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This informative book is about the rise of economic growth to the status of the number one goal of nations; the short-lived challenge to that dogma from the book The Limits to Growth (1972); the solidity of the Limits position as confirmed by subsequent data and the analyses of others; the intellectual poverty and dishonesty of the growth economists’ reaction against the Limits argument; and how it nevertheless happened that through modern public relations and well-financed ideological think tanks, the intellectually weaker growth arguments prevailed. Higgs focuses on the US story, but with informative parallels from her native Australia.
Higgs documents the cogency of the Limits position and how the business as usual projection of the World Model has for over thirty years fit the data better than any standard economic model. She also exposes how the economists resorted to ridicule and arrogance as a substitute for reasoned refutation in their response to Limits. This story is well known to me because I was a participant in the debate. I can testify that Higgs’ retelling is accurate and insightful. It is also refreshing to me that MIT Press published her book. This indicates the welcome likelihood that some anonymous member of the MIT department of economics no longer has a veto over the decisions of the MIT Press.*
What to me was new and challenging was Higgs’ detailed historical consideration of the following question: given that the Limits position is fundamentally correct, and that the growth economists’ “refutation” is based on ignorance, vested interests, and dishonesty, how did it come to pass that the economists’ erroneous position prevailed over the much more cogent and scientifically based Limits position? That it has done so can hardly be doubted, even if one still hopes for better in the future. For those of us who believe in the persuasive power of reasoned argument, this fact, and Higgs’ explanation of it, is a real kick in the head. Nor does it bode well for democracy. How did it happen? Can we learn from it? Can we recover from it?
The starting point for Higgs’ explanation is the classic 1928 work, Propaganda, by Edward Bernays, Sigmund Freud’s nephew, and pioneer in public relations. Bernays wrote:
"The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country . . . It is they who pull the wires which control the public mind, who harness old social forces and contrive new ways to bind and guide the world."
Propaganda becomes advertising, which becomes public relations identifying “the greater good” as defined and propagated by well-endowed “public interest” think tanks. According to Higgs, soon-to-be Associate Supreme Court Justice Lewis Powell, Jr.’s 1971 memorandum to the US Chamber of Commerce gave strategy and operational structure to Bernays’ philosophy. It led to the establishment of think tanks with the explicit purpose of defending “free-market capitalism” against labor unions, welfare legislation, and taxes on business. This docket was extended to include combating environmentalism and any questioning of the primacy of economic growth that would only “confuse” the masses. This opposition was already being put in place by the 1972 publication of Limits.
Democracy presupposes a citizenry capable of thinking for themselves rather than being misled by propaganda. But with the average family now holding two full-time jobs that are often uncertain, plus raising kids, there is little time for keeping informed and understanding increasingly complex economic issues. The appeal of easy ready-made answers lends force to Bernays’ cynical view of democracy as the art of manipulating the opinions of the masses.
In addition to the business PR opposition, there was the fierce opposition of academic economists who were religiously committed to the “Keynesian-Neoclassical growth synthesis.” The Limits argument had to be opposed because if it were true, then very many very important economists would have been very wrong about a very important issue for a very long time. So Limits faced the united opposition of business interests represented by the Chamber of Commerce, the National Association of Manufacturers, the propagandistic think tanks, and the academic economists. In the face of such concerted opposition, it is remarkable that Limits, by virtue of logical argument based on scientific premises, managed to get the significant hearing that it temporarily did. But it has not prevailed against the overwhelming growth coalition.
One of the verbal PR tricks is to use the word “free” as in “free market” and “free trade,” instead of the more precise word “deregulated.” The deregulated market, with deregulated global trade and deregulated finance, is destroying the freedom of the vast majority to attain a sufficient income for a decent life. Higgs shows how income and wealth have been enormously concentrated by the growth economy, and chides the Left, with which she is usually sympathetic, for being stubbornly slow to recognize the costs of growth, and for persisting in the belief that the “bigger pie theory” is the best hope for the working class.
The anti-Limits PR apparatus is so strong now that it even dares to oppose science in order to defend growth. This is most evident today in the denial of climate change and the attack on climate scientists financed by the fossil fuel industry. This strategy of “sowing and selling doubt” was previously used with some success by the tobacco industry. The American Enterprise Institute, the Cato Institute, the Heritage Foundation, The Club for Growth, the Heartland Institute, etc. can be counted on to conduct “independent” studies that reach conclusions supporting deregulated international trade, deregulated finance, repeal of environmental and welfare legislation, etc., all in the name of growth.
Even the public policy schools in universities, which have been relatively independent and objective, are now often staffed by joint appointments with these moneyed think tanks. This I have observed from having taught in a school of public policy for fifteen years. Economics departments, where I also have long experience, have become almost irrelevant, as Joan Robinson put it some time ago, having “run off to hide in thickets of algebra, leaving the important questions to journalists,” –who by default then get their information from the think tanks. And of course the corporate media are only too happy to eat what they are freely fed.
At least the Limits debate aroused economists from their dogmatic slumber enough to make a few ad hominem counter-attacks in self-defense. But they are too self-confident to see the need for actual thought, and have gone back to sleep. Higgs’ book is a wake-up call, but offers little on specifically what policies to adopt once awake. Maybe that will be the subject of a future effort–first things first, she might well say.
