I read an article in the Financial Times earlier this week (September 23, 2023) -…
This is Part 2 of a series on Deep Adaptation and MMT that I am writing. The first part – Deep Adaptation – Part 1 (August 22, 2022) – introduced the concept. I have recently written about the coming together of a number of crises which I consider to be all linked and part of the end of normal business as we have known it. See – The global poly crisis is the culmination of the absurdity of neoliberalism (July 18, 2022). Thinking about the social aspects of that conjunction of crises, we understand that advancing material prosperity is still a goal that we should seek to achieve for millions of the globe’s citizens, who live in abject poverty with little food and housing security. But then, when we consider the ecological dimension we see immediately how the social goals have to be solved within a constrained envelope of overall material deprivation. The question then is how can we move forward towards achieving that duality. There are various propositions out there – Green New Deals, Green Growth, etc. I think they are all flawed and that proponents tend to become captured by the power relations that have created the current mess. That is where I think the concept of Deep Adaptation comes into play. Which brings me to a starting point in understanding where these institutionalised ‘green’ conservations have lost their way. Today, I am writing about growth and degrowth, because there are a lot of misunderstandings out there about this apparent conflict.
In this paper – Monetary Adaptation to Planetary Emergency: Addressing the Monetary Growth Imperative – which was published in 2021 by Christian Arnsperger, Jem Bendell and Matthew Slater we read the following:
The experience of a different way of life during lockdowns has increased the degree of attention to the field of ‘degrowth’ … Meanwhile, governments have responded to the 2007/8 financial crisis and its aftermath by accelerating the rate at which they take on new debt. Our understanding is that these two trends are incompatible and that without structural changes to monetary systems, degrowth – or a steady-state economy – will be impossible.
Clearly, Modern Monetary Theory (MMT) tells us that governments do not have to ‘take on new debt’ in order to increase net spending.
But they do and the relevant issue is whether degrowth and government deficits are incompatible as is hinted at in this statement.
In a later post on this topic, I will address the specific arguments that are used by the above authors and others about the “structural changes to monetary systems”.
That is another issue again to the one I want to address today.
Jason Hickel – published an interesting book in 2020 – Less Is More: How Degrowth Will Save the World (Penguin Random House) – which is worth reading for sure.
He also wrote a blog post (September 23, 2020) – Degrowth and MMT: A thought experiment – which put some of the arguments in the book into an MMT context.
Which brings the debate into my forecourt.
To begin, I see many arguments in blogs and on Twitter about the concept of degrowth, zero growth, sustainable growth, end-of-growth etc, which often fail because they haven’t been grounded in conceptual clarity.
When I am asked can we stop ‘growing’, my response is, of course not.
Economists measure growth using the national accounting concept of Gross Domestic Product (GDP) and the related Gross National Product (GNP), and the differences between the two are not relevant here.
GDP is an attempt to measure the total market value of all goods and services produced by a nation in a given period (quarter, year, etc) irrespective of whether the income claimants on that production are residents or foreigners.
GNP measures the production (and income flow) produced by residents both domestically and abroad.
Either way the concepts sit within a framework that attempts to measure economic activity and income generation.
If that measured activity is expanding then we call that economic growth and vice-versa.
Up to that point, there is little to complain about although we note that there are inherent biases in the measure – for example, women who work within the home to maintain a household are not part of the ‘market’ sector so their valuable outputs are not included – a gender bias historically given the traditional segregation of roles between males and females.
But the problems begin when we think about what we are measuring.
GDP will go up in Pakistan in the coming months because activity will be required to resolve the dreadful environmental disaster they are facing as a result of the floods.
GDP will be positively impacted by the War in Ukraine as weapons and armament manufacturers increase production.
Increased killing rates is usually ‘good’ for GDP.
The point is that it is not only the scale of production that should be measured but also the composition of the goods and services produced, if we are to consider GDP to be anything more than a measure of activity.
