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Is it time to de-grow our economies?

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“Business as usual” and annual growth in western economies accelerate climate change and exhaust planetary resources. Perhaps, slowing it down could be the answer.

Why do we feel the need to sell and produce more every year? The answer is, we have been taught that a healthy economy works like that. Each year, a country’s GDP (Gross Domestic Product) is calculated to illustrate the total monetary value of goods and services produced in an economy in a year. Then, this value is compared to past years. Simplified: If the value is higher than before, that is good and if the value is lower, that is bad. It is evident that this metric is no value for social or environmental welfare or humans’ well-being. The way we are doing business cannot be sustained in the long-term. The costs for society and the environment are simply too high. It is time to define new economical standards and metrics. Environmental economists suggest we should learn to degrow our economies in a stable way. 

The economist Giorgos Kallis and his colleagues attribute the fact that western societies are in a state of long-term crisis and recession to a fixation on economic growth. For example, during the financial crisis in 2008 the financial sector was deregulated and easy money was supplied in order to maintain economic growth. Nowadays, less growth is associated with very negative things like poverty, unfulfilled needs and unemployment. Economists argue that stable degrowth, meaning to abolish growth as primary target and downscaling production and/or consumption while implementing new models of living, is possible. The aim is to develop an economy that is consistent with planetary boundaries. According to Kallis and his colleagues, one option for sustainable development would be the improvement of carbon efficiency. However, when the economy continues to grow at current rates, carbon efficiency improvements would need to be ten times faster than they currently are to reach our climate targets. Even without economic growth these efficiency improvements would have to be about eight times faster compared to the current state, since the world economy is so intensive now. Therefore, a realistic approach would be to combine degrowth and efficiency improvements. [1] General measures for so called “socially sustainable economic degrowth” could be caps on oil or CO2 emissions on a global scale, which could be divided between nations. Other general approaches are to implement a sharing economy and to invest in social security nets. [2]

„Things grow, and they grow up and they mature, and it’s only by doing so that they can thrive for a very long time.” – Kate Raworth (TED2018)

Of course, a degrowth model also demand a shift in values. Putting less focus on growth goes hand in hand with reducing private consumption and increasing leisure and well-being instead. [3] Since the beginning of the Covid-19 pandemic, there has been an economic decline in most countries. Countries where in lockdown, people could not consume as usual and could not travel. This led to a decrease in fossil CO2 emissions from GtCO2 in 2019 to 1.98 GtCO2 in the pandemic year 2020. [4]Many peoples’ mental health suffered and needs were not satisfied. 

However, data shows that in the long-term well-being is independent from the GDP and that it is much more about the distribution of national income and public services than the wealth itself. On the contrary, people’s individual income does enhance happiness, at least until a certain threshold. The question is: Does our money make us happy or is it the goods and services, the experiences and satisfied needs that we can buy with money that make us happy? [1] Economists suggest that people’s happiness becomes more independent from their access to wage labor, the more access they have to non-monetary goods and services, for example food gardens in cities that allow participants to produce and consume their own food or exchange of services in communities. Such economic spaces outside of formal economic markets tend to especially flourish during crises, when communities start to form their own networks. In this sense, the Covid-19 could also be seen as a chance. [2]

Another important aspect of degrowth is that it demands for new economic metrics. Economists like Kate Raworth call for a system that first sets social and environmental limits and then satisfies needs within those boundaries. [3] First, we need to dive a little deeper into the concept of planetary boundaries. The planetary boundaries, as defined by Johan Rockström and a team of scientists in 2009, are quantitative thresholds for the nine processes, that determine the stability of our planet earth. Those are: Climate change, ocean acidification, Stratospheric Ozone Depletion, Interference with the Global Phosphorus and Nitrogen Cycles, Rate of Biodiversity Loss, Global Freshwater Use, Land-System Change, Aerosol Loading and Chemical Pollution. Naturally, these processes are intertwined. For humanity to thrive for many years to come, the defined boundaries need to be respected.[4] In an attempt to sit down and think of a concept that measures prosperity while including the planetary boundaries, Kate Raworth came up with the ”Doughnut”. The inner circle of the doughnut illustrates a state of shortfall at which people suffer famine, health issues and do not have sufficient infrastructure or democratic rights. A society’s goal should be to build a social foundation, which is illustrated by scientific minimum social standards, and get into the green circle. To thrive, nations have to make sure to stay in the green circle while not overusing resources and thereby overstepping the ecological ceiling, which is illustrated by the planetary boundaries. Kate Raworth our “double sided challenge” for the 21stcentury is going to be to find a balance between the social foundation and the economic ceiling. At the moment, as a global community we are falling short (E.g. Starvation) while overshooting (E.g. High rates of biodiversity loss) at the same time. 

