Plan B: Is there an alternative to economic growth?
Imagine that a family takes a trip to the mountains.
They are walking on a path that looked quite good in the beginning
when they somehow got on it. But now it's getting increasingly difficult.
It's narrow and steep and there's a real danger of falling off the edge,
especially for the kids. And it is too late to turn back.
The question I would like to address is whether at this point it would be useful
to have a map
and to look at it. Just to see if there's an alternative way to go.
The answer can be informative for a much bigger journey
which is in many ways very similar. The path on which the majority of the world
population has found itself is the path of economic growth. More exactly,
a path on which GDP growth is a non-negotiable target
of economic and social policy. We got on this path a few hundred years ago
when increasing population density and easier trade
made it possible for many to abandon self-sufficiency.
Instead of producing almost everything for themselves
more and more people specialized on something and satisfied their needs
through exchange with others.
Markets grew quickly and people became mutually dependent on each other.
Market competition made the productivity of any specialized activity
essential for success, which led to the improvement of tools and machines.
Those who did not increase productivity,
however, could lose their jobs. But many of these people were not able to satisfy their
own needs anymore,
for instance, because they had no access to land. So the problem of unemployment
appeared.
The main solution was to increase total production in the economy
so that workers can find new jobs. Therefore,
economic growth rates and changes of unemployment became tightly correlated.
The extreme example for this is the United States where the relationship
between GDP reduction, shown in gray, and the rise of unemployment
is almost automatic. This correlation, however,
is just one of the factors that make current economies dependent on growth.
A second one is related to money. If there are more products and services,
then the amount of their virtual equivalents, which is money,
can grow as well without generating inflation. Sharing more money is easier,
especially if the costs of growth can be pushed onto other species, countries or
generations.
So then, growth means that the average income is higher,
tax revenues are higher. Governments can spend more on poverty reduction, health
care and education,
or give more money to the CEOs who will help to re-elect them.
States can also borrow more, and usually at a lower cost, which again helps to
increase public expenditure.
Moreover, larger economies are more powerful in the global economic and
military competition.
The extremely influential global financial sector is a further proponent of growth
because they stand to lose a lot of money if investments are cut back and
default rates
increase in the absence of growth. And this leads to a third,
systemic cause of growth dependence: self-amplification in the economic system.
Today, most of the important economic variables are connected in a way
that any positive or negative change is reinforced. If there is growth and
optimism,
then new business investments create jobs, wages earned in these jobs increase
aggregate spending,
and the amount of money can grow in the economy through relatively easy credit.
If, on the other hand, growth and expectations are negative,
then investments stop, unemployment soars, real incomes fall,
and debt problems increase. We are either on an
upward spiral or a downward spiral. Stability
is always fragile. And this is partly due to rules and institutions we
could change.
Yet, increasing stability
receives much less attention in economics and politics
than staying on, or getting back to, the upward spiral. This path, however,
has become life-threatening. Most people have a hunch that
endless economic growth is not sustainable on a finite planet.
But let's see what science says about this! It is a fact that past economic
growth has been accompanied
by increasingly serious environmental problems, such as climate change,
the chemical and physical change of our environment, and the loss of biodiversity
and ecosystems.
The main drivers of these problems are energy, materials and land use.
If environmental problems are to be solved in a growing economy,
then these drivers have to be decoupled from economic activity
at an extremely fast pace, and at a global scale.
We haven't seen that happening in the past. For example,
energy use rose only slightly slower than GDP and the correlation between the
two is so strong
that even economic recessions or slowdowns can be easily identified on
the energy graph.
Carbon emissions show almost exactly the same pattern because CO2 emitted per
Joule of energy has barely changed in the last forty years.
Any decarbonization due to windmills, solar panels and other cleaner
technologies
has been offset by the increasing share of dirty fuels,
such as coal in China. For materials use,
a different chart leads to similar conclusions.
Plotting per capita materials consumption against GDP for several
countries
reveals the correlation between economic activity and materials use.
The authors conclude that current modes of development
both in emerging and already industrialized economies
are fundamentally unsustainable. This is the consensus opinion in science.
For land use, this snapshot taken from Jonathan Foley's TED talk
shows where we stand after a couple of decades of global economic growth.
The least green and brown areas where agricultural expansion is still possible
and the climate is not too hostile
are mostly in tropical countries. In fact,
cropland has been expanding there by 48,000 square kilometers
a year, mostly at the expense of natural ecosystems.
Rising demand for food, especially for animal products has been in the
background of this change.
Consequences are dramatic.
Future economic growth can be different. It can be so much greener.
Cleaner technologies and many of the existing environmental initiatives
are inevitable for a successful environmental strategy
and they can make a big difference. Nevertheless,
there are very strong reasons to doubt that green growth is really possible.
First, in several cases we are well beyond environmental limits.
This means that just stopping the growth of environmental pressure is not enough;
we have to sharply reduce it it. With further economic growth
this would require absolutely unprecedented decoupling
between GDP and environmental pressure.
