#103 Jan/Feb 1999

Develop the Economy, Don’t Just Grow It

Beyond Growth: The Economics of Sustainable Development. Herman E. Daly. 253 pp. Boston: Beacon Press, 1996. Although I’ve never met him, I must admit: economist Herman Daly has had a […]

Beyond Growth: The Economics of Sustainable Development.
Herman E. Daly. 253 pp. Boston: Beacon Press, 1996.

Although I’ve never met him, I must admit: economist Herman Daly has had a big impact on my life. As students in the late ’70s, some friends and I got so excited about Daly’s fundamental challenge to our economy’s growth “addiction” that we did something about it – we lobbied for a course on it.

Student-initiated seminars (like most forms of activism) were rare at Princeton University at the time, but our goals were ambitious: to uncover the limits of growth economies, from the Soviet to the U.S. model. The course would look at steady state economic alternatives to growth, with a focus on locally based development and appropriate technology applications in low-income/low-wealth communities. We found a sympathetic professor to sponsor it and, since the readings were adequately theoretical, the university let us hold the seminar in 1980. Afterwards, a few of us crazy enough to think we could do it decided to put some of Daly’s theories to test.

In spring 1981, Isles was born. Based in Trenton, New Jersey, Isles, Inc. is a community and environmental development corporation. We do affordable housing, job training, environmental education, brownfield redevelopment, urban agriculture, and neighborhood planning. While much has changed since our academic beginnings, our mission remains mostly the same: “To foster more self-sufficient families in sustainable communities.” As Daly might put it, we work to improve the welfare of the two “victims” of a growth economy – the environment and people living on the bottom rungs of the economic ladder.

Beyond the quixotic story of Isles’ founding, why should Daly’s work be important to community builders? Because we know that, despite our extraordinary efforts in thousands of communities across the country, these efforts are a drop in the proverbial bucket. The real game is in the overall economy, stupid.

What is the goal of the economy? According to Daly, it is to create the “greatest good for an optimum number of people over the long run.” If that is true, then the economy’s success is pretty suspect. We know its limitations: the growing wealth imbalance, the cruel “efficiencies” of capital flowing in and out of communities, the questions about the earth’s capacity to sustain human life. Yet how many of us feel comfortable taking on mainstream economists and economic theory?

As a former economist at the World Bank, Daly takes them head on in Beyond Growth with reasoned arguments and increasingly intellectual elegance. He begins by challenging the trendy and fluid nature of the term sustainability. “One way to render any concept innocuous is to expand its meaning to include everything,” he writes. He then gives his definition of sustainability: “(D)evelopment without growth beyond environmental carrying capacity, where development means qualitative improvement and growth means quantitative increase.”

Daly clarifies that the economy is only a subset of the larger environment. Carefully showing how continuous growth is not only impossible in the long run, but undesirable, Daly dismantles some of the arguments in favor of unlimited growth, including the assertion that we can always replace natural resources with manmade ones. He offers a vision of a “steady state” economy that improves its citizens’ lives through qualitative improvement with no increase in “throughput” (Daly’s word for the materials and energy that the economy turns from raw inputs into waste). Daly calls this development, as opposed to growth, which means using continually more throughput to get bigger, without much qualitative improvement. Beyond Growth takes on the World Bank, accounting models, population control, and globalization, showing how to frame each in order to make sustainability truly possible.

Daly is the grandfather of steady state economic theory (increasingly called environmental economics). More than perhaps any other “macro” thinker, he can help bridge the gulf between the environmental community and those interested in critical community issues such as poverty. Perpetual growth is not only impossible to sustain biologically, it also requires underemployment (surplus labor for future growth without inflation) at unacceptably high levels in many lower-income pockets in the country.

If growth is not going to lift us out of poverty, what will? “The answer is painfully simple: by population control, by redistribution of wealth and income, and by technical improvements in resource productivity In sum, not by growth, but by development,” he writes.

In addition, traditional measures of economic health, such as the GNP (growth is good, contraction is bad) fail to distinguish between missiles and food, between consumption and development, or between the cost of the cleanup of the Exxon Valdez oil spill and community development projects. GNP does not count the depletion of natural resources even though they obviously have value. “GNP,” Daly continues, “is an index of throughput, not welfareTo design national policies to maximize GNP is not smart.”

Daly leads a growing number of economists who call for re-thinking the fundamental assumptions about how economics is taught and applied. His 1996 critique of World Bank economists says the Bank “is like the church – trying to do good in the world according to what its clergy learned in seminary. But the ‘seminaries’ are teaching bad theology.”

On October 6, 1998, the relatively new president of the World Bank, James Wolfensohn, shocked his peers in the finance world by noting, “Today, while we talk of financial crisis, across the world, 1.3 billion people live on less than $1 per day; 3 billion live on under $2 per day; 1.3 billion have no access to clean water; 3 billion have no access to sanitation; 2 billion have no access to power. We talk of financial crisis while in Jakarta, in Moscow, in sub-Saharan Africa, in the slums of India and the barrios of Latin America, the human pain of poverty is all around us. We must address this pain If we do not have greater equity and social justice there will be no political stability.”

Perhaps Daly’s message is working. But only if Wolfensohn believes that addressing the pain does not mean “growing” out of our dilemma.


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