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Until recently, the deliberate shrinking of the economy seemed only an unrealistic hypothesis. However, the corona crisis offers opportunities to take concrete steps towards such a ‘degrowth’ economy. However, the idea of degrowth still seems to raise many practical questions, arising from the overly theoretical nature that degrowth economists have bestowed upon it. It seems sensible to me not to assume a radical transformation of the economic system. If the degrowth economy is presented in terms of all-or-nothing, it has little chance of being taken seriously. It is wiser to think of policies that contribute to the radical curtailment of the economic system so that the destructive forces of capitalism can be constrained.
About a year ago I published an article about ‘degrowth’, or the sufficiency economy. A system that is not based on growth, because this will irrevocably go at the expense of the finite reservoir of natural resources, but on contraction. The economy should be curtailed to a level where everyone has sufficient resources to live a quality life without destroying the environment.
The whole idea of degrowth seemed unrealistic to me. The shock would simply be too big. The addiction to growth is in the capillaries of our entire economic system. Taking away economic growth implies a sustained period of mass unemployment, and the annihilation of the value of pensions and mortgages. This shock is not felt by big capital, but mainly by common employees. In short, one cannot expect wide support for a sufficiency economy.
But that shock has come with the measures against the corona virus. The economy has went in to slumber. It seems for the first time that we have deliberately brought about economic contraction. The reason for this is very sad and serious, but at the same time you can speak of a huge social experiment, in which we have kicked off cold turkey-style from our addiction to growth.
There are voices claiming that we should continue this way, that it does not make life worse, while improving the environment. This suggests that I have to swallow my words and reconsider my assessment, now that the first steps towards a degrowth economy have been made. Is it possible to say that further steps towards have become feasible now, and if so, what is the nature of these steps?
The default starting point of economic growth can easily become a straw man to blame for everything wrong in the world, with intentional shrinkage becoming the solution to all those problems. For example, degrowth is seen not only as pursuing environmental sustainability, but also ‘social sustainability’, which involves injustice, stress, exploitation, empathy, insecurity.
Indeed, there is much to be said about how economic growth has devastating consequences for people’s social and psychological stability. If it is not restricted by the right legislation, the capitalist system tends to ‘forget’ people. Profit, for example, is not used to improve the quality of life, but to create more profit. The pursuit of efficiency can lead to a race to the bottom, with child labor in low-wage countries being just one of the excesses.
Therefore, less emphasis on growth and limiting the capitalist system is also necessary, but the way in which a shrinking economy can combat injustice does raise the necessary questions. Questions that the advocates of degrowth economy could ignore until now, because they have been was mainly discussing a hypothetical thought experiment.
For example, there is the question of how we manage to less distribute resources in a more equal way. It is clear that most of the inhabitants of rich countries have sufficient means. Substantially less income would not make most of us much more unhappy, and if we transfer the liberated money to people who become much happier because of it, we will contribute to a better world.
But what exactly is sufficient? A roof over our heads and daily food are definitely needed, but where is the line between need and luxury? Of course, we can do without mobile phones, laptops, cars and airplanes, but can we also do without medicines or electricity? And what about those people who don’t have enough yet? Do they draw the line differently, because they are not yet used to the same level of prosperity as people in rich countries? And how do they actually transfer what we have too much to those who are short?
Either way, the first step is that there is the emergence of a collective awareness that enough is enough. When growth is no longer sacred, the rich part of the world will realize that it no longer needs it. Indeed, this seems to be a sentiment that quite a few people put forward during the corona crisis. Now that the obligation to travel from meeting to meeting has disappeared, it becomes clear how nonsensical it all was. Now that we are no longer on vacation, it becomes clear how nice it can be to stay at home. Wouldn’t it be good if these obligations did not return in the postcorona economy?
Of course, such claims are expressed by people who can easily afford it, who don’t have to worry about their rent or about their children. I also have the suspicion that these are people who will later try to make up for their missed holidays and meetings twice as hard.
