A political economy of degrowth, or post-growth, has been for a long time discussed only in academic environments. Now things are starting to change: more and more institutions are debating on practical policies to implement circular economics in place of boundless growing ones. From the 15th of May to the 17th, the “Beyond Growth Conference” was held at the European Parliament with the aim of discussing political models and pathways towards sustainable prosperity in the EU after an era of unlimited growth. This rhetoric is definitely not the main one in the current decision-making process, still, the repercussions of such a conference are potentially positive given its visibility and the relevance of the attending personalities.
Why is there a need for change?
Within existing market economies, basic institutions depend on and mandate continuous economic growth, while firms, industries, and nations pursue the object of increasing production year after year, regardless of what is needed. This dynamic is driving climate change and ecological breakdown. As a simple and immediate reminder of this, consider that in the last few years, the month in which human activities exhausted the world resources renewable within a year by the Earth has been July according to the National Footprint and Biocapacity Accounts (NFBAs), while “only” 50 years ago that date was reached at the end of December. It is unnecessary to add that economic activity is already well beyond the “safe operating space” of planet Earth, from which the human species depends for its survival. To evaluate the impact of human activities on planetary ecosystems we can resort to the “Planetary Boundaries: Guiding human development on a changing planet” study led by scientists in 2015 with the Stockholm Resilience Institute (SRI). The “planetary boundaries” concept details nine different environmental limits to human impact which, if crossed, could destabilize the Earth system and thereby threaten human societal development. According to the April 2022 version [see the picture below], humanity crossed out of the green “safe” space across six out of nine boundaries and is close to crossing one other boundary (ocean acidification).
Nowadays, we are pursuing objectives that are mainly related to an increase in production and capital. The clearest sign of this is the way we typically measure national well-being: through the GDP indicator. However, GDP does not distinguish between what is good and what is harmful in terms of social and ecological costs. We are used to thinking that the higher the GDP the better, promoting the idea that endless growth is not only possible but is indeed needed to assure us prosperity. This focus on an endless increase in production is quite unreasonable in the middle of an ecological crisis. According to the economist Michael Green, it is the right moment for a measurement revolution introducing a new way of looking at the world’s well-being through a Social Progress Index. Due to Green, there are at least 12 components that the GDP does not consider directly: how easy it is for everyone to have access to basic needs for survival and safety, the resources available to improve people’s lives (that is, education, information, health, and a sustainable environment), and the individual chance to pursue goals, dreams, and ambitions free from obstacles through rights, the freedom of choice, the freedom from discrimination and the access to the world’s most advanced knowledge.
Moreover, the current growth regime presents some internal contradictions that cannot be ignored anymore. With the belief of increasing prosperity, we are indeed increasing the risk of exacerbating inequalities both within countries and globally, exploiting the most fragile strata of society and the poorer countries, a phenomenon that is known as neo-colonialism. Another relevant issue is the constantly higher level of mental distress particularly in the most vulnerable sections of the population. The traditional functioning of the welfare state relies on mass production and consumption to increase well-being. However, such a regime in which productivity growth is the only focus can reveal itself as socially exploitative, and conflictual since it contains the roots of its own unsustainability even when strongly regulated.
The changes needed
The most commonly used macroeconomic indicators were introduced after World War Two and were devised as a yardstick to measure economic performance and to more effectively boost economies that had been destroyed by the war. Today the situation is completely different. Indicators are the first way we train ourselves to think about our social goals, they embody how public problems are conceptualized and solutions imagined, and they reflect as much as they institute our reality. GDP does not say enough about income distribution, quality of life, quality of education, environmental protection, and social costs of achieving economic output. A new metric of social well-being, fair policies, and sustainable development should be used and put in place to guarantee economic security. According to the English economist Kate Raworth, resilience should be one of the main pillars to promote a different type of progress and economic security. Resilience is the long-term capacity of a system to deal with change and continue to develop, that is, persisting in the face of change and navigating turbulence. The Covid-19 pandemic has proven the fundamental importance of building long-term transnational resilience. Raworth’s aim is the realization of resilient communities that are able to adapt to the impact of climate change, resilient food systems that can cope with price hikes and lost harvests, and resilient financial systems that will not be too prone to crises.
