Economic growth won’t fix poverty

Economic growth won’t fix poverty

Dr. Trevor Hancock

18 November 2019

702 words

In 2004 Roy Romanow, former Saskatchewan Premier and Chair of a Federal Commission on the Future of Health Care, gave his keynote address to the inaugural meeting of the Health Council of Canada, which was set up as a result of his report. He suggested seven things we could do to stay healthy: Number one was “Don’t be poor”.

At the global level the poverty line, set by the World Bank in 2015 at $1.90 per day, measures extreme poverty. This is the amount needed for basic shelter, food and clothing, but does not include clean water, sanitation, electricity, education or health care. In other words, the global poverty line represents mere survival, hardly even a bare existence. A more realistic poverty line, suggests David Woodward in the World Economic Review in 2015, would be $5 per day, “the income at which basic needs may be met, and social and economic rights minimally fulfilled.”

For decades the economic establishment has argued that we need economic growth to remove the scourge of poverty: A rising tide, they say, will float all boats. But there are flaws in that analogy. First, it may raise all boats, but if you are in a dugout canoe rather than a luxury yacht, you will still be in a dugout canoe. Second, if your boat has a leak, the rising tide will swamp and sink it – and a lot of people are in leaky boats.

Moreover, Woodward argues, if the pattern of economic growth and distribution we experienced from 1993 – 2008 continued indefinitely, it would take 100 years to lift everyone above the $1.25 level and 200 years to get them above $5 per day. And, he adds, to do so “global GDP would need to increase “to nearly 15 times its 2010 level by the time $1.25-a-day poverty is eradicated in 2115, and 173 times its 2010 level by the time of $5-a-day poverty eradication in 2222”. But the Earth cannot even support today’s economy, as we are seeing, never mind an economy at that scale.

In rich countries too, economic growth is not the answer. Sir Angus Deaton, a Nobel Prize-winning economist, pointed out in a July 2019 article that in America “real wages for men without a four-year college degree have fallen for half a century, even at a time when per capita GDP has robustly risen” and that “median real wages in Britain have not risen for more than a decade”. Moreover, he adds, in America “inequality has risen not only due to wealth generation from innovation or creation, but also through upward transfers from workers”. In other words, we are robbing the poor to enrich the wealthy.

So while there may have been a tiny amount trickling down to the world’s poorest – crumbs falling from the overloaded tables of the wealthy – that is vastly outweighed by the flooding up of wealth to the already wealthy. In a paper this month in Scientific American, Bruce Boghosian, a professor of mathematics at Tufts University, shows that this result is inevitable in a free market, unless there is significant government intervention.

He and his colleagues created a mathematical model of the economy which is highly accurate, matching the distribution of wealth in the US “to less than a sixth of a percent over a span of three decades” and European wealth distribution in 2010 to within half a percent.

Their key finding is that “far from wealth trickling down to the poor, the natural inclination of wealth is to flow upward, so that the ‘natural’ wealth distribution in a free-market economy is one of complete oligarchy” – a situation in which one person owns everything. Importantly, he adds, “it is only redistribution that sets limits on inequality.”

The answer to the problem of poverty, then, is not more growth – not only because the pie has to stop growing, but because growth does not fix poverty. In their book about a steady state economy, “Enough is Enough”, Rob Dietz and Dan O’Neill note “reducing poverty without global growth would require the redistribution of income from rich countries to poor countries” – and, we might add, the same applies within countries, from rich people to poor people.

© Trevor Hancock, 2019

Economic growth isn’t necessary for good health

Economic growth isn’t necessary for good health

Dr. Trevor Hancock

12 November 2019

700 words

Last week, I noted that economic growth, as presently understood and practised, is harmful, indeed malignant. This is not to say that some places don’t need economic development, and indeed economic growth. Low-income countries need a sufficiently large economy that they can afford to meet basic human needs for all. Those needs include clean water, sanitation, education, adequate supplies of nutritious foods, adequate housing and good public health and primary medical care.

But it is hard to see how accumulation of more wealth by Canadians is going to help them; we already have too much. In fact our profligate use of fossil fuels and other resources – both our own and their’s – and the concomitant production of waste and pollution, actually presents a danger to them. It is primarily low-income populations in low-income countries that will suffer most from climate change, resource depletion, pollution and loss of species.

In a finite world already showing signs of ecosystem decline the pie cannot keep growing, so it has to be distributed more fairly. If low-income countries need more of the Earth’s resources for their own development, then this can only happen if we use less. So what are we to do?

