Economic vs. Sustainable Growth: Identifying the Essential Mission of Sustainable Economies

Submitted by John Ikerd

By John Ikerd 

A sustainable economy must arise from and be supported by a consensus of society regarding the mission of the economy.

The basic nature of an economy invariably reflects the consensus, or at least the acquiescence, of the society within which the economy functions. Lacking a societal consensus for sustainability, governments cannot sustain the political power necessary to protect their natural and human resources from extraction and exploitation or to make the social and ecological investments essential for economic sustainability.

Steady State Economy or Sustainable Economy

Some economists believe sustainability will require a “steady state economy.”

A steady state economy must function at a constant or steady rate of resource use or throughput, meaning a constant flow of energy and materials used to produce goods and services. The sustainable level of energy throughout is defined by the ability to sequester useful energy from the daily inflow of solar energy and the capacity of nature to absorb, detoxify, or neutralize the outflow of wastes.

A steady state economy is typically described as an economy that maintains a constant population, meaning a constant supply of labor and constant stocks of natural and financial capital, including personal wealth. Any growth in total economic output or aggregate personal wealth must come from increased efficiency in energy use, accompanied by a comparable reduction of the wastes that must be detoxified by nature. The sustainable productive capacity of the global economy is thus limited by a natural ecosystem that is both finite and fragile.

Economic Growth Is Not Sustainable

Regardless of the specific economic model or paradigm, the first step toward a consensus of economic sustainability is a general understanding that economic growth is not sustainable.

For example, economic growth rates of 2 percent to 3 percent would be considered very modest by standards of the industrial era. However, with an annual growth rate of only 2.5 percent, the global economy would double in size every 30 years.

A global economy with a total economic output equal to only one $2,000 years ago, that had grown at a rate of 2.5 percent per year, would generate an economic output of $3.6-sextillion today – that is $3.6 followed by 20 zeros.

Such an economy would be equivalent to a global population of seven billion people spending nearly one-million dollars every minute of every day of the year. Furthermore, this amount would more than double over next 30 years and quadruple in 60 years. Obviously, the economic growth rates of the industrial era were an aberration in human history that will not be sustainable in the future. 

Economic Mission: Quality of Life

Economic growth is no longer a logical mission for sustainable economies. The logical mission is, as it has always been, the pursuit of happiness or quality of life. Such a change will not likely take place until people – individually, nationally, and globally – understand and accept that economic well-being is no more important than is social and ethical well-being.

Throughout human history, people have known that beyond some basic level of physical and mental well-being there is no relationship between further increases in income or wealth and increases in happiness or overall quality of life. Once the basic human needs for food, clothing, shelter, health care, and other essentials have been met, quality of life depends far more on the quality of social relationships and their sense of purpose in life than on the quantity of income or wealth.

Various studies have confirmed that many nations of the world have been able to meet the basic human needs of their people with no more than $10,000 to $15,000 per person of economic output. In general, as developing economies have grown beyond this modest level, there has been no consistent relationship between further economic growth and greater happiness or overall well-being.

Developed Economies vs. Developing Economies

Many people in the world, particularly those in the so-called developed nations, don’t need more economic growth. Their economies are already producing far more than enough economic output to meet their basic human needs. The economic mission of the industrial era has been accomplished, at least for those in the so-called developed nations.

In fact, there has been no indication of further increases in happiness or quality of life in the developed or industrial economies over the past 50 years. Some people in these nations are still in economic need, but only because their societies have failed to ensure social equity and justice. This is not an economic problem but a social and ethical problem.

Many so-called developing nations of the world still need to focus on their “economic problem,” meaning producing enough to meet the basic human needs of all within their societies. However, these nations need not consume all of the earth’s remaining natural resources in the process of developing their economies.

In addition, they can develop their economies without sacrificing their cultures, communities, and families. Such nations can balance their necessary economic growth with equally necessary social responsibility and ecological integrity.

Unsustainable population growth likewise can be avoided by ensuring social and economic equity and security rather than pursuing unsustainable economic growth, as explained in The Essentials of Economic Sustainability. Sustainable development may be slower and more difficult than industrial development, but in a world running out of fossil energy, sustainable development is the most logical alternative for the future for all nations.

Bringing Economic, Moral And Social Needs Together

Admittedly, we humans are economic beings; we need food, clothing, shelter, – the necessities of life. However, we humans also are social beings; we need to be accepted, respected, cared for, and loved. And, we are also moral beings; we need a sense of purpose and meaning in life. We need to believe what we are doing is significant; that our actions in some sense are “right and good.”

Once our basic human needs are met, our happiness or quality of life depends far more on cultivating the social and spiritual dimensions of life than on acquiring more income or wealth. The essential mission of a sustainable economy must be to advance individual happiness and overall societal well-being.

In happiness, there are no limits to growth.

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Part 9: The Essential Function of the Government In Our Pursuit of Sustainability

Part 8: Markets, Competition & The Collective Good: The Essential Characteristics of Markets

Part 7: Economic Sustainability: Ultimately about Energy

Part 6: The Essential Characteristics of Economies -- And How They [Could] Drive Sustainability

Part 5: The Three Economic Principles of Sustainability

Part 4: From Utilitarianism To Ethics: The Social Principles of Economic Sustainability

Part 3: The Three Ecological Principles of Economic Sustainability

Part 2: The Hierarchy of Economic Sustainability: Getting The Principles Right

Part 1: Ethics & The Challenge of Economic Sustainability