What is Uneconomic Growth
Let me explain uneconomic growth directly to you: it's the kind of economic expansion that brings negative externalities, ultimately lowering our overall quality of life. You might also hear it called unsustainable growth, where the downsides—social and environmental—outweigh any short-term gains from that extra bit of growth, making the whole thing uneconomic in the end.
Key Takeaways
- Uneconomic growth kicks in when the marginal benefits of an expanding economy get overshadowed by negative social and environmental fallout.
- Funds using environmental, social, and governance (ESG) criteria try to build portfolios that support truly sustainable growth.
- Some environmental advocates insist that tackling uneconomic growth's impacts requires dialing back growth rates altogether.
Understanding Uneconomic Growth
You need to grasp that uneconomic growth emerges when the benefits of producing more goods and boosting the economy are eclipsed by harmful social and environmental effects. This concept is a cornerstone in environmental and ecological economics, though ideas about unproductive growth aren't new.
Parts of this thinking have filtered into the world of climate-aware investors in the ESG arena, where big funds and foundations are pulling out of fossil fuel stocks. If you're a socially conscious investor, you're likely steering clear of those and making other ethical choices to match your investments with your principles.
Greens Champion the Cause of Uneconomics
The ideas of uneconomic growth and a steady state economy gained traction thanks to World Bank economist Herman Daly back in the late 1990s. Ecologists, including activists like David Suzuki, point out that the global economy has grown so massive we can't keep pretending it fits within an infinite ecosystem.
When a country ramps up production at the expense of the environment, it triggers negative effects that ripple across the planet, like losing vital ecosystem services. You can apply this same logic to a city, a company, or even your own household.
A Grim Prognosis for the Future of Global Economic Growth?
Worries about growth's adverse effects on the environment and society have pushed environmentalists and climate activists to call for reduced economic growth and fossil fuel consumption to curb damage to the planet and climate. Ecological economists believe we've already crossed the line where growth costs more than it's worth, so we should prioritize safeguarding natural habitats.
The United Nations pushes a progressive agenda for 'sustained economic growth,' but that's not enough for green economists who want to go 'beyond growth' and develop global indicators beyond GDP. GDP, being a monetary measure, doesn't separate transactions that boost sustainable well-being—like purchasing bikes, solar panels, or fresh produce—from those that harm it, such as gas-guzzling vehicles, guns, or cigarettes.
This GDP fixation builds a pro-growth bias into economic policies, with no way to tell apart economies that erode critical ecosystems from those that don't.
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