Policies for a Post-Growth Economy

* Report: Policies for a Post-Growth Economy. By Samuel Alexander. Melbourne Sustainable Society Institute, MSSI Issues Paper No. 6, April 2016

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"This paper provides a summary case for why there are, in fact, limits to growth, and outlines a range of bold policy interventions that would be required to produce a stable and flourishing post-growth economy. The analysis draws on and attempts to develop a rich array of thinking from literatures including ecological economics, eco-socialism, degrowth, and sustainable consumption. For decades a huge amount has been written in critique of growth economics, but the literature on what a post-growth economy would look like, or how to get there, is far less developed. This is inhibiting the movement for change. I acknowledge that most people do not recognise the need for a post-growth economy and therefore would reject my policy proposals as unacceptable. But as the limits to growth tighten their grip on economies in coming years and decades, I believe the debate will inevitably evolve, and the question will not be whether a post-growth economy is required, but rather how to create one – by design rather than disaster."

Excerpts

From the conclusion:

"I would argue, of knowing that a planned transition to a post-growth economy is both necessary and seemingly impossible. If there are indeed little grounds for thinking that a ‘top down’ transition is likely or possible without inducing deep economic disruption and instability, one strategic deduction is that a post-growth economy, if it is to emerge, may have to be driven into existence ‘from below’, with local communities coming together to do it themselves. One could adopt a ‘theory of change’ based in anarchism or participatory democracy, in which a new, post-growth Economy B is slowly built up at the grassroots level, with active social movements more or less ignoring the state, and over time this new economy becomes dominant as the old, growth-orientated Economy A deteriorates (Trainer, 2010). Indeed, it could be argued that, at this early stage in the transition, the most important thing a concerned citizen can do is to work on changing culture at the local, community level, trusting that, over time, if a large social movement develops which demands a post-growth economy, the structures and systems necessary for such an economy will eventually filter upwards as culture radicalises and develops a more engaged political consciousness. Admittedly, these strategies are unlikely to take down Empire in the near-term, but arguably they embody a more coherent political intelligence than the conventional approach of thinking that a post-growth economy could be smoothly introduced via ‘top down’ parliamentary politics.

The ultimate message from this analysis, therefore, is that those concerned about limits to growth should be splitting their energies between two main activities:

(1) raising awareness about the limits to growth and the inability of capitalism to resolve those limits; and

(2) attempting to establish examples of the postgrowth economy at the local, community level, and working on building the new systems and cultures required for such examples to proliferate and take root.

Fortunately these activities are likely to help build resilience even if they fail to produce a post-growth economy. Thus, if we face a future where the growth economy grows itself to death, which seems to be the most likely scenario, then building up local resilience and self-sufficiency now will prove to be time and energy well spent. In the end, it is likely that only when a deep crisis arrives will an ethics of sufficiency come to inform our economic thinking and practice more broadly."

The Policy Proposals

By Samuel Alexander:

"Policies for a Post-Growth Economy:

As outlined below, a post-growth economy will require, among other things, developing new macroeconomic policies and institutions, confronting the population challenge, and culturally embracing post-consumerist lifestyles of material sufficiency. The following proposals are not intended to be comprehensive, and they are not presented as a blueprint that could be applied independent of context. Instead, the review simply outlines a range of key issues that would need to be addressed in any ‘top down’ transition to a post-growth economy. After outlining what the structures of a post-growth economy might look like, I consider the question of whether such an economy could be legislated into existence in a globalised market economy, or whether a post-growth economy is inconsistent with globalisation as we know it.

