of society. It is evidenced by our satisfaction at work and our sense of shared meaning and purpose. The dilemma. looms so dangerously over our future that we are desperate to believe in miracles. In fact we already have at our disposal a range of technologies that could begin to deliver effective change. we lose the sense of shared prosperity that For the most part. The analysis in this study suggests that nature and structure conspire together here. continual production and consumption of consumer novelty. We stand in urgent need of a clearer vision.

This is a challenge that governments can no longer afford to ignore. To sweep away effective policies for a sustainable economy. In the following paragraphs. Examples/precedents: Sustainable Development Commission 103 . But the current economic crisis presents a unique opportunity to invest in change. 12 STEPS TO A SUSTAINABLE ECONOMY A Building a Sustainable Macro-Economy does not rely for its stability on relentless growth and expanding material throughput. The role of the state is too narrowly framed by a misguided vision of stands in urgent need of renewal. This will include developing tools to economic variables and to map the interactions between these and ecological variables. The policy demands of this task are considerable. But taken together they offer the foundation from which to build meaningful and lasting change. Specifying them with any degree of precision is beyond the scope of this or any other single document.Delivering these goals is not an entirely unfamiliar has extended that concern to psychological health. Beyond that need. This theme 1 Developing macro-economic capability There is an urgent need to develop the capabilities sustainability. Undoubtedly there are things missing can be achieved unilaterally. they call for a concerted and committed effort on the part of government to establish a detailed set of viable and and Respecting ecological limits Inevitably. it is possible to identify a range of broad policy recommendations on which the transition to a sustainable economy could be built. these recommendations capable of addressing the enormous challenge of delivering a lasting prosperity. Particular impact of changes in natural assets and ecosystem functioning on economic stability. First and foremost. place to economic growth. there is some overlap between these groupings.

clean Improving macro-economic accounting The shortfalls of conventional output or Examples/precedents: more robust measures of economic wellbeing that correct for the most obvious drawbacks in using to incorporate welfare losses from inequality in the 3 of material resources and other forms of natural capital. but detrimental ecologically and psychologically (Chapters to help achieve this task.2 Investment in jobs. savings. Examples/precedents: longstanding critiques in the up economic growth for over a decade. 4 support and training for green businesses. Examples/precedents: investments in renewable energy. B Protecting Capabilities for Flourishing The social logic that locks people into materialistic consumerism as the basis for participating in the life of society is extremely powerful. to account for the social costs of carbon emissions and other external environmental and and defensive expenditures. But and contributed to the global economic crisis. assets and infrastructures emerges as a key component – not just of economic recovery – but of a new macroeconomics for consumer debt. for example through secure (green) national Performance and Social Progress. public transport borrowers. 104 Sustainable Development Commission .

Developing national accounts of the measurement of outcome variables such as healthy life expectancy. Sustainable Development Commission 105 . Examples/precedents: proposals for higher income place more responsibility for planning in the hands broadcasting. Examples/precedents: seminar. time work as regards grading. Too trend towards income inequality. social wellbeing. promotion. employers) for family time. museum funding. parental leave. public libraries. Examples/precedents: 6 Tackling systemic inequality Systemic income inequalities drive positional consumption. educational participation. undermine social capital and expose lower income households to higher morbidity and lower life satisfaction. increase anxiety. trust in the community. Examples/precedents: many countries. training. social adjust existing economic measurement frameworks to account systematically for ecological and social factors.5 Sharing the work and improving the work-life balance 7 Measuring prosperity The suggestion that prosperity is not adequately captured by conventional measures of economic output or consumption leaves open the need to people’s jobs and livelihoods. Creating resilient social communities is particularly addressing the impact of immigration on urban and rural poverty. and sabbatical breaks. parks and green spaces. But in addition. But redistributive 8 Strengthening human and social capital Understanding that prosperity consists in part in our capabilities to participate in the life of society demands that attention is paid to the underlying human and social resources required for this task. different sections of the population and across the nation as a whole.