Climate change is one example. To have a reasonable chance of
limiting global temperature rise to 2 degrees by the end of the century,
which, by the way, may not be enough to avoid
extraordinary intergenerational injustice according to leading climate
scientists,
so for this not too ambitious goal, the decarbonization of the world economy
would have to be faster throughout the next forty years
than it has ever been since the Second World War.
In other words, we need faster improvement each and every year for
several decades
than in the years after the oil price shocks, when we had a very strong
motivation
and many easy opportunities to cut energy use.
Second, more than half of the world population lives in countries where
consumption is rising rapidly. More than three billion people are moving up the
food chain and
starting to use more materials. As a result,
demand is skyrocketing, which further increases required decoupling rates.
In addition, environmental efficiency is low in most emerging economies,
So it is possible that each and every country in the world increases its
on efficiency, but the overall global efficiency average goes down,
simply because less efficient economies grow faster.
Third, most easily available resources have been used up.
We are now drilling for oil in Arctic waters, mining minerals that are much less
concentrated than a century ago,
and converting land for farming that is less productive or more
ecologically valuable than existing agricultural areas.
For this reason, environmental impacts per unit of production are rising,
which is the opposite of decoupling.
A fourth concern is that absolute biological and physical limits
of efficiency
are not too far in certain cases.
Further increasing crop yields, for example, has proven to be difficult
in several major countries. Limits of energy efficiency will also be a
constraint if we scale up efforts to cut energy use.
Fifth, there is a huge physical lock-in effect.
Existing infrastructure has been built to be used.
Highways, coal-fired power plants and inefficient buildings will not be
abandoned overnight,
and inefficient city structures will change even slower.
A sixth reason for skepticism about the rapid decoupling of environmental pressure from
economic activity is inertia in social systems.
Changing the habits of individuals and overcoming the influence of vested
interests is extremely difficult,
which again limits the speed of decoupling.
And finally, efforts to solve environmental problems can be
accompanied by
unwanted side-effects. If you save energy
and spend the associated money savings on something else,
then the embodied energy of the product you purchased partly
offsets the initial energy savings.
This is just one of several rebound effects. Besides,
it is also possible that the solution to one problem
makes the solution to other problems more difficult.
For example, fertilizers increase crop yields but generate widespread
pollution that kills marine life.
Renewable energies help to reduce carbon emissions but increase demand for metals.
And the list could be continued indefinitely.
At this point, it may be fair to conclude
that the path on which growth is a binding condition
is really dangerous. Beyond this path, however,
there's uncharted territory. We see some promising directions,
like the reduction of working hours or salary caps,
but we don't really know how to run an economy without growth.
Furthermore, we don't really know how to reduce dependence on growth.
And what's even more surprising, we are not really trying to find it out.
Given that lower consumption could reduce absolute environmental pressure
and the required speed of decoupling, plus there is scientific evidence that
increasing
wealth does not bring happiness above a threshold, this is almost unbelievable.
How can we not be thinking about strategies to reduce dependence on growth?
How can we assume that sustainable prosperity is
always more feasible on a path of relentless growth than finding alternative
routes?
How can we ignore or rule out options we've never understood?
Because this is what we are doing right now. Leading economic journals or top
economists
never question growth. The environmental strategy of the OECD and the World Bank is just
green growth, there is no plan B.
In academia, there is no funding for research on growth dependence
and choosing this critically important topic may even put your carrier at risk.
There is a frightening collective denial in macroeconomics and politics,
which hurts people and the planet.
We have to change this. Academic,
public and policy discussions, as well as local experiments, are needed
to understand how dependence on growth could be reduced.
The benefits and difficulties of these strategies have to be compared with those
of
business as usual scenarios in which periods of growth and crisis alternate.
Such a comparison can help us to reflect on our priorities.
Take the reduction of working time as an example.
This may be one of the strategies to decouple unemployment from growth
and to simultaneously reduce environmental pressure, but there are
many open questions.
Under what social and economic conditions would people prefer to work
earn and consume less, while spending more time with their families
and enjoying more free time? What incentives would employers need to
facilitate this?
What macroeconomic consequences should we expect and is it possible to cope
with the difficulties?
If we want to answer questions like these, we will.
With major projects to explore the many complexities of non-growing economies and
the recognition of efforts,
we can make it cool to work on these issues.
The only thing that can prevent progress is a failure to admit
that looking beyond the current paradigm can be useful.
This attitude must be challenged.
Governments have to provide funding for research and experiments
and we, the people, have to create the social context
in which researchers and decision makers are motivated to address these issues.
We have to openly question the primacy of growth and those who take it for
granted.
We have to appreciate efforts that may lead to alternatives and celebrate
successes.
And we have to stick to values that go far beyond consumption.
Because of course it is a part of human nature to strive for more in a material
sense,
but it is not the only part. And it depends on our socio-economic systems
whether we strengthen one set of values or another.
Personally, I'm not only concerned about our relationship with nature
because of food security, pollution-related health impacts
or environmental refugees, but also because of the promise of a more fulfilling life.
I want a future, in which there is no drilling or mining in priceless natural
reserves, in which delegates from poor countries don't have to cry at climate
negotiations,
and where families, including children, can have a journey
that is as safe as possible. For this, we
desperately need a map with more than one path.
Thank you.