We tend to assume that our wages or salaries should, and will always rise in real terms. That living standards will follow the same trajectory. That house prices will never fall. That the price of Picasso paintings or ruby rings can be trusted always to “smash records”. And that the economy will “grow’ exponentially over time. Indeed “economic growth” is hard-wired in the way we think about, and measure the economy.

This is delusional stuff, if only in linguistic terms. “Growth” derives from nature. Plants are seeded, animals are born, they grow, mature and then die. And although humans mostly live in denial of the reality, our lives follow the same trajectory.

Death is as inevitable as taxes.

We know, in our heart of hearts, that there are limits. That markets and firms, grow, mature and then die – or implode. Think of the market for sub-prime mortgages, CDOs, credit default swaps or even that for chimney sweeps. Think of firms like Woolworths, HMV, PanAm, Arthur Andersen or Enron.

They are no more. 

There are limits. Not just to the lifespan of firms, markets and human lives, but above all to our ecosystem and planet.

So why, when we apply this language to the economy do we assume ‘growth’ is limitless?

In fact this delusion is a recent one. Before the 1960s economists, most notably Keynes, discussed the economy in terms of “levels” of activity. They were concerned with the level of output, the level of employment, and the level of prices. Was the level too high – and therefore inflationary? Or was the level too low – threatening recession? Or was it just right – sustainable?

In 1961 the OECD, encouraged by ‘classical’ economists like Samuel Brittan and discouraged by what - compared to today’s standards - were high, sustainable levels of economic activity, proposed to turbo-charge the economy.[1] At the time, Britain was in the happy position of providing full employment to her people. Macmillan’s 1957 comment that Britons ‘had never had it so good’ still rang true.

It was at this point that the OECD, the British government (the National Economic Development Corporation) and Samuel Brittan championed an unsustainable and delusional new target for something they named “growth” - a rate of change of a continuous function – which turned out to be 50% for Britain over the decade.