Malign Confusion about Growth, Economic Growth or “Degrowth”: Which Way Forward? – Pt 2

By Michael Hoexter

[Part I] [Part II] [Part III]

“De-Growth”:  A Serious Proposal

Lately, climate scientists have stepped into the gap where economists have generally feared to tread and have suggested that intentional “de-growth” is the only hope to stop the rising emissions associated with economic development and growth.  No news to anyone who follows developments in climate science, the earth’s climate is facing tipping points beyond which a recognizable human civilization will be almost impossible to maintain due to the expansion of inhospitable or entirely uninhabitable climate zones, destruction of existing human settlements by water and weather, and the destruction of co-evolved species (including food) upon which we depend.  The target of a maximum of 2 degrees Celsius rise in global temperature has been chosen as a difficult-to-achieve but also permissive target, which some think should be 1.5 degrees or less.  One way or the other global warming gas emissions, still on an upward trajectory, need to be reduced and the current upward trend reversed almost immediately.   Climate scientists understandably have been impatient with the response of the social sciences and policymakers to the threats they see present and emerging.

Prior to the recent interest in de-growth, the hope has been that through either a regime of carbon pricing or a massive government program of green investment or both that the developed economies would decarbonize, yielding economic growth with progressively less emissions until such time as economies would grow without adding in net to the earth’s carbon cycle.  No one has suggested that this decarbonization could happen overnight or without initial costs in emissions.  My “Pedal to the Metal” Plan involves incurring increased embedded emissions upon start-up via a program of building green infrastructure and focused incentive programs to achieve social and environmental goals, including full employment and long-term decarbonization of the developed economies.  The “market-based” approach of either cap and trade or carbon tax advocates take a more leisurely approach to decarbonization, with a highly unlikely achievement of that goal if at all.  Either way, it is assumed that growth of some sort is the mechanism by which change occurs in capitalist monetary economies, though in the P2M Plan, I posit that the growth is a transitional state to a achieving a steady-state economy.

While a number of climate scientists have called for direct political action and civil disobedience over the last several years, mainstream climate scientists Kevin Anderson and Alice Bows of the leading Tyndall Centre in the UK have gone further and called for governments to institute radical and immediate de-growth strategies in wealthy countries to sustain year over year reductions of 10% in carbon emissions.  A recent conference at the Tyndall Center collects a number of proposals along these lines.  Anderson and Bows arrive at the 10% annual reduction number, via a series of calculations based on a 2 degree Celsius maximum warming target and a relative permissiveness towards the developing world to increase emissions for another decade.  They come upon degrowth as the route to 10% per annum reductions via Nicholas Stern’s estimation that economic growth is conceivable only with 3-4% annual emissions reductions via in a decarbonizing economy..   The developing world would have a few years to grow using conventional means until 2025 and then it too would need to “de-grow” or develop on a path that would to zero net contributions to the concentration of greenhouse gases in the atmosphere.   Anderson and Bows turn to “degrowth” is substantiated by observations that certain emissions reductions were achieved when economies world-wide shrank for a period of several years either in the Great Depression or in the post-Soviet period in East Europe, where huge and inefficient industrial enterprises were stilled as governments turned to a capitalist economic structure.

The term “de-growth” is of fairly recent origin and most widely discussed in France (“decroissance”) over the past decade, though the concept or impulse has been around in various forms since the industrial revolution.  One of the early reactions to industrialization in Western Europe, were cultural and political movements that attempted to capture something of the material reality or ideals of a threatened or past agrarian or primitive society, which could be grouped together as “Romantic” reactions to industrialism.  I do not mean to suggest in using the term “Romantic” that this reaction is unrealistic in the broadest sense of the word, only that it has relied on an intuitive, aesthetic, or emotional reaction to industrial society.  The recurring Romantic reaction to industrial development has waxed and waned based in part on the aesthetic reactions of individuals to industrial and post-industrial society as well as the success or failure of various idealistic colonies based on agrarian or communitarian ideals.  The general impulse of these communities and cultural movements has been towards a smaller-scale, less rapidly-changing society.   The emergence of the ecology movement in the 1970’s throughout the industrialized world, in contrast, has found a basis at least in part in the biological and natural sciences.  There has been based on the notion that at some point there would be “limits to growth”, though a direct confrontation with the growth imperative of capitalism has been endlessly postponed.

