Degrowth Economics

Being a graduate student of Economics, I am always exposed as to concepts of how theory and empirics always seem to push and strive for economic growth stating that it's absolutely necessary. It's curious however that economic inequality, climate destruction and development induced displacement seem to be on the rise.

A few days ago I was given an opportunity to research and present Degrowth Economics theories by my professor Phanindra Goyari. I was so intrigued by the concept, I decided to write a post about it.

Sometimes the word ‘degrowth’ can draw us up short. It sounds unfamiliar and can lead to misunderstandings. Reading just the word, it has a negative, and for some, a non-ecological connotation. However, this could not be further from the truth. The word and theory’s foundations are European in nature - it is actually based on the Italian and French words that refer to a river going back to its normal flow after a disastrous flood. The theory gained popularity in 2008 and quickly a wealth of literature was built around this subject.

The existence of an imbalance between our planet’s reserves of resources and the conditions necessary to maintain high levels of economic growth is evident. The limitation of natural resources pushes companies and organizations to consider the possibility of facing critical situations in the future that will make it extremely difficult to reconcile economic and sustainable objectives.

In this context of dependence on an environment with finite resources, there are growing interests in alternative economic models, such as the Circular Economy which is "a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products as long as possible", oriented to the maximum efficient use of resources.

However, the Circular Economy approach is still very far from the reality of industries, and the depletion of natural resources continues undeterred. It is increasingly necessary to explore alternative approaches to address the imbalance between the economic system and the natural system.

Two approaches stand out. Both search for this balance through the re-organization of human society and its economy. On the one hand, there is Green Growth: focusing on the generation of wealth from investments in the environment. Green Growth interprets the protection of the environment not as a cost, but as an opportunity, and advocates investment in the environment as a driver for “recoupling” environmental protection with growth accumulation. In search of alternatives to carbon-intensive fossil fuel, clean energy use has the considerable most effective source of energy in the world. Therefore, international organizations, economists, environmental scientists, and policymakers are urging the developed and developing countries to shift their Energy Consumption patterns from non-clean sources to cleaner sources.

On the other hand, there is Degrowth, embracing the limitations of resources and willing to accept smaller growth rates, even negative, to attain a balance between the natural system and the economic system.

In a world obsessed with an ever increasing pattern of growth, using nature, labour, tools, knowledge, and institutions to push for income-driven consumerism, profit-based productivity, GDP-driven growth, degrowth is a radical alternative.

The current growth paradigm perpetuates existing gender and environmental injustices and degrowth theorists seek to mitigate it with a degrowth work-sharing proposal (I have a post coming up on this).

Upon my readings and exploration of this subject, I have surmised that Degrowth Theory draws and taps into 3 schools of thought: Feminist Economics, Ecological Economics and Political Economy.

The degrowth movement of activists and researchers advocates for societies that prioritize social and ecological well-being instead of corporate profits, over-production and excess consumption.

This requires radical redistribution, reduction in the material size of the global economy, and a shift in common values towards care, solidarity and autonomy. Degrowth means transforming societies to ensure environmental justice and a good life for all within planetary boundaries

If we move forward with understanding degrowth as a voluntary, democratically negotiated, equitable downscaling of societies’ physical throughput until it reaches a sustainable steady-state, we can move on to the biggest driver behind the movement.

As we know it, in biophysical terms, the economy is a societal metabolism that uses energy and matter as inputs to produce goods and services before expulsing them back as waste. From an environmental perspective, the main argument for degrowth is that thresholds for specific biophysical processes such as climate change, biodiversity and the nitrogen cycle are already being approached or have been crossed. In the case of climate change there is little evidence that greenhouse gas emissions can be decoupled from economic growth in absolute terms. If we as a global society do not manage to achieve climate reduction targets set by the United Nations Framework Convention on Climate Change, there is a strong likelihood that future generations’ ability to satisfy basic needs such food and water security or access to safe environments.

Since economic growth is one of the main drivers for rising emissions (and increasing depletion of non-renewable resources), degrowth theorists state that it’s evident that a transition to degrowth would make an help climate change mitigation, and hence to our moral obligation to preserve future generations’ rights to basic needs fulfilment.

Degrowth would require societies to abandon the idea that the percentage change in GDP is an accurate indicator of progress, and instead learn to live better while producing less.

The objective of degrowth is to reframe humanity’s goals to address the climate emergency by dramatically scaling down aggregate energy and resource use back into balance with the living world.