There is a need systematically to dismantle incentives towards materialistic consumption and unproductive status competition.g. Example/precedent: Example/precedent: 106 Sustainable Development Commission . sustainability and fair trade. The contraction related emissions should be applied more generally. pollution) – has been broadly accepted for at least a decade and has been implemented in varying degrees across Europe. advertisers’ claims. Examples/precedents: Scandinavian advertising Lei Cuidade Limpa. But progress towards this goal has been the ecological limits of economic activity. 10 11 Fiscal Reform for Sustainability The argument for an ecological tax reform – a shift in the burden of taxation from economic goods (e. more effective trading standards and stronger consumer protection – particularly on questions of product durability. C Respecting Ecological Limits contribute to that task. incomes) to ecological bads (e. these limits need to be built into the to design appropriate mechanisms for shifting the burden of taxation from incomes onto resources and emissions.g. Effective mechanisms for imposing caps on established.9 Reversing the culture of consumerism The culture of consumerism has developed in part driven economic growth. Declining caps on throughput should be established There’s an urgent need to achieve an order of should be established for per capita emissions and wastes. Identifying and imposing strict resource and emission caps is vital for a sustainable economy. But it has had damaging psychological and social impacts on people’s wellbeing.

for a comprehensive policy programme to make the transition to a sustainable economy. Sustainable Development Commission 107 . incentives and damaging social logic that lock us into unproductive status competition and materialistic consumerism.12 Promoting Technology Transfer and Ecosystem Protection prosperity in advanced economies is to make room these economies expand there will also be an urgent need to ensure that development is sustainable and remains within ecological limits. and the protection of ‘carbon sinks’ (e.g. International policy will be required to establish a global technology fund carbon reduction. forests) and biodiversity in developing resource levy (payable by importers) on imports from developing countries. or through a Tobin tax on international currency transfers. But it’s also essential to of offering meaningful guidance for a lasting able to replace it altogether. Example/precedent: Convention. There is a unique opportunity here for government to demonstrate economic leadership and champion international action on sustainability.

html. In particular. policy experts. and called on politicians. psychological. In the meantime. religious) on the meaning and interpretation of prosperity Economy ‘Lite’ evidence concerning the feasibility of ‘decoupling’ economic progress from material throughput and environmental impact Confronting Structure addressed the structural drivers associated with continued economic growth and explored the impediments to a ‘stationary state economy’ Living Well prosperity. SDC launched a The programme involved a series of workshops – workshops entailed intensive discussions based rather than defer them endlessly as tomorrow’s process with a series of stakeholder workshops Development Strategy. draft versions of these papers can be found on the SDC website prosperity. these essays provide a part of the ‘evidence base’ from which this study has drawn. That earlier report summarised evidence of a were organised around four related themes. Together with ‘background’ reports prepared by SDC staff (and interns) and the extensive literature on growth and sustainability. Following the launch of the new Strategy. mental sustainability and human wellbeing. healthy and just society’ that is ‘living within environmental limits’. Visions of Prosperity different perspectives (historical. as an inadequate measure of sustainable wellbeing. In the spirit of ‘opening out space’. and to be far more rigorous in distinguishing between the kind of economic growth that is compatible with the transition to a genuinely sustainable society and the kind that absolutely isn’t’. commentators. economic progress and the recent surge of policy and media interest in happiness and wellbeing. commitment in Securing the Future to explore the concept of wellbeing and develop new wellbeing respondents to explore people’s perceptions of the relationship between wellbeing and economic progress. It is intended to publish the seminar contributions as an edited collection. and that there is a need to ‘open out political space’ within which to address the shortcomings of conventional approaches to prosperity. 108 Sustainable Development Commission . the Commission itself led the engagement process that resulted in element in these principles is the recognition that – rather than being an end in itself – a ‘sustainable economy’ should be regarded as the means to reaching the more fundamental goal of a ‘strong.Appendix 1 The SDC Redefining Prosperity Project Prosperity without Growth? represents the conventional measure of economic output – the Sustainable Development Commission into the relationship between sustainability and economic when the Commission published its landmark report – Redefining Prosperity – which challenged dominance of economic growth as the driving force in the modern political economy. economic.

However. Rather. Sustainable Development Commission 109 . this report is not intended to be a commentary on the Redefining Prosperity workshops. Prosperity without Growth? aims to convey a coherent position on questions of sustainability concrete steps towards a sustainable economy. advice that we received from those who attended the workshops and contributed thinkpieces to them.

