We Won’t Solve the Climate Crisis with a Growth-Driven Economy; What are the Alternatives?

“All you can talk about is money and fairytales of eternal economic growth” - Greta Thunberg

May I begin with two propositions:

1. Economic growth[1] is incompatible with holding the temperature under a 1.5 degree increase.
2. Social inequality[2] is incompatible with an adequate response to the climate crisis.

I need to justify these propositions, but then I want to move swiftly on to examining alternatives to a growth-driven economy. For most of us, the current economic system has been the unquestioned background to our lives. The only alternative we’ve known has been authoritarian state communism, whose failure in our times seemed highly desirable. What else could there be?'

Economic growth is incompatible with holding the temperature under a 1.5 degree increase.

Endless economic growth is logically nonsensical. Three per cent per annum is conventionally said to be a desirable rate of growth in our global gross domestic product (GDP). This entails doubling the size of the economy (national or global) every 23 years, producing more and more stuff, providing more and more services[3]. Our world is finite, with diminishing productive land, fish in the ocean, materials that can be mined, sand and aggregate for construction. How much more stuff can you use? How many more services can you personally absorb? You’d need to use eight times as much stuff and absorb eight times as many services by the end of the century. You’d be sharing it with a few billion more people on the planet, but the prospect of endless doubling is obviously preposterous.

This ever-expanding provision of goods and services is what produces the greenhouse gases that have brought us the climate crisis. We are already in possibly irreversible trouble. We have resisted and argued with the idea of limits to growth for decades, most dramatically since it was modelled by the Club of Rome in 1972[4]. It’s surely time we faced up to the need to slow economic activity so that it proceeds at a steady pace within Earth’s biophysical limits.

We are continually improving our efficiency at deriving more utility from each unit of carbon emissions, by using renewable energy (a little) and using less energy and less material to produce the goods we want. This is the idea of ‘decoupling’ economic growth from growth of carbon emissions. But every smart innovation in decoupling is outpaced by growth in both population and consumption levels. Atmospheric greenhouse gases continue to rise.

Can Green Growth[5] solve our problems?

The World Bank and the Organisation for Economic Cooperation and Development are promoting the idea of ‘green growth’ - increasing the rate of innovations in eco-efficiency and pricing carbon as a route out of our ecological emergency. But not so fast; does it stand up to scrutiny? Hickel and Kallis (2019)[6] examined models of global resource use under green growth conditions, including very high taxes on carbon (up to nearly $600 per tonne) and fast rates of technological innovation. They reported that ‘emissions reductions in line with 2 ºC are only feasible if global GDP growth slows to less than 0.5%; and reductions for 1.5 ºC are only feasible in a degrowth scenario.’ Let us encourage every technological advance that will increase eco-efficiency, and let us promote high taxes on carbon, but green growth will not by itself do the job. We need to plan for an economy whose gross production operates within all planetary boundaries, while providing for everyone’s wellbeing and maintaining continuous improvement in goods and services.

What about low income countries?

However, we are left with the problem of countries where productivity is so low that even better distribution of wealth would not provide an adequate level of basic needs for a proportion of the population. These countries need to grow in productivity. This will necessarily produce emissions which will require greater emissions reductions by wealthy countries to compensate.

Social inequality is incompatible with an adequate response to climate change.

Globally, income and wealth inequality has been increasing since the 1970s surge of market supremacy and minimization of government role in welfare. The differences are steep. The top 10% receives half the world’s income, the bottom 10% receives 1% (Chancel and Piketty, 2015)[7]. Consumption-based emissions follow roughly the same profile.

In higher income countries, rising inequality is associated with higher carbon emissions (Grunewald et al, 2012)[8]. This is thought to be due to the drive to consume goods that signal higher personal status, such as sports utility vehicles and fashion clothing (Wilkinson and Pickett, 2009)[9]. This motivation, unfortunately, is insatiable, as most other persons in an individual’s social network are engaged in the same race for status. It leads to hyperconsumption very far beyond what is needed for wellbeing. Excessive greenhouse gas emissions are the outcome.

Rising inequality is also associated with longer work hours and rising debt levels, both of which stimulate consumption and emissions.

Carbon pricing as a mitigation measure works well in a relatively equal society. In an unequal society, the extra price for fuel to heat and cool houses and for transport may take the provision of basic needs for poor people below an acceptable level, while for rich people the price is not enough to change their emissions-related behaviour.

We have seen the angry reaction in the French ‘gilets jaunes’ movement when a levy on petrol and diesel fuels angered low income workers dependent on cars.

Social trust and solidarity are lower in an unequal society. This will tend to rouse resentment from the relatively poor at any climate mitigation measures with a social cost. It will seem that these have been imposed on them by the better-off elite. ‘Higher inequality strengthens the power of the rich to make decisions, set agendas and inculcate selfish values,’ (Gough, 2017)[10]. In addition, it may lessen the capacity of a society to come together in solidarity to try to force a government to take protective climate action, or to tolerate the pain of a carbon price, knowing that everyone is bearing it equally.

