Maria Joutsenvirta – a researcher on the sustainable economy, writes about the problems encountered by societies that are based purely on economic growth.

Economic discussions often refer to austerity, poor economic outlooks, lack of competitiveness, and difficult decisions. However, they can also feature positive expressions, such as ‘budding recovery’, ‘rebound in exports’, or ‘technological leap’. All of these concepts are related – whether we are aware of it or not – by the idea of economic growth. Everyone can perform his/her own little test when listening to the news: how often is an argument presented based on the concepts of economic growth? Are perspectives presented based on which different starting points can be sought for societal reforms, or for increasing well-being?

This suggests that careful research, from a multidisciplinary perspective, is required on what forms the basis for economic growth, the kinds of opportunities it presents for creating sustainable well-being, and whether other economic means exist – outside mainstream approaches – of supporting well-being. For this purpose, together with Tuuli Hirvilammi, Marko Ulvila and Kristoffer Wilén, I have written the book Talous kasvun jälkeen (Economy After Growth). Kone Foundation was the main funding body behind the book.

A society based on economic growth is affected by at least three problems. Firstly, if economic growth is no longer achieved, we reach a dead end. In the absence of economic growth, the welfare state is weakened. On the other hand, many people are expressing concern that countries like Finland have entered an era of slow or even zero growth. This is weakening faith in the omnipotence of economic growth. Regardless of this ,almost all parties to the economic policy discussion view economic growth as the key to lowering unemployment and solving other problems related to well-being.

Secondly, the pursuit of economic growth does not necessarily result in greater overall well-being, since the measure of growth is gross national product, which takes no account of low levels of well-being among exhausted employees, or of environmental degradation. If factors like these were taken into account in GDP calculations – as depreciations or decreases in value – growth would no longer be achievable.

Economic growth has improved our material standard of living in recent decades. However, after a certain income level has been achieved, our well-being is – above all – social and psychological in nature. A growth economy aims to maximise material wealth only, despite the fact that after a certain level of wealth has been achieved, the advantages of growth are outweighed by ecological, social and human disadvantages. Policy based on the compulsive search for  growth is intensifying the threat posed by climate change, while reducing natural diversity. It incentivises increasing levels of ecologically unsustainable production and consumption, while hampering the necessary environmental policy decisions and societal reforms.

Thirdly, a social model that functions in symbiosis with economic growth cannot make use of alternative – and in part more efficient – ways of generating well-being.

The paradoxical logic of economic growth entails that growth is only possible on the basis of continuous rationalisation, i.e. by reducing the workforce. At the same time, the aim is to increase employment. It is not easy, however, to come up with new export products that increase economic growth or provide sufficient profits for investors. We now need better ways of improving employment and well-being. With its lists of cuts and talk of competitiveness, economic policy is ‘running on just one track’.

The lack of alternatives is due to the size of the role assigned to the global growth economy, which is based on competition, in economic life. It is commonly thought that globalisation of the economy is without limits and incontestable as an idea. The economy is viewed as a global competition for capital, investments and work. On the other hand, our well-being is viewed as being dependent on how well we perform in the face of intensifying competition.

Although such ideas only tell part of the truth, they dominate the economic debate, having cast a shadow over other aspects of the economy and well-being.

In fact, the current growth economy is fairly complex: you work for a global company that pays your salary, from which you pay taxes which are used, via policy decisions, to ensure that they reach people in need of such money. However, many risks lie along the way. Due to the pressures of competition, a company operating in the global economy pays lower salaries and outsources as many hours of production as possible i.e. weakens the well-being of employees while engaging in as much tax avoidance as possible.

However, work and well-being are about much more than pay. In our book, we present a framework supporting economic policy reforms, which divides the economy into three fields: the global economy, local economy and the core economy made up of local communities and households. We need to understand the differences between these economies, since they operate on the basis of different principles.

An overall view will help us to understand that well-being can be promoted without growth, by creating work and livelihoods on a more diverse and local basis. The core and local economies are only partly dependent on the global economy. On the other hand, global economic activities benefit from the core and local economies – think of the development and export of ecologically sustainable products.

With respect to alternative economic theories and societal actors, models of work, livelihood and production have been created based on a holistic viewpoint. For example, local production based on people’s needs decreases the dependence of household and national economies on growth and the crisis-prone global economy. The aim of economic activities does not need to be financial gain for its own sake. We need more local companies owned by “the right” people, in which work is done to promote well-being rather than shareholder value.

Ecologically and ethically sustainable operating models of this kind should now be widely introduced and further developed. Why has this not been done already? Because the economic discussion has been too one-sided. The need to broaden the basis of the discussion has become evident in events organised since the book’s publication. At the publication event for the book held on April 12 and in a blog [LINK http://www.sitra.fi/blogi/tyo-ja-talous/onko-talouskeskustelu-vain-taloustieteilijoille], Eeva Hellström has stated that the economic debate cannot be left solely to economists. “Multidisciplinary research and wide-ranging discussion strengthen society’s ability to adopt new conceptual and operational models that are better suited to the changes taking place in the world and provide the ability to recover and become stronger after acute crises.”

Antti Rinne, Chair of the SDP, and  Ville Niinistö, Chair of the Green Party, commented on the book at  a subsequent event held on 22 April. Both of them emphasised the need for a more broad-ranging economic discussion. According to Niinistö, we should now be thinking about how well-being and employment can be organised in conditions of low or zero growth.

We need to take a diverse and bold approach in our thinking. Economic policymakers should open up to a more multidisciplinary dialogue which takes a wider view of the economy. In addition, the media should be more critical of the current notion that there are no alternatives and make room for new ideas. We need people that are brave enough to question prevailing ideas and express their own views.