R) accounts separately for fossil resources F and renewable resources R. where the energy variable E E (F. In particular. The simplest (and commonest) such production function includes explicit account of energy resources allows for incomplete substitutability between factors 110 Sustainable Development Commission . For these reasons. separately from total factor productivity. Rt Rt (Rt–1 . Model Development We may also want to use a production function where the elasticity of substitution is constant constant elasticity of substitution (CES) production 6) Y a.L) = a.K . I X coupled with some form of production function. there will be a need to shift investment substantially towards resource productivity.( KP + L + E ) + + = 1 and = (s – 1)/s where s is the elasticity of substitution.Appendix 2 Towards a Sustainable Macro-Economy This annex addresses the broad goal of developing Y Y (K. we might want the production function to be able to ‘pick out’ improvements in resource productivity. L between the economy and the demands of ¯ Y (K. This requirement is discussed in more detail below. Our initial requirements for a suitable production demand (AD AD ¯ C+G+I+X (where C G ¯ expenditure.E.L where K is capital. some of this investment may need to be led by the public sector – because of the nature of the required projects. energy technologies.IRt–1 ) that it includes no explicit reference to material substitutability between factors. we may want to adopt a production function that has explicit reference to (say) energy resources (E Y Y (K. Finally. and the level of renewable resources R in any given year is a function of investment I R in renewables capacity.L) structure are a prerequisite for sustainability. Secondly.L) = C + G + I + X This form of production function has been subject to emission and energy resource constraints with high investment to consumption ratios with high public sector expenditure and investment with low or no consumption growth with low or no aggregate demand growth.

For production function. we might want to separate investment dedicated to reducing the demand for resources from conventional business investments aimed at the recapitalisation of productive capacity. investment in ecosystem function or adaptation might more realistically be envisaged as between these extremes we might want to consider categories of infrastructure investment which typically require some public sector involvement. Business sector – sector sector – commercial – quasi social rate rate of commercial of return return the target investment. However. terms – whatever their importance for sustainability. Investments in ecosystem maintenance may have no direct impact on the production function at all. conditions of Energy Renewable supply Other capacity Climate adaptation Ecosystem maintenance I I I I I E B R B O B A B M B I I I I I E P R P O P A P M P I I I I I E S R S O S A S M S Firstly. and the augmented capital stocks will then lead – via the production function – to increased output. In practice. investments should add to capital stocks. In principle. Taken together. this feature of our model could be regarded as the single most important innovation over conventional more detail here. Some may be less productive (in conventional terms) than others. Sustainable Development Commission 111 . a part of the hypothetical exercise set out here would be to explore the potential for different kinds of investment conditions. we are likely to want to identify different technological targets for investment. these two dimensions suggest a ‘matrix’ of investment structure that lies at the heart of our exploration of alternative macroeconomic structures. The Tidal Barrage is an example of such an investment different investment conditions is the required rate models of this kind would assume a single rate of return consistent with current commercial conditions. however. Our second ‘dimension’ of investment structure follows on from this consideration of investment need to identify different conditions of investment. On the other hand. For instance. In fact. connections between our different types of investment and the production function might be of different kinds. some devoted to improvements may also want to consider investments dedicated targeted at climate adaptation. The Severn Tidal Barrage may be one potential investment in this category.accounts for resource productivity improvements. Investments in renewable energy (as indicated above) might contribute directly to the E factor in the production function. investment focused on technological as a conventional business sector investment. which might be more needed to mitigate or adapt to climate change or to restore ecosystem integrity. they ‘soak up’ income and have to be included in the model. The next consideration in developing a model along the lines outlined here would be to connect these different investment types to the production function. Energy of two main types. For example.