Economic growth has been held out as the answer to inequality – an unequal share of a bigger pie. In reality, it has worsened it. Of global economic growth between 1999 and 2008, the poorest 60% received 5% of additional income; the richest 40% accrued 95% (Gough, 2017). If growth is not the answer to inequality, we need economic and social policies that ensure a more just distribution of wealth and income.

So if unequal, growth-driven economies are worsening climate change and hindering adequate responses to it, what are the alternatives?

We might begin by asking what an economy is for. It is to support the wellbeing of humans-in-society-in-Nature. An economy’s success should be measured by this dimension.

We need changes in three aspects of our economies: the size of the economy must be brought within Earth’s biophysical limits; just distribution of the benefits of this smaller economy is needed; we need efficient allocation of resources from Nature to production so that the greatest human wellbeing is obtained from them.

These changes can come about in democracies only by significant shifts in how we citizens construct our world and what we value. We have seen such a shift in the latter part of last century, towards neoliberal valuing of market forces and minimal government. Now we need a shift towards valuing the integrity of Nature and adjusting human activities to restore and preserve it, and toward realising that it is within our power to create a more equal society and world.

In allocating resources, basic needs of all people should trump luxuries for the well-off. Valuing frugality and simplicity rather than the hyperconsumption of status competition would help. George Monbiot’s words, ‘Private sufficiency, public luxury’[11] suggest an emphasis on ‘the commons’ – the provision of public luxury through shared spaces such as libraries, schools, museums, parks, community gardens, sports grounds, meeting places, performance spaces, walking and cycling trails, Nature conservation areas, beaches, lakes, air quality, as well as public services in education and health care. A wellbeing economy of sufficiency.

The size of the economy

In what follows I’ll refer to interventions and policies in a cursory manner, with minimal explanation. There is a large literature on most items.

• Stop burning fossil fuels and shift to almost 100% renewable energy. This measure is heavily resisted because it threatens to shrink the economy. It will. Infrastructure for renewables requires massive investment to expand it rapidly. However fast we build it, it will not replace the quantities of concentrated energy we have enjoyed in the unique fossil fuel age.
• Stop government subsidies to all mining activity.
• Electrify transport and machines for production.
• Reduce consumption of energy and materials generally. Urban planning to support active transport and savings on other infrastructure, efficiency in use of materials.
• Support the idea of ‘circular economy’ in which ’waste’ streams of energy, water and materials from one activity become feedstock for another.
• Tax or price unwanted economic activities such as carbon emissions to bring them within Earth’s biophysical limits. Tax luxury goods.
• Set limits to constrain use of resources, such as fishing quotas.
• Regenerative farming, especially on small-holdings, reduces throughput of materials and energy.
• Tax advertising rather than subsidise it as we do currently. Advertising encourages consumption, especially of luxury goods – an unwanted economic activity.
• Consider individual tradable quotas of greenhouse gas emissions applied to our personal economic activity.
• Reduce working hours to reduce material and energy throughput.

Just distribution

• Set minimum and maximum levels for income and wealth.
• Better distribution of capital assets – Employee Shareholder Ownership Programs, Community Shareholder Ownership Programs (Daly and Farley, 2004)[12]
• Land tax rather than income tax. This would address the problems of affordable housing and urban sprawl.
• Lifelong education, health care, recreational opportunities, training for job transitions.
• Reduced working time to ensure the availability of livelihoods.

Efficient Allocation

In conventional economics, the market is the mechanism of allocation, driven by price and consumer preference. But in the bigger picture of humans –in-society-in-Nature, many goods essential to human survival and flourishing are non-market goods. Stable climate, air quality, natural beauty, ecosystem biodiversity, soil quality, water quality, erosion protection are among these.

More problematic still, some of these ‘goods’ are under the control of national governments other than our own. Currently we all watch helplessly as the Brazilian Amazon and Indonesian forests are destroyed, knowing that this affects the future of our children.

The structure of our current economies was arranged when none of these public ‘goods’ appeared to be in short supply. No financial resources were allocated to them. Now that these goods are severely threatened we are learning to apply a 'polluter pays’ principle, slowly and unevenly, and to allocate public resources to their protection. The allocation of public and private resources to ecosystem protection and restoration of course depends on people’s desire to pay for these ‘goods’. This appears to be growing, particularly in the form of carbon offsets paid by individuals and corporations.

However, in the absence of global environmental governance, we can’t apply the ‘polluter pays’ principle to the Brazilian or Indonesian governments. However, we can consider a ‘beneficiary pays’ principle of international subsidies for ecosystem preservation. Governments or local authorities would be paid to keep deforestation below an agreed level (Daly and Farley, 2004).

