No 2093 Posted by fw, November 08, 2017
“In the coming decades, we’ll be able to reduce the carbon intensity of the global economy by about 1.9% per year, if we make heavy investments in clean energy and efficient technology. That’s a lot. But as long as the economy keeps growing by more than that, total emissions are still going to rise. Right now we’re ratcheting up global GDP by 3% per year, which means we’re headed for trouble. … Costa Rica is the most efficient economy on earth: it produces high standards of living with low GDP and minimal pressure on the environment. … it’s all down to Costa Rica’s commitment to universalism: the principle that everyone – regardless of income – should have equal access to generous, high-quality social services as a basic right. A series of progressive governments started rolling out healthcare, education and social security in the 1940s and expanded these to the whole population from the 50s onward…” Jason Hickel, The Guardian
Jason Hickel is an anthropologist at the London School of Economics and author of The Divide: A Brief Guide to Global Inequality and its Solutions.
Although his article does not mention this, part of the reason for Costa Rica’s success could be related to its small estimated population of 4,857,274 and its economy, 75.9% of which is in services. (2016 estimates):
Of its GDP, 5.5% is generated by agriculture, 18.6% by industry and 75.9% by services. Agriculture employs 12.9% of the labor force, industry 18.57%, services 69.02%. Although 20.5% of the population lives below the poverty line (2017), Costa Rica has one of the highest standards of living in Central America. (Source: Wikipedia)
On a related note, British ecological economist Tim Jackson has written an instant classic, Prosperity without Growth (2017) which explains, in considerable detail, how to transform our consumer-driven capitalist economic system into “an economy capable of delivering a lasting prosperity.” For more information, check out links to my synopses of the first 7 of 11 chapters of his book by clicking on this link: Prosperity without Growth — Links to All Posts.
Below is a repost of Jason Hinkel’s excellent article, with my added subheadings. Alternatively, to read it on The Guardian’s website, click on the following linked title.
Global cuts to carbon emissions are cancelled out by economic growth
Earlier this summer, a paper published in the journal Nature captured headlines with a rather bleak forecast. Our chances of keeping global warming below the 2°C danger threshold are very, very small: only about 5%. The reason, according to the paper’s authors, is that the cuts we’re making to greenhouse gas emissions are being cancelled out by economic growth.
Currently, global GDP per year is 3%, which spells “trouble” my friend
In the coming decades, we’ll be able to reduce the carbon intensity of the global economy by about 1.9% per year, if we make heavy investments in clean energy and efficient technology. That’s a lot. But as long as the economy keeps growing by more than that, total emissions are still going to rise. Right now we’re ratcheting up global GDP by 3% per year, which means we’re headed for trouble.
Politicians say GDP growth is good for us — more jobs, more prosperity, more everything
If we want to have any hope of averting catastrophe, we’re going to have to do something about our addiction to growth. This is tricky, because GDP growth is the main policy objective of virtually every government on the planet. It lies at the heart of everything we’ve been told to believe about how the economy should work: that GDP growth is good, that it’s essential to progress, and that if we want to improve human wellbeing and eradicate poverty around the world, we need more of it. It’s a powerful narrative. But is it true?
Costa Rica’s high level of wellbeing has little to do with GDP
Maybe not. Take Costa Rica. A beautiful Central American country known for its lush rainforests and stunning beaches, Costa Rica proves that achieving high levels of human wellbeing has very little to do with GDP and almost everything to do with something very different.
So, how come Costa Rica tops the Happy Planet Index every year?
Every few years the New Economics Foundation publishes the Happy Planet Index – a measure of progress that looks at life expectancy, wellbeing and equality rather than the narrow metric of GDP, and plots these measures against ecological impact. Costa Rica tops the list of countries every time. With a life expectancy of 79.1 years and levels of wellbeing in the top 7% of the world, Costa Rica matches many Scandinavian nations in these areas and neatly outperforms the United States. And it manages all of this with a GDP per capita of only $10,000, less than one-fifth that of the US.
Costa Rica enjoys a high standard of living and minimal environmental impact
In this sense, Costa Rica is the most efficient economy on earth: it produces high standards of living with low GDP and minimal pressure on the environment.
