Malign Confusion About Growth, Economic Growth or "Degrowth": Which Way Forward? – Parts Two and Three

Monday, 30 December 2013 11:26 By Michael Hoexter, New Economic Perspectives | News Analysis
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Also see: Loathsome Wall Street Deficit Hysterics: "Blame the Old and Sick, Not Us" – Part 1

“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.


Variation in Fossil Fuel Dependency Among Developed Countries and Degrowth

As action is required today and in the near future, though, it is reasonable to assume that production will be organized via some form of a capitalist organization of firms and the motivation of economic actors to achieve monetary profits/savings.  In the period of transition to a new energy economy, the government sector and budget will play an enlarged and leading role in financing and regulating the transition.

Targeting net degrowth over a period of years, perhaps a decade, might or might not inhibit the development of the “greener” sectors of the energy and transport economy exactly because these sectors have to play “catch-up” in the area of infrastructure.  The most secure way to build out these sectors in terms of minimizing technology risk, is to deploy renewable energy generators, some on a vast scale, heavy and light electric rail infrastructure, electric road and other grid-tied systems not dependent on advances in battery technology or availability of moderately scarce elements like lithium.  These systems require as construction materials emissions-intensive steel and concrete on a very large scale.  Innovations may cut these emissions substantially though in the foreseeable future not completely.   Various commercial interests are claiming they have a breakthrough on the energy storage or generation side which would diminish the need for these investments but currently there is no certain alternative to the creation of some massive earthworks.

Anderson and Bows’ degrowth agenda takes the risk of stifling the growth of the greener sectors of the economy with initial embedded emissions costs, for the sake of what is hoped to be early and dramatic emissions reductions in the developed world and allowing some of the remaining atmospheric resources to be taken up by emissions from developing countries.

To avoid social collapse, Anderson and Bows’ degrowth perspective would require that a fossil fuel-independent basic community and transport infrastructure is in place in those countries that embark on a radical degrowth program.  They also assume, I believe, a robustly unified polity and sacrifice-ready members of the top 10-20% in wealth, who would assent to degrowth targeted at their consumption, with much sacrifice required of people of more modest incomes and wealth.  The countries where it would be easier but by no means easy to institute a degrowth program would include the densely populated countries of the British Isles, Western, Northern, and Central Europe that still have extensive rail and public transport networks, though have become dependent on fossil-fueled trucking for freight and fossil fueled personal transport for convenience.  Not only do these regions possess these potentially zero- or low-carbon networks but they also have from pre-capitalist times, structures of urban and community life which pre-date the fossil fuel age.

By contrast, the United States, Canada, Russia, Australia, and much of Latin America do not have a low- to zero-carbon potential infrastructure already built.  In many areas of these countries, commerce and community hinge upon the ready access to fossil fuels, as urban planning and more recent economic development, were predicated upon automobility and far-flung supply chains for goods and services.  Some of these nations have had oil deposits and a large oil industry presence in their political and economic systems.

So in some of the Annex I countries, UN-speak for the most developed countries,  as well as other highly fossil fuel dependent countries, a degrowth-first strategy has a high probability of attenuating the communication, commerce, and social support networks that are vital in the initial and longer-term in combating climate change.  Much of the radical conservation measures that Anderson and Bows are counting on require a unified polity and community integrity in order to make the proposed degrowth bearable for ordinary folk.  The choice is easier for Western, Northern and Central Europe, which in many countries enjoys an overall quality of life at fractions of the per unit GDP carbon emissions than other countries in both the developing world and in non-European and Eastern European Annex I nations (US, Canada, Russia, Ukraine, etc.).  Besides the density of population and choice of transportation services in these more fortunate Annex I countries, they can export their emissions by relying, increasingly on manufacturing and emissions-intensive resource extraction from other nations with laxer environmental standards or reserves of fossil energy.  As also mentioned above, they benefit from some of the highest levels of state-funded public services in the world, which, one assumes and rightly would remain largely in place as a degrowth program was put into action.

By contrast, the more recently built and sparsely populated parts of the world both in Annex I and outside it, a sudden reduction in emissions from degrowth without a massive countervailing program of social integration will lead to social and commercial disintegration rather than a path to a more sustainable society.  The effort to address climate change will involve in these countries, a simultaneous effort to reconstitute society, a society that is more resilient, future-oriented, nature-aware, and community-oriented.  While European countries fractured by austerity, the rise of right-wing anti-immigrant parties, and neoliberalism could also benefit from such a program of social integration, they are not as dependent upon large scale infrastructure projects to “green” their common spaces.

Clearing the Field: It’s Between “Green” Growth and Degrowth

We have over the past several years been living in a period of malign, toxic confusion about economic growth and how it is achieved.  This has been spurred on by the deficit hysteria/austerity campaign that has served only a small fraction of the elite in our financialized economy yet has dominated discourse in Washington and many other capitals.  The deficit hysteria campaign has capitalized on the deep flaws in academic economics and economics education to distort the understandings of politicians and lay people about how our capitalist economy works, in particular the functions of government spending and overall demand in regulating the rate of economic activity and growth.  Claiming to support growth, the austerity campaign has undermined it, yet continues to convince lawmakers otherwise, continuing to lead them or have them lead us, into an emissions-intensive economic abyss.

