Radical Implications of a Zero Growth Economy

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  • Article: Ted Trainer, “The radical implications of a zero growth economy”, real-world economics review, issue no. 57, 6 September 2011, pp. 71-82,

URL = http://www.paecon.net/PAEReview/issue57/Trainer57.pdf comments


Summary

Ted Trainer:

"For 50 years literature has been accumulating pointing out the contradiction between the pursuit of economic growth and ecological sustainability, although this has had negligible impact on economic theory or practice. A few, notably Herman Daly (2008), have continued to attempt to get the notion of a steady-state economy onto the agenda but it has only been in the last few years that discussion has begun to gain momentum. Jackson’s Prosperity Without Growth (200) has been widely recognised, there is now a substantial European ”De-growth” movement (Latouche, 2007), and CASSE (2010) has emerged.

The argument in this paper is that the implications of a steady-state economy have not been understood at all well, especially by its advocates. Most proceed as if we can and should eliminate the growth element of the present economy while leaving the rest more or less as it is. It will be argued firstly that this is not possible, because this is not an economy which has growth; it is a growth-economy, a system in which most of the core structures and processes involve growth. If growth is eliminated then radically different ways of carrying out many fundamental processes will have to be found. Secondly, the critics of growth typically proceed as if it is the only or the primary or the sufficient thing that has to be fixed, but it will be argued that the major global problems facing us cannot be solved unless several fundamental systems and structures within consumer-capitalist society are radically remade. What is required is much greater social change than Western society has undergone in several hundred years.

Before offering support for these claims it is important to sketch the general “limits to growth” situation confronting us. The magnitude and seriousness of the global resource and environmental problem is not generally appreciated. Only when this is grasped is it possible to understand that the social changes required must be huge, radical and far reaching. The initial claim being argued here (and detailed in Trainer 2010b) is that consumer-capitalist society cannot be reformed or fixed; it has to be largely scrapped and remade along quite different lines."


Excerpts

The key thesis:


"This society cannot be fixed; its major elements must be scrapped and replaced. Most obviously, you cannot reform a growth economy to be a zero-growth economy, and you cannot remove the growth element from the economy while leaving the rest of it as it was; you have to build a completely different economy. Above all, you will not solve the many problems the quest for growth is causing without scrapping core structures in our culture, that is until people in general come to be content with what is sufficient and design and run economies that are about subsistence, gift and reciprocity."


The Ecological Overshoot problem

Ted Trainer:


"The following points drive home the magnitude of the overshoot:

  1. If the 9 billion people we will have on earth within about 50 years were to use resources at the per capita rate of the rich countries, annual resource production would have to be about 8 times as great as it is now.
  2. If 9 billion people were to have a North American diet we would need about 4.5 billion ha of cropland, but there are only 1.4 billion ha of cropland on the planet.
  3. Water resources are scarce and dwindling. What will the situation be if 9 billion people try to use water as we in rich countries do, while the greenhouse problem reduces water resources.
  4. The world’s fisheries are in serious trouble now, most of them overfished and in decline. What happens if 9 billion people try to eat fish at the rate Australian’s do now?
  5. Several mineral and other resources are likely to be very scarce soon, including gallium, indium, helium, and there are worries about copper, zinc, silver and phosphorous.
  6. Oil and gas are likely to be in decline soon, and largely unavailable in the second half of the century. If 9 billion were to consume oil at the Australian per capita rate, world demand would be about 5 times as great as it is now. The seriousness of this is extreme, given the heavy dependence of our society on liquid fuels.
  7. Recent 'Footprint' analysis indicates that it takes 8 ha of productive land to provide water, energy, settlement area and food for one person living in Australia. (World Wildlife Fund, 2009.) So if 9 billion people were to live as we do about 72 billion ha of productive land would be needed. But that is about 10 times all the available productive land on the planet.
  8. The most disturbing argument is to do with the greenhouse problem. It is very likely that in order to stop the carbon content of the atmosphere rising to dangerous levels CO2 emissions will have to be totally eliminated by 2050 (Hansen says 2030). (Hansen, 2009, Meinschausen et al., 2009.) Geo-sequestration can’t enable this, if only because it can only capture about 85% of the 50% of emissions that come from stationary sources like power stations."

Trickle Down does not work

Ted Trainer:

"The global economy totally ignores the needs and the rights of people and ecosystems. It allows, guarantees, that 850 million people starve while 600 million tonnes of grain are fed to animals in rich countries every year and most of the best land in many hungry countries is devoted to export crops. Conventional development, i.e., development determined by market forces and profit, is therefore clearly a form of plunder – it puts the productive capacity of the Third World into enriching us not them.