The idea of resilience can be analyzed in the framework of ‘doughnut economics’ which depicts our social and planetary boundaries as a doughnut. According to this theory, inside the doughnut hole lies our social foundation, which consists of 12 basic human needs, like water, food, justice, and education. Around the doughnut are the nine planetary boundaries, which represent our ecological ceiling. If we overshoot things like ocean acidification, land conversion, air pollution, and climate change, we are hurting the planet to the point where it will not be able to sustain us in the future. Therefore, the ideal space for our economies to be in is the ‘dough’ of the doughnut, the space right between the social foundation and the ecological ceiling. As long as we are in that safe and just space, we are satisfying our needs, as well as maintaining Earth’s health. One of the main ways to achieve this and make our economy sustainable is by making our production process circular and focusing on maximizing the reusability of goods and services.
To implement a more sustainable economy, not just new models are needed, but reforms in fiscal and monetary policies as well. First of all, rising interest rates as most central banks are doing today to tackle inflation can be counterproductive since it disincentivizes the necessary investment in decarbonization and renewable energies to foster ecological transition. Moreover, increasing interest rates may impede adjustment in the labor market causing unemployment and intensifying inequalities even more. However, part of the investments needed for the green transition should be promoted by governments in the first place according to Jason Hickel. One way to finance these investments is by collecting taxes. In this situation, governments can impose different types of taxes consistent with the objective of sustainability, for example, augmenting carbon taxes to disincentivize polluting emissions, or profit taxes on multinational corporations to counterbalance the current trend of raising inequalities. These huge investments will certainly weigh on state coffers. However, looking just at one side of the balance sheet (debt) without considering the asset side can be self-defeating, in the sense that, as some economists like Joseph Stiglitz said, some debt is needed and indeed useful to sustain a well-functioning social state and long-term resilience. This is the reason why there is an ongoing debate on current European benchmarks in fiscal policies that limit government debt, such as the 60% limit on the debt-GDP ratio.
In view of this, the purpose should be to develop shared conventions about well-being for all and social-ecological sustainability, simultaneously fostering democracy by listening to communities’ voices. To determine democratically what type of production is to be promoted and what needs to be scaled down, a joint effort should be built between institutions, international organizations, governments, policymakers, academia, and businesses. Finally, transparency, informed democracy, and consideration for developing and emerging markets are needed too to assure a well-functioning economy, as the French economist Florence Jany-Catrice stated during the European “Beyond Growth” conference.
In conclusion, compensating or reducing emissions is no longer enough. Much faster mitigation and a significant reduction in the intensive use of resources are needed if we want to stop inducing the loss in biodiversity we are causing and if we want to assure the possibility of a respectable life for future generations. Imagining a post-growth world is really thinking about a society based on collective well-being, political stability, social cohesion, and perceiving human presence within the boundaries of a living planet. To achieve this, a process of degrowth is needed to start being realistic and consider the real limits of available resources. As the economist Kenneth Boulding said way back in 1970 “Anyone who believes that exponential growth can go on forever in a finite world is either a madman or an economist”. Now is the right time to change this narrative and make the most of economics’ possibilities.
Bibliography
European Parliament conference “Beyond Growth – Pathways towards Sustainable Prosperity in the EU” (2023, May 15-17) https://www.beyond-growth-2023.eu/
Jason Hickel, Giorgos Kallis, Tim Jackson, Daniel W. O’Neill, Juliet B. Schor, Julia K. Steinberger, Peter A. Victor & Diana Ürge-Vorsatz (2022, December 12) “Degrowth can work — here’s how science can help” https://www.nature.com/articles/d41586-022-04412-x
Giorgos Kallis (2011, March) “In defense of degrowth” https://www.sciencedirect.com/science/article/abs/pii/S0921800910005021
Tim Jackson (Taylor & Francis Ltd, 2016) “Prosperity without Growth: Foundations for the Economy of Tomorrow”
Kate Raworth (2014, Apr 3) “What is resilience? 6 icons tell the story” https://www.kateraworth.com/2014/04/03/resilience/
Michael Green (2021) “Social Progress Index – Executive Summary” https://www.socialprogress.org/static/8865a686e96ce3e2b0d3c266bb80f061/2021%20Social%20Progress%20Index%20Executive%20Summary-.pdf