Distinguishing between quantitative and qualitative growth

Distinguishing between quantitative and qualitative growth is a key aspect in Economic Design for Sustainability. Join our Economic Design E-Learning course to explore further.

By Dr Daniel Christian Wahl | 24th February 2017

handling local currency at a food market

We have known for a long time that judging an economy’s progress and success in quantitative (financial) terms — measured in terms of Gross Domestic Product — leads to dangerous distortions and misplaced priorities. In 1972, Limits to Growth warned of the potentially devastating environmental effects of unbridled growth and resource depletion on a finite planet. While some of the predictions made were delayed by the extraordinary resilience of the planetary system, recent research suggests that we are now very close to witnessing the collapse scenario of ‘business as usual’ that the authors of the report warned of. In their 30 years up-date to Limits to Growth they emphasised:

Sustainability does not mean zero growth. Rather, a sustainable society would be interested in qualitative development, not physical expansion. It would use material growth as a considered tool, not a perpetual mandate. […] it would begin to discriminate among kinds of growth and purposes for growth. It would ask what the growth is for, and who would benefit, and what it would cost, and how long it would last, and whether the growth could be accommodated by the sources and sinks of the earth.”- Meadows, Meadows & Randers (2005: 22)

Growth is not a bad thing. Nature thrives on growth in many forms. The trick is to know when to grow quantitatively (in size or numbers) and when to shift to qualitative growth (in relationships, synergies, and symbiosis)

Green growth and trees in forest

The calls for ‘de-growth’ (Assadourian, 2012), post-growth economics (Post Growth Institute, 2015), prosperity without growth (Jackson, 2011), and a ‘steady state economy’ (Daly, 2009) have become louder and have found a much wider audience in recent years. All these more or less anti-growth perspectives make important contributions to our rethinking of economics with people and planet in mind, yet they might be over-swinging the pendulum.

From John Fullerton’s article ‘Realities of shifting towards a Sustainable Economy (2014)

Growth diagram

What we need is a more nuanced understanding of how as living systems mature they shift from an early (juvenile) stage that favours quantitative growth to a later (mature) stage of growing (transforming) qualitatively rather than quantitatively. See this video of Eric Assadourian on The Path to Degrowth in Overdeveloped Countries (State of the World Symposium 2012)

It seems that our key challenge is how to shift from an economic system based on the notion of unlimited growth to one that is both ecologically sustainable and socially just. ‘No growth’ is not the answer. Growth is a central characteristic of all life; a society, or economy, that does not grow will die sooner or later. Growth in nature, however, is not linear and unlimited. While certain parts of organisms, or ecosystems, grow, others decline, releasing and recycling their components which become resources for new growth.” — Fritjof Capra and Hazel Henderson (2013: 4)

In their joint publication on Qualitative Growth, Capra and Henderson argue “we cannot understand the nature of complex systems such as organisms, ecosystems, societies, and economies if we describe them in purely quantitative terms”. Since “qualities arise from processes and patterns of relationships” they need to be mapped rather than measured (ibid: 7). There are close parallels between the difference in how economists and ecologist understand the concepts of growth and development. While economists tend to take a purely quantitative approach, ecologists and biologists know how to differentiate between the qualitative and quantitative aspects of both growth and development. Here is a short video (3 min.) of Fritjof Capra explaining growth in nature.

It appears that the linear view of economic development, as used by most mainstream and corporate economists and politicians, corresponds to the narrow quantitative concept of economic growth, while the biological and ecological sense of development corresponds to the notion of qualitative growth. In fact, the biological concept of development includes both quantitative and qualitative growth.”- Fritjof Capra and Hazel Henderson (2013: 9)

In ecosystems the rapid growth phase of ‘pioneer ecosystems’ gives way to a ‘succession’ of slower growth and maturation phases. “As living systems mature, their growth processes shift from quantitative to qualitative growth” (p.9). Life’s growth patterns follow the logistic curve rather than the exponential curve.

