This post has been prompted by a few things.  Most recently, Left Flank (in my view, in an exercise in question-begging), posted a critique of a zero-growth economic system as Greens policy (it isn’t).  But it’s true to say that there’s sympathy for the idea within the Greens, including at the top.

While I hesitate to enter into a debate with people like Richard Denniss and Tim Jackson – who know much more about this than I do – I feel there are basic things that are missing from critiques of economic growth.  In itself, I don’t see economic growth as a problem, and so I thought I’d note why.  This is going to be complicated, so I’ll do it in parts.

The first thing to do is define your terms, and then to defend the definitions.  I’ll go with a conventional definition of economic growth, which is growth in Gross Domestic Product (GDP) over time.

In defence of Gross Domestic Product

This leads to an obvious problem.  GDP is often criticised as a bad measure.  I’m going to argue not that it’s perfect, but that it’ll do.  Near enough can occasionally be good enough.

First, an overview.  GDP (Y) is simply consumption (C) plus investment (I) plus net government expenditure (spending minus taxes – G) plus exports (X) minus imports (M).  So, Y = C + I + G + X – M.  GDP approximates total economic activity.  It’s a measure of income as well (because income can only be consumed or saved, and C + I captures spending and saving).  The conventional critiques are not without merit, but are misguided when considering economic growth.  Here’s why:

Typical critiques of GDP
GDP doesn’t measure wealth. True, but irrelevant.  Wealth isn’t income – wealth is a stock, income is a flow.  Wealth does not contribute to income directly – while interest can be earned on deposits, that interest is picked up in GDP.
GDP doesn’t measure inequality. True, but irrelevant.  Economic growth knows nothing of inequality.  There are other arguments that note the problems inequality causes within a society, but that’s not a critique of GDP as a measure.  GDP alone isn’t going to tell you everything you’d like to know about a society – no single measure will.
GDP doesn’t measure the underground economy. True, but unimportant.  Nothing else does reliably either.  If you could measure it, it’d no longer be underground.  If a reliable measure of trade in illegal goods (assorted illicit drugs, for example) could be measured, it could be added to GDP if necessary, but if the value of the marijuana trade in Australia in 1998 (with marijuana being quite expensive at the time) was $3.2 billion, this represents less than 1% of GDP (and its contribution is largely picked up within elements that comprise GDP in any case).
GDP doesn’t measure non-monetary transactions. True, but unimportant.  Transactions by barter are few in Australia (and in most industrialised economies).  The value of such can be disregarded.  There are few subsistence farmers in Australia – folks who grow and eat their own food entirely are few and far between.
GDP doesn’t care what’s being produced. True, but unimportant.  Production of weapons, or repair of environmental damage all contribute to GDP, while a carbon tax reduces it.  But GDP isn’t a measure of desirability of production.  It’s just a measure of the production itself.  This production adds to economic activity, and to income.
GDP ignores externalities. Only the ones that aren’t taxed.  Tax them, and they’re brought into the fold.  And all externalities should be taxed, as an externality represents appropriation of a publicly-owned good for private gain.
GDP doesn’t measure whether growth is sustainable. True, but besides the point if the argument is that growth itself is unsustainable.
GDP doesn’t measure unpaid labour. True, but unimportant.  The argument about growth is that it increases consumption of irreplaceable resources.  Labour (whether paid or unpaid) is replaceable.  One could quite easily cost unpaid labour and add it to measures of GDP if it came to that.

So, for arguments about growth, GDP serves well enough as a measure.  Generally, given the correlation of GDP with many measures of interest, it’s a handy proxy measure for comparisons between countries.  It fails as a measure within countries, but then again, that’s not what it was designed for.

Next up, I’ll talk about the nature of economic growth – what causes it, the reason why zero growth is improbable, and the reason why it’s undesirable.