How do we get from here to there?

Globally, economic growth is currently slowing. In an economic structure dependent on growth, this is bad news. Are we entering unplanned post-growth? What is needed is a planned transition to a steady-state economy of sufficiency. Ian Gough in Heat, Greed and Human Need: Climate Change, Capitalism and Sustainable Wellbeing (2017) suggests a transition in three phases.

The first phase is characterized as Green Growth and comprises familiar measures: foster eco-efficiency through technological innovation, decarbonize the economy through carbon pricing, through regulation (eg vehicle emissions standards, stopping coal mining) and through investment in renewables and other low-carbon infrastructure, as well as in climate adaptation. We are entering this phase now. However the decarbonisation commitments of nations made in the Paris Agreements are far from enough to achieve a less than 1.5 degree temperature increase.

The second phase is decarbonizing and reducing consumption by such policies as taxing luxuries, regulating advertising, and rationing carbon at the household level. Universal public provision of education, health and other goods serves both to reduce inequalities, and to lower emissions in the provision of these services (Gough, 2012). The tradable personal carbon allowance card would be a tool serving the goal of this phase. The by-words for this phase are ‘sufficiency, enough’, alongside generous provision of public goods.

The third phase is the achievement of a steady-state economy, a post-growth state[13]. This attempts to move forward the plateauing of human population growth by providing for women to control their fertility, and to ensure their education and employment. At this point redistribution of wealth needs to seriously kick in through policies such as taxation of inheritance, wealth, land and capital gains. The monetary system would become less growth- dependent[14] by a transition from current high levels of public and private debt by diminishing the ability of banks to lend many times the amount of money they hold in savings. They would be able to lend only what they hold in savings. There would also be a transition from the current process of money-creation by the private banking system to money-creation only by a central public bank.

Conclusion

We can find a ‘safe, just space for humanity’, to use Kate Raworth’s[15] term, between the Scylla of an uninhabitable Earth and the Charybdis of intolerable human deprivation for some. There are promising ways of accomplishing this. It will require lots of us to take the trouble to understand how to do this and get behind action to move in this direction.

Joanna Santa Barbara is a retired psychiatrist and lecturer in Peace Studies living in a community outside Motueka. She is convener of Our Climate Declaration.

Published in Peace Magazine, 2020 April-June edition.

1. Economic growth is an increase in the amount of goods and services produced per head of the population over a period of time.
2. Social inequality occurs when resources in a given society are distributed unevenly
3. In this context ‘services’ refers to economic transactions in which there is no exchange of material ’goods’ between seller and buyer. Transactions such as hedge fund management, hairstyling, Tarot card reading, tourism arrangements, physiotherapy, legal advice, are of this nature. This does not mean that services have no carbon footprint. Nearly all services require buildings, energy, transport fuel, appliances, plastic, paper, etc. Some, such as health care, have a very large footprint. The argument in this essay is not that it is bad to consume services, or even that in some cases, more services are needed. The intention is to question the wisdom of endless growth in services (as well as of goods), which will indeed consume more concrete, jet fuel, forests, etc..
4. Meadows DH, Meadows DL, Randers J, Behrens WW (1972) The Limits to Growth. Potomac Associates.
5. Green growth is a term to describe a path of economic growth that uses natural resources in a sustainable manner. It is an alternative concept to typical industrial economic growth.
6. Jason Hickel & Giorgos Kallis. (2019). Is Green Growth Possible?. New Political Economy. https://www.tandfonline.com/doi/abs/10.1080/13563467.2019.1598964 and https://www.jasonhickel.org/blog/2018/9/14/why-growth-cant-be-green
7. Chancel L, Piketty T. 2015. Carbon and inequality: From Kyoto to Paris. VOX: CEPR’s Policy Portal, Paris.
8. Grunewald N, Klasen S, Martinez Zarzoso I, Muris C. 2012. Income inequality and Carbon emissions. Discussion Paper No. 92. Courant Research Centre, University of Gottingen, Gottingen.
9. Wilkinson R, Pickett K. 2009. The Spirit Level: Why more equal societies always do better. Allen Lane, London.
10. Gough I, 2017. Heat, greed and Human Need: Climate Change, Capitalism and Sustainable Wellbeing.Edward Elgar, MA, USA.
11. Monbiot G. For the sake of life on Earth, we must put a limit on wealth. The Guardian, Sept.19, 2019.
12. Daly HE, Farley J. 2004. Ecological Economics: Principles and Applications. Island Press, Washington.
13. https://steadystate.org/
14. http://positivemoney.org/wp-content/uploads/2018/01/Escaping-Growth-Dependency-final_print.pdf
15. Raworth K. A Safe and Just Space for Humanity Oxfam Discussion Paper, February 2012