The Growth Delusion (Essay by John Tons - Management Committee member, SPGN)

For most of us of a certain age the Monty Python Sketch on poverty strikes a chord - we had all been subjected to our parents telling us that things were really tough in their day and we should be grateful that our lives were so much easier. However, for our own children the situation is radically different; it is we who had the good times and it is they who, in comparison, are doing it tough.

For example in 1974 I had just graduated with a BA Hons from Flinders University. Looking for work was easy. The Government employment service had a special office for graduates. I was ushered into a plush office, given a cup of tea and offered a choice of jobs. Within a short period of employment I had saved up enough for a deposit on a house. My income was enough so that my wife did not have to continue in the job that she hated. We could afford to buy the things we needed. However, I also recall that although by dint of promotions my income kept increasing it became harder and harder to make ends meet.

When I compare my life in the seventies to that of my children one thing stands out - they are doing it far harder than I had to. They work just as hard but were it not for two incomes they would not have been able to afford to buy their house. Whereas in the seventies my university education had been free, they have left university with a debt.

Of course we can point to a range of gadgets that our kids have that we didn't but are they really better off because they have these gadgets? Well we can now use some hard data that demonstrates that 1974 was indeed a good year. So good in fact that it marks the high water mark as far as our quality of life is concerned.

Politicians throughout the world are doing their utmost to ensure that GDP (Gross Domestic Product) keeps growing. On the a daily basis we are confronted with the depressing news that our GDP has either stalled or grown by only a small percentage. But should we really take much notice of GDP?

By no means all economists are agreed that GDP is an effective tool for measuring our well being. The problem with GDP is, that as a tool for measuring well being, it a very blunt instrument indeed. Indeed in 1941 Simon Kuznets the inventor of GDP said: "The welfare of a nation can scarcely be inferred from a measure of national income. "The problem with GDP as a measure of human welfare is that GDP only measures final transactions on goods and services. This leads to the rather odd situation that bushfires mean a rise in GDP yet people volunteering to care for disadvantaged people does not count. Surely we would rather have fewer bushfires and more volunteers?

So what happens if you start including things that do not involve a monetary transaction? If you do that you get what is sometimes called the Genuine Progress Indicator (GPI). The key difference between the GDP and GPI is that the GPI counts any costs as a negative. So whereas a major bushfire will be a boost to the GDP as we spend more money in fixing the damage it will be shown as a cost in the GPI. The aim of the GPI is to reflect improvements in well being. What is emerging is that in Australia the seventies were the high watermark of GPI and since then it has been in decline - yet GDP has continued to go up.

The complete tables for Australia are included on the SPGN website as is the paper by Lawn and Clark showing the comparison between Australia and selected Asian countries. Two things stand out clearly from the Australian data. In 1974 our population stood at almost 14 million and our per capita GPI was $31,065 and our per capita GDP was $24,912. Since 1974 our population has continued a steady up ward trend as has the GDP but our GPI has shown a steady decline. Thus by 2007 we find that our population is just over 21 million, but our per capita GPI had declined to $21,015 while our per capita GDP has almost doubled to $45,309.

So what is happening here? Am I just being a grumpy old man in being upset that my kids are worse off than I was, am I clutching at straws by taking the GPI seriously? I think not for what the Genuine Progress Indicator does is to measure both the costs and benefits associated with all human activity. Thus the GPI includes as a benefit costs associated with unpaid household labour and voluntary labour. Effectively GPI measures both the benefits associated with economic activity and the costs. GPI will go up if we bring down the costs and increase the benefits. You can see that in your own household. Suppose you get a new, better paid job - clearly that is a good thing. Let us imagine that your weekly income goes up by $50 clearly you would be happy with that. But how happy are you if you now are spending an extra $25 a week on fuel then the benefit to you is only $25. If you were to measure that event using the GPI then it would show a benefit of $25. Using GDP it would show a benefit of $75.

This is not a case of looking back with rose coloured glasses. It is merely acknowledging that as a society we are losing our way - we have been sold the dream that an increase in GDP is what our governments should strive for and this they have done with diligence. Successive Labor and Liberal governments have been wedded to the need to grow our GDP.

This is also why your help is needed in bring new members into the Party. We need an alternative voice in Canberra - one that spells out loudly and clearly that chasing growth in GDP will not improve our quality of life. More people coming in the country means a growth in GDP but as the data from Lawn and Clark shows that growth in GDP comes at the expense of our collective well being.

At its latest we can expect a Federal Election in 2013 - ideally we should aim for registration as a Federal Party by the end of 2012. Bob has put in a Herculean effort to get the party this far - he has donated funds towards flyer printing and distribution and then spent many hours putting leaflets in letter boxes. We are to well on the way to the magic figure of 500 members but we need your help - if every existing member were to sign up just two extra members we would not only have enough members for registration but we would have more members who can be mobilised when an election is called.

Population growth means a decline in our living standards, we owe it to the future to ensure that all Australians have the opportunity to register their concern about population growth at the next election.

The following links refer to documents on which this article is based...
The end of economic growth? A contracting threshold hypothesis
Table 1: Genuine Progress Indicator (GPI) and real GDP for Australia, 1967-2006