At the same time, the idea is seeking to reduce inequality and improve wellbeing, through measures such as job guarantees, a shorter working week and potentially a universal basic income.

In practice, it is likely to result in a slower rate of GDP growth or perhaps even a reduction in GDP, but degrowth scholars say this should not be a cause for concern because GDP is not a proxy for progress.

On the right hand side, you can see a visual representation of what degrowth theorists propose. Plotting time against size of the economy, there is a period of growth (where we are now, globally), a period of rapid degrowth, until a steady state equilibrium is achieved. Here you can see how the moniker's origins relate to the concept.

In the middle portion, we can follow the popular and highly talked about Doughnut Economics model, pitched by British Economist, Kate Raworth - Senior Associate at Oxford University's Environmental Change Institute and Professor of Practice at Amsterdam University of Applied Sciences. A conceptual and an analytical tool that highlights key biophysical and social aspects of transitioning to a safe and just operating space and remaining within it. Doughnut Economics, the fun name aside, is also fascinating to me, so I shall be having a post about this too.

Now, moving on to the criticisms. There is no doubt about it, economic degrowth can be unstable. There are many critics pointing out that if GDP slows down it can impact those living in poverty even more which is highly relevant in the global south context I feel. It can lead to unemployment, therefore to a lack of effective demand, resulting in even more unemployment, more state expenditures for unemployment benefits and a potential fiscal crisis of the state. Some studies rebuff this but I felt it would be prudent to bring this up as I am trying to bring a clear, unbiased picture of this school of thought. Joseph Stigltiz is a firm believer of the fact that growth is undeniably good, but a different form of growth needs to be imagined. A Harvard Business Review article has provided a rebuttal to this here, stating that businesses need not shun degrowth because although some companies and industries will certainly be disrupted, others that are sufficiently prepared for such transitions will handily outmanoeuvre their competitors - which has been the name of the game for decades.

Can the Global South adopt this? Is this finally the new economic model and philosophy we can depend upon? What does this mean for the socio-political contexts within nations?

I am a strong believer that the economy is an embedded system within the environment and society. Degrowth theorists propose a system wherein social and ecological wellbeing is prioritised over a system that pursues relentless economic growth. Is this what the world needs but does not know?

I personally feel that as students of economics, and social scientists, we are at a unique position to be able to watch a whole new kind of economy unravelling right in front of us. Kate Raworth, the founder of the aforementioned doughnut theory, stated a really interesting sentence in a TED talk she gave - “No economist from last century saw this picture, so why would we imagine that their theories would be up for taking on its challenges? We need ideas of our own, because we are the first generation to see this and probably the last with a real chance of turning this story around.” I think there is a lot of fodder for discussion in this subject.

I used many resources for this post, they’re all listed below. For more information please visit:

- https://degrowth.org/wp-content/uploads/2012/11/Kallis_2012_The-economics-of-degrowth.pdf

- https://www.sciencedirect.com/science/article/pii/S0016328718300715

- https://www.firstpost.com/tech/science/eight-key-takeaways-from-the-ipcc-report-that-prove-we-need-to-put-in-the-work-to-fight-climate-change-9883301.html

- https://www.sciencedirect.com/science/article/pii/S0016328718300715

- https://www.jamhoor.org/read/degrowth-is-still-but-a-slogan

- https://tel.archives-ouvertes.fr/tel-02499463/document

- https://degrowth.org/wp-content/uploads/2012/11/Kallis_2012_The-economics-of-degrowth.pdf

- https://www.resilience.org/stories/2020-06-30/decoupling/

- https://degrowth.info/degrowth

- https://www.cnbc.com/2021/02/19/degrowth-pushing-social-wellbeing-and-climate-over-economic-growth.html

- Green Growth Policy, De-Growth, and Sustainability: The Alternative Solution for Achieving the Balance between Both the Natural and the Economic System - Diego A. Vazquez-Brust 1,2 and José A. Plaza-Úbeda 3,*

- https://degrowth.org/wp-content/uploads/2011/05/oneill_degrowth-transition-to-a-steady-state-economy.pdf

- https://therealnews.com/panel0517renewableenergyseg1

- https://hbr.org/2020/02/why-de-growth-shouldnt-scare-businesses?utm_medium=email&utm_source=newsletter_monthly&utm_campaign=finance_not_activesubs&referral=00209&deliveryName=DM70154#comment-section

- https://onlinelibrary.wiley.com/doi/epdf/10.1002/pa.2126