With global warming and the climate crisis we are seeing with an ever more quantifiable basis that the growth of the economy dependent on fossil fuels is becoming tightly coupled with the degradation of the natural basis of human life and the co-evolved life-world.   The buffering capacity of the natural environment to receive, dilute, and transform, the toxic or damaging byproducts of industrial civilization has been diminished and/or its incapability to perform these “ecosystem services” is becoming more apparent.  Previously the filters of aesthetics and personal preferences for a more “natural” environment which have motivated many offshoots of the environmental movement were required to draw the link between the expansion of fossil-fueled industrial civilization and the irrevocable destruction of natural wealth and the potential for a sustainable human civilization.   These filters should become, unfortunately at a very late date, less necessary for people to come to the conclusion that they are hurting themselves or their descendants via participating in and helping propagate a society based on economic growth fueled by fossil fuels.

With current and near-future technology, there is a trade-off between immediate degrowth and rapid decarbonization, as building green infrastructure will in an era of emissions-intensive building techniques and materials (like steel and concrete) mean increased emissions attributable to large construction projects.  These emissions might be trimmed by innovative use of materials but we are still looking at a massive construction project.    The “Pedal to the Metal” plan attempts to counteract these emissions by a program of voluntary emissions reductions encouraging activities similar to the following: reducing non-essential travel for business or pleasure, increased use of phone and computer networks, increasing the capacity utilization of vehicles by ride-sharing, and shifting food consumption towards low emissions foods.  However, given the historical record and acute crisis the priority of emissions reductions, it is understandable that a serious proposal for radical emissions reductions would focus on economic shrinkage in the developed, some would say “overdeveloped” countries.

Social Equality, Growth and Degrowth

The various streams of the environmental movement have, in general, not shown much sympathy for or understanding of basic economic issues or the dynamics of economies, in particular issues of economic equality.  They also have not shown much of an understanding of or interest in managing political coalitions on a grand scale, a scale required for the major transformation of the economy and society required by climate change.

Given the difficulties of extracting useful and practical information from the generally airy and impractical body of academic economic writings as well as the sprawling mass of the social sciences more generally, this is in part understandable but still a major problem if large-scale economic policy is, as I and others have recommended, to be guided by concern about our deteriorating climate and natural environment.  While there are exceptions, including the environmental justice movement arising from communities that have seen inordinate health impacts from dumping or emissions, in many cases concern about the environment seems to fall higher on Maslow’s “hierarchy of needs”, meaning that people attend to it only after becoming economically comfortable themselves and the resulting politics has often assumed that others are “taken care of” in terms of their basic needs.  The concept of “degrowing” the economy would also fall into this category of an idea that appeals to people who have had their basic needs satisfied and expect that in the future those needs will continue to be satisfied, even in a shrinking economy.

While economic growth is integral to capitalism, an already highly unequal socioeconomic system, growth, in particular robust growth of the real economy, is one of the few means by which those with middle and lower incomes can improve their economic positions.  An unequal economy that doesn’t grow or grows slowly is likely to see increases in inequality, as those with existing advantages continue to build on those advantages to the detriment of those with less income or social resources.  Hope for the future is often predicated on the possibility of a positive change of one’s personal or family circumstances, into which the economy’s overall growth plays a large role in exciting hopes and planning for a change in life circumstances for the better.

Within a capitalist economic framework, against which no one is proposing a likely and detailed alternative, degrowth of the entire economy is with very high probability going to have differential negative impacts on poor and working people.  While there are and could be a variety of degrowth recommendations, most aim at cutting the excess consumption of the middle- and upper-classes in the developed world by policies that are either mandated by governments or a government-facilitated form of voluntarism in the face of impending disaster.  While preferable to fatalistic notions about social collapse and “die-off” due to Peak Oil or other resource shortages, these recommendations overlook the feedback effects of sharp reductions in demand within a monetary economy.  Reduced consumption by the upper- and upper-middle-classes would reduce the currently-weak overall aggregate demand in the real economy even more.  That aggregate demand drives economic activity and if it were to shrink in net, it would lead to shrinkages in incomes from employment, increases in unemployment, and consequently of overall demand even further.   It could only be within the context of a reinforced welfare state that the economic shrinkage envisaged by degrowth advocates.would not increase poverty and differentially harm the less wealthy.  It is not accidental that degrowth seems to have its strongest advocates in countries that already possess a substantial welfare state, an economic institution which luckily does not seem to be a target of degrowth advocates.

Anderson and Bows are aware of the potential that degrowth polices they propose would appear indifferent to the lot of the less fortunate in developed countries.  The policies they suggest involve a combination of voluntary and mandated changes in the economy that would differentially effect the well-to-do.  However they seem not to operate with an understanding of the economy, like the climate, as an dynamic system, treating their proposed subtractions from the consumption of the well-to-do as isolated within the economic system.  They are trained as climate scientists but of course training in economics would not necessarily compel them to attend to the aggregate effects of their policy proposals.  Anderson contrasts his degrowth program to the suggestions of carbon pricing advocates, whom he points out would impose a carbon price that would effect mostly middle- and lower-income consumption while not seriously inconveniencing the wealthy due to their ability to pay.  Anderson makes some good points about the regressivity of carbon pricing but also downplays or does not seem to understand the systemic effects of the reduction of consumption on employment and productive economic activity.

