The Cinderella economy: an answer to unsustainable growth?

Cinderella's gloves
The 'Cinderella economy', where people trade crafts and services, may provide a model for a more sustainable financial system.
As worldwide Governments blindly attempt to support unlimited growth using limited resources, Tim Jackson believes the answer to true sustainability may lie on the economy's fringes

Society is faced with a profound dilemma. To refrain from growth is to risk economic and social collapse. To pursue it relentlessly is to endanger the ecological systems on which we depend for survival.

For the most part, this dilemma goes entirely unrecognised. When reality starts to impinge on the collective consciousness, the best suggestion to hand is that we can somehow ‘decouple’ growth from its material impacts and to continue to do so even as the economy continues to grow indefinitely. The green economy – as this idea is often called – was all the rage at Rio in June.

The reasons for such blind utopianism are easy enough to find. The modern economy is structurally reliant on growth for its stability. When growth falters, as it has done recently, politicians panic. Businesses struggle to survive. People lose their jobs and sometimes their homes. A spiral of recession looms. Questioning growth is deemed to be the act of lunatics, idealists and revolutionaries. 

But shooting the messenger won’t evade the dilemma. With oil prices clinging tenaciously to the once-inconceivable $100 a barrel mark and carbon emissions rising faster than ever before, we need something more than wishful thinking to avert the calamities ahead. The policy mantra ‘growth equals jobs’ is frankly unhelpful when growth itself is not just unlikely but sometimes positively unpalatable.

More to the point, this mantra turns out to be false in general. The relationship between growth and jobs isn’t straightforward at all; it’s mediated by something called labour productivity: the amount of output delivered (on average) by each hour of work in the economy. When labour productivity stays constant, then sure, an increase in output leads to an increase in employment. But if labour productivity increases faster than output does, then unemployment can rise even with a rise in the GDP: it’s quite possible for this to lead to ‘jobless growth’. Conversely of course if labour productivity stabilises or declines then it’s possible for employment to rise even without a rise in the GDP.

At first sight this doesn’t seem very comforting either. We’ve become so accustomed to see labour productivity as the engine of progress in modern capitalist economies. It’s our ability to generate more output with fewer people that’s lifted our lives out of drudgery and delivered us the cornucopia of material wealth – iPhones, hybrid cars, cheap holiday flights and plasma screen TVs – to which we would all very much like to become accustomed. 

Let’s leave aside here momentarily that one of the ways in which we’ve achieved this remarkable feat is by substituting capital (lots of clever technology) and material resources (fuel and other minerals) for people’s time. And that in the process we’ve created a lot of the ecological problems we now have to solve. My point here is rather to draw attention to the structural demands imposed by ever rising labour productivity.

Put simply, the obsession with labour productivity means that if our economies don’t grow, we risk putting people out of work, even without increases in the population. Higher unemployment generates rising welfare costs. Higher public spending leads to unwieldy levels of sovereign debt. Higher debts can only be serviced by increasing tax revenues from future income. We’re literally hooked on growth.  
This unhappy dynamic has recently prompted the revival of an old idea. If there’s less work to be had in the economy, for whatever reason, then perhaps we should all just work less and enjoy it. As it happens, we’ve always taken some of the labour productivity gains in the form of increased leisure time. Working hours in the UK declined by 15% between 1970 and 2005.

Reducing working hours further is the simplest and most often cited solution to the challenge of maintaining full employment with declining output. And it has a surprising pedigree. In an essay called simply 'Economic possibilities for our grandchildren' published in 1932, John Maynard Keynes foresaw a time when we would all work less and spend more time with our family, our friends and our community. Every cloud has a silver lining? It’s certainly a strategy worth thinking about, when growth is hard to come by.   

But simple arithmetic suggests another powerful option for keeping people in work when demand stagnates. What happens if we relinquish our fetish for labour productivity? Sounds crazy at first. We’ve become so conditioned by the language of efficiency. Output is everything. Time is money. The drive for increased labour productivity occupies reams of academic literature and haunts the waking hours of CEOs and Treasury Ministers across the world. 

In some places, this still makes sense. Who would rather keep their accounts in longhand? Wash hotel sheets by hand? Or mix concrete with a spade? Between the backbreaking, the demeaning and the downright boring, labour productivity has a lot to commend itself.

But there are places too where chasing labour productivity doesn’t stack up at all. What sense does it make to ask our teachers to teach ever bigger classes? Our doctors to treat more and more patients per hour? Our nurses to rush from bed to bed no longer able to feel empathy and offer comfort. Compassion fatigue is a rising scourge in the caring professions, hounded by meaningless productivity targets. Or to take another example, what – aside from meaningless noise – is to be gained by asking the London Philharmonic to play Beethoven’s 9th Symphony faster and faster each year?

Trivial though this example seems, it has its roots in another famous economic essay by the nonagenarian economist William Baumol. Analysing the dynamics of the cultural sector, he identified a general trend in modern service-based economies to slow down over time. Why? Because services require irreducible inputs of people’s time. The phenomenon has come to be called ‘Baumol’s cost disease’. Low productivity growth sectors are the scourge of modern economies. In formal terms these enterprises barely count. They represent a kind of Cinderella economy that sits neglected at the margins of consumer society.

Yet, people often achieve a greater sense of well being and fulfilment, both as producers and as consumers of these activities, than they ever do from the time-poor, materialistic, supermarket economy in which most of our lives are spent. And here perhaps is the most remarkable thing of all: because these activities are built around the exchange of human services rather than the relentless throughput of material stuff, there’s a half decent chance of making the economy more sustainable.

In short, achieving a green economy may be less to do with ‘sustained growth’ and technological utopianism and more to do with building an economy of care, craft and culture. And in doing so, restoring the value of human labour to its rightful place at the heart of the society.

Tim Jackson is Professor of Sustainable Development at the University of Surrey and Director of the Sustainable Lifestyles Research Group (SLRG) funded by DEFRA and the ESRC. He is author of the controversial bestseller Prosperity without Growth - economics for a finite planet (London: Earthscan/Routledge, 2011).

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