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It’s now abundantly clear that the overriding priority of this Labour Government is “growth” – a word endlessly repeated by Keir Starmer, Chancellor Rachel Reeves and other senior ministers.
Opening an investment summit in London this week, Starmer urged the assembled corporate executives to unleash “the shock and awe of investment” and promised them: “We will rip up the bureaucracy that blocks investment […] and we will make sure that every regulator in this country, especially our economic and competition regulators, takes growth as seriously as this room does.”
Why? Because “it’s not just that stability leads to growth – it’s also that growth leads to stability”, Starmer said.
But is this true? As the former Green Party MP Caroline Lucas commented on X: “It’s as if none of the work on sustainable economies ever happened. Starmer bangs on about ‘growth’ but growth of what, for whom, at what cost? Not all growth is good and, as scientists concluded last week: ‘In a world of finite resources, unlimited growth is a perilous illusion.’”
Lucas was referring to a major study by an international team of scientists in the journal BioScience, ‘The 2024 state of the climate report: Perilous times on planet Earth’. Its authors don’t pull their punches, warning that “the future of humanity hangs in the balance” and that this balance is now tipping heavily towards irreversible catastrophe:
These projections paint a bleak picture of the future, with many scientists envisioning widespread famines, conflicts, mass migration, and increasing extreme weather that will surpass anything witnessed thus far, posing catastrophic consequences for both humanity and the biosphere
The 2024 state of the climate report
Endless Growth Doesn’t Create Stability
The assumed necessity for endless economic growth has been at the heart of most economic thinking for well over 150 years – and not just among economists who believe in unfettered capitalism.
In The Communist Manifesto, Karl Marx and Friedrich Engels observed that capitalism “has created more massive and more colossal productive forces than have all preceding generations together” and “rescued a considerable part of the population from the idiocy of rural life”. Marx saw this as an entirely necessary stage in the development of human societies, albeit one that contained the seeds of its own destruction.
For Marx, capitalism’s contradictions – the competitive forces that compelled capitalist enterprises to grow by constantly expanding into new markets and intensifying the exploitation of labour – were inherently unstable and would lead inexorably to communist revolution.
But the world he envisioned emerging from this was not one in which economic growth was no longer necessary. On the contrary, he believed that the revolution would only have succeeded when “the productive forces have also increased with the all-around development of the individual, and all the springs of co-operative wealth flow more abundantly”.
Under Stalin, the world’s first communist government in the Soviet Union focused relentlessly on expanding these productive forces, at huge cost to the natural environment and human health.
The arguments for government intervention in the market economy made by John Maynard Keynes In the 1930s addressed precisely the contradictions of capitalism that Marx had identified, and that had led to the Wall Street Crash of 1929 and the Great Depression that followed.
Keynesian economics aimed to ensure a steadier form of growth than classical “free market” doctrine had proved capable of, avoiding the booms and busts that had caused such social and political turbulence in the period before World War Two. This approach underpinned the policies of most Western governments for more than three decades after the war, a period of unprecedented growth, until the resurgence of laissez-faire ideology in the shape of Thatcherism and “Reaganomics”.
In the wake of the 2008 financial crisis – seen by many as an inevitable result of the deregulation of the financial sector under Thatcher, Reagan and their successors – Keynesian thinking enjoyed a revival, providing the theoretical basis for the macroeconomic interventions needed to avert systemic collapse.
As Harvard professor N. Gregory Mankiw wrote in the New York Times, “If you were going to turn to only one economist to understand the problems facing the economy, there is little doubt that the economist would be John Maynard Keynes.”
The Ecological Limits to Endless Economic Growth
Through all these upheavals and reversals, however, one thing has remained constant: the assumption that unending growth is a desirable goal in itself. Yet if we are to take the increasingly desperate warnings of scientists seriously, we can only conclude that Starmer’s assertion that growth leads to stability is not just wrong – it is a dangerously false misrepresentation of the situation we now face.
This assumption was brought into question as early as 1970, when a team of researchers at the Massachusetts Institute of Technology were among the first to examine the ecological limits to endless economic growth. They created a model to test the impacts of the further expansion of population, agricultural production, non-renewable resource depletion, industrial output, and pollution, and in 1972 this research formed the basis of The Limits to Growth, a report by the Club of Rome.
The conclusions of this report were to prove prescient:
The limits to growth on this planet will be reached sometime within the next one hundred years. The most probable result will be a rather sudden and uncontrollable decline in both population and industrial capacity
The Limits to Growth report, Club of Rome
With large parts of the biosphere now dying in front of our eyes, from tropical rainforests to marine ecosystems, and evidence emerging that the natural carbon sinks that should prevent rapid global heating from further accelerating are now absorbing almost no carbon, there can be no doubt that this point has now been reached.
