A common factor underlying several of Australia’s major problems — housing, inadequate public transport, slow response to the climate crisis, loss of biodiversity, water shortage, pollution and deforestation — is the growth in consumption. Yet it is receiving negligible attention from the government and Opposition.

The growth problem

Conventional economics assumes that endless economic growth is both feasible and desirable on our finite planet. Economic growth is defined as the increase in production (with corresponding increase in consumption) of goods and services over a period of time compared with a previous period. Although goods and services are physical entities, either whole or in part, economic growth is measured in monetary terms, usually by growth in gross domestic product. When pressed, some conventional (i.e. neoclassical) economists admit endless physical growth on a finite planet is impossible, but claim that, eventually, economic growth will be able to continue without physical growth. This claim, examined below, is similar to the concept of “ green growth” promoted by proponents of business-as-usual economics, including some environmentalists.

Economic growth is strongly correlated with the growth in the use of materials and energy. Some “green” economic goods and services use less materials and energy than average. For example, education requires buildings and equipment; writing a book nowadays requires a computer, internet connection and a server. Although building solar, wind and hydro power systems uses much less energy than they generate over their lifetimes, these renewable energy systems are materials intensive, along with other energy generation technologies. And, like growth in fossil fuel use, growth in renewable energy drives economic growth that entails environmental impacts.

Earth system science finds human activities have exceeded six out of nine sustainable planetary boundaries in terms of environmental impacts: climate change; biodiversity loss; land use change; freshwater impacts; chemical and plastic pollution; and biochemical flows resulting in, for example, the loss of phosphorus and nitrogen. They have almost exceeded a seventh boundary, ocean acidification. In other words, human activities are leading to the collapse of our life support system, the biosphere, in six or seven different, but related, ways. As the economy grows, demanding more and more materials and energy, so do its environmental impacts.

Growth in energy consumption is undermining the energy transition from fossil fuels to renewable energy. In the year 2000, 80% of global total final energy consumption was supplied by fossil fuels. (TFEC covers all energy consumption – electricity, transportation or heat.) After a period of rapid growth in renewable energy, fossil fuels still supplied 80% of TFEC in 2019, declining to 78% in 2022.

This was not the fault of renewable energy, which grew much more rapidly than expectations, but the result of continuing growth of the global economy driven by, and driving, the growth in energy consumption. Renewable energy is chasing a retreating target. The slowing of the energy transition by the growth in consumption is greatly increasing the risk of our planet crossing a climate tipping point from which there is no recovery.

Clearly, the need to transition away from the growth paradigm is urgent.

A steady-state economy

A steady-state economy is defined in physical terms: an economy with constant stocks of people and products, maintained with low levels of materials and energy throughput that are ecologically sustainable. This definition is very similar to that advanced in 1977 by one of the founders and leaders of the transdisciplinary field of ecological economics, Herman Daly. Unlike environmental economics, which is a branch of neoclassical economics, ecological economics is a transdisciplinary field whose researchers and educators include scientists, engineers, lawyers, sociologists and political scientists, as well as economists who work on socio-ecological sustainability. It researches economic systems that give top priority to ecological sustainability and social justice, placing economic efficiency, the principal goal of NCE, in third place.

In the context of ecological economics, social justice means a distribution of wealth that is fair and equitable both in the present and on an intergenerational basis. In contrast, NCE generally gives social justice low priority compared to economic efficiency. Social justice is closely linked to environmental protection through the observation that the richest 10% in the world are responsible, through their economic activities and investments, for half of all greenhouse gas emissions, and for the vast majority of environmental impacts in general.

As the present level of materials and energy use have exceeded several planetary boundaries, the transition to an SSE must involve a planned reduction in global economic activity called “ planned degrowth". This is different from economic collapse that can result from the failure of NCE, war, colonial or neocolonial exploitation, internal conflict, pandemic and poor governance. Planned degrowth to an SSE, as envisaged by some practitioners of ecological economics, is a planned program to reduce the use of energy, materials and land, and to stabilise the population, initially in the rich countries.

An SSE would be a dynamic economy, with destructive or unproductive industries and activities declining (e.g. fossil fuels; private jet aircraft; armaments for offence; logging of native forests; advertising of harmful products; gambling, including many financial services) and some growing (e.g. renewable energy; public transport; environmental protection; local tourism; public health facilities; aged care and childcare).

A net effect is likely to be reduced GDP, but this would not necessarily be a problem because GDP is a poor measure of human well-being. The criticisms of the use of GDP for issues beyond its original purpose are well-known: in brief, GDP measures bad as well as good, omits to take account of unpaid caring activities ( still mostly by women), and says nothing about the distribution of wealth and income in an economy.

