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Exodus from Growth

"Growth, prosperity, free trade, liberal world economy and international division of labor are all ideologically charged terms. They reflect veiled interests more than a search for truth. The starting-point for an alternative concept of economics and development is a fundamental ideology-critical position." translated from the German
Exodus from Growth

Foundation for an Ecological-Solidarian World Economy

By Manfred Busch

[This article originally published in: W & F (Wissenschaft und Frieden), 2/92 is translated from the German on the World Wide Web,
 http://www.uni-ms.de/PeaCon/wuf/wf-92/9220301m.htm. Manfred Busch is an economics spokesperson for the Greens in the Landtag NRW.]

"Growth", "prosperity", "free trade", "liberal world economy" and "international division of labor" are all ideologically charged terms. They reflect veiled interests more than a search for truth. The starting-point for an alternative concept of economics and development is a fundamental ideology-critical position.

Ideological terms are the opposite of enlightenment and reason. The sciences that claim to act in an enlightened way are closely connected with dominant interests in authoritarian systems even with us in the West. This is obviously true to a great extent for economics in a capitalist society.

Growth Policy in the National Context

"Growth" is a central term of an economic theory that veils rather than explains economic conditions and an economic policy that enforces brutal interests under the cloak of seemingly certain principles and assumptions.

"Growth" is an objective of economic policy and a common barometer for economic success. The current growth rate adorns the headlines. Our economic experts sing the high song of growth in a free world economy.

This growth policy was massively criticized from many sides for at least 20 years. Little has changed in the praxis of economic policy. The so-called new reservations of economists only appear in their Sunday speeches. The praxis is always the old praxis.

The notion that growth is invariably positive and leads to increased prosperity has a superficial plausibility derived from the simple "the more, the better". For example, the industrialization in the 19th century is characterized as follows: "The natural growth drive inherent in humankind could develop freely. The trees of production could suddenly grow to the sky" (Kurt Biedenkopf in "The New View of Things", 1985). However industrial growth is neither "natural" nor infinite in view of a finite world. Our present economic processes are in large part more cancerous excesses than growth.

The core statement of this established western (neoclassical) economic theory can be summarized as follows: A free enterprise system finds its natural and optimal path by itself under the conditions of complete competition, that is with freely adjustable prices and functioning competition.

In reality, these model conditions are not manifest anywhere. Therefore established economists argue about their function. Should they promote growth alone by rigorously approaching the model conditions, for example through withdrawal of the state from economic activity, encouraging mobility for the unemployed or actively promote growth, above all through advancement of technology (key technologies) and favoring investments, tax gifts and massive export promotion?

What is described neutrally as "creating free enterprise conditions" means suspending wage agreements. Inflexible "factor prices", wages and credit-market interests that do not reach to changes in supply and demand, are regarded as growth brakes. The weak points of neoclassical economists are above all the wages that must go downward in times of increasing unemployment. The council of experts (the "five economic wise men") seize every opportunity for attacking "excessively high" wages in east Germany. If wages only fall strongly enough, according to the free enterprise creed, then the employment of the last jobless persons will be profitable again. The question whether an adequate supply of employees exists is unimportant for the prophets of pure theory.

All environmental or social conditions, encroachments in the supposedly free play of the markets, impede growth. The priority of the economy over all other social interests like ecology is actually enforced with the demand for free entrepreneurial development.

Shortcomings of the Economic Growth Concept

To justify its far-reaching measures, established growth policy appeals to a concept with crucial shortcomings or deficiencies.

The Assessment- or Quality Problem

The growth theory has no concept for distinguishing useful from harmful goods. Harmful goods also increase the gross national product. Repairing the damages arising on account of the mode of production furthers growth. Increased use of pesticides raises chemical and agricultural production, increases the costs of processing drinking water, the "value" of drinking water and sickness costs. All this inflates the gross national product. The share of follow-up costs in the gross national product for west Germany is estimated at 20%. These follow-up costs are growing twice as fast as the gross national product.

The satisfaction of unnecessary needs also raises the gross national product, for example the construction of the Transrapid, a costly foreign body in our transportation system, the development and introduction of high-resolution television, manned spacecraft and all objects of special state promotion. Growth policy needs absurd, unnecessary and noxious products like we3apons production and weapons exports. On one hand, ecological destruction and social misery are produced and on the other the appearance of an affluent society.

Goods that have no market or price, for example the air that we breathe or the natural environment, do not generally enter in the calculation regardless of their actual importance. This is also true for products of the barter economy. Neither the subsistence products of the Third World nor housework among us appear in the gross national product.

