It seems a long time ago, but there was an era when the economy was treated less like a critically ill patient and more like a statistical contest. As chancellor, Gordon Brown inevitably began Budgets by boasting of his unbroken growth record. Journalists and City types treated GDP numbers as if they were a scoreline: a 2.7% rise was a solid result, whereas 2.3% was somehow sub-prime.
Such silly talk was based on the serious conviction that the more growth we had, the better off we were. But just as the crash has shown up the flaws of other boomtime assumptions, so our growth fetish also needs re-examination.
For all its prominence, GDP is only one yardstick of economic performance and it is no guide to social progress. It simply indicates the market value of all goods and services produced in an economy. It takes no account of how income is shared out, or of how it is generated. Few would celebrate a boom in costly divorce cases – but it would be great for GDP.
And there is mounting evidence that, beyond a certain point, greater prosperity does not make us feel any better. Over the past 50 years, Western standards of living have soared, yet survey after survey shows that Britons and Americans are no happier now than they were half a century ago.
"This focus on growth fails to take account of what the social and psychological evidence tells us," says the economist Richard Layard. Our wellbeing depends on three things, he says: family relationships, satisfaction at work and strong communities: "Many policies to drive up income harm precisely those things from which we derive our quality of life."
Layard wants to make the pursuit of happiness part of government policy – and he's not alone. An all-party parliamentary group on Wellbeing Economics (including Layard) holds its first meeting today, while next month a commission launched by the French President, Nicolas Sarkozy, and led by Nobel laureates Amartya Sen and Joseph Stiglitz will report on how to incorporate quality of life into objective measures of economic activity.
Increasing GDP is obviously important in a recession – and it remains essential for the developing world. But over the long run it is unclear why rich countries with static or falling populations – like much of continental Europe – should obsess about earning ever greater levels of income. Why shouldn't they work less, spread their wealth more evenly and enjoy themselves? We may nearing the condition predicted 160 years ago by John Stuart Mill in his Principles of Political Economy, in which he suggested that there is "as much room for improving the Art of Living, and much more likelihood of its being improved, when minds ceased to be engrossed by the art of getting on".
Mill's "stationary state" economy is referred to with approval by greens, who argue that growth-at-all-costs depletes natural resources and heightens global warming. The godfather of ecological economics is 70-year-old Herman Daly, who believes that over the course of his lifetime "we've moved from an empty world to a full world – full of us and our stuff".
"In an empty world, if you wanted to catch more fish you sent out extra fishermen and boats," he has said. "Now we have way too many fishing boats – but not enough fish. It's no longer man-made capital that's in short supply; it's natural capital."
Nicholas Stern and others talk about green growth, with greater technological efficiency and carbon-conscious markets. But it is highly debatable whether this would deliver the scale of change needed as quickly as many climate scientists urge. We may have little choice but to take our feet off the economic accelerator.
"As someone who lives in a rich country I would prefer to live under the current system, but climate change means we don't have a choice," says Peter Victor, environmental economist and author of a recent book called Managing Without Growth. "We can either design a slower-growth economy over the next few decades, or we'll get there suddenly, through environmental disaster."
