Unpicking Growth’s Triple Lock
It’s good to change your mind sometimes. One topic that I’ve changed mine about is growth. I used to be a committed “green growther”, adamant that GDP could be decoupled from environmental harm if we just innovated hard and fast enough. By 2018, I was on the fence. Influenced by books like Tim Jackson’s Prosperity Without Growth and Kate Raworth’s Doughnut Economics, I had become a “growth agnostic”.
2022 was the year I slipped down the other side of the fence and became convinced that “degrowth” is, at the very least, worth a try. The book that tipped me over the edge was Vaclav Smil’s How the World Really Works, which makes an unintentionally compelling case for why we need degrowth.
Smil’s sobering conclusion is that ‘complete decarbonization of the global economy by 2050 is now conceivable only at the cost of unthinkable global economic retreat.’ I agree with his analysis, but not his defeatism. Why ‘unthinkable’? Surely the conclusion to draw is that we should be thinking very hard about global economic retreat. What would it take? How could we do it equitably and safely? What would need to be sacrificed and what can be salvaged?
These are questions I want to explore in 2023, and preferably not alone. This blog is an invitation to (potential) fellow travellers: to the extent that I have any answers to the questions I pose below, they are partial and tentative. If you can help make them less partial and less tentative, I want to hear from you.
Why quitting growth is hard
As a society, we have become massively dependent on growth. In order for degrowth not to be a total disaster, we need to figure out how to break the link between growth and the stability of our financial, political and international systems.
There are, in short, three inconvenient truths about the world today that make switching from a growth to a degrowth economy challenging:
- Our financial system is built on a massive Jenga tower of debt: without growth, the tower is liable to collapse.
- Our politics is based on materialistic values and a promise that a rising tide will, however unevenly, lift all boats: making degrowth viable in a democratic society requires a shift in values and a different promise.
- Our international order rests on a constant, competitive expansion of military might: unless we can find a path to a less militarised world order, a degrowing economy will buckle under the weight of the spending required to maintain national security and international stability (such as it is).
Between them, these three factors constitute a “triple lock” that keeps us imprisoned in a world where growth is a necessity. To escape and build a viable degrowth economy, we need strategies for unpicking each lock. In the rest of this blog, I examine each of these three locks in turn, setting out the questions we need to address if we are to become a society that can safely and successfully declare independence from growth.
1: The Financial Challenge
What happens to all the debt if the economy stops growing? What about the value of people’s pensions and savings?
According to the Institute of International Finance, global debt surpassed $300 trillion in 2021. That’s more than three times global GDP. The viability of such an enormous debt burden relies on the promise of future growth. So long as output grows faster than interest, it’s plausible that all that debt could one day be paid back.
But if you take away growth, then a significant proportion of this global debt burden is no longer viable. What then?
A Modern Debt Jubilee? What level of debt monetisation is feasible? What would the impact on prices be? We know from Modern Monetary Theorists that, in principle, any government that has control of the currency that most of its borrowing is denominated in can (to use the technical term) magic its debts away. But not without consequences for the value of money (ie., inflation).
How about a 21st-century Dawes Plan? A global debt restructuring with widespread adoption of debt-for-climate and debt-for-nature swaps? What level of debt forgiveness, on what terms, is achievable?
And how do we make sure that, having once reduced the global debt burden to a more manageable size, it doesn’t simply balloon again? What sort of constraints would need to be applied to bank lending? Could we — should we — abolish debt-based currency altogether? Or move to money that decays in value over time?
I have focused on debt, but degrowth has similarly profound implications for every part of the financial system. Stock prices reflect expectations of companies’ future profits. If a chunk of the future growth that has already been priced in by markets is no longer possible, the consequences for the value of ordinary people’s savings and pensions are potentially grim.
Transitioning to degrowth will inevitably involve some financial pain for the world’s asset-holders, but the vital question is how successfully that pain can be minimised. We need to figure out how to make the transition as orderly as possible — how to avoid the election of the world’s first degrowth-minded government triggering capital flight and financial collapse. This will be an enormous challenge given the extreme interconnectedness and fragility of today’s financial system. But unless we have a convincing story about how we are going to do it, the next challenge — generating the political will — is going to be even harder.
2: The Political Challenge
How can we build — and then sustain — enough support for degrowth to create a new political order around it?
If there’s one thing that the world’s political leaders agree on, it’s the desirability of economic growth. It’s an article of faith for everyone from Joe Biden to Xi Jinping. Doesn’t matter whether you’re leading a rich country or a poor country, a democracy or an autocracy, nobody seems to believe their GDP is high enough.
The beauty of growth, politically speaking, is that it offers the possibility of everyone being able to have more, without anyone having to have less. Wealth distribution in a growth economy is a positive-sum game. As Henry Wallich, a US economist who served on Dwight Eisenhower’s Council of Economic Advisors, put it, ‘growth is a substitute for equality of income. As long as there is growth, there is hope, and that makes large income differentials tolerable.’
In a degrowth economy, wealth distribution is a negative-sum game. If one person gets more, somebody else must get less. That makes it harder to build broad political consensus and to placate potential opponents.
The politics of degrowth is the politics of redistribution, both within countries and between them. It requires persuading those with more than enough “stuff” to trade some of it in for more leisure. Not an impossible sell by any means, but there’s work to be done to build a movement broad and strong enough to make it happen. (I’ve written elsewhere about what we might learn from neoliberalism’s success in transitioning from a tiny, marginal intellectual movement to a globally hegemonic political order.)
3: The Diplomatic Challenge
How can we reverse the environmentally destructive global military build-up of the last 100 years without jeopardising security? What does a degrowth foreign policy look like?
If there’s one institution that most embodies the energy- and material-intensive, debt-fuelled model of growth that we need to escape, it’s the military. As Amitav Ghosh notes in The Nutmeg’s Curse, the Pentagon is the single largest consumer of energy in the United States — and probably the world. In the 1990s (a relatively peaceful decade), the US military was responsible for more than a fifth of the country’s total fossil fuel consumption. During the Iraq War, the US military’s Middle Eastern operations consumed 1.3 billion gallons of oil a year — more than Bangladesh, a country of 180 million people.
Degrowth is not just about “economic disarmament” then — it requires at least a degree of actual disarmament too. The energy and material consumption of the world’s militaries is too large to ignore if you’re trying to reduce aggregate energy and material throughput. How could a process of (partial) demilitarisation be engineered? This is a tall order in a world that appears to be becoming more, rather than less, conflict-prone.
A degrowth foreign policy will need to wrestle with the reality, acknowledged by Matthias Schmelzer, Andrea Vetter and Aaron Vansintjan in their book The Future is Degrowth, that ‘if degrowth were implemented in a single country, it would likely lead to capital flight, capital strikes, geopolitical tensions, and possibly even armed conflicts.’
As you can see, I’m a long way from having a comprehensive, workable plan for global economic retreat. But I have at least begun to think about it, which means it clearly isn’t quite as unthinkable as Vaclav Smil (and many others) would have us believe.
And I’m certainly not finished thinking about it either, which means I am wide open to pointers and recommendations: who else is thinking about aspects of this? Whose work should I be following? Which lines of inquiry are worth pursuing?
