Degrowth Versus Sustainability

I was on the “Steve Keen and Friends Livestream” very recently, and one of the topics that came up is “Degrowth.” I had earlier made some comment about degrowth on Twitter and noted that I found it hard to find a good explanation of what “degrowth” really meant. A few helpful people sent me the article “What does degrowth mean? A few points of clarification” by Jason Hickel.

Jason Hickel notes that critics do not like the term.

Many of the objections to degrowth have to do with the term itself. Some people worry that degrowth introduces confusion because it is not, in fact, the opposite of growth. When people say ‘growth’ they normally mean growth in GDP, so one might reasonably assume that degrowth is likewise focused on reducing GDP. Proponents of degrowth are therefore condemned to perpetually clarify that degrowth is not about reducing GDP, but rather about reducing material and energy throughput.

He argues that the problem is the word “growth.”

In reality, people pursue growth not in order to increase an abstract number (GDP), but because they want to consume or do more, which of course requires using more materials and energy. So when economists and politicians talk about growth they really mean an increase in materials and energy (and specifically an increase in commodified materials and energy), even though this is not stated outright. The preoccupation with GDP is a fetish that obscures this fact; it makes it seem as though growth is immaterial when in reality it is not. If GDP growth did not come along with an increase in material consumption, people would not pursue it (what’s the point of having a higher income if it doesn’t enable you to expand military spending, buy bigger houses and faster cars, or pay people to do things for you?)

I can only say that I find this line of argument unconvincing. I believe that “sustainability” (or a similar phrase) is the one that fits. Instead of launching a dubious linguistic jihad on “growth” or “GDP,” you are focussing on what matters: can the Earth support projected resource consumption? Furthermore, as the fiscal conservatives figured out decades ago, it puts opponents to your policies on the linguistic back foot: are they in favour of unsustainable policies?

Furthermore, I think Hickel’s arguments about “growth” and “GDP” are mainly useful for generating attention. And why do they gain attention? Because anyone who disagrees with any of Hickel’s premises can see weaknesses with them, and therefore they generate publicity via controversy.

1. To the extent that most people care about Gross Domestic Product (GDP), it is because it equals Gross Domestic Income (within a statistical discrepancy). Falling incomes typically implies falling profits and/or a falling aggregate wage bill, which normally results from rising unemployment. I do not know entirely why GDP pushed GDI out of contention in terms of media attention, but my guess is that the GDP releases are more timely. In particular, recessions involve social ills, and falling GDP is heavily associated with recessions. Not wanting negative growth is hardly a “fetish.”

2. I am severely unimpressed with historical analyses relating energy/resource use and GDP growth. (I have seen many of these over the years when I monitored the Peak Oil scene.) We have never been in a regime where capping resource use was a serious objective of policy, so of course resource usage itself grew over time. And once we keep in mind that GDP equals GDI, even in a steady state world where resource extraction was sustainable, it seems likely that measured GDP per capita would rise. (I use per capita since population growth is negative in many countries. I expect negative long-term real GDP growth on a multi-decade horizon based on demographics — even if there are “magic” ways to work around resource limits, like cheap fusion power. There is uncertainty whether “fluff” in GDP resulting from the changing mix of products and services is enough to overcome demographics.) Hickel notes “pay[ing] people to do things for you” is part of GDP, and doing so consumes zero material resources (beyond the consumption of the people involved, which we assume has to happen — as otherwise they will starve/freeze to death). For example, rent/mortgage payments can consume 30% of many households’ expenditures, and other than embedded utility costs in rents, new resource consumption is limited as the residences can be decades old. We are so far away from a steady state world that it makes little sense to have an arcane debate whether per capita GDP growth would be positive or negative when in that state.

Transition To Sustainable Growth?

The real question is what happens to growth during the transition to a “sustainable steady state”?

I do not have time to review “degrowth” plans, but I see two overall strategies.

1. Total incomes are tanked, and output is rationed, so that all consumption is throttled to get within sustainable limits

2. The economy is restructured so that consumption is weighted towards goods and services that have limited resource requirements, putting resource consumption within limits.

The first option is going to obviously reduce GDP, whereas the second would be mixed (and country dependent). However, only the second appears politically plausible to me. You can get voters to support changes to the structure of the economy if you are offering measures to mitigate the costs of the change, and those measures will act to replace the income destruction from sectors of the economy that are being shut down.

Email subscription: Go to https://bondeconomics.substack.com/ 

(c) Brian Romanchuk 2023