investment is key. for example. to estimate productivities separately for each of the capital matter for a simulation model. The most immediate way to take this forward would be to expand or disaggregate the subcategories us to establish (within the model) a relationship between the schedule of investments determined model energy resource requirements associated with the different demand categories using known carbon intensities. In principle. and conditions for. It will be essential in understanding how to build a different kind of predicated on increasing consumption growth. but at some level we will want to ensure that business as usual can be calibrated consistently with current trends.of return. 112 Sustainable Development Commission . (say) two categories in the production function. with different productivity assumptions associated with each. in the model is the ability to map the carbon levels and compositions of aggregate demand. calibration of the model. social infrastructures. It isn’t clear that we have be used to explore further some of the arguments made in this study. They may be essential to reduce carbon emissions. One would be to assume that different forms of investment augment different categories of capital. the enhanced capability to explore different targets of. to protect ecosystems or to guarantee need to be able to distinguish different categories enough econometric data. in part because of the longevity of the investment. Broadly speaking. this brief overview serves to establish achieved. In particular. In summary. sustainable technologies and the maintenance and protection of ecosystems. Several possibilities exist. This is not to denigrate these relatively ‘unproductive’ investments. this attribution exercise could also be used to develop different scenarios to some obvious caveats about the limitations of the underlying EIO data. each of which has the production function and relate investment to changes in the availability of those resources. but emerges through strategic investment in jobs. the development of an appropriate production function emerges as one of the key tasks inherent in taking this work forward.

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Endnotes
1 Introduction
1 8

9 2 3 ‘Be moderate in prosperity, prudent in adversity’, advised Periander, the ruler

This evocative phrase comes from the Indian

10 11 12

4

For useful summaries of these impacts see

2
1

The Age of Irresponsibility
th

2 course the SDC’s own report on Redefining Prosperity xiv

5

The most widely cited statistic from Stern’s

an estimated cost from climate change of 6 oil prices to global economic stability as early

3 html Source data are from The Economist based Commodity Price Index (accessed at www.economist.com)

4

5 fell sharply in the following months, the long term concern is widely acknowledged. See for on Peak Oil and Energy Security (ITPOES 7 On income inequality in developed nations executivesalaries In Varieties of Capitalism Peter Hall and David ‘liberal market economies’ and ‘coordinated market economies’. It’s instructive up to a between these economies in approaching 7 taken from ‘Debt Facts and Figures – Compiled
st

6

statistics.html

122

Sustainable Development Commission

8 9 Statistics (accessed at www.statistics.gov.uk). Formally known as the public sector net debt, liabilities issued by the public sector less its 20 21

trend. See, for example, the speech at Cooper
th

Citibank quote is from the Financial Times July Citigroup had to be rescued by the US
rd

10

On rising inequality and increasing relative that ‘The gap between rich and poor and the number of people below the poverty line have both grown over the past two decades. quarters of OECD countries. The scale of the century, however, the report reveals that income inequality fell
st

22

1

From Zia Sardar’s ‘thinkpiece’ for the Sustainable Development Commission

2 contributions to the SDC project from Tim

11 12 3 as attempting to ‘create the social world and contributed to the most recent bank bailout. Peter Townsend’s groundbreaking analysis of poverty, in which he argued that people can be said to be poor when their resources are ‘so seriously below those commanded by the average individual or family that they are, in effect, excluded from ordinary living patterns, customs and activities’ (Townsend or material possessions as such, Townsend claimed, poverty is about the inability to participate actively in society. 4 5 6 7 other free market economists believed 8 18 19 The Economist
th

htm 13

14

See The Economist, Race to the Bottom,
th

15 16 17

The Living Standard published in Oxford Economic Papers, an economics journal, but is usefully reproduced Sen’s later essays on the subject in Crocker

Barack Obama (amongst others) has offered a convincing historical perspective on this

