Le Gross National Happiness

As countries begin emerging from the global financial crisis, France is proposing to measure progress in a new way - one that includes happiness and well being, as well as traditional economic benchmarks.

In France, Mr. Sarkozy says focusing too much on gross domestic product as the main measure of prosperity contributed to the financial crisis. He wants other countries to follow France's example in looking at less materialistic indicators of progress.

Read the rest from Voice of America News.

A Bedside Moment with Thomas Friedman

Last night I had something akin to what NPR calls a "driveway moment"; only, living in a high-rise apartment building in Brooklyn, I have no driveway. Instead, it was more like a bedside moment, involving not a car radio but the New York Times app on my iPhone, which I had just opened up one last time before climbing into bed. I'm not proud of this, but there I was in the dark, sitting at the edge of my mattress, squinting into the bluish light of the screen, amazed at what I was reading.

In Sunday's New York Times--on the "most-emailed" list no less--was this:

Let’s today step out of the normal boundaries of analysis of our economic crisis and ask a radical question: What if the crisis of 2008 represents something much more fundamental than a deep recession? What if it’s telling us that the whole growth model we created over the last 50 years is simply unsustainable economically and ecologically and that 2008 was when we hit the wall — when Mother Nature and the market both said: “No more.”

Granted, Thomas Friedman, the author of the article and the man with whom I was sharing this bedside moment, was writing as an op-ed columnist, not as a "true" journalist. But still, there those words were; the "whole growth model" was being questioned in the nation's newspaper of record.

Riveted, I read on. Friedman quotes physicist and climate expert Joseph Romm, author of the excellent book Hell and High Water and creator of the Climate Progress blog. Romm compares our current growth-centered approach to a Ponzi scheme, in which we are (or until recently, were) getting rich at the expense of future generations by depleting our natural stocks of fish, farmland, forests, petroleum, and just about everything else, wreaking havoc on the climate in the process.

Friedman goes on:

Over a billion people today suffer from water scarcity; deforestation in the tropics destroys an area the size of Greece every year — more than 25 million acres; more than half of the world’s fisheries are over-fished or fished at their limit.

As I understood it, Friedman's point so far was that the growth model is not only unsustainable from an economic point of view (he mentions our propensity to borrow from abroad to finance our insatiable appetite for foreign-manufactured consumer goods), but that this entire system of growth, even if it were to keep on "working," depletes our limited resources too fast and takes too much of an ecological toll to be desirable. He quotes Paul Guilding: “We are taking a system operating past its capacity and driving it faster and harder. . . . No matter how wonderful the system is, the laws of physics and biology still apply.”

Right on, I thought.

But then Friedman makes a jarring mid-paragraph transition. His very next sentence is "We must have growth," which he qualifies by writing, "but we must grow in a different way."

Wait a second! Didn't he just finish suggesting that our growth paradigm is flawed, unsustainable, as doomed to eventual collapse as Madoff's empire? Why this U-turn? And what is this "different way" he says we ought to grow?

"For starters," Friedman writes, "economies need to transition to the concept of net-zero, whereby buildings, cars, factories and homes are designed not only to generate as much energy as they use but to be infinitely recyclable in as many parts as possible."

Really? "Cars . . . that generate as much energy as they use"? Really? The "Mr. Fusion"-powered flying Delorean from Back to the Future II notwithstanding, it seems pretty unlikely that such an invention will ever exist.

Sadly, despite any efforts to make economic growth less resource intensive and emit less carbon, such efforts can do nothing more than slow down the rate of destruction. Without tackling the growth model itself, such nominal gains in efficiency merely lead to a bit less carbon emitted per unit of GDP growth.

Even if we were to get to the point where factories had enough solar panels (or whatever) on the roof to run the machines, there is still no such thing as "net-zero" growth if our economy continues to depend on more factories sprouting up each year. If we were to somehow apply today's most energy-efficient technologies to all the world's factories, homes, and cars, ecological collapse would be slower to arrive, but it would be no less inevitable.

That is because economic growth, as we pursue it, is exponential. Even at a modest rate of growth, say 2.5% per year, a country's GDP will double after just twenty-eight years. At 8%, a growth rate not unheard of in parts of Asia in recent years, GDP doubles in a mere nine years. Plot a country's annual rate of GDP growth, even a modest one, and you get what looks like a hockey stick. Sooner or later, the line heads almost straight for the sky, and so do rates of resource depletion and levels of carbon emissions.

When anyone (even an environmentalist such as Tom Friedman) argues that "We need growth," think of the hockey stick and reply, "Nonsense!" Will a baby born today need twice as many goods and services when she reaches the age of twenty-eight as we enjoy now? Of course not. Would holding steady at, say, our current level of economic output ($14.2 trillion in the United States in 2008) mean life would get worse or that economic activity would have to cease or that we would have to become socialists? Absolutely not.

