Reviewed by Brian Milani

If there’s any topic on environment or economics that concentrates the mind on fundamentals, it’s economic growth. This fact alone makes the publication (in late 1999) of a substantially revised and updated version of The Growth Illusion a welcome way to start the new millennium.

          First published in 1992, The Growth Illusion is well up on my list of the top ten green economics book of the decade. Its current updating more than reinforces its status as a classic, and it remains a necessary read for anyone who wants to make sense of how our economic system works. In it, Douthwaite deconstructs the mythology of economic growth, and closely examines its real impacts on society—economic, social and environmental—which he argues are significantly more negative than positive. As such, the book serves as a complement to Douthwaite’s other main book, the 1996 Short-Circuit, which focuses on positive grassroots alternatives to the corporate-global growth machine in key sectors of the economy, like energy, finance and agriculture.

         The thematic focus of Douthwaite’s attention is Britain in the period from 1955 to 1988, where he demonstrates that the quality of life deteriorated in the face of substantial economic growth. This ostensible focus, however, does not prevent Douthwaite from taking the reader on a remarkable environmental tour de force—in which he covers climate change, toxic chemicals, ozone depletion, the crisis in agriculture, GM foods, and much more. All these crises he convincingly ties into the imperatives of capitalist economic growth.

        This is not just a book on the environment, however, and in chapters on structural unemployment, on health, and on community life, he shows how the essential dynamic of economic growth consistently works against the well-being of anyone but a small handful of people. While the focus of Douthwaite’s statistical review is Britain, he makes clear that his basic analysis applies to the whole world. In addition to supplying examples from around the world in his main chapters, he also devotes specific chapters to Holland ("The Dutch Dilemma"), India ("The Mahatma’s Message"), and his home Ireland ("De Valera’s Dream"). Douthwaite’s style of writing is journalistic, making the book accessible to a wide variety of readers, but this does not compromise the analytical content of the book, which must rank as first-rate scholarship.

          If I have any quibble with Douthwaite’s arguments, it’s on the theoretical level—on the nature of growth and capitalism—but I do think these have some important strategic implications for developing alternatives. Despite the fact that Douthwaite devotes an entire chapter to showing "Why Capitalism Needs Growth", in discussing alternatives at the end, he seems to back off on this position. He argues for "turning down the growth knob"on a capitalism which apparently wouldn’t require growth. Apparently Douthwaite feels we must accept capitalism "because it is the only functioning economic system in the world", and that it is possible to "turn down growth" by holding down interest rates.

          Part of the problem, I think, derives from the very definition of "growth" itself. In most discussions, it refers to a growing mass of material accumulation and consumption. It presumes a quantitative definition of wealth, which is certainly destructive today. But Herman Daly makes an important distinction between "growth", a material process, and "development", which he feels can be non-material, qualitative and spiritual. Such development involves human work which regenerates communities and ecosystems. Certainly this kind of work is economic activity, and something we want much more of, since it can result not just in a "steady-state" economy but an actual shrinkage in resource and energy use. As I argue in my own book, however, this requires a fundamental redefinition of wealth, implemented not by draconian state socialism, but by new kinds of incentives for truly qualitative development.

          Is capitalism capable of so redefining wealth? I have argued that capitalism is intrinsically a system of quantitative development (much like Douthwaite seemed to be saying earlier in his book) which, system-wide, is incapable of substantial "dematerialization". By contrast, spokespeople for "green" or "natural capitalism", like Amory Lovins, are saying that it is possible to disconnect monetary from material accumulation. Douthwaite criticizes some of these assumptions about growth as expressed in Lovins’ Factor Four book. But he fails to recognize the power of the profit motive in driving economic growth, as well as the possibilities to gradually displace the profit-motive with more positive incentives for regenerative enterprise. Such qualitative development might utilize markets and invest capital, but it would not be capitalist because both money and material would become means, not the ends, of economic activity. Capitalism is where the primary goal is monetary accumulation, and quality of life is but a spin off of the accumulation process. An economic system cannot redefine wealth when quality is a by-product or trickle-down of accumulation. I think Douthwaite appreciates that there is more of a connection between monetary and material accumulation than Lovins believes. But he doesn’t take the next logical step and look at how we might create wholly new driving forces than the profit-motive.

          Happily, Douthwaite implicitly tries to do this as part of his exploration of green economic alternatives in his book Short-Circuit. And David Korten, in his recent book The Post-Corporate World, also explores possibilities for markets essentially driven by use-value (or intrinsic value) rather than exchange-value (money). Korten calls them "mindful markets". It just would have been nice to see Douthwaite more explicitly elaborating an ecological "third way" at the end of The Growth Illusion—one which highlights green economic development as a holistic paradigm in itself.

          Regardless of this, Douthwaite provides us with important insights into the dynamics of capitalism, and in Short-Circuit, he provides us with key elements of an alternative way forward. Unlike so many writers on economics, he doesn’t mess around with inessentials. He goes right to the core, and provides readers with plenty of examples to support his arguments.