New Yorker - John Cassidy
The critique of economic growth, once a fringe position, is gaining widespread attention in the face of the climate crisis.
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The degrowth movement would overhaul social values and production patterns. Illustration by Till Lauer
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In
1930, the English economist John Maynard Keynes took a break from
writing about the problems of the interwar economy and indulged in a bit
of futurology. In an essay entitled “Economic Possibilities for Our
Grandchildren,” he speculated that by the year 2030 capital investment
and technological progress would have raised living standards as much as
eightfold, creating a society so rich that people would work as little
as fifteen hours a week, devoting the rest of their time to leisure and
other “non-economic purposes.” As striving for greater affluence faded,
he predicted, “the love of money as a possession . . . will be
recognized for what it is, a somewhat disgusting morbidity.”
This
transformation hasn’t taken place yet, and most economic policymakers
remain committed to maximizing the rate of economic growth. But Keynes’s
predictions weren’t entirely off base. After a century in which G.D.P.
per person has gone up more than sixfold in the United States, a
vigorous debate has arisen about the feasibility and wisdom of creating
and consuming ever more stuff, year after year. On the left, increasing
alarm about climate change and other environmental threats has given
birth to the “degrowth” movement, which calls on advanced countries to
embrace zero or even negative G.D.P. growth. “The faster we produce and
consume goods, the more we damage the environment,” Giorgos Kallis, an
ecological economist at the Autonomous University of Barcelona, writes
in his manifesto, “
Degrowth.”
“There is no way to both have your cake and eat it, here. If humanity
is not to destroy the planet’s life support systems, the global economy
should slow down.” In “
Growth: From Microorganisms to Megacities,”
Vaclav Smil, a Czech-Canadian environmental scientist, complains that
economists haven’t grasped “the synergistic functioning of civilization
and the biosphere,” yet they “maintain a monopoly on supplying their
physically impossible narratives of continuing growth that guide
decisions made by national governments and companies.”
Once
confined to the margins, the ecological critique of economic growth has
gained widespread attention. At a United Nations climate-change summit
in September, the teen-age Swedish environmental activist
Greta Thunberg
declared, “We are in the beginning of a mass extinction, and all you
can talk about is money and fairy tales of eternal economic growth. How
dare you!” The degrowth movement has its own academic journals and
conferences. Some of its adherents favor dismantling the entirety of
global capitalism, not just the fossil-fuel industry. Others envisage
“post-growth capitalism,” in which production for profit would continue,
but the economy would be reorganized along very different lines. In the
influential book “
Prosperity Without Growth: Foundations for the Economy of Tomorrow,”
Tim Jackson, a professor of sustainable development at the University
of Surrey, in England, calls on Western countries to shift their
economies from mass-market production to local services—such as nursing,
teaching, and handicrafts—that could be less resource-intensive.
Jackson doesn’t underestimate the scale of the changes, in social values
as well as in production patterns, that such a transformation would
entail, but he sounds an optimistic note: “People can flourish without
endlessly accumulating more stuff. Another world is possible.”
Even
within mainstream economics, the growth orthodoxy is being challenged,
and not merely because of a heightened awareness of environmental
perils. In “
Good Economics for Hard Times,”
two winners of the 2019 Nobel Prize in Economics, Abhijit Banerjee and
Esther Duflo, point out that a larger G.D.P. doesn’t necessarily mean a
rise in human well-being—especially if it isn’t distributed
equitably—and the pursuit of it can sometimes be counterproductive.
“Nothing in either our theory or the data proves the highest G.D.P. per
capita is generally desirable,” Banerjee and Duflo, a husband-and-wife
team who teach at M.I.T., write.
The two made their reputations by
applying rigorous experimental methods to investigate what types of
policy interventions work in poor communities; they conducted randomized
controlled trials, in which one group of people was subjected to a
given policy intervention—paying parents to keep their children in
school, say—and a control group wasn’t. Drawing on their findings,
Banerjee and Duflo argue that, rather than chase “the growth mirage,”
governments should concentrate on specific measures with proven
benefits, such as helping the poorest members of society get access to
health care, education, and social advancement.
Banerjee
and Duflo also maintain that in advanced countries like the United
States the misguided pursuit of economic growth since the
Reagan-Thatcher revolution has contributed to a rise in inequality,
mortality rates, and political polarization. When the benefits of growth
are mainly captured by an élite, they warn, social disaster can result.