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For a more detailed 13 argument to explain the life satisfaction 14 Communication. Support for the relevance of income as a factor in wellbeing also emerged from Defra’s clearly emerged as a contributing factor in the survey.9 whether the concept of utility is about the ‘satisfactions’ received from commodities or distinction need not concern us here. Data on each of these countries can be found in Ruut Veenhoven’s ‘World Happiness 8 For a more detailed exploration of Indian attitudes to the environment. in which expenditures – on positional goods – are necessary mainly to defend our social position. 10 theory of ‘attributes’ which attempted to are not the same as satisfactions. where the lower social grades profess themselves more Statisticians say the two scales have different ‘orders of integration’. 15 12 16 17 18 The most notable exception to the rule that higher social grades show higher satisfaction is in the domain of community. The costs of car accidents and cleaning up oil spills have this character. 24 25 4 11 For a discussion of trends over time in the 1 2 The Dilemma of Growth For more insight on the symbolic role of 12 alternative economic indicators. There is also an extensive and useful discussion of the relationship between satisfaction and material commodities in modern needs 21 22 23 frailty does have interesting lessons for government policy which I shall return to later. Though these expenditures makes sense at an individual level it is perverse to count them cumulatively as an addition to wellbeing. he argues explicitly that freedom is both the means and the end of development. poverty. see for describes it. See Jackson literature on adjusted economic indicators – 3 4 5 6 relevance for sustainable consumption see Performance and Social Progress set up by 7 13 Defensive expenditures are those incurred as a result of the need to ‘defend’ against activity elsewhere in the economy. In Development as Freedom example. Positional expenditures can be seen as a special case. Evidence of the importance of relative income 9 14 10 11 Data from the Health Survey for England. Sustainable Development Commission 19 20 124 .

Data are taken from statistics compiled for the Human Development Report. available takes domestically extracted resources. This relationship is sometimes called the th The 15 Sustainable Development Commission 125 . For more detail on (and critique of) this 11 These numbers are taken from Druckman 24 25 5 The Myth of Decoupling 1 nd 12 2 3 4 5 Energy Annual 2006 6 Energy Annual 2006 7 html International International 13 Economist 14 progress) is itself a driver of economic growth. capital and technological innovation. resources are often excluded from the equation and the main dependencies are thought to be on labour. It doesn’t account for the resources goods. The problem of ‘rebound’ is discussed further in Chapter 6. adds in resource imports and subtracts resource exports.’ World carbon intensity is calculated using total emissions data in 17 Data are taken from statistics compiled for the Human Development Report.15 16 Data are taken from statistics compiled for the Human Development Report.gapminder. Source data for individual nations taken Dioxide Emissions from the Combustion and Flaring of Fossil Fuels per Thousand Dollars Exchange Rates. available 8 18 Data are taken from statistics compiled for the Human Development Report.org There is a strong correlation (the R value 20 21 growth. available 9 Data for CO 22 23 10 In the conventional model. available 19 There are some notable recent attempts to Online at www.

the estimated technology improvement rate is always slightly higher than the actual rate. It can also be shown that when per capita income and population rates are positive. where rp is the average population growth rate. It needs more care in application when the rates of change exceed this. than reductions in other greenhouse gases. in CCS and in ecosystem industrial average) emissions would need to (pro rata) target range for carbon dioxide . and partly because we might need reductions in CO to do more work. its contribution would be severely limited by resource constraints in the context of a continually expanding global demand (SDC 29 30 31 th 21 June scienceofclimatechange For PwC estimate 22 o rd climatechange 32 33 climate change investments do or do not enhance economic productivity. ra is the average growth in per capita income and rt is the average growth (or decline) in carbon p a t i 24 25 26 Though the numbers here refer to carbon emissions. and investments in renewables fuel costs rise. particularly at the margin. The error term in calculating the technological improvement rate using the rule of thumb in for ra 27 28 this theoretical list. enhanced early investments in renewables. So the rule of thumb provides a robust indication target reductions. But even if the issues around waste disposal and decommissioning could adequately be addressed. 23 16 17 18 19 20 average annual growth in emissions ri over ). right hand side of the equation gives the # rp a t.between incomes and income inequality. i This approximation works very well for small percentage changes (a few per cent per annum). partly because the target is to get down to the lower end of the range of atmospheric concentrations. the same basic arithmetic applies scarce forestry resources or biodiversity impacts. Here it is assumed that global emissions today are and that we would want to achieve something towards the – 126 Sustainable Development Commission . Whilst investments which improve resource productivity (for example) may offer positive returns.

