In his weekly column last Friday, Tim Harford criticised the concept of “degrowth” now being promoted by some environmentalists. But I think he’s missing the main point.
Degrowth, as presented by Mr Harford, is the idea that the stopping of economic growth must be part of the policy toolkit towards creating a sustainable economy. As such he thinks it is misguided.
His reasoning is sound. The current Coronavirus epidemic has halted and reversed economic growth, and that has indeed has been mostly beneficial to the environment, by reducing carbon emissions for example. But the environmental effects are not proportionate. Even this scale of disruption is not enough to deal with the climate crisis, for example. Much deeper changes are required. Much better to focus on these instead, rather than being diverted into arguments over growth. He further argues that the idea is too blunt an instrument to deal with the environmental crisis, and that policies need to be much better targeted to be persuasive.
I agree on both counts. But Mr Harford quotes one supporter, Ricardo Mastini, as defining degrowth as “the abolition of growth as a social objective.” Put like that, I don’t think it can happen soon enough. Economists and policymakers are far to focused on growth, and its companion, productivity. They need to abandon this if they are going to help with the transition that the global economy surely needs. For conventional economists, the idea that growth will reduce to zero or even reverse is very scary. Our entire financial infrastructure seems to built on an assumption that we will keep growing. There is also an assumption that in order to find the resources to deal with environmental and social ills, the best way is to divert the proceeds of growth. And as growth has slowed in the developed world, these economists are getting increasingly anxious. They moan loudly about low productivity growth and try to find culprits. Instead they should be trying to think through the implications of slow, zero or negative growth, and the best way of promoting public policy in that environment. If that means big changes to the financial system and policy framework, then we have no time to lose in working out what those changes should be.
The first thing that economists need to appreciate is that the main reason that growth is slowing is through the freely made choices of people based on a rational appreciation of their needs. It is not some kind of disease that needs to be cured. That would apply whether or not an environmental crisis was engulfing us. Productivity gains apply to a shrinking proportion of the economy; consumption of goods is long past rational saturation. Productivity improvements in one part of the economy are balanced by losses elsewhere as people pursue less intensive lifestyles (think organic farming), or demand more expensive healthcare treatments. That is the way things are. Get used to it.
Meanwhile, chasing after productivity can be positively damaging. Direct environmental damage is easy to see, for example as modern agriculture decimates biodiversity. But it is also more subtle: the systematic hunting down of resilience in the name of improving efficiency is one of the reasons that the Covid-19 epidemic has been so destructive.
This leaves society with two huge problems. The first is changing lifestyles to the environment to recover, rather than degrade further. The second is to reduce inequality and the piling up idle financial resources while too many others pile up debt. This is what economists need to be thinking about, rather longing for steady economic growth.
To me “degrowth” is about changing the conventional policy mindset. And that is an urgent task. More people need to be talking about it, not fewer.