Anyone who believes in indefinite growth in anything physical, on a physically finite planet, is either mad or an economist

When Boulding spoke those words in the 1970s, the environmental movement was but a shadow of what it is now. In the decades since, climate change has moved from fringe concern to being at the centre – rhetorically at least – of how we think about our economies. As the problem of climate change takes centre stage, so the question of growth has followed, with countries including Scotland, New Zealand and Bhutan have made moves towards going beyond GDP in their national accounts.

They are still very much in the minority; since the industrial revolution, finance and economics have taken a constantly growing economy to be both a fact of life and an ideal state of being, something to take for granted and to strive for. But there have been voices of dissent. Before he was tragically killed, Bobby Kennedy had raised concerns about the idea of limitless growth. As Prof. Tim Jackson notes in his excellent new book Post Growth: Life After Capitalism, the younger Kennedy had, in a 1968 speech, raised concerns about the accuracy of GDP measuring social wellbeing, and the impact that pursuing it would have on the planet and its people.

Prof. Jackson, Director of the Centre for the Understanding of Sustainable Prosperity (CUSP) will be appearing in an interview with Kaisie Rayner, Climate Change Lead at Royal London on 14 July at 14:00 BST as part of our Radical Old Idea series. In the spirit of that series, inspired by the Scottish Enlightenment, the ideas discussed go back even further: John Stuart Mill professed a sympathy towards a steady state economy in 1848’s Principles of Political Economy, at the start of the industrial revolution.

Despite the constant presence of economic growth since the industrial revolution, it has changed over time. The 5% rates of growth typical in Western countries during the “golden age of capitalism” immediately following World War II had given way to rates of just 1-2%, even before the Global Financial Crisis.

Why is this? Labour productivity has been in decline. While it grows, social tensions between classes can easily be resolved. As the pie grows, we can all content ourselves with a growing slice. When it stops growing, getting a bigger slice for yourself becomes a zero-sum game. In fact, it is arguable that the astonishing growth rates of the post-war period were in fact only possible due to an increasing exploitation of the natural environment.

Since the 1980s, the social contract that characterised post-war capitalism has been broken, as the embrace of neoliberalism by Thatcher and Reagan removed any restrictions on uninhibited profit. Smith would have disagreed, railed against “those who live by profit” – a Radical Old Idea indeed – and advocated state regulation to guard against their capture of the economy. It had lead to a finance system that, as Lord Turner stated in the wake of the financial crisis, includes a lot of “socially useless” activity, focused on pursuing and capturing rents, not allocating capital to where it is most needed.

Can we continue to grow? 1972’s Limits to Growth pushed this question towards the mainstream. Fundamentally, as Jackson argues, people do not like being told their lives are limited. The idea of limits is anathema to most economists. Green growth is the preferred solution. But is it possible? There is, after all, “no growth on a dead planet”, as Jackson states.

So far, we have not decoupled economic output from material input to a great enough degree. Relative decoupling has been achieved: the carbon intensity of economic activity has fallen by a third since the 60s, but this is not enough. To reduce our impact on the planet, we have to decouple faster than we grow, and that is not happening. The solution, according to Jackson, is a reimagining of what prosperity means, moving beyond simple expansion of material wealth.

Indeed, there have been serious questions raised about whether expanding material wealth truly does entail “true” prosperity. The Easterlin Paradox was the remarkable finding by economist Richard Easterlin that, beyond a certain amount, raising average national income does almost nothing for happiness. Once you cross a threshold of roughly $20,000 per person (which suggests that growth is still important for the poorest countries), and extreme poverty and basic needs are taken care of, an ever-increasing average fails to deliver any meaningful progress.

The work of Pickett and Wilkinson in The Spirit Level perhaps goes some way to explaining this – the pair find that equality, rather than material increases, is a more reliable driver of contentment in industrialised economies. Another explanation lies in the idea of “the hedonic treadmill”, introduced by Philip Brickman and Donald T. Campbell, which suggests that humans quickly adjust to new luxuries, moving them from novelties to things they cannot live without, and losing any increase in happiness in the process.

The challenge for humanity – for finance, and for economics – is to find something other than growth to pursue, and to deal with the social consequences of limiting growth. To return to talk of pensions after discussing the future of the economy might seem mundane, but it is important.

To hear Prof. Tim Jackson in conversation with Royal London Climate Change Lead Kaisie Rayner on Wednesday 14th July, exploring these ideas in the context of the pension industry, click here to sign up. We are looking forward to a provocative debate. Tim’s latest book Post Growth can be purchased at https://politybooks.com/bookdetail/?isbn=9781509542512.