9 10 For an exploration of national trends in labour productivity and their impact on growth see 2 The hypothesis that technological change is a key driver of growth is a key component 3 The Protestant Ethic and the Spirit of Capitalism to refer to the bureaucracy that he saw emerging as a constraint on individual freedoms in capitalism.’ (op and applied to consumerism more explicitly 4 For a more formal exposition of the basic economics here see for example Begg et al For its relevance to the environment see 14 13 materials. It’s important to note that capital is not the organisational changes and training are also destruction has given rise to successive ‘epochs of capitalism’.protection may not always be productive in other process design changes (see for 8 6 1 The Iron Cage of Consumerism Extract from ‘Pack behaviour’ an article about the vulnerability of banking giant Santander. th The Economist of the last century or more have picked up on this anxiety. 12 more detailed discussion of the relevance of Schumpeter’s work in this debate see 5 6 This is probably the one place where the standard economic model pays any attention to the physical reality of keeping activity going. Early growth theories suggested that growth could be predicted mainly on the basis of how much labour and capital was available. making sure that machinery and buildings are fully utilised. and even of 15 For an extensive recent treatment of creative innovation as the ‘origin of wealth’ see 16 17 18 19 20 For more empirical evidence see. but eventually a transformation of the institutions of governance. Each technological revolution ‘brings with it. eg 7 The commonest way to increase capital productivity has been to increase the capital utilisation factor. In Swan independently argued that this residual could be explained by technological progress 11 the rebound effect. But there are also elements in Weber’s work where he uses the same concept to characterise consumerism itself as the following quote goods should only lie on the shoulders of the “saint like a light cloak. of society. But these models failed to account for the ‘residual’ growth after expansions in capital and labour had been factored in. The gradual degradation of capital goods is foreseen explicitly by the laws of thermodynamics. not only a full revamping of the productive structure. for example through continuous batch processing and Sustainable Development Commission 127 . which can be thrown the cloak should become an iron cage. both as an epidemiological fact and as a systemic aspect of modern life.

See for 8 22 The scale of the investment needs to achieve 9 10 colleagues estimated that the value of global 23 24 25 week as the PBR. 128 Sustainable Development Commission . 7 Economy Initiative’. The Guardian gmac 17 bailout’. the Treasury estimated reduction in credit card bills rather than an increase in spending. th Robinson’s newslog and interview with Paul 20 This could include the establishment of ‘green bonds’ to promote sustainable investment. Press Release at London nd 21 development of green vehicles. leading article th in the Independent on Sunday October 3 13 14 15 16 See eg. 4 economist Cary Brown argues that this was largely because the federal public spending stimulus was undermined by spending cuts and tax hikes at local and state level. famously 2 ‘The green lining to this chaos’. Telegraph th th Increases in income tax are more likely to be put away as savings than reductions in tax on consumables. as proposed by Climate Change Capital and others. 5 th December 18 19 6 ‘Finding a way out of the Economic Crisis’. economics of climate change.21 22 23 24 25 11 pdf Reference scenario (business as usual) 7 1 Keynesianism and the Green New Deal 12 Economy Initiative in the Independent on th trillion to this cost. Even so.

If demand rises above supply they draw down stocks and build them up next year. 17 See also the interim report of President 6 question here which is. even if you can. This form of production function is called a 8 1 2 3 4 5 Macroeconomics for Sustainability chapter has this form. 7 8 9 10 20 set a target for reducing carbon emissions in To make the sums add up. should you make money from all these of the simpler. the expenditure net exports (i. income and employment creation. his much deeper than that and provides the basis for the idea that high street spending is the 12 development of the multiplier concept.26 with using public sector money to stimulate economic demand in times of crisis. is the is the principal limitation on the growth of aggregate demand. 18 The model is described in more detail in a 19 Human Poverty Index.e. 11 computed annually) tend to ‘force’ an measures by making adjustments for stocks course the practical means by which supply 24 France has now more or less abandoned its 21 22 23 a single signatory achieved the target.’ 27 28 14 15 13 and demand are balanced. companies hold more in stocks and set these off against future demand. more creative bits of our lives change the nature of the activities some who argue that it does. The model also contains a forestry submodel. since the diagram doesn’t show the foreign sector. which looks at changes in forestation. If demand falls below supply in a given year. exports minus imports) of traded goods. For other attempts see 16 This is one of the reasons why it was so easy This idea has a long pedigree (Jackson and White paper for a ‘Supplier Obligation’ – a mechanism for capping carbon emissions associated with sales from energy suppliers. Since this is less relevant for the Sustainable Development Commission 129 . hence. Jonathan cites Paulo Virno’s argument that post–Fordist economic activity is focused on the ‘life of the mind’.. This is illustrated in slightly more complexity exports. The model simulates the ability to affect this index through redistributive policies and through health spending.