A short review cannot do justice to such an excellent and detailed book. In conclusion I want to return to the point that Higgs’ explanation of the ascendancy of the weaker anti-Limits position constitutes a kick in the head for those of us who believe in the persuasive power of reasoned argument. Higgs’ book itself is a reasoned argument. She has clearly not given up on persuasion. But she reminds those of us who have a tendency to forget, that reason and honesty must confront power and corruption, not just honest error. Even correcting the honest error requires a substantial paradigm shift–a change from the pre-analytic vision of the economy as the whole with nature as a part, to the recognition that the economy is the part. The economy is an open subsystem of the enveloping ecosphere that is finite, non-growing, materially closed, and entropic. Reason and truth will ultimately prevail, but Higgs makes it clear that it will take longer and be a more costly fight than many of us have imagined.
* For details the interested reader may see H. Daly, Beyond Growth, Beacon Press, 1997, fn. 5 on p. 225.
ABOUT THE AUTHOR
Herman Daly has received numerous significant awards (e.g., the Right Livelihood Award and the NCSE Lifetime Achievement Award) that recognize the value of his ideas for making this world a better place. For decades, he has been an inspiration to students of economics and public policy — how often do you see students lining up at the end of the semester to have their professor sign their textbooks?
Over his career, Herman has taken a courageous stance, swimming upstream against the currents of conventional economic thought. Not content to bequeath his ideas on economic development solely to the academic realm, he did time at the World Bank to change policies in the real world. He also has written books that are popular with citizens around the world.
It’s a rare combination indeed to have keen insight, kindness, razor-sharp analytical skill, wit, amazing capacity for work, humility, and an uncanny way with words all rolled up into one human being. It’s a good thing, too — the planet needs Herman Daly. His books, lectures, papers, and essays are filled with ingredients for cooking up a better economy and better lives.
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A Business Built for Resilience
James Magnus-Johnston
This article was originally published in
The Daly News, 16 April 2015
under a Creative Commons License
What does business look like in a steady state economy? I’m often asked whether or not a steady state economy would somehow lead to the stagnation of free enterprise. Yet all around us today, we’re witnessing the flourishing of ‘social enterprise,’ a business model designed to maximize human and environmental wellbeing rather than accumulate profits for shareholders. From not-for-profit and cooperative models to the birth of the B Corp (benefit corporation), we find ourselves in the midst of a profound shift in business–away from growth and profit as an organizing principle, and towards one that respects the social and ecological limits to growth. With a planet under profound stress and a Ponzi-inspired economy poised for decline, there’s no harm in trying something a little different.
As policymakers waste time hand-wringing about embracing alternatives to growth, social enterprise provides individuals and communities with the ability to demonstrate the viability of the post-growth paradigm. Measuring social and ecological outcomes can be challenging, but some models (such as the B Corp) have adopted a specific method to measure outcomes using a point-based system. Others are using simple tools to reduce waste and ensure a fairer, more equitable working environment.
I have recently been involved in starting a pair of social enterprises, which stand as humble examples of business models for resilience rather than growth. The first is RISE Urban Incubator, which promotes and mainstreams innovations to reduce waste; the other is Fools & Horses, a coffee shop with a triple bottom line. Both businesses have been structured according to a relatively simple principle–do more good than harm–by tackling problems such as inequality and environmental degradation. Fools & Horses was named after the beloved British sitcom Only Fools and Horses, about a group of people who spend all their time trying to come up with “get rich quick schemes” and, ironically, work all the time. What better way is there to describe an economy designed for growth-at-all-costs?
Our Fools & Horses wants to demonstrate the benefits of a more flexible, equitable work arrangement for its employees. Workers earn a living wage when they join us, are invited to have a say in how the business should be run, and are given the opportunity to become owners. Worker-owners look forward to more than the accumulation of money and a periodic hike in their hourly rate. They are given greater autonomy in their work, freedom to experiment and innovate according to their talents, and enough flexibility in their schedule to pursue other interests or spend time with family and friends. Autonomy and flexibility are not just tolerated, they are encouraged.
More interestingly, perhaps, the coffee shop is designed to provide the incubator with the cash it needs to experiment with projects that systemically reduce waste, including the use of permeable pavement and solar technology. Any waste streams we do have are audited so the businesses will offset more waste and emissions than they create.
The businesses have also been designed to provide benefits to the local economy by keeping dollars circulating locally. Fools & Horses is designed to re-localize the economy wherever possible by supporting budding entrepreneurs in the local food industry, including farmers, bakers, craft brewers and roasters, and chefs. Eventually, we hope to help foster a network of local suppliers, which also helps reduce fossil fuel requirements. Each of our producers offers only the highest-quality products, fostering an economy of quality rather than an economy of quantity.
There are other sustainable business models out there, and people doing far more important and captivating things to shift the economy in a new direction. But this is one example of a small effort to demonstrate the shift in thinking at the macro level. One of the other, less intangible things Fools & Horses will foster is a sense of conviviality and good living. In Dutch, it’s called ‘gezellig,’ and in German, it’s called ‘gemütlichkeit,’ both of which connote a sense of warmth, coziness, and belonging. In a steady state economy, what we need to accomplish above all else is the re-connection of people with one another. Perhaps it says more about the present state of business–and the prevalence of monopolies–that it’s considered novel to do so.
ABOUT THE AUTHOR
James Magnus-Johnston has worked in the financial industry, in policy positions with lawmakers, and in the communications industry as an editor. He has an MPhil in Economics from Cambridge University, where he completed a thesis on the growth dynamics imposed by the global banking system. He is presently a professor of Political Studies and Economics with Canadian Mennonite University, the social enterprise development liaison with Manitoba’s Green Action Centre, and a member of Transition Winnipeg’s Initiating Committee. In his work, James promotes the transition to a steady state economy through financial reform, low-impact living, and the use of entrepreneurship to ignite change.
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