The Resource Problem

The resource problem came into the debate worldwide with the 1970 study of the Club of Rome "Limits of Growth". Production-factors that have no price are consumed shamelessly even if their preservation is vital. "Qualitative growth" requires frugal relations with resources. Resource efficiency increases, for example, the specific energy consumption. However this relative savings effect is often over-compensated by quantitative growth. Numerous environmental problems are also not controlled even with the most modern technology. In some areas, slight consumption is too high. For example, heavy metals and dioxin are not reduced. Thus we must consume absolutely less, not only relatively less.

The Distribution Problem

The growth of the gross national product increases possibilities and temporarily deactivates the distribution problem. This is an important reason for its political attractiveness and for the "pressure to growth" of modern industrial societies. On the other side, the unjust distribution of assets and income in the national and international standard remains inviolable and even intensifies. The distribution margins are utilized largely unequally. The better-off profit more and others less or not at all.

The Growth Fundamentalists

Confrontation with the disastrous consequences of growth policy cannot shake the orthodox. For them, the cause is too little market, not too much market or too much growth. They seemingly have one answer to all problems:

If only the environment kept its just price, consumers demanded useful, environmentally-sparing products and businesses invested in environmentally-friendly technologies, the environmental problem would be solved.
If only the wealth formation in employee hands were promoted along with better trained workers, employment would increase and the social question would be solved.

They keep in the dark whether these framing conditions are realizable and enforceable, that is are suitable for praxis. All experience shows that these "ideal" conditions are not realizable or even desirable. Wages may not be completely flexible since people would become the playthings of economic developments. Even low wages cannot prevent labor-saving technical progress from destroying jobs. The social answer must be reduction in working hours, not lower wages. Numerous environmental problems elude a purely free enterprise solution. The dangers of nuclear technology, genetic engineering, the chemical industry and many others must be evaluated socially. The necessary steps must be taken after the assessment. State action supported by democratic decision-making is essential here.

Growth Policy on the World Scale

Like the term growth, the concepts "international division of labor" and "free trade" have a superficial plausibility: "If everyone does what he can do best, then everyone profits." Experiences that every person makes in his or her immediate environment are transferred inadmissibly to the world economy.

The (neoclassical) growth theory is the foundation for the modern foreign trade theory that has its political expression in the free trade dogma. As a result, free trade promotes the growth and prosperity of all (!) involved countries.

Foreign trade theory as broken in gently to all students of economics still reflects the perspective of David Ricardo at the beginning of the 19th century. With his "theory of comparative advantage, Ricardo sought to show the advantageousness of foreign trade for all concerned, the economically inferior and the superior. In an example, he demonstrated that mutual specialization in trade - here cloth and there wine - could be profitable for England and (!) Portugal.

This is a surprising conclusion since Portugal at that time was leading over England both in wine- and cloth-production. The clever Englishman Ricardo wanted to show the stubborn trading partners in Portugal that they would benefit from Portugal's specialization in wine. The English could concentrate on industrially manufactured cloth with great economic success since the market for cloth was the "market of tomorrow".

Models that start from given production conditions and resource supplies (natural environment, land and labor for Ricardo and later capital and labor) cannot adequately reflect the characteristics of a dynamically growing world economy. The term "capital" is ambiguous, a monetary sum on one side and a real production asset on the other. However both are not bound to national borders. Financial capital can be exported and imported just as production goods can be invested in different locations. Both frequently change their value and their capacity for production in dependence on international conditions. World trade is pursued by corporations, not by countries. A large part of world trade is even between different firms of the same multinational conglomeration.

A country's "supply of a given factor" becomes a fiction and cannot explain or justify foreign trade. Theory is actually at a loss about what to do next.

The idea that a country controls a given stock of workers and capital that determines the relative profitability of production and the most favorable worldwide production structure is theoretically ridiculous and historically false. Some countries like Japan for example have managed a consistent protection to modernize the capital stock of their political economy and become competitive on the world market. Improving capital equipment and training employees must be the goals of politics, not adjusting trade to a supply seemingly given as a natural law.

Correspondingly a world development policy must be oriented at creating presuppositions for equal trade, not cementing the present gradients in the GATT negotiations for example.

These and other conceptual errors are minimized or played down as necessary simplifications to reach the desired conclusions. These conclusions are unequivocal: All countries - supposedly in their own interest - must pursue trade, specialize and integrate themselves in the world market. Wages are low as by a natural law in countries with relatively low capital supply and high underemployment of workers, that is in the Third World. In other words, cheap workers are regarded according to Ricardo as a "comparative cost advantage" of the developing countries.