Growth or Degrowth of What?

There have been over the past several decades a number of both mainstream and heterodox critiques of the measurement of economic growth and a few that question growth as a goal in itself.  Out of these critiques have emerged a number of modifications or alternatives to the simple numerical measure, Gross Domestic Product (Consumption + Investment + Government Spending + Net Exports), that has been the standard of measurement for national economies in the post-WWII era.   While there has been widespread dissatisfaction with GDP because it does not capture social welfare or even the “happiness” that economists might hope to measure, the alternatives to GDP have varied in their utilization by policymakers and economists with no clear replacement for GDP yet emerging.  Among the more interesting for this discussion are measures like ecological footprint and carbon footprint, which themselves do not encompass the welfare/happiness aspect of an economy, so cannot fully measure the ultimate delivery of services for a given footprint.  From outside economics, there is for instance, a prescriptive approach of targeting a 2000-watt society from a Swiss technical organization.

Ultimately, “growth” in macroeconomics is the change in the aggregate of all economic activity, however measured, in a given economic area in a given time period.  Once one has selected either a single or a complex measure of economic activity, different sectors or areas within the economy will either have grown or shrunk within a set time period, or if one is using a complex non-linear measure undergone some meaningful or hard-to-interpret transformation.  That growth or shrinkage and those sectors involved interact both financially and in real terms in a monetary economy, so that the aggregate measure is not simply the arbitrary sum of disconnected events.

All of those who take climate change seriously realize that certain sectors of the economy must shrink or disappear while others must grow to some extent in order for human civilizations to survive and become in some way sustainable.  We can say with certainty that for there to be a civilization of even moderate complexity, renewable energy and energy efficiency sectors must grow and some also believe that nuclear energy must be part of the mix, at least for a while.  Electrification of much of transport, agriculture, and industry should occur to enable the use of non-fossil energy, a process which entails also the production of new infrastructure and equipment.  At the same time, the fossil fuel industry must decisively shrink and, either temporarily or permanently, those sectors of the economy that must depend exclusively on fossil fuels for their primary energy must also shrink or go through a hard period of readjustment.

So using the language “growth/degrowth”, climate policy of any effectiveness would degrow the fossil fuel sector and activities that are completely dependent on fossil fuel use, while growing those sectors of the economy that in the short, medium and/or long term decrease dependence on fossil fuels.   The total balance of growth and degrowth in any given year would yield the net growth or degrowth of the economy.  If the economy would degrow in net, then one would expect that overall emissions would decrease for that year, though the emissions-intensity of those sectors that grow and degrow would play a key role in determining how much emissions would decrease (if at all).  Of course, in reality, these sectors interact, producing real and financial effects that are only measured at the end of the period, let’s say a year.  It may be, especially in a phase of infrastructure and building construction, that the “green” sectors of the economy would have in that year, higher per GDP emissions, than for instance, the travel sector.

It may be that such a system could be adjusted for net degrowth for the purpose of emissions reductions and at the same time buffering for the socially harmful system effects of that degrowth.  But this system would either break from or evolve very rapidly away from a market-driven capitalist economy, leading to the need for the creation of almost an entirely new economic language and methods of economic coordination.

 

4 responses to “Malign Confusion about Growth, Economic Growth or “Degrowth”: Which Way Forward? – Pt 2

  1. I like the use of the “growth/de-growth” concept. That usage in itself could be the beginning of “an entirely new economic language.” One important area of de-growth would be to encourage people to stop using the stock market for wealth creation which would then require us to imagine other activities that produce “wealth” but that would be more inclusive, less prone to manipulation and less risky. Once a growth or de-growth sector is chosen, then the creativity for choosing alternatives can begin. What a heady experience that would be.

    Lovely article!

  2. I don’t see the citizens of developed countries ever willingly consenting to a fall in per capita incomes for the sake of environmental sustainability until it’s far too late. The only way this will work is if we start practicing family limitation enough that the population falls at a modest rate, so that our consumption and output will fall substantially over time but not so quickly that we aren’t strained by the burden of aging dependents rising faster than productivity. And if I am correct in saying that birth rates fall as income rises above a certain point, then the MMT goal of poverty elimination and environmental sustainability will complement rather than conflict with each other.

  3. Are you selling “Pedal to the Metal” T-shirts?

  4. Pingback: Effects on Bulgaria: Malign Confusion about Growth Economic Growth or “Degrowth | Euro Economy