1. Explicit adoption of post-growth measures of progress:

In order to transcend the growth model, the first thing needed is to adopt better and more nuanced measures of progress than GDP (Stiglitz, Sen, and Fitoussi, 2010). What we measure, and how we measure it, matters. It is now widely recognised that GDP is a deeply flawed measure of societal progress, yet it remains the dominant way to assess politico-economic success. GDP is merely an aggregate of market transactions, making no distinction between economic activities that contribute positively to sustainable well-being and those that diminish it. For example, GDP can be growing while at the same time our environment is being degraded, inequality is worsening, and social well-being is stagnant. Accordingly, a politics and economics ‘beyond growth’ must begin by explicitly adopting some post-growth measure of progress, such as the Genuine Progress Indicator (GPI). Although it is not a perfect metric, the GPI takes into account a wide range of social, economic, and environmental factors that GDP ignores, thus representing a vast improvement over GDP. Public understanding of and support for such post-growth accounting systems would open up political space for political parties to defend policy and institutional changes – such as those outlined below – which would genuinely improve social well-being and enhance ecological conditions, even if these would not maximise growth in GDP. If we do not measure progress accurately we cannot expect to progress.

2. Reduce overconsumption via diminishing ‘resource caps’:

One of the defining problems with the growth paradigm is that the developed nations now have resource and energy demands that could not possibly be universalised to all nations. The quantitative ‘scale’ of our economies is overblown. It follows that any transition to a just and sustainable world requires the developed nations to stop over-consuming the world’s scarce resources and reduce resource and energy demands significantly.

Although in theory efficiency gains in production provide one pathway to reduced demand, the reality is that within a growth economy, efficiency gains tend to be reinvested in more growth and consumption, rather than reducing impact. After all, efficiency gains can reduce the costs of production, making a commodity cheaper, thus incentivising increased consumption of the commodity. In order to contain this well documented phenomenon (for a review, see Alexander, 2015: Ch. 1), a post-growth economy would need to introduce diminishing resource caps – that is, well defined limits to resource consumption – to ensure that efficiency gains are directed into reducing overall resource consumption, not directed into more growth. In fact, diminishing resource caps would actually encourage and stimulate efficiency improvements, because producers would know that there would be increasing competition over key resources and so would be driven to eliminate waste and create a ‘circular economy’ where products at the end of their life are reused in the next phase of production. In an age of ecological overshoot, the over-consuming developed nations need to achieve significant absolute reductions in resource demand (absolute decoupling) not just productivity gains (relative decoupling).

Determining where to set the resource caps, how quickly they should be reduced (e.g. 3% per year to allow markets to adjust), and where they should be aiming to stabilise (e.g. an equal per capita share), are open questions that can be debated. Formulating a workable policy in this domain would require, among other things, a highly sophisticated and detailed scientific accounting of resource stocks and flows of the economy. But the first step is simply to recognise that, in the developed nations, diminishing resource caps are a necessary part of achieving the ‘degrowth’ in resource consumption that is required for justice and sustainability.

3. Working hour reductions:

One obvious implication of diminishing resource caps is that a lot less resource-intensive producing and consuming will take place in a post-growth economy. That will almost certainly mean reduced GDP, although there is still great scope for qualitative growth (technological innovation and efficiency improvements). But what implications will a contracting economy have for employment? Growth in GDP is often defended on the grounds that it is required to keep unemployment at manageable levels. If a nation gives up the pursuit of GDP, therefore, it must maintain employment via some other means. Restructuring the labour market is essential for the stability of any post-growth economy. Today, Australians work some of the longest hours in the OECD, but it is not clear such long hours contribute positively to social well-being. Could we work less but live more? By reducing the average working week to, say, 28 hours, a post-growth economy would share the available work amongst the working population, thereby minimising or eliminating unemployment even in a non-growing or contracting economy, while at the same time increasing social well-being by reducing overwork (Coote and Franklin, 2013). The aim would be to systematically exchange superfluous consumption for increased free time, which would also bring environmental benefits. While some of the increased free time could be spent enjoying local, low-impact leisure activities, some of it would also be spent engaging in the informal economy, such as activities of self-sufficiency (e.g. various forms of household production, growing food, house maintenance, sharing, volunteering, etc.) and local barter. This increased self-sufficiency and community engagement would also mitigate the impacts of reduced income in a post-growth economy by reducing household expenditure on basic needs. In this way a post-growth economy would not induce spiralling unemployment or hardship as is often feared. A deliberately created post-growth or degrowth economy is very different to unplanned recession. Indeed, planned contraction of the formal economy has the potential to liberate people from the work-to-spend cycle and provide people with more autonomy, meaning, and variety in their working lives.