In the words of Carl-Dieter Spranger, minister for economic cooperation: "Free trade is an important helper in development" (1991). Third World countries, according to the argument, first receive the coveted high-tech industrial goods - a prerequisite for growth and increased prosperity - for their raw materials and simple products in the framework of the international division of labor.

The claimed advantages of free trade and international specialization are not confirmed by the concrete experience of the Third World:

For the Third World, important goods, above all agricultural products, textiles and other simple industrial goods, are subject to sharp world market competition and harsh protectionist measures of the industrial countries. Third World countries are structurally disadvantaged. Their terms of trade increasingly deteriorate. Their world market integration does not bring adequate currency. They remain dependent on the North.
Social dumping occurs when international corporations, the "multis" (multinationals), shift production into developing countries to exploit the low wages. What about the demand "equal pay for equal work"?

In the journal Impulse, "the magazine for business success", December 1991, we read "Marokko, the best workbench in Africa. There are skilled workers for low wages in the larger cities" and "Vietnam: wages are low with a large number of German-speaking experts. Many projects with the former DDR (east Germany) are a good basis for new cooperation." These "shifted work benches" where cheap workers, especially women, produce for western markets according to western standards, serve the interests of the industrial countries. This is also true for investments opening up sources of raw material for the North.

The exploitative trade structure is justified as a quasi natural law. Developing countries are eternally pushed aside or forced off the road in the dependent role of raw material suppliers.

The Debt Trap

Integration in the world market as an offensive strategy for growth and industrialization led many Third World countries into catastrophe. Their attempts at equalizing industrialization ended in the debt trap or heavy-indebtedness. On balance, developing countries pay more in debt service than flows to them in economic aid and private capital.

Many Third World countries must export without regard to losses to fulfill their debt service. Under these conditions, the sellout of the people's assets occurs without a meaningful development strategy. The unrestrained export of tropical wood to industrial countries irrevocably destroying the presuppositions of agricultural production is an example or the import of toxic waste declared to be an economic asset.

Despite these negative experiences, industrial countries insist on an absolute market economy and stronger world market integration for Third World countries. What industrial countries have not realized themselves, the enforcement of radical market concepts without corresponding presuppositions, is expected of them.

Whoever does not comply with these conditions is punished. The international debt negotiations are the most important levers. For example, the new "development cooperation" of the German government identifies introduction of a free enterprise system and nexus to the world market as presuppositions for economic aid to developing countries.

The economically stronger ruthlessly enforce their interests with this absolute demand for integration in the world market. Continued exploitation can then be declared as "higher reason" or "assistance".

That this concept preserves the exploitative status quo indicates that an "equalizing development" according to the model of capitalist industrial countries is not possible any more today. This equalizing development must already fail in the excessive per capita energy consumption of a US - or German citizen. As another example, North Rhine Westphalia has as many cars as the whole African continent.

Alternatives to the Goals of Economic Growth and World Market Integration

Economic growth and world market integration, growth raters of gross national product and world trade are not suitable economic targets beyond all social interests. These objectives give no information about the actual state of development, the quality of life or the chances of human development.

The target "qualitative growth" is also not a way out. "Qualitative growth" is only the propagandist answer to the massive criticism of growth since the seventies. Otto Schlecht, undersecretary in the ministry of economics for years, once described this connection between growth and environmental quality: "Growth is the presupposition that necessary investments can be made for recycling, sewage treatment and avoiding environmental pollution." In other words, the quantitative growth model should be pursued - modified in a trifling way by technocratic environmental aftercare. A shriveling or dismantling of injurious branches of production is scorned. The ecological consequences of modern growth branches, for example genetic engineering, are largely systematically minimized. This is also true for the modernization concept of "sustainable growth" of the Brundtland report (1987).

Exodus from the seemingly neutral goal of growth must be proclaimed. The question "Growth: Yes or No?" is falsely framed. Growth may no longer be a goal in itself but only the statistical result of a development process adjusted for the follow-up costs of the economy. Growth should be one indicator among many. This is true for the growth of world trade and world market integration. Both are not values in themselves but instruments used selectively after careful examination. New targets must be assuring basic needs, preserving the natural environment, reducing resource consumption, social justice and combating unemployment among others.

These goals can be made understandable through indicator systems with a multitude of quantitative and qualitative elements. Indicator systems cannot be drawn up without explicit judgments or without naming social interests. They may turn out very different and context-dependent between industrial- and developing countries and between East and West.

The market economy and world market integration may not be considered ideologically but only instrumentally. The result of an economic process may be a selective growth in which some sectors of the economy grow and others shrivel. A selective world market integration should be sought for the Third World. This economic reorganization cannot be left to an anonymous world market process or multinational corporations but must be decided socially and democratically.

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