One example of aberrant quantitative growth in living systems is that of cancer cells which ultimately kill their host. Unlimited quantitative growth is fatal for living systems and economies. Qualitative growth in living organisms, ecosystems and economies, “by contrast, can be sustainable if it involves a dynamic balance between growth, decline, and recycling, and if it also includes development in terms of learning and maturing” (p.9). Capra and Henderson argue:

Instead of assessing the state of the economy in terms of the crude quantitative measure of GDP, we need to distinguish between ‘good’ growth and ‘bad’ growth and then increase the former at the expense of the latter, so that the natural and human resources tied up in wasteful and unsound production processes can be freed and recycled as resources for efficient and sustainable processes.”- Fritjof Capra and Hazel Henderson (2013: 10)

The distinction between good growth and bad growth can be informed by a deeper socio-ecological understanding of their impact. While bad growth externalises the social and ecological costs of the degradation of the Earth’s eco-social systems, good growth “is growth of more efficient production processes and services which fully internalise costs that involve renewable energies, zero emissions, continual recycling of natural resources, and restoration of the Earth’s ecosystems” (p.10). Capra and Henderson conclude: “the shift from quantitative to qualitative growth […] can steer countries from environmental destruction to ecological sustainability and from unemployment, poverty, and waste to the creation of meaningful and dignified work” (p.13).

Fritjof Capra and Per Luigi Luisi’s eloquent and detailed description of the ‘Systems View of Life’ (Capra & Luisi, 2015) offers a scientific underpinning of the ‘narrative of interbeing’. Once we understand how central regeneration is to the continued evolution of living systems from individuals, to ecosystems and the biosphere, we can also understand that any effort to shift the global economy towards sustainability also has design regeneration into the system.

The call for practices that move beyond simply being sustainable is growing stronger. Being sustainable, or as William McDonough has defined it “100% less bad” is not enough anymore. We have severely degraded ecosystems everywhere to the point that the integrity of the biosphere is compromised the cumulative effects of our actions (see section on Planetary Boundaries). To create a successful transition within the 21st Century we need to start thinking in terms of restorative and regenerative practices that contribute to systemic healing and aim to optimise the whole system for all of humanity and all of life. Here is a link to a short video(90sec) summarising the regenerative design framework first proposed by Bill Reed in Shifting our Mental Models (2006).

This approach is now beginning to inform many promising projects aimed a re-designing our economic systems, practices and policies (see chapter on regenerative economy).

The spectrum from ´business as usual’ to “green”, sustainable, restorative, reconciliatory and regenerative practices is a transcend and include invitation to move from a degenerative system to a regenerative system. This graphic is an adaptation of Bill Reed’s original graph. It was first published in Designing Regenerative Cultures, 2016

Signs of hope — regenerative economic patterns are emerging locally, regionally and globally

To make the world work for 100% of humanity in the shortest possible time through spontaneous cooperation without ecological offence or the disadvantage of anyone.” — R. Buckminster Fuller

Buckminster Fuller gave us the design brief for the 21st Century: to make the world work for 100% of humanity…

Quote from Buckminster Fuller

Much of our day-to-day behaviour and cultural activity is structurally determined by the way we have set up our monetary and economic systems. Their redesign is a crucial enabler of the transition towards a regenerative culture. The growing collective intention to participate in the transformation of our economic system(s) at local, regional, national and the global scale will require all of us to become learners again. If we aim to leverage changes deep enough to avoid the collapse of civilization and stop further damage to ecosystems and the biosphere, we will have to share knowledge, co-design and co-create, experiment with failures and successes, and use all our collective intelligence liberated by focussing on collaborative rather than competitive advantage.

Shifting our economic practices towards sustainability will have to occur simultaneously at local, regional, national and global scales in ways that are ideally synergistic and mutually supportive. More likely, we will continue to see powerful examples of local and regional transition towards more sustainable and regenerative systems, while the global efforts to support these changes by a re-design of global trade policies and a fundamental transformation of the dysfunctional structure of the current economic and monetary systems will take a lot longer.

