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Dublin: 5 °C Thursday 2 October, 2014

Column: We believe economic growth can save us… but can it?

Our blind faith in growing the economy may be ignoring some important facts, writes Dermot McNally.

Dermot McNally

THERE IS MUCH debate in Ireland on how we should get out of this painful economic paralysis and contraction. However, the main political parties agree that it will hinge on creating growth. And if I park my innate cynicism, this agreement puzzles me.

The broad consensus of political and economic commentary goes a little like this:

We have to slowly correct the deficit and rebuild confidence. Gradually, spending by individuals and organisations will increase. This further increases confidence, investment and spending. Profits will follow as will further jobs, investment and innovation. Technological improvements and the wealth generated will gradually trickle down to all members of society, even the weakest and poorest. And so little by little, the global economic engine will push forward once again and all of humankind can eventually expect to live blissfully in a utopian world of ever-rising standards in health, education and working conditions.

Economic growth as the panacea for all human problems has been the consensus solution in Western nations for generations, despite regular boom-bust cycles. But larger, unavoidable concerns have arisen.

Firstly prioritising the creation and maintenance of growth is to sidestep a myriad of challenging global structural reforms which are needed. These include the badly needed reform of the financial and banking industry; reform of world trade rules; reform of environmental legislation and targets; improvements in the employment and living conditions of workers in so called low cost countries; and on and on.

Chicken and egg

Prioritising the encouragement of growth, investment and spending prior to implementing global structural reform is akin to saying of a house with inadequate foundations that if we plaster over the cracks and put a pump in the basement to remove the seeping water that all will be fine – the real repair can wait.

Of course the pro-growth pundits will put forward the chicken and egg argument – rising economic and investment tides will improve the cause of environmental sustainability and living/working standards, as well as solving numerous other related issues. The same advocates of rising-tide economics will also purport reassuringly that future growth must be ‘sustainable’. I used to accept this.

However to accept these clichéd answers and the promise of solutions tomorrow is to whitewash the immediate and undeniable immorality of accepting that slave labour and toxic environmental practices are pivotal in providing many of the unnecessary consumer goods for our insatiable appetites. There is no simple way to butter this up – the West sits comfortably on the backs of the worlds poor.

Lip service

So while some progress may be in train, we are at best playing lip service to dealing seriously with the global issues mentioned. Clearly, economic growth comes first in the list of all priorities. For now let’s not lose further time on such trivial matters as access to adequate food, shelter and sanitation. (Bah – my cynicism has reappeared to spite me – down you dog!)

Secondly and most crucially, the consensus to prioritise growth makes a colossal assumption – that the economic growth required to achieve the utopian world aforementioned is actually possible within the resources of the planet.

This assumption is quite startling no matter which way you re-state it: that economies can continue to grow without risking humankinds’ ability to live on the planet. As little as we do know, we can say for certain that growing economies require increasing amounts of fuel/energy sources to power their engines. The fuel conundrum increases as every economy grows bigger and hungrier.

Therefore to assume economic growth can be increased, or merely sustained, is (1) to take for granted our ability to create infinite amounts of energy sources to replace those running out; (2) to assume that these new energy sources will not undermine our ability to live within the resources of the planet; and (3) to dismiss the scientists who say that severe environmental deterioration is already happening at existing levels of economic activity.

Quality of life

To broaden the debate, can economies across the world grow and thrive indefinitely, giving all workers on the planet the quality of life we enjoy in the West, while simultaneously reaching environmental equilibrium? We’ll need more forests producing more timber, more clean drinking water (a scare commodity in some of the wettest parts of Ireland at times) and we’ll need more food and more of everything else – can Mother Earth provide all in increasing volumes?

Then again, if economic growth is in fact not expected to be infinite within the resources of the biosphere, then why is this not evident within the broader political debate? From my observation neither Government nor existing Opposition will countenance an economic world without growth. Indeed, the current economic, political and social commentary suggests that if we attach a few ultra-improved carbon reducers on our dirty engines then all will be fine.

I truly hope that it works out as simply as this. Otherwise things will be getting a lot warmer in Ireland. In the meantime, cast my pessimism aside and get on board the non-stop train to GrowthVille!

Dermot McNally is the owner of a long-established family furniture business in Monaghan, Ireland. Their website is furniturefair.ie.

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