Conventional development theory and practice are based on the idea of “growth and trickle down”, i.e., the assumption that if we all enthusiastically pursue growth within the market place then this will be the best way to raise the Third World to satisfactory living standards. What a delight for the very rich! “No need to think about redistributing existing wealth, or producing what’s needed rather than what’s profitable…just produce whatever most enriches the already rich and wealth will trickle down to enrich all.” This is to say we should be content with an approach to development which delivers almost all of the Third World’s produced wealth to us in rich countries while a tiny fraction of it benefits Third World people.

The greatest blind spot in this conventional development theory and practice is that its goal is utterly impossible. The discussion above makes clear that there is no possibility of the Third World developing to be like the rich countries or to have rich world “living standards”; there are nowhere near enough resources for that. “But look at China!” Yes there are places in the global economy where some people are winning spectacularly, and where significant benefits are going to poorer people. There is strong evidence that the ‘living standards” of large numbers of people in the Third World are indeed rising significantly. (See for instance Rosling, 2009.) However this does not mean the Trickle Down approach is acceptable or that it could solve the basic problems.

Firstly the booming export markets the Chinese now enjoy have been taken from many in poor countries who once had them but now can’t earn from exporting the things they used to sell. Also it is easy to overlook the fact that 800 million Chinese are not sharing in the new wealth. (Hutton, 2007) Market based systems mostly benefit the middle class and the rich, and create limited opportunities for some to rise to the middle class. Ask 500 million in Africa, or most people in Haiti and Tuvalu about the miracles of growth and trickle down. Most of them are probably enjoying declining GDP per capita."


The far reaching and profoundly radical implications of zero-growth

"The growth problem is not just that the economy has grown to be too big, now depleting resources and damaging and eventually destroying ecosystems. The more central problem is that growth is integral to the system. Most of the systems basic structures and mechanisms are driven by growth and cannot operate without it. Growth cannot be removed leaving the rest of the economy more or less as it is. Unfortunately people in the current “De-growth” movement tend to think growth is like a faulty air conditioning unit in a house, which can be taken away and the rest of the house will function more or less as it did before.


• If you do away with growth then there can be no interest payments. If more has to be paid back than was lent or invested, then the total amount of capital to invest will inevitably grow over time. The present economy literally runs on interest payments of one form or another; an economy without interest payments would have to have totally different mechanisms for carrying out many processes.


• Therefore almost the entire finance industry has to be scrapped, and replaced by arrangements whereby money is made available, lent, invested etc., without increasing the wealth of the lender. That is incomprehensible to most current economists, politicians and ordinary people.


• Among related problems is how to provide for old age, when this can’t be done via superannuation schemes relying on returns on invested savings?


• The present economy is literally driven by the quest to get richer; this motive is what ensures energetic search for options, taking of risks, construction and development, etc. The most obvious alternative is for these actions to be motivated by a collective effort to work out what society needs, and organise to produce and develop those things. This involves an utterly different world view and driving mechanism. Such a society would have to find another way to ensure innovation, entrepreneurial initiative 77 and risk taking when people can’t look forward to getting richer from their efforts. (This is not necessarily a difficult problem; See Trainer 2010a, Ch. 5.)


• The problem of inequality would become acute and would demand attention. It could not be dealt with by assuming that “the rising tide will lift all boats“. In the present economy, growth “legitimises” inequality and defuses the problem. Extreme inequality is not a source of significant discontent, because it can be said that economic growth is raising everyone’s “living standards”. But if the pie remains at a constant size, and everyone is driven by a competitive struggle to get richer all the time, before long the most energetic/talented/ruthless few will have taken most of the pie. Thus inequality would have to be addressed and dealt consciously and deliberately, involving social decisions regarding distribution and fair shares...which again would involve a very different kind of society.


• Above all, if there is to be no growth there can be no role for market forces. Many people who oppose growth do not seem to realise this. The market is about maximising; i.e., about producing, selling, and investing in order to make as much money as possible from the deal, and then seeking to invest, produce and sell more, in order to again make as much money as possible. In other words there is an inseparable relation between growth, the market system and the accumulation imperative that defines capitalism. If we must cease growth we must scrap the market system.


