For three centuries there has been a consensus on the objective of economic policy. Since the dawn of the industrial age in the 18th century, the goal has been to achieve as rapid growth as possible.
It is not difficult to see why there has been this concentration. Growth has raised living standards, increased life expectancy, improved medical care and resulted in better educated and better nourished populations.
Indeed, the fact that developing countries are keen to have what we have had shows how successful rich Western countries have been in lifting people out of poverty. If faster growth means cleaner drinking water, more children in school, and fewer mothers dying in childbirth, then the world’s poorest nations want more.
But there is an obvious problem. If developing countries are to have the same – or even remotely the same – standard of living as developed countries, this means a much greater use of resources and additional pressure on the planet. This means increased energy consumption and the risk of an irreversible global climate crisis.
Given the existential threat posed by global warming, the concept that growth is good is being seriously challenged by those who say policymakers should be aiming for zero growth or even shrinking, shrinking economies. Don’t get me wrong, it’s a good thing that accepted wisdom is being challenged. The idea that faster growth is the solution to all problems is no longer tenable.
There is nothing new in the current debate. Thomas Malthus predicted a possible famine once population growth exceeds food supply. John Stuart Mill’s comment that “the increase in wealth is not unlimited” paved the way for what has been called steady state economics. Herman Daly, who died last month, long championed the idea that the constraints of the natural world set limits on growth. Robert Kennedy said gross domestic product measured everything but what makes life useful, and his words now resonate even more strongly than when he spoke them in 1968.
That said, achieving a stable economy or degrowth will not be easy. Far from it, it will be terribly difficult.
For starters, it will mean changing the way we think about economic success. Political debate is driven by parties competing to promise voters the best growth strategy. Language matters, so when GDP goes up, it’s good news, and when it goes down, it’s bad news. Countries are judged by their place in international growth rankings. It would be the hardest sell for any politician to try to convince British voters that they should welcome the recession which is still in its infancy.
Indeed, for many decades people – especially the most vulnerable – found that degrowth was not good for them. Recessions are a form of degrowth and they result in unemployment, bankruptcies, homelessness and hardship. Recessions also mean politicians tend to double down on growth, fearing a backlash from voters if living standards fall. Faced with the choice between increased use of fossil fuels or turning off the lights, governments have opted for the former.
The only way to make a stable economy possible is to combine an anti-poverty strategy with a pro-planet strategy. It is just about possible to imagine Western societies where – after vigorous redistribution – everyone has the income, wealth and time to lead a good life. But even that will not be enough. What is needed is a global strategy that encourages the poorest countries to achieve their legitimate poverty reduction goals in the least environmentally damaging way.
Britain accounts for 1% of annual CO2 emissions, while China and India together account for 36%. African countries have much lower carbon footprints, but they are likely to grow as the population grows and the demand for energy increases. The UK could accelerate its progress towards a net zero economy, but unless this is accompanied by significant reductions in the use of fossil fuels by much larger emitters of greenhouse gases, it would not have no discernible impact on rising global temperatures. Western countries can – and should – lead by example in accelerating the transition to cleaner energy, but it is naïve to imagine that the poorest countries will soon opt for degrowth.
This does not mean that the idea of a steady-state planet is a pipe dream. This suggests, however, that the immediate priority should be to make growth in developing countries as clean as possible. And that takes more than warm words. This requires a lot of money: $2 billion a year by 2030, according to one estimate.
The goal should be a new version of the post-war Marshall Plan, in which funding provided by governments and international financial institutions acts as a catalyst for private investment. Avinash Persaud, the special climate envoy to Mia Mottley, the Prime Minister of Barbados, rightly says that the International Monetary Fund and the World Bank could do more to provide developing countries – many of which are burdened with high debts and punitive borrowing costs – access to cheaper finance to fund climate change mitigation and adaptation projects.
Failure to mobilize the necessary resources would be disastrous but, tragically, all too likely. Western governments assume they have all the time in the world to make changes to their status quo models. The brutal truth is that they don’t.
Larry Elliott is a Guardian columnist
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