biomatrix systems theory blog

reflection on economic growth

In the 1980s, the famous systems thinker R. L. Ackoff wrote about his concern about our obsession with economic growth, the difference between growth (an increase in size) and development (an increase in quality) and that there can be development without growth. He also proposed that the purpose of a business organisation should be the development of stakeholders, not merely growth as measured by financial return on investment for its shareholders. Our economic thinking regarding growth does not seem to have changed since.

Current economic theory is based on growth. It measures growth, not development. Growth is one-dimensional (i.e. the increase in size of a variable – e.g. profits, costs, units of production). It is measured quantitatively, while development is multi-dimensional. Equally problematical (from a development perspective) is the focus on short-term growth and ROI.

Dare we suggest that the current economic growth obsession not only drives continuing growth (much of it being unsustainable) but also discourages (if not kills) development?

At least two systemic concerns come to mind immediately, that of governance and of measurement.


It is a systemic rule of thumb that what we measure, evaluate and reward, we bring about. What we don’t or can’t measure, we tend to neglect.

Since growth is easy to measure, we value it, reinforce it and build economic theory around it. Development is not as easy to measure. One can illustrate this with the Persian proverb which states that “Poverty is not a lack of things, but a lack of beauty”. The (lack of) things can be objectively measured by economic growth, while beauty (like other intangible qualities such as dignity, happiness, ethics or creativity) is an attribute of development. These attributes are also quite subjective. We typically try to objectify the measurement of such qualities by some growth related indicators (e.g. the price of a painting, the number of court cases on corruption, the number of patents filed). These types of measures are referred to as social indicators. They are a crude approximation of measuring development and often miss the essence, as the Persian proverb suggests. By using them as measures, we may well loose the essence of development. Yet development may be more important than growth (as also hinted at by the proverb).

The growth versus development issue is also the dilemma of the triple bottom line, which refers to development, but is limited by what is measurable (e.g. the social indicators).

The development paradigm requires different value currencies than the money and quantity driven values of the growth paradigm. As an additional thought: could the use of fuzzy logic (possibly linked to statistics in order to reduce subjectivity) get us closer to the measurement of development?

From a systemic perspective, there is another problem associated with the measurement of economic growth: that of measurement based on co-production and mutual impacts.  Examples are the impacts of a production process on the planet (e.g. pollution, using scarce resources) or society (e.g. a society burdened by unemployment and unused infrastructure left behind by a company relocated to another country – in the name of increasing the efficiency of its production).

Put differently: we only measure the cost of production, not that of co-production and impact. Thus we do not measure the true cost of a product. We measure it only at one level and not across levels in the containing systems hierarchy (e.g. to the planet, society, other organisations, employees, their health and well-being).

We also do not measure positive impacts (e.g. who benefits by the economic growth of the organisation, national and international economy). Thereby we would be able to identify who benefits by our current economic practice (e.g. the trickle to the poor and the gushing river to the rich; the country of production or transnational elites). The latter example raises the question if some of the concepts of current economic theory would change if considered in the context of globalisation (i.e. are they derived from observation of a national or regional economy)?

Coming back to the question Does investing systemically create more value for the dollar than a linear system?, the answer depends on what you mean by systemic and by value?

If we mean by value the conventional return on investment, we argue from the current traditional, growth-driven economic paradigm.

If we argue from a systemic economic paradigm (which does not exist yet, or at best in fragments), why the reference to monetary value? The development related values which would be incorporated into a systemic economic paradigm are not measurable in dollars in essence (merely by indication). We have not developed other value currencies.


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