In the past ten years, economists such as Kate Raworth and institutions including the New Economics Foundation (NEF) and the Institute for Public Policy Research (IPPR) have developed new ways of looking at the economy that prioritise human wellbeing and environmental sustainability rather than gross domestic product (GDP).
But while these ideas have gained traction in academia and in the environmental movement, they still seem remote from the centres of economic decision-making.
How Labour’s Rhetoric on the Economy is very Conservative
In a 2018 article discussing how paradigm shifts in economic thinking occur, Michael Jacobs and Laurie Laybourn-Langton of the IPPR observed that “the UK is now perhaps the country furthest advanced in this field. It has a number of think tanks and campaigning organisations more or less explicitly committed to the idea of a paradigm shift.”
But they also noted that, at the level of political parties and governments, “it is hard to discern any significant paradigmatic transition in progress”. Despite this, they sounded a note of hope: “It is arguably only the UK Labour Party that has committed to a radical break from neoliberalism and has a chance of winning power.”
That window of opportunity closed in 2019 and, under Starmer’s leadership, Labour’s rhetoric on the economy is now almost indistinguishable from that of David Cameron and George Osborne on coming to power in 2010.
Neoliberal economics of the sort promoted by the web of influential think-tanks and lobby groups known collectively as “Tufton Street,” after the street in London most of them originated from, continues to dominate public discourse, thanks not least to the almost constant presence of representatives of these dubiously funded bodies on political talk shows such as the BBC’s Question Time.
But as the realities of the climate and ecological crisis impact on our lives in ways that are increasingly impossible to ignore, the Panglossian pronouncements of the Tufton Street talking heads and their political accomplices are coming to seem ever more absurd. Paradigm shifts can happen very quickly, and there is now a very substantial body of economic thinking around which such a shift is likely to materialise.
Few individual thinkers have single-handedly brought about a radical change in the way people understand the way the economy works, or might be made to work. Marx was one, as was Keynes.
In his masterwork, ‘The General Theory of Employment, Interest and Money’, Keynes wrote of the challenges he had experienced in writing it, and that he realised his readers would have in understanding it: “The ideas which are here expressed so laboriously are extremely simple and should be obvious. The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds.”
Wealth Always Wins
The fatal flaw in the economics of perpetual growth is indeed a simple one to understand, and it is perhaps more difficult for political leaders to escape this fixation than it is for the public. One reason for this is that the maximisation of profit is the principle to which the ultra-wealthy individuals and corporations who fund the major parties owe their wealth.
The story these people tell themselves, and tell to the politicians they sponsor, is that any deviation from this principle will prevent the wealth they “create” from trickling down to others. And they are aware that any deprioritisation of growth will have to be accompanied by a more equitable redistribution of wealth through taxation. Yet polling consistently shows that the public overwhelmingly support such redistribution.
When paradigms shift, it is not unusual for the work of earlier thought leaders to be trawled for evidence to suggest that their work prefigured this new way of looking at the world. This has already been happening in the case of Marx, for instance in Kohei Saito’s Capital in the Anthropocene, a revisionist study that draws on unpublished notebooks of Marx to build an argument for degrowth.
Marxist revisionism is unlikely to spark much interest among the current leadership of the Labour Party. But Keynes has had far more influence than Marx on Labour Governments since 1945, and there is good evidence that Keynes too was beginning to look beyond the idea of perpetual growth.
In a 1930 essay, ‘Economic Possibilities for our Grandchildren’, Keynes imagines the world as it might be in 2030 – a world in which technological advances enable everyone’s basic needs to be met and “for the first time since his creation man will be faced with his real, his permanent problem – how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.”
“I feel sure that with a little more experience we shall use the new-found bounty of nature quite differently from the way in which the rich use it to-day,” Keynes wrote, “and will map out for ourselves a plan of life quite otherwise than theirs.”
What might such a plan look like? Keynes is not prescriptive but thought the blind pursuit of wealth, or of growth for growth’s sake, was unlikely to be part of it: “Of course there will still be many people with intense, unsatisfied purposiveness who will blindly pursue wealth – unless they can find some plausible substitute. But the rest of us will no longer be under any obligation to applaud and encourage them. For we shall inquire more curiously than is safe today into the true character of this ‘purposiveness’ with which in varying degrees Nature has endowed almost all of us.”
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For Keynes, this healthier approach to life would be ushered in by an age of technological abundance. He could not have predicted the way in which technologically driven growth would threaten to undermine the very conditions of life itself, and make a radically different economic model not just desirable but a matter of survival.
And, as he wrote elsewhere, the person who “refuses to change his opinion merely because facts and circumstances have changed is the one who in the long run comes to grievous loss”.