Uneconomic Growth What It is How It Works
Uneconomic Growth: What It is, How It Works
What is Uneconomic Growth
Uneconomic growth produces negative externalities that reduce overall quality of life. This is unsustainable growth, where the negative social and environmental consequences outweigh the short-term value of additional growth.
Key Takeaways
– Uneconomic growth occurs when the negative social and environmental consequences surpass the marginal benefits of a growing economy.
– Funds investing based on environmental, social, and governance (ESG) criteria aim for more sustainable growth.
– Some environmental advocates believe addressing the impacts of uneconomic growth requires lower rates of growth.
Understanding Uneconomic Growth
Uneconomic growth occurs when the negative social and environmental impacts outweigh the marginal benefits of increased manufacturing and economic growth. It is a concept deeply rooted in environmental and ecological economics.
This philosophy has influenced climate-conscious investors in the ESG space. They divest from fuel stocks and make ethical investment decisions to align their investments with their values.
Greens Champion the Cause of Uneconomics
World Bank economist Herman Daly popularized the concept of uneconomic growth and the steady state economy in the late 1990s. Environmentalists, like David Suzuki, argue that the global economy no longer operates within a limitless ecosystem.
When one nation damages the environment to increase production, negative consequences are felt globally in terms of lost ecosystem services. This principle applies to cities, companies, and even individual homes.
A Grim Prognosis for the Future of Global Economic Growth?
Concerns about the negative effects of growth on the environment and society have led environmentalists and climate activists to advocate for lower levels of economic growth and fossil fuel use. Ecological economists believe that growth costs more than it is worth and that protecting natural habitats should be the focus.
The United Nations aims for sustained economic growth, but green economists want to go "beyond growth" and find alternative global indicators to GDP that differentiate between transactions that contribute positively to well-being and those that diminish it.
The focus on GDP creates a pro-growth bias in economic policies, without distinguishing between economies that harm critical ecosystems and those that do not.
