Economic Growth and Population

Bruce Dinham

There is a popular belief that economic growth is essential for our prosperity and because population growth is seen as a driver of economic growth, a corresponding belief in a need for population growth. So what is economic growth, what is the economy and how does it grow?

What we call the economy is an artificial, man-made system for trading goods and services using tokens and symbols called money as indicators of comparative value.

Values represented by money are arbitrary, set by fiat and the market, the latter influenced by mob psychology and the so-called ―invisible hand‖ of greed and self-interest, euphemistically referred to as supply and demand. The system has positive feedbacks in the form of interest, especially compound interest, and fractional reserve banking, creating money as debt out of nothing so is inherently unstable and subject to continuing inflation and recurrent booms and busts.

A measure of the economy is taken as an aggregate, with some adjustments to avoid double counting and to allow for inflation, of money spent over a particular period. This is expressed as a number called Gross Domestic Product or GDP. An increase in GDP is called economic growth and usually celebrated as an achievement, regardless of the cause or effect of the increased spending.

Economics has no morality, in that it makes no distinction between good and bad or between essential and inessential. While GDP includes essential food, clothing, housing, education, health services (including aged care) and law and order, a large part of it is inessentials, such as professional sport, advertising, car racing, fireworks displays, festivals and pageants, luxury and sports vehicles, fashion clothing, speculative finance, gourmet foods, alcohol and tobacco, horse racing, gambling, tourism and other indulgences and extravagances. GDP is as much a measure of inessentials or waste as it is of needed products and could just as well stand for Gross Domestic Profligacy. The waste in inessentials is not all we need to consider. The inescapable end effects of almost everything we buy or do are increased pollution, greater environmental degradation and more rapid depletion of finite resources, especially oil. Because they are not monetised or accounted in money terms, end effects (or in economists‘ jargon, externalities) are ignored and not included in GDP. Nevertheless they are real and significant. The more of us there are and the more we spend and consume the worse they become. Together with waste in inessentials, end effects are part of economic growth. The reality of economic growth, when all parts are considered, is that far from being beneficial it is an insidious cancer, with widespread and damaging symptoms. Water shortages, greenhouse emissions, climate change, land erosion, river and dry-land salinity, over-fishing, deforestation, species loss, urban sprawl and traffic congestion are some of them. It is often said that economic growth creates employment, however an alternative viewpoint is that economic growth is a consequence of employment, rather than a cause. We argue about carbon trading (an attempt to monetise some pollution), build expensive energy intensive desalination plants, fritter around mandating half-flush toilets and banning incandescent light globes, subsidising hybrid cars and solar panels and sticking efficiency labels on appliances but this is only dealing with the effects, not the causes. The primary cause is fairly obvious — there are too many of us, and we are wastefully spending and consuming more than we need (and calling it economic growth).

We live in a world of finite resources. No matter how cleverly and efficiently we use those resources, the more of us there are the faster those resources will be used, the smaller will be each share, the less there will be for the future and the worse off we and our children will become.

The supposed benefits of population and economic growth are a delusion. Instead of a mindless pursuit of growth with increasingly disastrous boom and bust cycles and destructive environmental effects, a government concerned for the future and not hostage to various self-interested growth lobbies (business and industry will always want growth because it means bigger and easier profits) would stop encouraging growth and be planning and acting for an orderly transition to a stable no-growth economy.

With a stable population and economy there would be no need to keep building new houses and expensive infrastructure, meeting continually increasing demands for services and endlessly digging holes in the ground for minerals.

In regard to immigration policy, it is often said there is a skills shortage. This depends upon how one looks at it. From a different perspective a skills shortage may be viewed as a surplus – a surplus of profit-seeking companies eager to rip out our mineral resources and sell them to foreigners as fast as possible. After they have taken all they want, they find a gullible government elsewhere and move on, leaving us to deal with the holes in the ground and the mess left behind. In effect our country is being used as a quarry and turned into a big rubbish dump – an ugly downside of economic growth.

[Bruce Dinham is a member of ERA(SA)]