4. Rethink budget spending for a post-growth transition:

Governments are the most significant player in any economy and have the most spending power. Accordingly, if governments decide to take the limits to growth seriously this will require a fundamental rethink of how public funds are invested and spent. Broadly speaking, within a post-growth paradigm public spending would not aim to facilitate sustained GDP growth but instead support the projects and infrastructure needed to support a swift transition to a post-growth economy. This would include huge divestment from the fossil fuel economy and a co-relative reinvestment in renewable energy systems (see next section). But it would also require huge investment in other forms of ‘green’ infrastructure. The importance of creating new infrastructure highlights the fact that consumption practices in a society do not take place in a vacuum.

Instead, our consumption takes place within structures of constraint, and those structures make some lifestyle options easy or necessary, and other lifestyle options difficult or impossible. Currently, many people find themselves ‘locked in’ to high-impact lifestyles due to the structures within which they live their lives (Sanne, 2002). To provide one example: it is very difficult to stop driving a private motor vehicle if there is poor public transport and insufficient bike lanes. Change the infrastructure, however, and new, low-impact lifestyles implied by a post-growth economy would be more easily embraced.

Greening infrastructure will therefore require a significant revision of government expenditure. Recognising climate change as a national ‘security threat’, for example, and on that basis redirecting a significant portion of military spending toward renewable energy and efficient systems of public transport, is one path to funding the infrastructure (and other post-growth policies) needed for a stable and flourishing post-growth economy.

5. Renewable energy:

In anticipation of the foreseeable stagnation and eventual decline of fossil fuel supplies, and recognising the grave dangers presented by climate change, a post-growth economy would need to transition swiftly to renewable energy and more efficient energy systems and practices.

This provides a hugely promising space to meaningfully employ large segments of the population as the fossil fuel economy enters terminal decline. But just as important as ‘greening’ the supply of energy is the challenge (too often neglected) of reducing energy demand. After all, it will be much easier to transition to 100% renewable energy if energy use is significantly reduced through behavioural changes, reduced production and consumption, and more efficient appliances. Indeed, the extremely tight and fast diminishing carbon budget for a safe climate now makes this ‘demand side’ response a necessity (Anderson, 2013; Anderson, 2015), yet the significantly reduced energy demand required for a safe climate is incompatible with the growth model, because energy is what drives economic growth (see Ayres and Warr, 2009). Accordingly, a post-growth politics would initiate a transition to 100% renewable energy financed in part by a strong carbon tax, and undertake a public education campaign to facilitate reduced energy demand. Given how hard it will be to fully replace the fossil fuel economy with renewable energy (especially the 94 million barrels of oil currently consumed everyday), it is also worth highlighting that a post-carbon economy will have to adapt to an energy descent context and is likely to be a far more localised economy than the globalised, fossil fuel dependent economy we know today (Moriarty and Honnery, 2008). While there would still be some limited space for global trade in a post-growth economy, most production would seek, by default, to use local resources from the bioregion to meet mostly local needs, thereby shortening the links between production and consumption. As well as running the economy on renewables, a post-growth strategy could also involve placing a moratorium on the cutting down of old growth forests and planting up huge tracts of land with trees to sequester carbon. Any coherent climate strategy must also address the huge carbon footprint of meat (especially red meat) and accordingly promote significantly reduced meat consumption (see Harvey, 2016).

