The American economic juggernaut is growing again. Gross domestic product – the goods and services produced by people and property in the U.S. – grew at a rate of 3.5 percent last quarter, according to the Commerce Department.
Economists, politicians and pundits all agree: Growth is good.
In 1776, when Adam Smith published “The Wealth of Nations,” economic growth could increase quality of life by securing basic necessities for most Americans. That time has passed. Yet economists and politicians still blindly promote policies that aim only to increase the amount of stuff the economy produces.
Up to a certain point, growth has done us considerable good. But that point may be surprisingly far behind us. According to one analysis, extra income is correlated to increased happiness only up to $10,000. Past that, the correlation disappears.
In the developed world, more has little to do with better.
Crime, divorce, alcoholism, depression and suicide have all increased along with GDP around the developed world. So has the gap between the rich and the poor. Growth has not necessarily caused these problems, but it certainly hasn’t alleviated them.
Most significantly, we are not any happier now than before. Since 1950, gross domestic product per capita has tripled. The average American family now lives in a house twice as big, owns twice as many cars, flies 25 times as far and uses 21 times as much plastic. But, the number of people who say they are happy has decreased steadily since then.
We began this economic experiment with a 3.8 billion-year store of natural capital in old-growth forests, rich topsoil, fossil fuels and other natural resources. We are going through it like it’s free. In the accounting of GDP, it is free.
As The Economist magazine put it, a country could increase its GDP just by cutting down all its trees, selling them as wood chips and then gambling the money away playing tiddly-winks. Some developing countries are actually doing something very similar.
Economists may argue that technologies will be invented to replace any natural resource if it becomes scarce enough. Empirically, this is not evident.
As Paul Hawken points out in the book “Natural Capital,” progress is not restricted by the number of chainsaws but by the disappearance of primary forests. Plywood may be a suitable substitute for sawlogs, but forests provide more than wood. Forests and other ecosystems provide services, such as recycling carbon dioxide into oxygen, that are difficult or impossible to duplicate technologically.
By some estimates, these services are worth $36 trillion per year – roughly equal to the output of the entire world economy. That is, if you can put a price on breathing. In economic lingo, the marginal cost of GDP may now exceed its marginal benefit.
In the American West, this is becoming increasingly apparent. New developments impose greater costs on infrastructure and community services than those developments pay for in taxes.
In Larimer County and Fort Collins, residents are realizing this. Fort Collins has a growth management plan that will cap its size at 223,000 people. For the most part, this is because the city can only provide water to that many people. In Colorado, fresh water is a resource with no reasonable substitutes.
Larimer County residents have twice voted to levy a 1/4 cent sales tax increase to fund the open lands program. It is an investment in smarter growth, the type of growth we need.
The Genuine Progress Indicator (GPI) adjusts GDP for environmental degradation, loss of natural capital and other costs of growth. It shows a steady decline for the past 30 years. Adopting GPI as an index for social welfare can put an end to this uneconomic growth.
In the words of Bill McKibben, More and Better once were two birds perched on the same tree. Better has flown away, but we are still aiming for More.
Erik Anderson is a senior natural resources major. His column appears Wednesdays in the Collegian. Letters and feedback can be sent to email@example.com.