A strategy for introducing planned degrowth to an SSE

Unfortunately, not all practitioners of ecological economics accept the need for planned degrowth. In a culture where propaganda has falsely identified well-being with GDP for decades, planned degrowth appears very radical to some. However, most people would agree with recommendations and policies to improve human well-being: better and cheaper public health, public education, public housing, public transportation in cities, public parks, pollution control, aged care and childcare. We call these improvements collectively “universal basic services” or “ universal public services”. Demoting GDP and promoting UBS would form the first step towards weakening the present undue emphasis on economic growth and introducing the need for planned degrowth to an SSE. UBS is part of a “social wage”.

In addition, well-being for the majority of people would be increased by a green job guarantee, the second step of the strategy. Environmentally sound and socially just jobs would be funded by the national government and provided by state/provincial government, local government and registered community-based non-government organisations. The jobs would be paid the basic minimum wage to perform work that is not provided by the market: much essential caring for the environment and people and citizen science. As well as providing socially useful work for all who want it, the JG would provide a “ buffer stock of labour", instead of the current practice of using unemployment against inflation. A pilot JG program commenced in Gramatneusiedl, Austria, in 2020; Sweden has a limited program known as Arbetsförmedlingen.

The reaction of the big business and NCE establishments to Steps 1 and 2 is likely to be twofold. Especially in the United States, UBS and JG would be labelled as “socialism”, which is seen to be a bad thing by definition, or, even worse, “communism”. A simple answer is that the Scandinavian countries have progressed substantially along the UBS pathway, while being among the richest countries per capita in the world. They still have market economies, albeit ones that are directed more towards serving the majority rather than the rich.

The more general objection to UBS and JG is the claim that the government cannot afford it. Within the framework of NCE, this can be answered by pointing out that vast sums of money would become available by reducing huge military expenditures, especially on offensive weapons, and by ensuring that large corporations that make large profits in our country pay tax. Additional funding could come from wealth and inheritance taxes, and strongly progressive income taxes. Taxing the rich has the additional benefit of reducing environmental impacts.

Within the framework of Modern Monetary Theory, it is understood that governments of countries with monetary sovereignty — e.g. Australia, China, Japan, the UK and the US — do not need tax revenues to fund their spending, as they spend by issuing currency. These governments do not have to balance their budgets like a household or a state/provincial or local government. It is common for these countries to have budget deficits without causing high inflation.

Inflation can be avoided by ensuring that total (government plus private) spending remains within the country’s economic capacity, which is determined by physical resources, existing industries, available labour force and its skills. Even when the economy appears to be operating at full capacity, its capacity can be increased by government policies to, for example, increase skills, improve infrastructure, and discourage businesses and industries that are unproductive and destructive while encouraging the transfer of workers to new, productive, constructive industries. This is similar to what the UK did, advised by the great economist John Maynard Keynes, in fighting World War II. Further, governments that wish to increase public spending can reduce private spending by taxation (progressive income tax, wealth tax, and taxes on specific goods and services), incentives to increase savings (e.g. savings bonds, superannuation), and rationing of certain products. Applying MMT’s understandings of money creation and flows, without necessarily using its name, is the third proposed step towards an SSE.

The fourth proposed step is the implementation of government policies to encourage business and industry to provide environmentally sound, healthy products, to discourage waste of natural resources and pollution, and to drive the economy towards one that is, at least to a large degree, circular instead of linear. Policies would include the following: environmental taxes (including a carbon tax); environmental audits and labelling of products; grants, low-interest loans, fees, rebates and subsidies; funding of R&D, education, training and information; regulations and standards for energy efficiency and materials efficiency; tighter controls on advertising harmful products; and legislation to encourage the design of products for reuse, recycling and remanufacture.

This step is the most difficult because it directly challenges capitalism by setting national and international caps on the throughput of materials and energy, and by ensuring the fair distribution of these limited resources. The most urgent part is to address the climate emergency by reducing global TFEC while supporting technological change to renewables and energy efficiency. In neoclassical economics theory, a cap-and-trade emissions trading scheme is the ideal method, as pointed out in the 1970s by Daly, but, because it has a large, complex set of design options, it can be easily designed to be ineffective by governments under the influence of vested interests, NCE and neoliberalism.

As the global South must still grow its energy consumption, the global North must substantially reduce its consumption. Superficially, this appears feasible because TFEC of the European Union has not increased from 1990 to 2022. However, much energy is embodied in goods manufactured in the global South and imported into the European Union. Therefore, in addition to reducing its own territorial emissions, the North must assist the South in the latter’s energy transition and, in particular, in reducing the energy intensity of the South’s manufacturing industries. This is Step 5.

Implementing these five steps would set an economy, national or global, onto a path of degrowth to an SSE. Many other issues would have to be addressed along the journey, for example:

• the political power of large corporations and other vested interests;
• ending population growth with policies that give people choice and improve their lives;
• changes to superannuation, banking and other financial services; and
• international trade and the North’s neocolonial control of the economies of the South.

The reward would be a less polluted, fairer and possibly more peaceful world.