The political and economic predators who have pushed deficit hysteria have politically capitalized on sincere concerns that some individuals and political leaders have had about lax financial standards in the private credit industry, debt-fueled consumption and overconsumption more generally.  They have misattributed the private debt-fueled consumption boom of the last decade to government, exonerating the role of private lenders eager to profit via offers of credit from people’s wish to consume essential or luxury goods and services.  They have politically capitalized on the confusion of laypeople and many economists between financial and real resources especially as regards government finance, treating conservation of a limited pool of financial resources as equivalent in virtue to conserving the finite resources of the earth.

A critical casualty of the deficit hysteria campaign is the instrument of government itself, a necessary institution for the process of transforming our energy and transport systems to face the challenge of climate change.  In pursuing their perverse campaign for political power, the policy space for government has been hemmed in by false accusations and notions about money and the role of government.

An honest discussion about the standards according to which we might organize and regulate our economies must exclude the false notion that there exists for a monetarily-sovereign national government a limited pool of financial resources even though we are fast approaching real limits in the planet’s ability to absorb the effects of our economic activity.  The difficulty of this mental and political feat in an era where we have two versions of the austerity narrative, a reluctant “Left” or “liberal” one and an enthusiastic, sadistic right-wing one, is quadrupled:  not only do listeners need to distinguish between the two but a sham political conflict between the two flavors of deficit hysteric can further confuse.  It is no progress to content oneself with the sympathetic version of deficit phobia that laments that government does not have the financial resources to address the existential social and environmental threats facing us.

This leaves among the tripartite choice offered in the title of this piece between the current “malign confusion”, growth and degrowth, only the latter two as options to be taken seriously.   Of course confusion about growth, stoked by our ambivalence about consumption, remains the dominant political-economic discourse, so to have this serious discussion about the choice between growth and degrowth requires considerable focus, mental effort and research.

A government’s growth orientation, once disentangled from the ideological morass of neoclassical economics, neoliberalism, and the deficit hysteria campaign, however faces some real rather than financial constraints as well as real constraints that will become financial constraints.  In the former category, as discussed above, economic growth as currently conceived is predicated upon a diminishment and in many cases destruction of the non-human biosphere, most sharply and critically by fossil fuel use.

With climate change that destruction is not merely a passive deformation and diminishment of non-human nature and that nature growing more scarce as a resource for humans but rather a rebound by climate forces that will destroy large parts of human civilization.  In the area of financial constraints, the fossil resources required for growth in our current technological regime are not unlimited in supply, contrary to industry propaganda and government complicity with the industry; increases in demand for fossil energy lead to increases in prices and puts pressure on supply.  These shortages and price rises in turn put a damper on growth, yielding a negative feedback loop.

The only currently feasible and realistic growth orientation then would mobilize available resources upon the task of freeing society from the scourge of fossil fuel dependence, even as some of the activities involved in that process will inevitably use substantial amounts of fossil fuels for at least a decade and a half.  As my Pedal to the Metal Plan demands, as well as other “Green New Deal” proposals, copious government spending with or without compensatory tax increases are required to build infrastructure, fund innovation, and subsidize nascent industries.  Taxes, the “degrowth” side of the economy, would need to target those activities that yield high emissions with some exemptions for those activities that are life-essential or on a path to zero net emissions during operation.

Another orientation that we have considered as serious is a degrowth orientation, which attempts to front-load emissions savings by strict conservation and small-scale energy efficiency measures that themselves do not represent large emissions investments.  Degrowth advocates seek to engineer a controlled economic recession that would guarantee yearly emissions reductions.  As currently understood, these efforts would in developed countries leave some of the nascent green industries or infrastructure projects in a state of limbo as well as have negative employment effects unless counteracted by something like a job guarantee program, itself with a low emissions profile.  Instituting a degrowth politics and strategy would require an extraordinary commitment on the part of a large swath of the population to break with the economic and social status quo, as well as experience some forms of deprivation.  The role of state support and leadership, while critical in the Pedal to the Metal Plan, becomes even more central in an economy that would degrow over the period of perhaps a decade.

Managing Growth and Degrowth under Threat of Climate Apocalypse

Ultimately, if economics is to become a relevant and realistic discipline, it must confront the real physical world which economies have transformed but economics has not measured or accounted for in relevant physical aspects like carbon emissions and other dimensions of ecological footprint.  An exclusive focus on growth or degrowth as “good” or “bad” or vice-versa will lead to mismanagement of an economy, even one that is attempting a crash-course in emissions reductions.

The management of growth will depend critically upon carbon emissions incurred during production and consumption of goods and services, which currently are known in estimates but often not in detail or in measured reality.  If we take the Pedal to the Metal Plan as a model, the exact timing and prioritization of elements of that plan may depend on engineering analysis and real world data collection regarding actual emissions required to provide certain economic services in the present and results in future emissions reductions.  The interaction between those emission expenditures and economic benefits will feed into an iterative process whereby incentives and subsidies can be adjusted to lower emissions and/or increase economic output per unit emissions.   The focus on projects that reduce overall consumption, such as energy efficiency and conservation projects, would seem an intuitive place to start.

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