“We, the people of the early 21st century, this is our selfie” – Kate Raworth (TED 2018)

The doughnut of social and planetary boundaries (Source: Kate Raworth https://www.kateraworth.com/doughnut/

As Kate Raworth points out in her TED Talk (2018): “No economist from last century saw this picture, so why would we imagine that their theories would be up for taking on its challenges?”. With the knowledge that we have gained over the last decades, we can develop economies that are designed to thrive within our earth’s boundaries, not to grow. With the technological advancements we have developed, like AI and big data, we can design economies that distribute wealth evenly among the globe to provide every nation with a social foundation. Perhaps the 21st century will teach us to emphasize community, creativity, meaning and equality rather than growth.

By Marlena Niedl

Recommended TED Talks: 

Kate Raworth (2018): https://www.ted.com/talks/kate_raworth_a_healthy_economy_should_be_designed_to_thrive_not_grow/transcript?language=en#t-436387

Johan Rockström (2010): https://www.ted.com/talks/johan_rockstrom_let_the_environment_guide_our_development/transcript?language=de

[1] Jeroen C.J.M. Van den Bergh, Giorgos Kallis (2012): Growth, A-Growth or Degrowth to Stay within Planetary Boundaries?, Journal of Economic Issues, Volume XLVI, Pages 909-919.

[2] Jeroen C.J.M. Van den Bergh, Giorgos Kallis (2012): Growth, A-Growth or Degrowth to Stay within Planetary Boundaries?, Journal of Economic Issues, Volume XLVI, Pages 909-919.

[3] TED (2018): Kate Raworth: A healthy Economy should be designed to thrive, not grow. (Retrieved from: https://www.ted.com/talks/kate_raworth_a_healthy_economy_should_be_designed_to_thrive_not_grow/transcript?language=en)

[4] Rockström, J., W. Steffen, K. Noone, Å. Persson, F. S. Chapin, III, E. Lambin, T. M. Lenton, M. Scheffer, C. Folke, H. Schellnhuber, B. Nykvist, C. A. De Wit, T. Hughes, S. van der Leeuw, H. Rodhe, S. Sörlin, P. K. Snyder, R. Costanza, U. Svedin, M. Falkenmark, L. Karlberg, R. W. Corell, V. J. Fabry, J. Hansen, B. Walker, D. Liverman, K. Richardson, P. Crutzen, and J. Foley. 2009. Planetary boundaries:exploring the safe operating space for humanity. Ecology and Society 14(2): 32.

[1] Giorgos Kallis, Christian Kerschner, Joan Martinez-Alier (2012): The economics of degrowth, Ecological Economics, Volume 84, Pages 172-180.

[2] Jeroen C.J.M. Van den Bergh, Giorgos Kallis (2012): Growth, A-Growth or Degrowth to Stay within Planetary Boundaries?, Journal of Economic Issues, Volume XLVI, Pages 909-919.

[3] Giorgos Kallis, Christian Kerschner, Joan Martinez-Alier (2012): The economics of degrowth, Ecological Economics, Volume 84, 2012, Pages 172-180.

[4] UN Environment Programme (2021): COVID-19 caused only a temporary reduction in carbon emissions – UN report (Retrieved from: https://www.unep.org/news-and-stories/press-release/covid-19-caused-only-temporary-reduction-carbon-emissions-un-report)

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