Citizen Action Monitor

What to do when demand stagnates, unemployment rises, and social instability follows?

Jackson suggests a transition to services offers a more ‘holistic’ solution to unemployment in a low-growth economy.

No 2119 Posted by fw, December 10, 2017

To access all other synopses from Prosperity without Growth, click on the Tab titled “Prosperity without Growth” — Links to All Posts in the top left margin of the Home page.

In his Introduction to Chapter 4, “The Dilemma of Growth”, Jackson asks: “Could it be that, without growth, our ability to flourish diminishes entirely?” As his title denotes, we find ourselves on the horns of a dilemma: continued growth is ecologically unsustainable; but growth is essential for lasting prosperity.

Which prompts him to ask, at the outset of this, Section 7, Chapter 9, two of the “most profound and the most important questions” raised in his book:

Are we inevitably heading towards macroeconomic instability?

Or are there ways in which the structural foundations of this new economy might mitigate instability and in doing so allow us to escape the dilemma?

Given Jackson’s title for Section 7, “Confronting instability”, he quickly zeroes in on the relationship between demand, employment and labour productivity, the very crux of the dilemma of growth.

Tim Jackson is a British ecological economist and professor of sustainable development at the University of Surrey.

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Confronting instability, a synopsis, from Chapter 9, “Towards a Post-Growth Macroeconomics ” of Tim Jackson’s book, Prosperity without Growth, Routledge, 2nd edition, 2016-17

In his Introduction to Chapter 4, “The Dilemma of Growth”, Jackson asks: “Could it be that, without growth, our ability to flourish diminishes entirely?” As his title denotes, we find ourselves on the horns of a dilemma: continued growth is ecologically unsustainable; but growth is essential for lasting prosperity.

Which prompts him to ask, at the outset of Section 7, Chapter 9, two of the “most profound and the most important questions” raised in his book:

Are we inevitably heading towards macroeconomic instability?

Or are there ways in which the structural foundations of this new economy might mitigate instability and in doing so allow us to escape the dilemma?

Given Jackson’s title for Section 7, “Confronting instability”, he quickly zeroes in on the relationship between demand, employment and labour productivity, the very crux of the growth dilemma. Because when demand stagnates — as it inevitably does in a boom and bust capitalist economy — unemployment rises, and social instability follows.

When this occurs, one remedy is to share work by reducing the work week: a “managing without growth” solution proposed by Canadian ecological economist Peter Victor.

A “more integrated solution”, suggests Jackson, as discussed in Section 6, is “a structural shift towards service-based enterprise”, which “increases the employment intensity of the economy and facilitates full employment.

In a series of simulation tests, Tim Jackson, working in collaboration with Peter Victor, validated the effectiveness of a structural shift towards the service-based sector of the economy in terms of maintaining high levels of employment during a decline in growth rates.

Jackson elaborates: “The transition to services offers a more ‘holistic’ solution to the employment challenge of a low-growth economy…. There are routes to full employment that are entirely consistent both with stagnating demand and with improved prosperity.”

However, and this is where all things economic once again get complicated and difficult for novices like me to understand and explain in a coherent manner —

A shift towards service-based enterprises is not without complications in our capitalist economy as it is currently structured, where profits (capital) are unequally distributed. As we saw in Section 6, inherently, labour productivity in the service sector cannot be increased; therefore, absent an increase in labour productivity in this sector, and given the existing unequal distribution of profits, inequality will grow.

Jackson notes: were profits equally distributed, incomes would come from profits, not wages.

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