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July 17, 2023

Why Degrowth won’t save the world

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During economic downturns, sales of Karl Marx’s Das Kapital typically surge. Fewer jobs, more uncertainty, and difficulties making ends meet, understandably generate discontent. Global capitalism bears the brunt of such anger. In 2008, at the height of the Global Financial Crisis, the Degrowth Movement was launched in Paris. And in 2021, at the height of the Covid-19 pandemic recession, Jason Hickel, published  a Degrowth manifesto-of-sorts, his book Less is More: How Degrowth will Save the World. Since its launch the Degrowth Movement has been primarily gaining attention in European countries. It remains a marginal group. However, it has been quite vocal.  In 2023, Hickel addressed the Dutch Parliament and EU Parliamentarians held a “Beyond Growth” conference in Brussel.  The latter aimed to facilitate a “move away from the harmful focus on the growth of GDP as the basis of our development model.” 
The Degrowth Movement demands an end to economic growth and the West’s obsession with growth; and moreover, a reduction in overall GDP – in  Hickel’s words, it is time to “de-develop” the West. Global capitalism needs to be replaced with a system that degrows and de-develop the West. This is argued to be the only option to stop exceeding planetary ecological boundaries- the ultimate sin of global capitalism. The world needs to be saved from this, and only degrowth can deliver, as the sub-title of Hickel’s book proclaim. Green growth is no option because the movement argues that no absolute decoupling between GDP and material resource use is possible. 
The movement has a point about the difficulty of decoupling GDP from material use in an absolute manner. But otherwise, the overarching solution of downsizing economies, is not a solution. There have been several deconstructions of degrowth for instance by Ted Nordhaus, and economists Branko Milanovicand Andrew McAfee
From these, several reasons can be highlighted for why degrowth is no option- and which I elaborate in my recent IZA discussion papers available here and here:

  • Degrowth will not decrease decarbonization enough. 
Most (63%) of current carbon emissions come from developing countries - where it will only continue to increase in the foreseeable future. China is building the equivalent of two new coal-fired power plant every week. Only reducing rich countries’ GDPs will not result in enough decarbonization to limit global warming in line with global commitments. 
  • Degrowth will make matters worse. 
Degrowth may be dirty. Global redistribution will increase aggregate consumption through a well-known "growth through redistribution" effect. Degrowth may cause low-income households to revert to deforestationand environmental destruction - as they in fact did during the 2022-2023 winter in Europe when faced with steeply rising energy prices. And much less resources will be available to invest in making the transition to renewable energy. Thus, as Nobel Laureate Ted Nordhaus concluded, degrowth may "do more harm to the planet than good".
  • Degrowth is politically infeasible. 
Humans are loss averse. Thus, if over the short-term, levels of income (GDP) would fall, happiness would fall too. Because of the endowment effect, people would attach high value to their levels of GDP per capita. They would therefore be unlikely to vote for politicians who propose lowering their levels of GDP per capita. And politicians, being generally subject to a status quo bias, would be reluctant to propose such a radical policy. As Degrowth proponents acknowledge “political parties that have put forward degrowth ideas have received limited support in elections.” 
  • Degrowth policies are disappointing.
The degrowth movement has come up with a long list of policy proposals. The extent of this list of “degrowth policies” suggests that everything can be thrown in under “degrowth.” A recent inventory identified 530 proposals. The prominent policies are universal basic income, work-time reductions, job guarantees, maximum income caps, non-for-profit cooperation’s, eco-villages, and housing cooperatives.  
None of these are novel. Most are or have already been implemented - most extensively in market economies. For example, the first deliberate policy intervention to reduce the working week was in the Great Depression of the USA in the 1930s.  
  • Degrowth may be irresponsible / unethical.
We would not imagine subjecting human populations to potentially dangerous experimental drugs without first rigorously testing their efficacy. Why embrace the “medicine” prescribed by the degrowth movement? Olivier Simar-Casanova points out that “Global warming is a serious issue and claiming to respond to it with solutions of uncertain carbon efficiency, which we do not know how to implement in practice, is irresponsible.” Degrowth may furthermore make the world much more exposed and vulnerable to shocks, make the adjustment to a zero-carbon-emitting economy more costly, and raise the risk of conflict by turning the economy into a zero-sum game.
© Wim Naudé

Wim Naudé is Visiting Professor in Technology, Innovation, Marketing, and Entrepreneurship at RWTH Aachen University and an IZA Research Fellow 

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We recognize that IZA World of Labor articles may prompt discussion and possibly controversy. Opinion pieces, such as the one above, capture ideas and debates concisely, and anchor them with real-world examples. Opinions stated here do not necessarily reflect those of the IZA.

Related IZA World of Labor content:
Gross domestic product: Are other measures needed? by Barbara M. Fraumeni
Employment effects of green energy policies by Nico Pestel