6. Banking and finance reform:

Currently, our systems of banking and finance essentially have a ‘growth imperative’ built into their structures. Money is loaned into existence by private banks as interest-bearing debt, and in order to pay back that debt plus the interest, this requires an expansion of the money supply (Trainer, 2011). Furthermore, there is so much public and private debt today that the only way it could be paid back is via decades of continued GDP growth. This type of banking system requires growth for stability and yet limitless economic growth, as argued above, is the driving force behind the environmental crisis. In order to move toward a stable, post-growth economy, part of the institutional restructuring required involves deep reform of banking and finance systems. This is a complex transition that could take various forms, but at base it would require the state taking responsibility for creating banking and finance systems that do not require growth for stability, and strictly regulating these systems to ensure equity. A post-growth transition might also require ‘debt jubilees’ in some circumstances, especially in developing nations that are unjustly being suffocated by interest payments to rich world lenders. Developing nations, for example, receive about $136 billion in aid from donor countries but pay about $600 billion servicing debt (see Hickel, 2013). No fancy theorising can plausibly defend such a situation as just.

7. Population policies:

As population grows more resources are required to provide for the basic material needs of humanity (food, clothing, shelter, etc.), increasing our demands on an already overburdened planet. It is absolutely imperative that nations around the world unite to confront the population challenge directly, rather than just assuming that the problem will be solved when the developing world gets rich. Population policies will inevitably be controversial but the world needs bold and equitable leadership on this issue. Research suggests that the world is facing a population of around 9.5 billion by mid-century and 11 billion by the end of this century (Gerland et al, 2014), which would be utterly catastrophic from both social and environmental perspectives. As Paul Ehrlich famously noted, ‘whatever problem you’re interested in, you’re not going to solve it unless you also solve the population problem.’ The first thing needed is a global fund that focuses on providing the education, empowerment, and contraception required to minimise the estimated 87 million unintended pregnancies that occur every year (WHO, 2016). If these unplanned pregnancies were avoided, a significant part of the population problem would be resolved. Furthermore, all financial incentives that encourage population growth should be abolished and the benefits of small families should be highlighted. Command-and-control policies, such as one or two child policies, should be a last resort, but even such controversial policies would arguably be preferable to a world of 11 billion people. I think everyone who casually dismisses the limits to growth perspective should be given a Petri dish with a swab of bacteria in it and watch as the colony grows until it consumes all the available nutrients or is poisoned by its own waste. From a distance, Earth today would look very much like that Petri dish. Bacteria mightn’t show the insight to stop growing on a finite resource base – but will humanity? We are at the crossroads and are in the process of choosing out collective fate.

8. Reimagining the good life beyond consumer culture:===

Despite the environmental necessity of population stabilisation and eventual decline, the fact remains that currently there are 7.4 billion people on Earth, all of whom have the right to the material conditions needed to live a full and dignified human life. Nevertheless, if the global economy is to raise the material living standards of the great multitudes currently living in destitution, this is likely to put further pressure on global ecosystems.

Therefore, in order to leave some ‘ecological room’ for the poorest people to develop their economic capacities in some form, high-impact consumer lifestyles must be swiftly transcended and rich nations must initiate a degrowth process of planned economic contraction. There is no conceivable way that seven billion people, let alone eleven billion, could live sustainably on Earth in material affluence.

Globalising affluence, quite simply, would be ecologically catastrophic. Accordingly, members of the global consumer class need to re-imagine the good life beyond consumer culture and develop new conceptions of human flourishing based on sufficiency, moderation, frugality, and non-materialistic sources of meaning and satisfaction. From a consumption perspective, this might mean driving less and cycling more; growing local organic food; putting on woollen clothing rather than always turning on the heater; taking shorter showers; flying less or not at all; eating less meat; making and mending rather than buying new; sharing more; and in countless other ways rethinking lifestyles in ways that radically reduce energy and resource burdens. In sum, a post-growth economy would not aim to provide affluence for all but modest sufficiency for all – which is what justice and sustainability requires.