The Victor study is calibrated against Canadian econometric data. Increased divorce rates have themselves been linked to declining social integration. study is that it is not calibrated against historical data. index measures a weighted average of the households. 27 28 to view the results of these studies with caution.org 4 html 130 Sustainable Development Commission . speaking this is an index of 21 22 On Plum Village see www.plumvillage. the exact 7 to ascertain. ‘For simplicity it is assumed that the Bank of Canada. 30 31 32 Interestingly. regulates the 6 5 ‘aloneness’ rather than ‘loneliness’. But as an indicator of the degree of fragmentation of communities it is a useful tool. It also two. this problem has the same basic structure as the problem of funding public sector spending in a welfare economy. See of labour mobility hurts EU productivity’. but is nonetheless essential for social welfare and 12 13 14 15 16 On downshifting and voluntary simplicity see pros and cons of the idea of living better 17 published his paper on ‘Voluntary Simplicity’ in the Indian Journal Visva Bharati Quarterly. principally the absence of a monetary sector in the model. Investment in social goods may less no direct contribution in a conventional production function (except perhaps in maintaining the labour supply).’ The Times 2 3 Jonathan Rutherford is from the leftwing rightwing thinktank Policy Exchange. Canada’s central bank. but also has some limitations. recent inhabitants (people who have moved to their current address within the last year) and people renting privately. For this reason. We need a new vision to live by. New th Europe 8 9 10 11 See for example the groundbreaking work of the Young Foundation’s Local Wellbeing 29 state is an absolutely vital ‘commitment device’ for achieving sustainability. 18 19 20 th 9 1 Flourishing – within limits Ben Okri. ‘Our false oracles have failed. Strictly. Both models have some limitations.25 26 of this model is the production function which includes explicit reference to both energy resources and the capital stock.

23 6 7 8 9 26 27 clustered together in a form they called On wage disparities see. at least until the end of the period while unemployment in Sweden (a coordinated market economy) has risen by almost a quarter. BBC th 29 12 10 Governance for Prosperity 1 Peter Hall – Professor of European Studies 14 For example. For a useful – and still relevant – discussion of the ambivalent political economy of the welfare state see 15 16 For background on the evolution of social 17 This tension is what the historian Polanyi society. 2 This question was evident for example in the clash during one of the Redefining Prosperity workshops between Jonathan Rutherford (from the political left) arguing for more right) arguing for less state. for example Bradley 10 although they have been coming down steadily over the last decade. 11 database (as in several other international do this. while economic stability relies on this by addressing the macroeconomics of sustainability. 30 13 24 25 It also strikes the balance between novelty and tradition differently. the unemployment rate in Canada (a liberalised market economy) has fallen slightly. ‘People power vital to climate deal’. th 3 th The Economist 18 4 5 19 environment Sustainable Development Commission 131 . 28 ‘Enormous shopping complex opens’.

11 Transition to a sustainable economy 1 From a speech on ‘shared prosperity’ that Obama made in Janesville. this failure of and environmental indicators seriously is positively embarrassing given its claims for international leadership in sustainability. although he does not constrain the production function 2 2 3 Investment is shown in the table in each target and condition dimension. 132 Sustainable Development Commission . the Surrey Environmental be used to attribute the carbon emissions 4 3 Appendix 1 The SDC Redefining Prosperity 1 Redefining Prosperity commission. it is most likely that some targets (ecosystem maintenance eg) will only be undertaken social).uk Securing the Future development. For example. th Appendix 2 Towards a Sustainable Macro-Economy 1 study of the Canadian economy.gov. In practice. Wisconsin.org.uk 3 Redefining Progress 2 4 in spite of a commitment by the Labour to submit updated analytical tables to 4 statistics in the ILO database.

Sustainable Development Commission 133 .

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