To answer the question of what exactly is enough, we cannot simply assume objective criteria. The sufficiency economy is contrasted by ‘psychology of the ever more’ that has blossomed in capitalism. The emotion of envy, not wanting less than anyone else, fuels the evolutionary mechanisms of the free market. The free market is a domain in which there is scarcity and in which people are motivated not so much to bring in enough for themselves, but above all to have more than anyone else. After all, if you do not do so, a competitor will try to get those scarce resources. So it’s not that people are intrinsically greedy, but the market forces us to greed.
Capitalism encourages us to work harder, to buy nicer things, to put on an even bigger mouth, to go on vacation. So that we can outdo others and make them jealous of us. Envy seems to be the great engine behind the capitalist system. We want more and more, even if we destroy the environment and ourselves.
It is possible to control the emotion of envy. In fact, it is the goal of just about all cultural norms and institutional rules to achieve that. Religion, culture, agreements, law, conventions and so on can be seen as a method to eliminate the “destructive power of envy’, as Michael Walzer puts it. These rules and standards allow a distribution of scarce resources that people accept without asking for more. In fact, the free market is the only institution we know of that does not combat envy.
And that’s not all that bad. Because envy can also be the engine of technical progress. As Joseph Schumpeter’s creed reads: capitalism means creative destruction. Everything is destroyed, but there are new inventions to replace it. The competition between entrepreneurs forces them to keep innovating so that they gain the favor of the consumer.
These innovations are not only unnecessary knickknacks, but are also concern by medicines and science. Matters that actually improve our lives, and it is the question whether those improvements can continue to be pursued if the need for innovation disappears, if envy is effectively curbed. In this, it is not about individual inventors or researchers, but about the overall climate within which innovations are created. Modern innovations require investment, research and development, research programs, social legitimacy. There must be enough people who believe in the promise of an innovation before it can actually be implemented. Without an underlying capitalist engine, this whole innovation climate will disappear. The question is whether that is what we want.
The most famous book about degrowth is Tim Jackson’s Prosperity without growth from 2009. Jackson shows that a so-called ‘steady state economy’ can develop, in which the same amount of goods is produced and consumed every year. This economy is based on the equal distribution over the population and the freed-up working hours could be spend on meaningful activities, such as culture, self-development and commitment to the community. Prosperity should not be measured in terms of gross national product, but in terms of human flourishing.
The idea of steady state was introduced in the 1970’s by Herman Daly, who saw this steady state as an alternative to the ‘growthmania’ of capitalism. His teacher, Nicolas Georgescu-Roegen, found the whole idea implausible. After all, how can the economy continue to adapt to people’s changing needs? You need innovation for that and innovation implies creative destruction, as Georgescu-Roegen had learned from his teacher Joseph Schumpeter. So even in a steady state economy you will have to destroy things and because there is only a finite supply of such ‘things’, the economy will eventually destroy itself – even it is steady state.
The ideologically tinted debates between the supporters of Gerogescu-Roegen and Daly are mainly held in theoretical terms. Model calculations are used by so-called ‘heterodox’ economists to show whether a particular economy is possible or not. But how we should turn the shrinking economy to a steady state remains unclear. Even if it is theoretically possible to reform the economy at will, it would require a level of command over the economic system which to me seems completely unrealistic.
After all, the recessions of the past have proven that turning from a shrinking economy to a growing economy has never been easy and attempts to do so are always accompanied by conflicting insights and assumptions. Indeed, even after the fact, economists continue to defend opposing statements about the nature of the recession and recovery.
It is therefore not clear to me how economists and politicians think to achieve a steady state economy. What strikes me in any case among both orthodox and heterodox economists is that the economy is seen as an independent system of which the parameters of which can be influenced by macroeconomic politics, but which cannot be intervened directly. The economy itself seems to be separate from politics and morality.
The underlying idea is that people are first concerned with satisfying their individual needs and only then focus on issues such as meaning and collective concerns. The market, in turn, is the domain where people can meet their needs.
