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Published on 19 de May, 2016 at Consulting

Local development and zero growth: Are they compatible?

By Pol Solà
5 min read

One of the classic debates on economic thought since the XVIII century has been whether earth resources would be enough to provide health and wellness for the whole of humanity. In this sense, the key question to answer is two-fold.

  • Is it possible in the context of a market-based economic system (capitalism) to create wealth without growth? The dominant paradigm, heir of Adam Smith thought, is not agree, because it estimates that more growth (GDP, productivity, domestic demand, international trade…) is an essential requirement to create jobs, attract more investors and obtain more tax revenues to make public investment possible.
  • Given the current level of resources consumption (oil and other raw materials, food, consumer goods, energy) which is taking place in the first world countries, would that be possible for the rest of the world to reach their standards of development following the same model, reaching its level of consumption? The dominant school of thought in this field, Malthusianism, estimates that the planet’s ecosystem would not resist it.
Adam Smith (1723-1790) and Thomas Robert Malthus (1766-1834)
Adam Smith (1723-1790) and Thomas Robert Malthus (1766-1834)

Let’s have a look to this ongoing debate. Erik Brynjolfsson i Andrew McAfee published in 2014 The second machine age, a book where the two MIT professors advocate for a next tech revolution. On the other hand, Robert J. Gordon, from Northwestern University, published in 2016   The rise and fall of American growth, where it estimates that the growth scenario is over and it will bring all kind of conflicts and intense changes.

Is there any chance?

Today we have no answer to these two questions from both a technical and political point of view. In fact, there had always been a blurred alternative which, refused by a lot of scientists, can bring us some hope: continuous technological change is the key element to solve this problem, since it will create a last-minute solution overgrowing the ongoing scenario. It is quite a human attitude to expect that nowadays problems will be solved in a nearby future, something even supported by historical evidence. Additionally, it has to be taken into account that “tech change” is not based in deep science and engineering only. Social innovation, new ways to organize production, management and collective intelligence create change as well. In other word, innovation is not a technology lead only.

Local economic development has become the key question for local politicians ruling cities and territories, and the topic of innovation is the corner stone. Some solutions are shown here:

  • If innovation is much more than technology it means that value is found in ideas and attitudes that bring cultural success and create social influence, especially among young people. This is the case of the Peruvian Chef Gaston Acurio, who had put his country on the international cuisine map. It is the same case for Bollywood or even Latin American soap-operas.
  • Another success case is related to the city of New York since 2008, by this time at the core of the global financial crisis. The mayor Michael Blomberg decided, inspired by Silicon Valley, to go for supporting tech start up creation and universities, while searching the involvement of companies in teaching. It can be quoted as a university – business new experience, in a city that has a particularly favorable starting position in any global issue
  • It can be also mentioned the case of the fifty years old city-state of Singapore as model that focuses on talent attraction and retention and fiscal advantages for entrepreneurs. As the node of knowledge and innovation in South East Asia, Singapore has become a living lab where public authorities actively promote talent recruitment, placing its universities at the top of international rankings
  • It can also be mentioned the case of the Aalto University Urban Mill, a public-private partnership that allows interaction between research centers and business in order to develop cooperative and creative new projects

This innovative paradigm is expressed through the Global Innovation Index, an annual report that includes the world rankings innovation of national economies. From 2008 onwards, it is considered as the leading reference in innovation, in order to include human factors for the optimal design of policies helping to promote economic development in a local sphere, starting from a horizontal and comprehensive vision that goes beyond the traditional measurement of R & D.

Global Innovation Index

Cities and territories: sustainability, zero growth and new economy? 

Macroeconomic data shows repeatedly how average world economy is stagnant around the 1-2% despite the intensity with which information and communications technology have been applied since the 1990s. However, real chances for zero growth economy and its practical consequences are a chimera. Even accepting that the need for continuous growth will have a negative impact on the environment and equality, zero growth will be hardly accepted by humanity from a cultural point of view.

Therefore, is there any alternative for local development? Maybe a Third Way has already been in fact applied: sustainable growth, smart productive specialization rooted on local resources and low cost production developed in creative environments. Are these examples a solid foundation for a new economy? It is difficult to know. However, it is hard to assume by political and economic local actors (businesses, public sector, citizens, knowledge institutions) that nothing can be done. Some EU initiatives shed light on the way ahead.

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