Here’s Costa Rica’s secret – social prosperity for all without growth
How do they do it? Professors Martínez-Franzoni and Sánchez-Ancochea argue that it’s all down to Costa Rica’s commitment to universalism: the principle that everyone – regardless of income – should have equal access to generous, high-quality social services as a basic right. A series of progressive governments started rolling out healthcare, education and social security in the 1940s and expanded these to the whole population from the 50s onward, after abolishing the military and freeing up more resources for social spending.
Why has Costa Rica succeeded where other Latin American governments failed? – no US armed intervention
Costa Rica wasn’t alone in this effort, of course. Progressive governments elsewhere in Latin America made similar moves, but in nearly every case the US violently intervened to stop them for fear that “communist” ideas might scupper American interests in the region. Costa Rica escaped this fate by outwardly claiming to be anti-communist and – horribly – allowing US-backed forces to use the country as a base in the contra war against Nicaragua.
On the downside, Costa Rica continues to struggle with income inequality
The upshot is that Costa Rica is one of only a few countries in the global South that enjoys robust universalism. It’s not perfect, however. Relatively high levels of income inequality make the economy less efficient than it otherwise might be. But the country’s achievements are still impressive. On the back of universal social policy, Costa Rica surpassed the US in life expectancy in the late 80s, when its GDP per capita was a mere tenth of America’s.
The poorest region of Costa Rica is home to those who live the longest, happiest lives
Today, Costa Rica is a thorn in the side of orthodox economics. The conventional wisdom holds that high GDP is essential for longevity: “wealthier is healthier”, as former World Bank chief economist Larry Summers put it in a famous paper. But Costa Rica shows that we can achieve human progress without much GDP at all, and therefore without triggering ecological collapse. In fact, the part of Costa Rica where people live the longest, happiest lives – the Nicoya Peninsula – is also the poorest, in terms of GDP per capita. Researchers have concluded that Nicoyans do so well not in spite of their “poverty”, but because of it – because their communities, environment and relationships haven’t been plowed over by industrial expansion.
New slogan – “Growth was a substitute for redistribution, now redistribution will be a substitute for growth”
All of this turns the usual growth narrative on its head. Henry Wallich, a former member of the US Federal Reserve Board, once pointed out that “growth is a substitute for redistribution”. And it’s true: most politicians would rather try to rev up the GDP and hope it trickles down than raise taxes on the rich and redistribute income into social goods. But a new generation of thinkers is ready to flip Wallich’s quip around: if growth is a substitute for redistribution, then redistribution can be a substitute for growth.
Downscaling economies of rich nations 4-6% per year is the best way to avert dangerous global climate change
Costa Rica provides a hopeful model for any country that wants to chart its way out of poverty. But it also holds an important lesson for rich countries. Scientists tell us that if we want to avert dangerous climate change, high-consuming nations are going to have to scale down their bloated economies to get back in sync with the planet’s ecology, and fast. A widely-cited paper by scientists at the University of Manchester estimates it’s going to require downscaling of 4-6% per year.
Redistributing existing resources and investing in social goods delivers prosperity without growth
This is what ecologists call “de-growth”. This calls for redistributing existing resources and investing in social goods in order to render growth unnecessary. Decommoditizing and universalizing healthcare, education and even housing would be a step in the right direction. Another would be a universal basic income – perhaps funded by taxes on carbon, land, resource extraction and financial transactions.
The opposite of growth isn’t austerity, or depression, or voluntary poverty. It is sharing what we already have, so we won’t need to plunder the earth for more.
Follow Costa Rica’s lead – recalibrate our consumer-driven capitalist economic system
Costa Rica proves that rich countries could theoretically ease their consumption by half or more while maintaining or even increasing their human development indicators. Of course, getting there would require that we devise a new economic system that doesn’t require endless growth just to stay afloat. That’s a challenge, to be sure, but it’s possible.
What will it be? – More stuff? — Or more happiness, wellbeing, peace, stability, clean air and rivers?
After all, once we have excellent healthcare, education, and affordable housing, what will endlessly more income growth gain us? Maybe bigger TVs, flashier cars, and expensive holidays. But not more happiness, or stronger communities, or more time with our families and friends. Not more peace or more stability, fresher air or cleaner rivers. Past a certain point, GDP gains us nothing when it comes to what really matters. In an age of climate change, where the pursuit of ever more GDP is actively dangerous, we need a different approach.
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