This is a peculiar picture and it has only recently emerged in Europe. Until about 200 years ago, the market was seen as a necessary evil, where lower urges such as greed and envy could find their way. These urges had to be restrained by the moral virtues that at that time were mainly supplied by the church. It may be that greed and envy have acquired their place as virtues within the free market − as indicated above − but the free market has been given that space. Adam Smith showed that it would increase general prosperity if the market was given space, the individual vice of ‘self-love’ turned out to lead to a positive result on an aggregate level. Moreover, the competition that took place on the market turned out to be far more peaceful than the belligerent competition of politics of the time.
It is actually paradoxical that degrowth economists continue the idea of an independent market. It is certainly better and more realistic to say that the market can operate within political and moral conditions. In addition, these conditions can be restrained if necessary.
Tim Jackson’s broad concept of prosperity is symptomatic here. Instead of leaving important human values outside the economic system, this concept of prosperity tries to capture as many moral values in economic terms as possible. But one should not so much try to transform all values into economic values; it makes much more sense to secure those values in other social domains, so that the economy can be confined.
Instead of steering the market as an autonomous system towards a steady state, you can better think about how to overcome the destructive powers of envy by resurrecting sharper boundaries. By having standards and rules that directly intervene in the ‘psychology of the ever more’. One may wonder how the policies proposed by degrowth economists relate to this?
In fact, a number of these measures make perfect sense. For example, according to Tim Jackson, the innovation climate should be influenced in such a way that it is particularly profitable to invest in sustainable technologies. Whether that leads to degrowth or sustainable growth is hard to say, but it is a good idea in any case.
In a sufficiency economy, you don’t have to work 40 hours. As early as in 1930, John Maynard Keynes suggested that a 15-hour work week would be enough. Sharing labor is an important condition in this. People do not compete for a job or a position, but work together to produce sufficient resources to make a good living. A surplus of money is then in fact exchanged for an unprecedented increase in free time.
Another measure that is proposed is the ‘basic income’. For the degrowth movement, this income serves to slow down the economy as people get more free time and work less. In turn, I would say that a basic income allows people not to participate in the economy and instead participate in domains that delimit the economy.
Something similar applies to the elimination of debts. Debt is the essence of capitalism, because entrepreneurs have to borrow money for their investments. But debt also leads to artificial growth that is of no use to anyone and it leads to people who have to get deeper into debt without ever having a chance to get out again. If debt is eliminated, new opportunities arise to break this vicious circle.
A problem for the degrowth approach is that there is no clear theory of social change. Macroeconomic measures such as those described above build on existing economic theories, but ultimately the degrowth economy also requires a completely radically different culture. Instead of maximizing economic utility, solidarity and meaning should be pursued. How such a mindset can be initiated remains vague. Much seems to be expected from local solidarity and sustainability initiatives, such as eco-communities, introduction of local currencies and sharing platforms. But how such local initiatives can lead to large-scale cultural change is unclear to me.
And maybe that’s not necessary at all. The most important could just be that small initiatives show people that there are alternatives. That the market does not encompass all of life, that we can set limits for the globalized, free market. We don’t always have to maximize our economic utility, but we can also make other choices. A sustainable initiative does not have to be of service to a large-scale transition, but can have added value just by staying small.
It is tempting to see the measures described above as a coherent package that ultimately makes the degrowth economy feasible. This temptation is especially great because the degrowth alternative has been developed as a theoretically consistent systems, based on the question whether a shrinking economy could actually be possible. But it is difficult to come up with concrete proposals from such a hypothetical starting point, especially now that the time seems suddenly to be ripe to take further steps towards a degrowth economy.
An all-or-nothing story is difficult to sell, especially because it has to compete with the plans that are currently being developed to rebuild the economy as much as possible. There is hardly any mention of sustainable investments, but instead there is strong support for airlines and heavy industry. Money is paid to many people, but that money seems to be primarily intended to encourage them to consume. The call for degrowth remains fairly marginal, drowning in the midst of all other sounds. It would be wise not to present vistas of a steady state, but instead to point to the destructive forces of capitalism and the opportunity to curb them now. We do not need a comprehensive economy that is shrinking, but we need an economy that is given less space in which it can grow.
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