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The ‘degrowth’ movement and the complex role of economic expansion on a changing planet

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Born in Cape Town, Natale Labia lives in Milan, Italy, and writes on the economy and finance. Partner of private equity firm Lionhead Capital Partners. MBA from Università Bocconi. Supports Juventus.

Last week’s UN Intergovernmental Panel on Climate Change report made for ‘unequivocally’ depressing reading. It served as a long overdue warning to all of humanity, but especially policymakers, on what exactly is at stake unless we do not rapidly and permanently change how we live.

This year has witnessed some of the starkest illustrations of the likely consequences if we do not. Fires in California, Siberia, Greece and floods in China and northern Europe are clearly a mere harbinger of more Dante-esque infernos to come. 

Take the melting ice caps as an example. Sir David King, head of the Climate Repair Institute at the University of Cambridge and the former chief scientific adviser to the UK government (who was also born in Johannesburg and educated at Wits), stressed this week that much of what is occurring across the globe is likely an effect of the rapid heating of the Arctic.

He believes that the resulting rise in sea levels could mean some great global cities — even entire countries — may become inhospitable within 30 years. He mentions Vietnam, Bangladesh and Jakarta, but Cape Town and Durban are clearly just as much at risk. The implications for food production and mass migration are all too obvious.

These looming apocalyptic realities pose far broader questions than pertain to the environment only. What is the role of economics, and indeed politics, in such a massively and materially different future?

When it comes to economics, the questions are no less than existential. Economics is, really, about one thing: growth. If economic growth threatens the very existence of the planet and humanity itself, should we not ask about the value of growth as an objective at all? If it is the supposed “end”, should we not ask if it is justified by the dire consequences of the “means”?

In what has become a modern classic, John Cassidy in The New Yorker posed exactly that question when he asked in an essay, “Can we have prosperity without growth?”. There has indeed been a resulting “Degrowth” movement, which calls on advanced countries to embrace zero or even negative GDP growth. 

Once confined to the margins of economics, the ecological critique of economic growth has gained momentum and widespread attention. In 2019 at a UN climate change summit, the teenage Swedish environmental activist Greta Thunberg thundered “We are in the beginning of a mass extinction and all you can talk about is money and fairy tales of economic growth. How dare you!”

The concept of degrowth, however, strikes one as an essentially “first world” problem. It is all very well for the overwhelmingly well off in Europe, the US and Japan to advocate the benefits of being post-growth. They are, after all, the beneficiaries of the longest and most environmentally destructive economic boom in history, the latter half of the 20th century. 

Where does this debate leave countries such as South Africa, where the majority are not close to being remotely well off? What exactly would “degrowth” mean in a country where the majority live in poverty? In addition, surely believing that a no-growth or low-growth economy would be more equal is, at best, naive. As South Africa in the past year has shown, when the pie stops growing, the fights over who gets the bigger slice becomes immediately more brutal. 

The challenge for economics is therefore how to rephrase the concept of growth itself. If it is necessary for lifting millions out of poverty, as has been shown to be the case, how can we ensure that it is not only pro-poor but also truly “sustainable”, and not just in the manner which pays lip service to using recyclable water bottles? 

It is self-evident that if economic growth cannot be sustainable, then the entire point of economics is moot as it will simply sow the seeds of planetary destruction.

Proponents of “green growth”, who now include the European Union, the World Bank, the Organisation for Economic Co-operation and Development, US President Joe Biden and indeed President Cyril Ramaphosa, argue that given the right policy measures and continued technological progress we can enjoy perpetual growth and prosperity while also reducing carbon emissions and our consumption of natural resources.

Are we not, to paraphrase the UK Prime Minister Boris Johnson on Brexit, all “fans of having our cake and eating it”? But how realistic is this actually?

Either way, policymakers — particularly in developing countries such as South Africa which face particularly extreme looming environmental and humanitarian catastrophes — need to be far more explicit about what kind of growth should be pursued and what growth should be specifically avoided. If green growth is the future, then surely there must be a rapid prioritisation of “green” over “growth”.

In Good Economics for Hard Times, two winners of the 2019 Nobel Prize for Economics, Abhijit Banerjee and Esther Duflo of the Massachusetts Institute of Technology (MIT), point out that a larger GDP does not necessarily mean a rise in human wellbeing, especially if it is not distributed equitably. “Nothing in either our theory or the data proves the highest GDP per capita is generally desirable,” they write.

If economics cannot successfully reorientate itself to discern what growth is indeed sustainable, the consequences are clear. At least, assuming it manages to keep fresh water running, the future of a city like Johannesburg should be bright, being safely out of the grasp of any future sea level. BM/DM

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  • Excellent discussion! I think company shareholders, including pension and RA contributors hiding behind insurance and investment companies, need to exert themselves and force investment in the right direction. That means a lot of our middle class as well as the super-rich! Trade a lower return on investment for an environment in which our grandchildren can live? Sounds like a no-brainer, so why doesn’t it happen?

    • Excellent ideas, and absolutely critical. ESG investing is going someway to this but agreed, not fast enough. It would be good to see managers put GREEN growth front and center as opposed to a lot of the greenwashing which currently happens. Customers should vote with their feet too.

  • An earlier good book on the topic is ‘Prosperity without Growth:Economics for a finite planet’ by Tim Jackson, and before that the great steady-state economics pioneer Herman Daley and subsequently CASSE – Centre for the Advancement of Steady State Economics.

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