That’s not to say that Banerjee and Duflo are opposed to economic growth. In a recent essay for
Foreign Affairs,
they noted that, since 1990, the number of people living on less than
$1.90 a day—the World Bank’s definition of extreme poverty—fell from
nearly two billion to around seven hundred million. “In addition to
increasing people’s income, steadily expanding G.D.P.s have allowed
governments (and others) to spend more on schools, hospitals, medicines,
and income transfers to the poor,” they wrote. Yet for advanced
countries, in particular, they think policies that slow G.D.P. growth
may prove to be beneficial, especially if the result is that the fruits
of growth are shared more widely. In this sense, Banerjee and Duflo
might be termed “slowthers”—a label that certainly applies to Dietrich
Vollrath, an economist at the University of Houston and the author of “
Fully Grown: Why a Stagnant Economy Is a Sign of Success.”
As
his subtitle suggests, he thinks that slower rates of economic growth
in advanced countries are nothing to worry about. Between 1950 and 2000,
G.D.P. per person in the U.S. rose at an annual rate of more than three
per cent. Since 2000, the growth rate has slowed to about two per cent.
(Donald Trump has not, as he promised, boosted over-all G.D.P. growth
to four or five per cent.) The phenomenon of slow growth is often
bemoaned as “secular stagnation,” a term popularized by Lawrence
Summers, the Harvard economist and former Treasury Secretary. Yet
Vollrath argues that slower growth is appropriate for a society as rich
and industrially developed as ours. Unlike other growth skeptics, he
doesn’t base his case on environmental concerns or rising inequality or
the shortcomings of G.D.P. as a measurement. Rather, he explains this
phenomenon as the result of personal choices—the core of economic
orthodoxy.
Vollrath offers a detailed decomposition of the sources
of economic growth, which uses a mathematical technique that the
eminent M.I.T. economist Robert Solow pioneered in the nineteen-fifties.
The movement of women into the workplace provided a onetime boost to
the labor supply; in its aftermath, other trends dragged down the growth
curve. As countries like the United States have become richer and
richer, Vollrath points out, their inhabitants have chosen to spend less
time at work and to have smaller families—the result of higher wages
and the advent of contraceptive pills. G.D.P. growth slows when the
growth of the labor force declines. But this isn’t any sort of failure,
in Vollrath’s view: it reflects “the advance of women’s rights and
economic success.”
Vollrath estimates that about two-thirds of the
recent slowdown in G.D.P. growth can be accounted for by the decline in
the growth of labor inputs. He also cites a switch in spending patterns
from tangible goods—such as clothes, cars, and furniture—to services,
such as child care, health care, and spa treatments. In 1950, spending
on services accounted for forty per cent of G.D.P.; today, the
proportion is more than seventy per cent. And service industries, which
tend to be labor-intensive, exhibit lower rates of productivity growth
than goods-producing industries, which are often factory-based. (The
person who cuts your hair isn’t getting more efficient; the plant that
makes his or her scissors probably is.) Since rising productivity is a
key component of G.D.P. growth, that growth will be further constrained
by the expansion of the service sector. But, again, this isn’t
necessarily a failure. “In the end, that reallocation of economic
activity away from goods and into services comes down to our success,”
Vollrath writes. “We’ve gotten so productive at making goods that this
has freed up our money to spend on services.”
Taken
together, slower growth in the labor force and the shift to services
can explain almost all the recent slowdown, according to Vollrath. He’s
unimpressed by many other explanations that have been offered, such as
sluggish rates of capital investment, rising trade pressures, soaring
inequality, shrinking technological possibilities, or an increase in
monopoly power. In his account, it all flows from the choices we’ve
made: “Slow growth, it turns out, is the optimal response to massive
economic success.”
Vollrath’s
analysis implies that all the major economies are likely to see slower
growth rates as their populations age—a pattern first established in
Japan during the nineteen-nineties. But two-per-cent growth isn’t
negligible. If the U.S. economy continues to expand at this rate, it
will have doubled in size by 2055, and a century from now it will be
almost eight times its current size. If you think about
growth-compounding in other rich countries, and developing economies
growing at somewhat faster rates, you can readily summon up scenarios in
which, by the end of the next century, global G.D.P. has risen
fiftyfold, or even a hundredfold.
Is
such a scenario environmentally sustainable? Proponents of “green
growth,” who now include many European governments, the World Bank, the
Organization for Economic Co-operation and Development, and all the
remaining U.S. Democratic Presidential candidates, insist that it is.
