Pearls and Irritations

An opinion piece (‘Degrowth approach is disastrous’, Canberra Times, 9 September, p.38) by authors from the Centre for Independent Studies (CIS) attacked the concept of degrowth to a steady-state economy (SSE) and defended the notion of continuing economic growth on a finite planet.

The Canberra Times did not publish the opinion piece I submitted in reply. So that we can have a debate about degrowth, I set out here the main arguments or claims of the CIS authors together with my responses.

CIS: “Degrowth is based on several assumptions and conjectures that are highly suspect and lack evidence, particularly regarding a speculative ecological collapse or various catastrophes associated with climate change.”

MD: Thus CIS dismisses the huge body of climate science which recognises that climate change is an existential threat to human civilisation! Even an elementary study of ecology or environmental science shows that we humans are totally dependent on the natural environment for our survival.

CIS: “Degrowth proponents say economic growth is to blame for climate change, pollution, species extinction, and resource exhaustion. They think the only solution is a contraction of economic activity…”

MD: Earth system scientists find that human activities have exceeded safe planetary boundaries in the areas of climate change, loss of biodiversity, deforestation, soil depletion, freshwater extraction, biogeochemical flows (e.g. phosphorus and nitrogen), and pollution. Environmental scientists recognise that, at one conceptual level, environmental impact I can be disaggregated into the product of three driving forces: affluence (consumption per person) A, population P, and technological impact T. This is the well-known I = PAT identity.

More detailed analysis shows that, in practice, growth in consumption per person has a bigger environmental impact than population growth, although both are important. To mitigate environmental impacts, technological change is necessary but not sufficient, especially considering that time is of the essence in climate mitigation.

There is a close correlation between the growth in global consumption as measured by GDP and the growths in the global consumptions of energy and materials. The growths in physical consumption have resulted in huge environmental impacts. Growth in energy consumption when all energy is renewable will still drive increasing impacts, albeit at a lower rate than from fossil fuels.

CIS: “Even in wealthy countries like Australia, a policy of degrowth would cause widespread poverty from declining employment and consumption; with its related costs in social welfare and social ills such as crime and homelessness”.

MD: Degrowth proponents recommend planned degrowth to an SSE by the rich countries as one of the solutions. Planned degrowth, combined with a job guarantee, an expansion of universal basic services, and working time reduction, would be very different from a recession, as demonstrated by macroeconomic modelling and physical system modelling (see e.g. chapter 9 of this book).

Universal basic services involve expanded public housing, education, health, transport, etc. Incentives and disincentives – such as taxes, grants, regulations and standards, and institutional changes – would be used to redirect resources from unproductive or destructive economic activities to those that satisfy human needs as opposed to artificially stimulated wants.

CIS: “Credible modelling of climate change mitigation shows economies still growing as we transition to net zero”.

MD: Presumably CIS is referring to the Integrated Assessment Models published by the IPCC and the Net Zero Emissions Model of the IEA. These climate change models assume unproven technologies will remove huge quantities of CO2 from the atmosphere. This is speculative and risky. In the absence of large-scale CO2 removal, degrowth is necessary for timely replacement of fossil fuels by renewables and energy efficiency. If global energy consumption continues to grow at the pre-pandemic rate, the transition is unlikely to be completed in time to avoid crossing climate tipping points. Despite very rapid growth in renewable electricity since 2009, fossil fuels were still responsible for 80% of global total final energy consumption in 2019, the same proportion as in 2009.

CIS: “Economic growth is closely connected to innovation, and it is to innovation we must look to solve complex problems like climate change.”

MD: An SSE would be internally dynamic. Innovation will take place while destructive technologies and institutions are phased out and ‘green’ technologies and institutions are created to replace them.

CIS: “the degrowth movement would deny those living in poverty around the world the improvements in living standards that come with economic development.”

MD: The rich are responsible for the vast majority of adverse environmental impacts––for example, see the detailed study by Chancel and Piketty. Spending by the rich must be reined in to help make our civilisation ecologically sustainable and socially just. The poor need economic development. Therefore, for the sake of environmental protection and social justice, the rich must reduce their economic activity so that the poor can develop economically. Beyond a certain level, increasing wealth does not increase happiness.

Concern for the poor of the world is often lacking in people who consider GDP to be a good measure of wellbeing. I suspect that CIS will be reluctant to support the following policies to reduce social inequality.

In rich countries the policies needed are wealth and inheritance taxes, carbon taxes or cap-and-trade emissions permits, universal basic services, a job guarantee and reduced working week. To those who cry ‘class warfare’, the obvious reply is that class warfare has been conducted by the rich and powerful for centuries, within and between countries. The gap between rich and poor has been increasing, especially during times of crisis such as the Global Financial Crisis and the COVID pandemic.

Many countries of the Global South are poor because of the impacts of past colonialism and present neo-colonialism. Several studies (e.g. the Just Transition Africa report) find that there has been a net transfer of wealth from the Global South to the Global North. Social justice demands that sovereign debt of the poorest countries be cancelled, or at least converted into development grants, and increased assistance be given to the development of local green businesses and industries.

CIS: “One of the great achievements [of capitalism] of the past 30 years has been the lifting of over 1 billion people out of poverty worldwide, particularly as China and India moved away from the anti-market economy and the Licence Raj.”

MD: The use of World Bank’s poverty line of $1.90 PPP per day has come under criticism for several years. According to this method, the poverty rate in China fell from 66% in 1990 to 19% in 2005. However, if we instead measure incomes against the Basic Needs Poverty Line, we find poverty increased during this period from 0.2% in 1990 to 24% in 2005.

CIS: “Abandoning capitalism, growth and innovation in the name of ecological purity would condemn us all to poverty.”

MD: There are several straw persons in that rhetoric! Planned degrowth to a steady-state, internally dynamic economy, does not necessarily involve abandoning innovation or markets. However, markets would have to be constrained to some degree to be consistent with ecological sustainability and social justice.

Failure by the rich to undertake degrowth to a steady-state economy is likely to lead to ecological, social and economic collapse and condemn us all (except possibly the richest 1%) to poverty.

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