LEIF’S CORNER: THE DE-GROWTH MOVEMENT?

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Leif Olson

In 2019 the UN Environment Programme published its annual Emissions Gap Report, which measures current emissions data against the goals laid out in the 2015 Paris Accords — a global warming progress report for national governments. Unfortunately, most countries have fallen far short of their objective.

Time is running out to keep the global temperature average from exceeding the 1.5°C threshold outlined in the agreement. As of 2019, countries need to cut emissions by 7.9%. If they wait until 2025, that number rises to 15.4%, which would amount to an impossible challenge given current trends. Without action, climate change will cause continued extreme and costly weather patterns, famine, wars, increased competition for scarce resources, and mass migration — all exacerbated by one another.

The most commonly endorsed strategy on the international stage is sustainable or green growth. This is the central goal that the Green New Deal, proposed by Representative Alexandria Ocasio-Cortez and Senator Ed Markey, is designed to achieve. Other countries have proposed similar policies aimed to partner environmental protection with economic growth.

Still other politicians — most notably President Trump — deny the very existence of climate change, while perceiving climate policy as a zero-sum game. They claim you cannot maintain economic growth while also achieving environmentalist goals.

According to some, they may be right. A 2020 UN advisory board of climate researchers found that environmental sustainability is incompatible with capitalism’s demand for infinite economic growth.

Enter the “degrowth” movement.

The Degrowth Movement

Romanian economist Nicholas Georgescu-Roegen is well-known for his argument that permanent economic growth is inherently unsustainable, which he outlined in his 1971 book, The Entropy Law and the Economic Process. As expressed in the title, Georgescu-Roegen applied the entropy law (the second law of thermodynamics) to the global economic system as the core of his argument.

Entropy is defined as “a measure of the unavailable energy in a closed thermodynamic system that is also usually considered to be a measure of the system’s disorder.” The second law of Thermodynamics is expressed in the following equation:

ΔS ≥ 0

In this equation “S” is the level of general entropy in a closed subsystem (our environment), while “Δ,” or delta, represents change. The law dictates that any change of the total entropy in a closed system will always be zero or higher. This means that entropic systems tend either toward stasis (equilibrium, or zero change) or higher levels of disorder (a higher total of unavailable energy), but never toward lower levels of disorder.

This is also true of our environment. Because we use more energy than the natural environmental equilibrium to produce or consume goods and services, the level of entropy necessarily must grow alongside economic activity. Therefore, economic growth is necessarily entropic.

However, there are exceptions. In many degrowth models, materials such as earth minerals and fossil fuels are finite, and thus any use of them is entropy-increasing. However, other resources like trees, wildlife, and crops are only entropy-increasing if they are used above their natural levels of regeneration.

The axiomatic theory of thermodynamic equilibrium developed by Georgescu-Roegen began the “degrowth” movement in earnest.

Other prominent economists have taken the same tack. In his essay Economics in a Full World, economist Herman Daly states that neoclassical economics has largely ignored the implications of finite resources for their models of growth. Instead, they continue to propose models of infinite growth, only considering finite resources in individual preference structures for goods and services.

Instead, Daly argues the economy must reach a “steady-state” where, “birth rates must equal death rates, and production rates of commodities must equal depreciation rates”. The steady-state will reign-in harm to the environment by reducing growth to nearly zero while dampening any entropic effects.

The steady-state proposal begs the question: what should the economy do if not grow?

Daly proposes three things: improve efficiency without increasing quantitative production of goods above the rate of their depreciation; use resources within the ecosystem’s ability to replenish said use (in an entropic sense); and maintain an equilibrium balance between man-made capital stock and natural capital stock, i.e., not expanding man-made capital (fishing boats) if natural capital cannot keep pace (the rate at which fish replenish).

If possible, this type of economy could supply people with necessary goods and services while minimizing entropy.

With this, we now have a basic framework for degrowth economics. If you are looking for deeper analyses, you can find them in Daly’s book of collected essays, Ecological Economics and Sustainable Development, and Nicholas Georgescu-Roegen’s book, The Entropy Law and the Economic Process.

Even so, economics is never without tradeoffs. What are the limitations? Let’s examine two significant challenges to the model to better understand degrowth and its implications.

Financial Structure

Investments and finance would have to play a key role in transitioning to a degrowth economy. However, Daly’s writing on the financial sector is vague. He assumes that financial speculation would not play a large role in a degrowth economy. Instead, finance would be almost wholly oriented toward reinvestment — toward replacing components of existing economic exchanges and improving the efficiency of production, as opposed to increasing the number of economic exchanges.

How would such strict investment rules be enforced? Conversely, how would one incentivize this type of behavior on the part of private investors? Daly does not advocate for the global revolution as these investment goals might suggest (or require). Instead, this amounts to is a normative claim about what should be done, rather than a positive claim about what could or would be done.

Developing Countries

Perhaps the most glaring within the degrowth model is it has so little to say about the developing world. Developing countries are entirely reliant on economic growth, often driven by highly entropic extractive industries, in order to raise incomes and living standards.

In order to implement the degrowth model, these countries may need to wait until they are productive enough to maintain a steady-state economy. This idea is not new. John Maynard Keynes proposed that by the mid 21st century, levels of productivity in western economies would reach such heights that people would only work 15 hours a week. Instead, increased productivity led to extreme wealth inequality, and all of that extra wealth never found its way into the pockets of those that produced it.

As developing countries become more productive, they could enact more sustainable economic policies. Hence, the most realistic path available right now is achieving some level of sustainable growth, while aiming for an eventual transition. However, this is an unlikely possibility. Reaching a steady-state economy at current levels of productivity would be impossible for most developing countries.

Is Economic Growth Destined to Continue?

There is little to indicate that the consensus surrounding the infinite growth doctrine will change any time soon. Neoliberal capitalism continues to predominate and has shown itself to be highly adaptive. Sustainable development is by far the most popular alternative, but if degrowth experts are to be believed, sustainable growth will not suffice.

World governments must act in the next 10 years or risk irreparable damage to the world ecosystem. This is not subject to theoretical debate. Recent extreme weather, and the resulting millions of dollars in damages, have already been linked to anthropogenic (human-induced) climate change.

At the very least, proponents of the degrowth economy have rigorously demonstrated that, at least hypothetically, it is structurally possible to achieve constant economic growth. Perhaps the better question is, could we stomach it?