The scale-linking nature of the fundamentally interconnected system in which we participate invites us to re-design local and regional economic systems. These local and regional successes wil serve as transformative examples and case-studies for a wider global transformation. Nevertheless, we also need to pay attention to the top-down processes of policies and regulations, aiming to influence them in ways that support local and regional transition rather than sabotage it in the favour of multinationals and their lobbies.

A diversity of promising approaches to re-designing our economic system have emerged over the last decade, and we should always first look at how they might compliment each other at and across scales, rather than fall into the mental habit of regarding them in competition with each other. Let’s have a look at some of them. We will return to other examples throughout this module, taking a closer look at the solidarity economy in module four and a global commons based economy in module five.

Collectively designing a regenerative economy

The universal patterns and principles the cosmos uses to build stable, healthy, and sustainable systems throughout the real world can and must be used as a model for economic-system design.”- John Fullerton (2015: 8)

The simple insight that on a finite planet a system based on infinite material growth is impossible, or that there is a clear message in the term ‘non-renewable resource’ alone should be enough to convince most people — who are paying attention — that we do need to redesign the basis of our current economic systems and the patterns of material and energy used that are associated with it.

In addition, the frequency of economic crises with disruptive effects on the global economy is getting higher, the costs of bail-outs and rescue packages is rising fast, and the effects of national and international inequity are threatening health, social cohesion, security and the environment.

We urgently need to move from a degenerative economic system that incentivises (directly or indirectly) the destruction of diversity, ecosystems integrity, planetary health, and social well-being, to a regenerative economy that incentivises the protection and restoration of all of the above and regenerates the key resources needed to meet human needs within closed-loop, renewable energy based and environmentally and socially benign systems. We can create economic structures and policies that will favour the emergence of regenerative cultures everywhere, and an increasing number of people, organizations and networks are already exploring how we would do this.

Here is a link to a short documentary (8 mins) of John Fullerton, president of the Capital Institute, exploring what reimagining capitalism might mean. He argues that reforming the capital markets will take a shift in consciousness and his own story of turning from being a Wall Street Banker into an advocate for a regenerative economic systems shows that this shift is already happening.

In 2015, the Capital Institute published a list of eight principles that could be used to characterize a regenerative economy which are based on a holistic understanding of whole systems health (Capital Institute, 2015). These principles are clearly aligned with the salutogenic design approach (Wahl, 2006) which also informs much of Gaia Education’s framework for co-creating more sustainable and regenerative cultures. Here is a link to a summary of these eight principles:Are you able to respond to May’s call; to Slype?

    1. Nurturing Right Relationships
    2. Viewing Wealth Holistically
    3. Staying Innovative, Adaptive, and Responsive
    4. Empowering Participation
    5. Honouring Community and Place
    6. Using the ‘Edge Effect’ [Collaborative Diversity] to create Abundance
    7. Establishing Robust Circular Flows [Regeneration]
    8. Seeking balance between efficiency & resilience, collaboration & competition, diversity & coherence, and between small, medium, and large organizations and needs.

The 100 page white paper on Regenerative Capitalism — How Universal Principles and Patterns will Shape our New Economy published in 2015 offers a hopeful summary of many trends, best practices and best processes that show how we are already in the middle of a transition to a new economy. The financial system has to be designed in such a way that it fosters systemic health. Natural patterns can teach us how to create scale-linking systemic health.