In fact, diverging from this harmful path of exponential growth is the only way to ensure that our children and grandchildren inherit a planet as habitable as the one we enjoy now ourselves. Even if we believe that scientists will come up with brilliant technological solutions to our energy and ecological problems, wouldn't it be prudent to avoid runaway growth for the time being, at least until such technologies are implemented?

I respect Friedman's opinions and commend him for daring to question growth--that universal panacea of our age. It's just a shame that he seems to have come up with the wrong answers.

When Consumers Cut Back: A Lesson From Japan

"As recession-wary Americans adapt to a new frugality, Japan offers a peek at how thrift can take lasting hold of a consumer society, to disastrous effect," writes Hiroko Tabuchi in yesterday's New York Times. The article offers examples of how the Japanese are cutting consumption:

Today, years after the recovery, even well-off Japanese households use old bath water to do laundry, a popular way to save on utility bills. Sales of whiskey, the favorite drink among moneyed Tokyoites in the booming ’80s, have fallen to a fifth of their peak. And the nation is losing interest in cars; sales have fallen by half since 1990. . . . a survey last year by the business daily Nikkei found that only 25 percent of Japanese men in their 20s wanted a car, down from 48 percent in 2000, contributing to the slump in sales. Young Japanese women even seem to be losing their once- insatiable thirst for foreign fashion. Louis Vuitton, for example, reported a 10 percent drop in its sales in Japan in 2008.

The premise is that all this thrift is hurting Japan's ability to weather the global recession. "Japan’s economy is in free-fall because it cannot rely on domestic consumption to pick up the slack," Tabuchi writes. Saving instead of spending could lead to deflation, the author warns.

Yet the article, published in the Business section, does little to explain exactly what "disastrous effect" this frugality might have other than to spur deflation. Deflation, in which the prices of goods and services drop, and the value of a dollar (or yen) increases, can be self-reinforcing, possibly leading to what economists call a deflationary spiral, in which production and demand fall together. It is this potential for shrinking GDP--and the accompanying loss of jobs--that worries economists.

While deflation's potential to negatively impact individuals, especially those who haven't saved, is very real, let's look at it in a different way. Given what we now know about the earth's limited ability to provide the raw materials and energy for human consumption (and absorb its wastes), it is very likely that we will have no choice but to curb our consumption in the future, especially since there will be more and more people vying for limited resources. In other words, whether we like it or not (and there is much not to like), consumption cannot expand exponentially forever. Perhaps a shift from borrowing and spending to saving is a rational, sometimes even a desirable trend.

“As the world becomes full of us and our stuff, it becomes empty of what was here before," writes economist Herman Daly. In other words, "When the economy’s expansion encroaches too much on its surrounding ecosystem, we will begin to sacrifice natural capital (such as fish, minerals and fossil fuels) that is worth more than the man-made capital (such as roads, factories and appliances) added by the growth"

The result is uneconomic growth. The question is not if we will reach that state if we keep growing, but when. Not surprisingly, the answer is subjective and depends on the value we place on “what was here before”—all those fish, minerals, and fossil fuels, not to mention ecosystems, familiar weather patterns, forests, biodiversity, and so on.

While we're used to measuring the well-being of a nation by how fast its economy grows, it is becoming apparent that at least some of this growth in GDP--which depends largely on rising consumption--is uneconomic in nature. That is, after we balance the benefits of our consumption with its deletrious effects, our quality of life may actually be diminished.

It is telling that the goods Tabuchi reports the Japanese are giving up are largely luxury items--designer handbags, expensive whiskey, personal automobiles, and the like. That highlights how dependent the world economic system is on what might be considered superfluous consumption. We make every effort to direct our economies to grow not merely to meet our needs, but for the sake of growth itself, doing so because we worry about the "disastrous" effects if we don't: mainly that the economy will contract.

But rarely do we consider the truly disastrous effects if we do continue to measure success only by growth. In a world running out of cheap energy and filling up with heat-trapping greenhouse gasses, the more sensible approach would be to strive for a more sustainable level of consumption. That's not to suggest that we should embrace the deflationary spiral. Rather, we must redefine the way we measure success--not by more Louis Vuitton handbags and cars but by quality of life and intact ecosystems.

My bet is that the future is going to be defined by limits, and the sooner we can start figuring out how to live comfortably and happily within them, the better chance we have at avoiding real disaster. So instead of brashly calling the reduced consumption in Japan, or anywhere else, "disastrous," we'd do better to keep an open mind and try to learn about how they're adapting. In the wake of our own big bubble popping and the collapse of the financial system as we know it, the spending and saving habits of disenchanted Americans may start to look a lot like those of the Japanese.

In the Times article, Tabuchi quotes a twenty-year-old Tokyo college student: “I’m not interested in big spending. . . . I just want a humble life.” It's an attitude that's certainly not as sexy as that of our recent pre-recession, high-rolling, ultra-leveraged past, but it's one that's much more grounded in reality.