They say that, given the right policy measures and continued
technological progress, we can enjoy perpetual growth and prosperity
while also reducing carbon emissions and our consumption of natural
resources. A 2018 report by the Global Commission on the Economy and
Climate, an international group of economists, government officials, and
business leaders, declared, “We are on the cusp of a new economic era:
one where growth is driven by the interaction between rapid
technological innovation, sustainable infrastructure investment, and
increased resource productivity. We can have growth that is strong,
sustainable, balanced, and inclusive.”
This
judgment reflected a belief in what’s sometimes termed “absolute
decoupling”—a prospect in which G.D.P. can grow while carbon emissions
decline. The environmental economists Alex Bowen and Cameron Hepburn
have conjectured that, by 2050, absolute decoupling may appear “to have
been a relatively easy challenge,” as renewables become significantly
cheaper than fossil fuels. They endorse scientific research into green
technology, and hefty taxes on fossil fuels, but oppose the idea of
stopping economic growth. From an environmental perspective, they write,
“it would be counterproductive; recessions have slowed and in some
cases derailed efforts to adopt cleaner modes of production.”
For a
time, official carbon-emissions figures seemed to support this
argument. Between 2000 and 2013, Britain’s G.D.P. grew by twenty-seven
per cent while emissions fell by nine per cent, Kate Raworth, an English
economist and author, noted in her thought-provoking book, “
Doughnut Economics: Seven Ways to Think Like a 21st Century Economist,”
published in 2017. The pattern was similar in the United States: G.D.P.
up, emissions down. Globally, carbon emissions were flat between 2014
and 2016, according to figures from the International Energy Agency.
Unfortunately, this trend didn’t last. According to a recent report from
the Global Carbon Project, carbon emissions worldwide have been edging
up in each of the past three years.
The pause in the rise of
emissions may well have been the temporary product of a depressed
economy—the Great Recession and its aftermath—and the shift from coal to
natural gas, which can’t be repeated. According to a recent report by
the United Nations and a number of climate-research institutes,
“Governments are planning to produce about 50% more fossil fuels by 2030
than would be consistent with a 2°C pathway and 120% more than would be
consistent with a 1.5°C pathway.” (Those were the targets established
in the 2016 Paris Agreement.) In a recent review of the literature about
green growth, Giorgos Kallis and Jason Hickel, an anthropologist at
Goldsmiths, University of London, concluded that “green growth is likely
to be a misguided objective, and that policymakers need to look toward
alternative strategies.”
Can
such “alternative strategies” be implemented without huge ruptures? For
decades, economists have cautioned that they can’t. “If growth were to
be abandoned as an objective of policy, democracy too would have to be
abandoned,” Wilfred Beckerman, an Oxford economist, wrote in “
In Defense of Economic Growth,”
which appeared in 1974. “The costs of deliberate non-growth, in terms
of the political and social transformation that would be required in
society, are astronomical.” Beckerman was responding to the publication
of “The Limits to Growth,” a widely read report by an international team
of environmental scientists and other experts who warned that
unrestrained G.D.P. growth would lead to disaster, as natural resources
such as fossil fuels and industrial metals ran out. Beckerman said that
the authors of “The Limits to Growth” had greatly underestimated the
capacity of technology and the market system to produce a cleaner and
less resource-intensive type of economic growth—the same argument that
proponents of green growth make today.
Whether or not you share
this optimism about technology, it’s clear that any comprehensive
degrowth strategy would have to deal with distributional conflicts in
the developed world and poverty in the developing world. As long as
G.D.P. is steadily rising, all groups in society can, in theory, see
their living standards rise at the same time. Beckerman argued that this
was the key to avoiding such conflict. But, if growth were abandoned,
helping the worst off would pit winners against losers. The fact that,
in many Western countries over the past couple of decades, slower growth
has been accompanied by rising political polarization suggests that
Beckerman may have been on to something.
Some degrowth proponents
say that distributional conflicts could be resolved through work-sharing
and income transfers. A decade ago, Peter A. Victor, an emeritus
professor of environmental economics at York University, in Toronto,
built a computer model, since updated, to see what would happen to the
Canadian economy under various scenarios. In a degrowth scenario, G.D.P.
per person was gradually reduced by roughly fifty per cent over thirty
years, but offsetting policies—such as work-sharing,
redistributive-income transfers, and adult-education programs—were also
introduced. Reporting his results in a 2011 paper, Victor wrote, “There
are very substantial reductions in unemployment, the human poverty index
and the debt to GDP ratio. Greenhouse gas emissions are reduced by
nearly 80%. This reduction results from the decline in GDP and a very
substantial carbon tax.”