• The above changes could not be made unless there was also a profound cultural change, involving nothing less than the abandonment of the desire to gain. For more than two hundred years our Western society has been focused on the quest to get richer, to accumulate wealth and property. (The point is focal in the writings of Polanyi, 1944, and Tawney 1922, in the emergence of capitalist society from Medieval society.) This is what drives all economic activity, such as the innovative and development behaviour of firms and the behaviour of individuals and firms in the market, and it is at the core of national policy. People work to get as much money as possible. Firms strive to make as much profit as possible and to get as big as possible. People trade in order to end up richer than they were. Nations strive to become richer all the time.


• The logically inescapable point here is that in a zero-growth economy there could be no place whatsoever for this psychological motive or economic process. People would have to be concerned to produce and acquire only that stable quantity of goods and services that is sufficient for a satisfactory quality of life, and to seek no increase whatsoever in savings, wealth, possessions etc. It would be difficult to exaggerate the magnitude of this cultural transition. A zero-growth economy cannot exist unless there is enormous change from the mentality that is typical in consumer society and that has been the dominant driving force in Western culture for several hundred years."


Subsistence, gift, reciprocity...sufficiency

Ted Trainer:


"The alternative to a growth economy is in fact a subsistence economy, that is, one in which people produce to meet stable needs and not to accumulate wealth. In tribal, peasant, ancient and Medieval societies and in many communes today items are not made to sell in order to gain, to accumulate money over time. (See Polanyi’s discussion, 1944.) They are produced to exchange for other needed items of equal “value”. Market day enables all to acquire the things they need, in exchange for a contribution to meeting the needs of others. No one intends to gain from the exchange; they just intend to exchange items of a certain “value” for others of the same “value” (usually measured in labour time needed to produce them.) People do not go into the market to get rich. (Merchants visiting the town, usually with non-necessities, luxuries, to sell, did trade to gain, but in Medieval Europe were an almost irrelevant minority on the fringe of the mainstream economy, and were not respected.)

In these subsistence economies the basic operation was not getting, it was giving...knowing that others would give to you. In other words the key economic mechanism was gift and reciprocity. In tribes elaborate rules govern the giving and receiving, ensuring that all are provided for. (No one in tribal society is poor or hungry, unless times are difficult for all.)

These are the economic principles that must exist, whether we like it or not in a satisfactory, viable economy in the coming era of intense and irremediable scarcity, in which we must develop mostly small local cooperative stable economies focussed on meeting needs. The focal concerns must be organising local resources and productive capacities to provide well for all, without any notion of gain or getting richer over time. The basic mechanism must be giving to others and the community, knowing that you will be given what you need. (for instance contributing to voluntary working bees that maintain the community orchards.)"


Is capitalism compatible with a zero-growth economy?

Ted Trainer:


"It should now be obvious that a stable or zero-growth economy cannot be a capitalist economy. Capitalism is by definition about accumulation, making more money than was invested, in order to invest the surplus to have even more...to invest to get even richer. It would be possible in a stable economy for a few to still own most capital and factories, and live on the income from these investments, but they would be like rentiers or landlords who draw an income from their property. They could not be driven to accumulate, get richer, increase the amount of capital they possess and invest to get richer. If they did, a very few would quickly take almost all of the fixed amount of income and wealth available...and the system would soon self-destruct.

Some people, such as Herman Daly believe that “productivity” growth would enable capitalism to continue in a zero-growth economy. The counter-argument is that there would be a tendency for this to happen, but that the effect would be trivial and short lived.

Many in the emerging “De-growth” movement do not wish to face up to the conclusion that if you get rid of growth then you will also have got rid of capitalism and you will inevitably have (some kind of) “socialism”. That is, the economy could not then be left to competition between people who own capital operating in free markets. At least the main economic decisions would have to be made by deliberate social discussion, debate and planning...because this is the only logical alternative to leaving them to “free markets” and the owners of capital competing to gain.

It is crucial to immediately stress that this does not have to mean we must accept a big authoritarian, bureaucratic state running everything...which no one is likely to prefer. A new economy is sketched below ... It has the main decisions made collectively, by all people within small community economies (but with most of the economy in the form of private firms.)"


Conclusion: What is the alternative?

"If we must abandon growth and greatly reduce production and consumption then there is no alternative but to develop an economy which is basically under social control, i.e., in which we discuss, decide, plan and organise to produce that stable quantity of the basic things we need to enable a high quality of life for all. In the coming conditions of intense resource scarcity, viable communities will have to be mostly small, self-sufficient local economies using local resources to produce what local people need. Such economies can only work well if control is in the hands of all citizens, via participatory-democracy exercised through whole town assemblies. This vision would enable most of the firms and farms to be privately owned or community cooperatives, and would involve little role for councils, state or federal governments."

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