Transcriber: Zane Mitrevica Reviewer: Ilze Garda
Some of you may have had this experience.
You see something or read something, and it changes your life.
About ten years ago this happened to me.
I was taking an economics course, and I read a paper.
It was called: "If the GDP is up, why is America down?"
I didn't realize it at the time, but I was beginning a journey
from the madness of more to the wisdom of enough.
When I read this paper,
I learned that our main measure of economic progress, the GDP,
doesn't distinguish between good and bad economic activity.
So, if I buy a beer, this adds to GDP.
If the government invests in education, this adds to GDP.
These are good things
(Laughter)
especially the first one.
(Laughter)
But if there's an oil spill, and we have to clean this up,
well, that adds to GDP too.
If someone breaks into your house, steals your laptop,
and you have to buy a new one and a new door,
well, that adds to GDP as well.
War, crime, environmental destruction; all add to GDP.
When I found this out,
I felt like I was in the Matrix, and I've just taken the red pill.
I began to question things around me, I began to question
whether economic growth is really such a great idea in wealthy nations.
This eventually led me to the alternative of a steady state economy.
Questioning growth may seem radical,
but there are a number of good reasons to do so.
I'd like to tell you about three of them.
The first reason is environmental.
A few years ago, there was an influential study
in which the authors tried to quantify
the safe operating space for humanity on this planet.
They discussed eight planetary boundaries related to key ecosystem processes.
And they discovered, alarmingly,
that we're already exceeding three of these boundaries.
The ones shown in red there, related to climate change,
biodiversity loss, and the nitrogen cycle.
And we're not so far off in some of the other ones.
They issued a pretty dire warning.
They said: "Transgressing one or more of the planetary boundaries
could lead to catastrophic change at the continental to global scale."
And here we are, transgressing three of them.
The second reason we might question growth is social.
Data are now widely available from surveys of happiness and life satisfaction.
If we look at these data over time for countries like the US and the UK,
what we see is that, while per capita GDP has more than tripled since 1950,
people haven't become any happier.
When we compare the data across a bunch of countries,
the picture is more complicated.
Happiness and life satisfaction do tend to increase with income,
but only up to a point.
Once people's basic needs are met,
additional money doesn't seem to buy additional happiness.
Importantly though, other things do:
like being in a strong personal relationship,
having good health, living in a safe community,
having a secure job, and not watching too much TV.
A third reason we might question growth is largely practical.
Growth is the exception in the world history, not the norm.
These data span 1,000 years,
and what they show is that the periods of high growth in today's wealthy nations
only lasted about 20 years,
from just after the end of the World War II to the early 1970s.
This is the only time in history
that these nations have had GDP growth rates above 2% per year.
It seems like inventions, such as mobile phones and Facebook,
aren't transforming our lives in the same way as historical inventions,
like electricity, the automobile, indoor plumbing.
This was a transformative invention.
(Laughter)
So what do we do? What's the alternative?
How do we achieve a high quality of life for all people without economic growth?
The good news is that there are people all over the world
working on this problem, and a solution is emerging.
Some people call this the New Economics,
some people call it sustainable prosperity,
degrowth, or a steady state economy.
Whatever you call it, it's an economy where resource use is stabilized
and kept within ecological limits,
and where the goal of increasing GDP
is replaced by the goal of improving people's lives.
Now, there's no one simple change that allows us to do this.
A number of changes are needed to achieve a steady state economy,
and I'd like to share three of them with you.
They relate to jobs, equality, and the banking system.
Let's start with jobs.
When most people hear 'no growth, ' probably their biggest worry is 'no jobs.'
But the relationship between growth and job creation
is much weaker than you would expect,
and it varies remarkably between countries.
In the US, for example, if GDP goes up by 3%,
then the unemployment rate tends to fall by about 1%.
In France, the same amount of GDP growth
gets you about half a percent of reduction in unemployment.
In Japan,
there's no relationship whatsoever between these two things.
Clearly it's possible to break the link between growth and employment,
we just need the right policies.
One of these policies is working time reduction.
Currently, we tend to use the benefits of technological progress
to produce and consume more stuff.
What do I mean by this?
Let's say I work in a factory,
and it takes me eight hours to produce one of these cups.
But maybe, perhaps due to my university education,
I come up with a better way of producing these cups,
and do it twice as quickly.
Does this mean I get to go home at noon? Well, no.
It means I produce twice as many cups,
then our marketing department has to go out and convince people
to buy these cups with witty slogans like, "One cup is never enough."
(Laughter)
Because otherwise, I'm out of a job.
But we can't just keep ramping up production
simply to keep people employed.
Remember the planetary boundaries.
But what we can do is the blindingly obvious.
We can use the benefits of technological progress
to reduce our working hours.
We can have the same salaries, but more leisure time.