We need to redesign the financial system to run by the rules of life, rather than perpetuate a trend where life seem to be increasingly run by the rules of the financial system. Wealth understood holistically is primarily expressed in the health of the whole system. Many aspects of healthy socio-ecological systems and a regenerative culture are not reducible to monetary values and numbers. They evade quantification since they are qualities rooted in being nurtured by and nurturing collaborative relationships. A regenerative economy will redefine wealth based on multiple kinds of capital rather than just financial capital. Ethan Roland and Gregory Landua proposed a whole-systems map of economics based on an expanded conception of wealth relying on eight forms of capital: living, cultural, experiential, intellectual, spiritual, social, material and financial capital (2011). Here is a short article by Ethan Roland summarising this holistic map of the economy as a basis for a financial system that looks more like an ecosystem. Roland and Landua’s excellent book Regenerative Enterprise — Optimizing for Multi-Capital Abundance (2013) can be downloaded for free or a donation here.

Eight Forms of Capital (Roland & Landua, 2013)

8 forms of capital schema

The redirection of the flow of financial capital from the speculative to the real economy, and from exploitative and destructive to regenerative and for-benefit enterprises is also a crucial step towards creating a regenerative economy. Ethical Markets Media, a social enterprise set up by Hazel Henderson, has been reporting success stories of the transition towards a green economy for over ten years. The organisation’s ‘Green Transition Scoreboard’ monitors the amount of private green investment globally and has shown a steady increase over the last ten years to $US5.7 trillion by September 2014, predicting that the $10 trillion mark will be reached by 2020. Together with Biomimicry 3.8, Ethical Markets developed a set of “Principles of Ethical Biomimicry Finance” (Ethical Markets, 2012). Here is a short video (3:30mins) of Hazel Henderson explaining the fundamentals of the transition to the green economy and how the green transition score board is tracking the progress of this transition.

Hazel Henderson also offered a major step towards more qualitative and holistic ways of measuring economic success with a practical alternative to the dysfunctional success indicator GDP. Supported by the socially responsible investment firm Calvert, Henderson led the development of a new set of indicators, now called the Ethical Markets Quality of Life Indicators. This economic performance measure is based on education, employment, energy, environment, health, human rights, income, infrastructure, national security, public safety, recreation and shelter. We will take a look at a series of new kinds of holistic economic indicators in module three.

Ethical Markets has produced a documentary (54min) called Growing the Green Economy. It explains how redirecting financial capital flows to restorative and regenerative activities can catalyse the transition to occur more quickly. Here is the link: http://ethicalmarkets.tv/video-show/?v=345

A regenerative economy will furthermore require us to redesign the role of the banking system. The Global Alliance for Banking on Values is an independent network of banks using finance to deliver sustainable development for “unserved people, communities and the environment”. The alliance includes pioneering, innovative banks on six continents which are all committed to i) “delivering social finance products”, ii) “financing community based development initiatives and social entrepreneurs”, iii) “fostering sustainable and environmentally sound enterprises and fulfilling human development potential including poverty alleviation” while, iv) “generating a triple bottom line for people, planet, and profit” (GABV, 2014).

We are not starting the transition towards a regenerative economy from scratch. Many important tools, processes and innovations are already at our disposal and the transition is already occurring. Here is a short video by (1:30mins) the Global Alliance for Banking on Value explaining their strategy to help financial capital meet with people trying to solve the biggest challenges of our time.

All over the world individuals, organisations and businesses are asking culturally transformative questions about how we might transform our dysfunctional economic system. In the USA, the New Economics Coalition (NEC) unites many of these pathfinders aiming to co-create “an economy that is restorative to people, place and planet, and that operates according to principles of democracy, justice and appropriate scale” (New Economy Coalition, 2015).

In the UK, the New Economics Foundation is equally committed “to transform the economy so that it works for people and planet” (new economic foundation, 2015). Equivalent institutions exist in other countries. We might not have worked out all the answers and solutions yet, but we are asking the right questions to take important steps towards a regenerative economy. Here is a link to the Global Transition to a New Economy Map. The New Economics foundation has produced this short video to remind us why we need this transition. Enjoy the Impossible Hamster video and have a look at the report that explains why continued quantitative growth in the economy is impossible.

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