More recently, Kallis and other
degrowthers have called for the introduction of a universal basic
income, which would guarantee people some level of subsistence. Last
year, when progressive Democrats unveiled their plan for a Green New
Deal, aiming to create a zero-emission economy by 2050, it included a
federal job guarantee; some backers also advocate a universal basic
income. Yet Green New Deal proponents appear to be in favor of green
growth rather than degrowth. Some sponsors of the plan have even argued
that it would eventually pay for itself through economic growth.
There’s
another challenge for growth skeptics: how would they reduce global
poverty? China and India lifted millions out of extreme deprivation by
integrating their countries into the global capitalist economy,
supplying low-cost goods and services to more advanced countries. The
process involved mass rural-to-urban migration, the proliferation of
sweatshops, and environmental degradation. But the eventual result was
higher incomes and, in some places, the emergence of a new middle class
that is loath to give up its gains. If major industrialized economies
were to cut back their consumption and reorganize along more communal
lines, who would buy all the components and gadgets and clothes that
developing countries like Bangladesh, Indonesia, and Vietnam produce?
What would happen to the economies of African countries such as
Ethiopia, Ghana, and Rwanda, which have seen rapid G.D.P. growth in
recent years, as they, too, have started to join the world economy?
Degrowthers have yet to provide a convincing answer to these questions.
Given
the scale of the environmental threat and the need to lift up poor
countries, some sort of green-growth policy would seem to be the only
option, but it may involve emphasizing “green” over “growth.” Kate
Raworth has proposed that we adopt environmentally sound policies even
when we’re uncertain how they will affect the long-term rate of growth.
There are plenty of such policies available. To begin with, all major
countries could take more definitive steps to meet their Paris Agreement
commitments by investing heavily in renewable sources of energy,
shutting down any remaining coal-fired power plants, and introducing a
carbon tax to discourage the use of fossil fuels. According to Ian
Parry, an economist at the World Bank, a carbon tax of thirty-five
dollars per ton, which would raise the price of gasoline by about ten
per cent and the cost of electricity by roughly twenty-five per cent,
would be sufficient for many countries, including China, India, and the
United Kingdom, to meet their emissions pledges. A carbon tax of this
kind would raise a lot of money, which could be used to finance green
investments or reduce other taxes, or even be handed out to the public
as a carbon dividend.
Taking energy efficiency seriously is also vital. In a 2018
piece for the
New Left Review,
Robert Pollin, an economist at the University of Massachusetts,
Amherst, who has helped design Green New Deal plans for a number of
states, listed several measures that can be taken, including insulating
old buildings to reduce heat loss, requiring cars to be more fuel
efficient, expanding public transportation, and reducing energy use in
the industrial sector. “Expanding energy-efficiency investment,” he
pointed out, “supports rising living standards because, by definition,
it saves money for energy consumers.”
To ameliorate the effects of
slower G.D.P. growth, policies such as work-sharing and universal basic
income could also be considered—especially if the warnings about
artificial intelligence eliminating huge numbers of jobs turn out to be
true. In the United Kingdom, the New Economics Foundation has called for
the standard workweek to be shortened from thirty-five to twenty-one
hours, a proposal that harks back to Victor’s modelling and Keynes’s
1930 essay. Proposals like these would have to be financed by higher
taxes, particularly on the wealthy, but that redistributive aspect is a
feature, not a bug. In a low-growth world, it is essential to share what
growth there is more equitably. Otherwise, as Beckerman argued many
years ago, the consequences could be catastrophic.
Finally,
rethinking economic growth may well require loosening the grip on modern
life exercised by competitive consumption, which undergirds the
incessant demand for expansion. Keynes, a Cambridge aesthete, believed
that people whose basic economic needs had been satisfied would
naturally gravitate to other, non-economic pursuits, perhaps embracing
the arts and nature. A century of experience suggests that this was
wishful thinking. As Raworth writes, “Reversing consumerism’s financial
and cultural dominance in public and private life is set to be one of
the twenty-first century’s most gripping psychological dramas.”
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