A good place to start would be to get rid of ‘bad’ economic growth – all forms of economic activity that actually make things worse by harming health, social wellbeing and the natural systems that are our ultimate source of health. This would include all forms of pollution, including air pollutants and greenhouse gases associated with fossil fuel use; tobacco and other products that harm health and further production of more ‘stuff’ that we don’t need.

This calls for a very different system of economics. Ecological economists have been critiquing the ‘standard model’ of the economy for decades. Chief among them here in Canada is Peter Victor, former dean of the Faculty of Environmental Studies at York University. His 2008 book Managing Without Growth, explored both a ‘business as usual’ (continuing growth) economy and a variety of alternative low and no growth scenarios for the period between 2005 and 2035.

He found that while a ‘no growth’ scenario could be disastrous, the right combination of low then no growth by 2035, with high government investment in poverty reduction, literacy and health care and a revenue-neutral carbon tax (at about $200 per ton, with other taxes reduced) could lead to “attractive economic, social and environmental outcomes: full employment, virtual elimination of poverty, more leisure, considerable reductions in GHG emissions and fiscal balance”, as well as wide adoption of renewable energy and energy-efficient technology and other benefits, including increased GDP per capita, if achieved without increased energy and resource use.

Similarly Dan O’Neill, another Canadian, now teaching ecological economics at the University of Leeds in the UK, has championed the ‘steady state’ economy proposed in the 1970s by Herman Daly. Recently, in his foreword to the book ‘Enough is Enough’ that O’Neill co-authored with Rob Dietz, Daly states, simply: “Enough should be the central concept in economics”, where enough means “sufficient for a good life”.

In their book, Dietz and O’Neill contrast an economy of enough with the present economy of more, summarising the latter as destined to fail “environmentally as it exhausts natural resources and exceeds ecological limits” and socially, as “diminishing returns to growth [mean that] after a point, more fails to improve people’s lives”.

A compelling case for an economy that is fit for purpose in the 21st century has been put forward by Kate Raworth in her book ‘Doughnut Economics’. The essence of such an economy is that it be large enough and distributed fairly enough that we can meet the needs of everyone on Earth for good health and a good quality of life. But at the same time, the economy cannot be so large that it undermines the ecological systems that ultimately determine our wellbeing.

For rich countries in particular, Raworth notes, this will require them to “overcome their dependency on GDP growth and develop economies that are regenerative and distributive by design”. Creating an economy that regenerates damaged natural ecosystems and distributes benefits more fairly is perhaps the greatest challenge we face in the 21st century.

© Trevor Hancock, 2019

Economic growth is malignant

Economic growth is malignant

Dr. Trevor Hancock

5 November 2019

700 words

While the exchange between my fellow columnist, Lawrie McFarlane, and myself on the issue of economic growth may seem esoteric, it is fundamental to the future wellbeing of our civilization and many forms of life on our planet, including humans. In his column last week, Lawrie took issue with my view – responding to his column about the policies of the Greens and the NDP – that continuing to pursue economic growth is mad if it meant “further harm to the Earth’s natural systems, further depletion of vital natural resources and further extinction of the species that make up the web of life – as it does in the current mainstream model of development”.

He argues that economic growth has lifted many out of poverty and brought us improved health and an improved quality of life, and that with many still living in poverty and a growing population, “we’re going to need a lot more of it, not less”. To some extent he is correct, but only if we qualify what sort of economic growth we are talking about (not all growth is good), where it is needed and by whom, and how its benefits are distributed.

First, the health benefits of economic growth are not linear. If we look at the relationship between GDP per person (GDPpp) and life expectancy for the world’s nations, we find that as GDPpp goes up, so does life expectancy, and quite dramatically – to a point. That point is about $20,000 US per person, according to a 2014 report from Euromonitor International, with life expectancy increasing more than 20 years from the lowest levels of GDPpp to the $20,000 level.

But beyond that point, further increases in GDPpp have little or no relationship to life expectancy, with a mere 2 years increase in life expectancy in developed countries between $20,000 and $60,000 GDPpp. Indeed, the Euromonitor International report showed that for the wealthiest countries “where income exceeds US$40,000, the relationship becomes inverse”. So high levels of GDP may actually be harmful.

Moreover, the most common measure of a country’s economy, its GDP, is a grossly misleading indicator, because it fails to distinguish between good and bad economic activity. For example, GDP grows if we sell more tobacco and treat more tobacco-caused disease, if we spend a lot of money clearing up oil spills, or if we produce and sell more fossil fuels and worsen climate change. Is that the economic growth we want?

