It is something probably every junkie dreams of – to be able to keep taking drugs and feeling free, careless or just high, but without all the unpleasant side-effects like health issues, financial ruin, destroyed social networks etc. This, however, is illusion and no reasonable person would deny that it is. It is therefore astonishing how many otherwise reasonable persons fall prey to this illusion with regard to the great societal addiction – economic growth. They invoke the idea of decoupling GDP growth from resource use, environmental pollution and the like. But decoupling growth has nothing to do with reality, it is a myth.
I am taking for granted here that it is clear to everybody who is reading this blog why economic growth in the current form is not a good thing (if not, feel free to comment or browse this blog’s growth-tag). The main question to be asked here therefore is: Why are we addicted to economic growth, actually? The answer is: Because, under the current circumstances, the proper functioning of capitalist economies is fully dependent on growth. We have seen in the recent (and ongoing) crisis what happens when the machinery ceases growing. The consequences are unemployment, unrest, exploding debt and general societal instability. But why do capitalist economy and consumer society need growth? The latter is actually more of a result of the need for growth, not the other way around. To grow at an “acceptable” pace, a capitalist economy needs consumers. Lots of them. It needs steadily changing tastes, it needs positional competition and what I once called the TESCO mentality. This is, basically, what generates economic growth. We are generating economic growth.
And why are we doing this? Because without consumption we cannot keep the economy growing, and if it does not grow, we cannot maintain our standard of living. It is a kind of closed loop – from consumption to economic stability to consumption. Nevertheless, I still have to explain why economic stability depends on economic growth.
There are, indeed, numerous reasons for this. One is that this is what our financial system forces firms to do. If they do not grow, they cannot repay their loans, and without loans they cannot do investments – without which they have no chance to survive in a competitive economy. At least as long consumers except them to offer ever lower prices or a continuous stream of “better”/different products (I used the quotation marks to emphasize my doubt about whether a new, say, Samsung Galaxy is in any objective sense “better” than an older model).
Another reason why economic growth is a conditio sine qua non of modern capitalism is what Robert Solow got his “Nobel Prize” for in 1987 – the thing economists use to call total factor productivity (TFP). This is what remains when we subtract increases in factor inputs (i.e., more natural resources, more capital, more labour) from GDP growth. It could also be called technological progress or just productivity, for the sake of simplicity. Whatever the name, it is noncontroversial that TFP reduces the need for human labour in production. Indeed, standard economics is all about achieving such reductions. Since TFP is continuously rising (though, of course, at a slower pace than GDP), production (and, for that matter, consumption) has to rise at a similar pace if employment is to stay constant. A stagnation combined with TFP growth leads to unemployment.
These are just two reasons for our addiction to economic growth, but they should suffice to make my case – under the current capitalist system, there is no room for de-growth. Grow or die, so to speak. No wonder people are looking for ways to decouple the drug (economic growth) from its unpleasant consequences (environmental destruction, pollution, Peak Everything etc.). But they are looking for the wrong thing, as they are blinded by an illusion. There are no drugs without side-effects.
Why it is highly unlikely, if not impossible, to decouple GDP growth from resource use and pollution was shown very impressively by Tim Jackson in his by-now famous book Prosperity without Growth. He pointed out the frequent confusion of relative and absolute decoupling. While related, these two terms are of completely different meaning. Decoupling proponents often point to the fact that there is an observable trend of relative decoupling – in other words, the resource intensity of GDP is falling (we need less resources to produce 1$ worth of goods/services). This is true, but, as can be seen in the right-hand picture depicting global trends of energy intensity of GDP, this trend is not strong. Indeed, in China it seems to have stopped falling recently – and China is arguably one of the most important actors here. Furthermore, this is only the story of relative decoupling – which in the end is meaningless by itself. What really counts is absolute decoupling, i.e., absolute decreases in resource use, emissions, pollution and the like. Nothing like that seems to happen. Indeed, for many metals, greenhouse gas emissions, oil etc. the trend is clearly rising, which is clear given the needs of emerging economies, but also, e.g., the European transition towards renewable energy generation. While the lack of absolute decreases for the time being does not per se mean that decoupling is impossible, it does not really strengthen the optimism regarding it.
Moreover, it should be noted that decoupling seems to be a logical impossibility. If the economy is to continue growing indefinitely without raising its ecological footprint, the resource intensity would have to keep falling continuously – and, in the end, be reduced to near-zero.
Proponents of the idea of decoupling draw a picture of a world of services, where physical production is but a small part of total economic activity, where production cycles are closed (consistency) and people tend to use products longer, to share, to use renewable energy, possibly to engage in social entrepreneurship and some kind of subsistency measures. There is little to say against that, except maybe the objection that large amounts of renewable energy imply increased needs for land, while voices are becoming loud that Peak Soil may be our next big problem, and the hint that the assumption is problematic that commercialized services are per se less resource intense than are the respective individual consumptive activities they are meant to replace. But there is one strong argument against this decoupling vision – if we really would reform our economies in the ways proposed, they likely would stop growing. You cannot increase GDP by engaging in urban gardening, social entrepreneurship or increasing the life-time of products. So while the proposed strategies are worth consideration and may make our society more sustainable, they are not really a good way to decouple growth from anything. They choke it off, instead.
But is there an alternative to decoupling (business as usual not being considered an alternative here)? Well, if one believes Jackson or Niko Paech, author of the powerful pamphlet entitled Liberation from Excess (a very good supplement to Prosperity without Growth), there is a way to reach prosperity without growth. You may call this de-growth or a post-growth society. The main proposals made by both Jackson and Paech are:
- Re-focus from consumption as a source of elusive happiness to more robust and sustainable personal goals, much in the way proponents of Amartya Sen’s capability approach have been advocating for years already. Individual satisfaction, social bonds, equality, engagement in societal decision-making processes are some examples of what could replace consumption as human goals and dimensions of well-being.
- Sufficiency! It is important to recognize that we have been living above our means. To change that, viz. to become sufficient, would mean in practice e.g. less air travel, more regional products, fewer throw-away products etc. As Paech rightly points out – if environmental “externalities” would be priced in, the resulting price increases of almost all products and services would lead us to such changes, either. But we are intelligent beings, we do not have to wait for changes in natural capital to become an integral part of standard accounting procedures.
- Work less. If we would work less (say, 20-30 hours a week), this would a) lessen the pressure of technological progress on employment and b) release time-resources for the pursuance of personal goals, for social activity and other things that are truly important for human well-being.
- De-globalize. I already mentioned it in Pt. 2 – global division of labour had its merits, but it also has increased our dependence on the outside world. In addition, at least in the last few decades, it was only possible to increase the level of economic globalization because the true social cost of transportation, lower working standards in poorer countries etc. has not been reflected in goods prices. Of course, more regional production and services would lower the diversity and “freedom of choice” – but whether this is really a bad thing, is disputable. In other words, what we need is an attitude following the motto of “As locally as possible, as globally as necessary.”
- Incentives for positional competition should be lowered. There are many ways to do this – in the end they are reducible to the call for more equality and social cohesion.
The need for reforms, according to Jackson, Paech and many other thinkers of the truly sustainable post-growth society, is huge. The specific requirements imply a thorough overthrow of cultural, economic and societal institutions. It should be clear, however, that business as usual is not an option. And decoupling growth is a myth. We seem not to have a choice.