A necessary part of any post-growth politics would therefore require a public relations campaign that openly challenged consumerist lifestyles and highlighted the social and environmental benefits of a ‘simpler life’ with less stuff but more free time. Linked to such an education campaign would be a strategy to minimise exposure to advertising that currently glorifies and encourages consumerism. For example, a post-growth economy might follow the city of Sao Paulo by banning all outdoor advertising on billboards, shop fronts, vehicles, etc.

9. Distributive justice:

Last but not least, environmental concerns cannot be isolated from social justice concerns. The conventional path to poverty alleviation is via the strategy of GDP growth, on the assumption that ‘a rising tide will lift all boats’. Given that a post-growth economy deliberately seeks a non-growing economy – on the assumption that a rising tide will sink all boats – poverty alleviation must be achieved more directly, via redistribution, both nationally and internationally. In other words (and to change the metaphor), a post-growth economy would eliminate poverty and achieve distributive equity not by baking an ever-larger economic pie but by slicing it differently. Any attempt to systemically redistribute wealth via taxation or property reform will be highly controversial, especially in our neoliberal age, but present concentrations of wealth demand a political response. Research published this year (see Elliot, 2016) shows that the richest 62 people on the planet now own more than the poorest half of humanity. Dwell on that for a moment. Furthermore, it has been shown that, as the US seeks to recover from the Global Financial Crisis, 95% of GDP growth has gone to the top 1% of the population (Saez, 2012). This highlights the point that growth itself will not resolve poverty; we need policies that directly redistribute wealth and ensure a dignified material baseline.

There is no single best policy for eliminating poverty or achieving a just distribution of wealth, but key policy options include

(i) a basic income for all, which guarantees every permanent resident with a minimal, living wage;

(ii) an alternative is the ‘negative income tax’, which guarantees a minimum income for those who earn below a certain threshold;

(iii) progressive tax policies (i.e. the more you earn, the higher the tax rate) which could culminate in a top tax rate of 90% or more; (iv) wealth taxes, that systematically transfer 3% of private wealth from the richest to the poorest recognising the large social component in wealth production; and (v) estate taxes of 90% or more to ensure the laws of inheritance and bequest do not create a class system of entrenched wealth and entrenched poverty. These and other tax-and-transfer policies should be explored to eliminate poverty and ensure distributive equity. Obviously, arguments that such policies would inhibit growth do not hold water within a post-growth framework.

I contend that these policy platforms – all in need of detailed elaboration and discussion – should be the opening moves in a ‘top down’ transition to a post-growth economy. To be employed in concert, they clearly challenge the dominant macroeconomics of growth and would require far more social control over the economy than neo-liberal capitalism permits today. Markets work well in some circumstances, no doubt, but leaving everything to the market and thinking this will magically advance the common good has been proven dangerously false. It follows that a post-growth economy must be a post-capitalist or eco-socialist economy, with increased democratic planning and perhaps even some rationing of key resources to ensure distributive equity. The policies above also depend upon a society that sees the necessity and desirability of a post-growth economy, hence the special importance of public education campaigns and the emergence of a new, post-consumerist culture of consumption."

=Author Bio

"Dr Samuel Alexander is a lecturer with the Office for Environmental Programs and a Research Fellow with the Melbourne Sustainable Society Institute, University of Melbourne. He currently teaches a course called ‘Consumerism and the Growth Economy: Interdisciplinary Perspectives’ into the Master of Environment, University of Melbourne. His books include: Sufficiency Economy: Enough, for Everyone, Forever (2015); Prosperous Descent: Crisis as Opportunity in an Age of Limits (2015); Simple Living in History: Pioneers of the Deep Future (2014); Entropia: Life beyond Industrial Civilisation (2013) and Voluntary Simplicity: The Poetic Alternative to Consumer Culture(2009)."