In fact, the Genuine Progress Indicator (GPI) and the Canadian Index of Wellbeing (CIW) – both of which are more sophisticated indicators of social progress – show that while the economy has grown a lot, human and social wellbeing has not. An estimate of global GPI per capita published in 2013 found that it had decreased since 1978, when it peaked, that “Life Satisfaction in almost all countries has also not improved significantly since 1975” and that beyond about $7000/ GDPpp the GPI does not increase.

Similarly, for the 20 years from 1994 to 2014 Canada’s GDP grew 38 percent while the CIW increased only 9.9 percent. In other words, while the economy, as measured by GDP, may be doing better, Canadians are not feeling all that much better for it. Peter Victor, a leading Canadian ecological economist, wrote with respect to the USA that “Americans have been more successful decoupling GDP from happiness than in decoupling it from material and energy”. In other words, GDP growth is related to growth in use of materials and energy – with their attendant environmental impacts – but not with growth in the social benefits of improved happiness and wellbeing.

This is because we have lost track of a very simple concept, well described in a statement from the WWF’s 2014 Living Planet Report: “Ecosystems sustain societies that create economies. It does not work any other way round”. So growing the economy in ways that harm the ecosystems that sustain, especially when there is little or no social benefit or even harm, is a ridiculous proposition. As a physician, when I find something that grows exponentially and does harm I recognize it as cancer. Our current economic system does exactly that, and is thus malignant.

More on this next week.

© Trevor Hancock, 2019


It’s time to be responsible ancestors

It’s time to be responsible ancestors

Dr. Trevor Hancock

29 October 2019

700 words

As I listen to the increasingly shrill and heated rhetoric of Jason Kenney, and others of his ilk as they try to defend and promote the fossil fuel industry, it brings to mind a phrase from a 2015 report from The Lancet. This leading medical journal has sponsored several Commissions, often in partnership with international organisations, on the health effects of global ecological change. There have been two on climate change and one each on pollution, healthy diets from sustainable food systems, and planetary health.

The Commission on Planetary Health, funded by the Rockefeller Foundation, examined the “health of human civilisation and the state of the natural systems on which it depends”. In their report, the Commission noted “we have been mortgaging the health of future generations to realise economic and development gains in the present. By unsustainably exploiting nature’s resources, human civilisation has flourished but now risks substantial health effects from the degradation of nature’s life support systems in the future.”

In other words, we have been flagrantly violating the fundamental principle of sustainable development put forward in 1987 by the Brundtland Commission: To meet the needs of the present without compromising the ability of future generations to meet their own needs. Or to use an older concept, we have forgotten that we do not inherit the Earth from our parents, but borrow it from our children.

Of course it’s not just the fossil fuel industry that is causing harm. Other major industries behind these global ecological changes also bear a heavy responsibility – as do we all, ultimately, in that we use and enjoy their products. The focus on making money now and to heck with the future is grossly irresponsible. The legacy is a depleted and impoverished natural environment for our descendants, an infringement of their right to a healthy environment.

But I cannot think of a better example of a group that is intent on harming the health of their descendants than the fossil fuel industry and their political allies and supporters. We know that our present path will take us well beyond a global temperature increase of 20C. We also know that much of the carbon in the ground, in the form of coal, oil and gas, will need to stay there if we are to avoid this.

So continuing to push for the use of fossil fuels, leaving in place tax breaks and subsidies to the fossil fuel industry and opposing carbon taxes and other measures to limit fossil fuel use is the height of inter-generational selfishness and irresponsibility. The defence of the industry in Canada – which basically amounts to ‘other people around the world are being irresponsible, so we should be irresponsible too’ is an abdication of leadership.

The approach of these fossil fuel advocates is also harmful to those who make their living from fossil fuels, because in going to the wall for the industry, Kenney and his fellow-travellers around the world delude not only themselves but these workers that the industry must be there and must grow.

In doing so, they are postponing the vitally important work of creating a socially just transition away from fossil fuels for these workers, with the training, support and other measures they and their communities will need. That will only make the changes, when they do happen, that much more sudden and wrenching.

What we all need to do, including Kenney, Ford and the rest of the fossil fuel support clique, is to follow the advice of Jonas Salk, creator of the polio vaccine, who said “Our greatest responsibility is to be good ancestors”. Being responsible ancestors does not include mortgaging the health of future generations and compromising the ability of those future generations to meet their own environmental, social and economic needs.

Acting as responsible ancestors means, first of all, recognising the issue of intergenerational justice, the right of our descendants to a healthy environment. It means seeking to create high levels of human and social development for this generation in a way that is socially just and within the limits of the Earth. It does not mean continuing to boost the fossil fuel industry, but seeking the quickest possible transition to a low-carbon future.

© Trevor Hancock, 2019