It certainly sounds good to me.
The second thing I want to talk about is inequality.
Growth is often used as an excuse to avoid dealing with inequality.
We're told that a rising tide lifts all boats,
if you're lucky enough to have a boat.
Henry Wallich, who was a former governor of the Federal Reserve in the US,
came right out and said this:
"Growth is a substitute for equality of income.
So long as there is growth, there is hope,
and that makes large income differentials tolerable."
Now, hold on a second here.
If growth is a substitute for equality,
then equality is also a substitute for growth,
and a much better choice for the environment and society.
As Thomas Piketty has shown in his recent book though,
greater equality doesn't come easily to capitalist societies.
We need strong interventions to make it happen.
And one intervention we could use
would be to have a minimum and a maximum income throughout society.
By a minimum income I don't mean a minimum wage,
conditional on working at McDonalds,
I mean a basic minimum entitlement,
available to all people as a right of citizenship.
You might say: "If we did this, everyone would just stay at home,
lie on the couch, drink beer, and watch daytime TV.
Nothing would ever get done."
I don't buy this argument.
When you give people the opportunity,
they do really interesting things with their time.
They plant gardens, learn languages, play music,
they take care of children and the elderly,
all things which we as a society need.
Plus, there's still only so many hours of EastEnders you can watch.
A recent study found that 74% of people in Britain support the idea
of a basic minimum income for all people.
A maximum income might seem more controversial,
particularly if you are a professional football player,
but surely no more controversial
than top CEOs earning 250 times what people at the bottom earn.
We need greater equality.
The other thing we need, the third thing, is reform in the financial system.
I was searching very hard for an image to really sum up
the fractional reserve banking system that we have today, and why it's so bad.
And I think I found it, courtesy of Jeremy Williams.
(Laughter)
[Fractional reserve banking makes cats sad]
Seriously though, we have a problem.
Have you ever wondered where money comes from?
Most people think it comes
from the Bank of England, or the Royal Mint,
but they only produce about 3% of our money.
The vast majority is produced by private banks when they make loans.
How does this work?
Let's say I go into my bank, and I want to take out a mortgage.
They may look at me and say: "Aha! He was just on a TEDx talk.
The sky's the limit. Let's loan him 1,000 pounds."
(Laughter)
10,000 pounds, 100,000 pounds.
You'd figure that, in order to do this,
they would actually have to have the money.
After all, if I want to borrow this money from you,
you have to have it to loan it to me.
But that's not how the system works.
Banks are allowed to create this money out of thin air,
by typing some numbers into a computer.
And you wonder how we ended up in a global financial crisis.
Of course, at some point I have to pay this money back.
And not only do I have to pay 100,000 pounds back,
I have to pay back interest on it as well.
If everyone in society is doing this
- taking out loans, having to pay them back with interest -
then the total money supply has to increase over time.
And where does this additional money come from?
The same place all of our money comes from - more loans.
It's a bit like using your Visa to pay off your MasterCard.
For the system to function,
the total level of debt in society has to increase and increase,
and increase, and increase.
Clearly, this is not sustainable.
If we want to avoid another global financial crisis,
we need to prohibit banks from creating money out of thin air,
and transfer this responsibility to an accountable public institution
like the Bank of England.
If we did this, we'd still have banks,
but they'd only be allowed to loan existing money,
which is how most people think the system works anyways.
OK.
We're nearing the end of our journey
from the madness of more to the economics of enough,
and I'd like to finish with a story about another journey.
The Apollo 13 mission was supposed to be the third landing on the Moon.
You may have seen the excellent movie starring Tom Hanks,
which was made about this story.
On the way to the Moon,
There was an explosion in the oxygen tank which damaged the ship.
The commander James Lovell famously radioed back to Earth:
"Houston, we have a problem."
Interestingly, their biggest problem wasn't running out of oxygen,
it was the gradual build-up of CO2.
My favourite scene is when all of the engineers back in Houston
pile out everything that is on the ship onto a table,
and try and figure out what to do.
They had a limited amount of time and limited materials
to prevent the toxic build-up of CO2 in the atmosphere.
Not so different from our own problems with climate change.
However, they found a solution using relatively simple materials,
and the astronauts returned home safely.
It's a story of creativity within limits, of what we can do
in a resource-constrained world, on our own spaceship, Earth.
At the moment, we're making decisions,
based on whether they're good for growth or good for productivity,
not whether they're good for people or the planet.
We've forgotten that economic growth is just one means to an end,
not and end in itself.
But once we let go of our obsession with GDP,
we can focus on what really matters,
the health of our societies and the ecosystems that contain them.
Imagine an economy founded on fairness.
Imagine an economy that uses resources wisely.
Imagine taking action to start the transition.
We can build a steady state economy,
but we first need to recognise that enough is enough.
Thank you.
(Applause)