What I mean there is that the tendency in the media is to conflate ‘GDP growth’ with a qualitative state like ‘well-being’ or ‘standard of living’ and conclude that if we are recording GDP growth then we are raising our living standards.
A nation that is spending $x billion per year on tanks, guns and prisons will have the same GDP as a nation spending $x billion on schools, hospitals and parks and gardens.
But qualitatively the two are light years apart.
All sorts of alternative measures are proposed, like the – Genuine Progress Indicator – to overcome these ‘compositional’ issues with the standard national account measures in terms of providing a measure of ‘well-being’ – both societal and environmental.
They have merit but are not the issue discussed in this blog post.
The point is that strictly focusing on GDP growth and acknowledging the limitations of the measure often leads to claims that we have to ‘stop growing’, which is shorthand for arguing that we need to have zero GDP growth to address the challenge ahead.
And those that seemingly haven’t read the literature very deeply confuse degrowth with some statement about movements in GDP, which is not a valid inference.
What is degrowth then?
In Chapter 5 of Jason Hickel’s book he writes:
… degrowth is not about reducing GDP. It is about reducing the material and energy throughput of the economy to bring it back into balance with the living world, while distributing income and resources more fairly, liberating people from needless work, and investing in the public goods that people need to thrive. It is the first step toward a more ecological civilisation. Of course, doing this may mean that GDP grows more slowly, or stops growing, or even declines. And if so, that’s okay; because GDP isn’t what matters.
That is an important distinction.
To push the point, a nation say, that reoriented its employment towards the production of music using renewable electricity and other inputs and moved away from coal extraction, could be moving towards ‘degrowth’ while expanding its GDP.
That reorientation could be the result of the currency-issuing government expanding its net spending and employing lots of musicians and retraining a lot of coal miners to play music.
The government deficit would more likely rise and more measured public sector ‘growth’ (via the national accounts) would be recorded which would be perfectly compatible with a ‘degrowth’ agenda.
The fact that currency would enter the system (more ‘money’) to facilitate that employment shift would not be a problem or create any new imperatives.
Whether that shift could become a ‘reality’ is not the point at this stage – it is just a thought experiment to settle concepts.
But we don’t want to fall into the trap of thinking that a fiat monetary system is the problem and creates an imperative for ‘bad’ growth or prevents us from pursuing a ‘degrowth’ agenda.
In fact, a first step in shifting our focus to designing such an agenda is, I would argue, coming to terms with what MMT offers by way of understanding.
An MMT understanding lifts the lid off all the fictions that the mainstream economists use to hide their real purpose – to support the profit-making, extractive system of capitalism.
An MMT understanding is, in my view, an essential part of the solution, because it allows us to construct the possible and avoid falling into traps where our worlds collapse because governments run out of money and have to tax us out of existence and all the rest of the fictions that allow governments and their backers in the financial world to perpetuate a system that is not only moving us towards ‘extinction’ but keeps millions of workers in relative penury as part of the process.
In the blog post by Jason Hickel I cited above he writes that degrowth and MMT:
In fact, the two belong together.
I agree with that assessment.
In a sustainable productive state in balance with nature we will still need a monetary system and we will still need a currency issuer who has unique capacities as a consequence of that status.
In a later post in this series, I will come back to that necessary coincidence between degrowth and MMT (and deep adaptation).
But we should explore the degrowth concept more fully first.
In ‘Less is More’, we read that we cannot continue to grow:
… because more growth means more energy demand, and more energy demand makes it all the more difficult – impossible, in fact – to roll out enough renewables to cover it in the short time we have left.
Here I think the term “growth” is used too loosely.
Referring back to the previous comments on GDP measurement, the task is not to reduce ‘growth’ per se but, rather, to reduce energy usage and bring it back into balance with nature.
That is what degrowth is about.
There are many ways in which measured GDP can increase while we achieve lower energy usage.
Building local permaculture community gardens and selling the produce in the local market place would be a boost to GDP but would also help to achieve degrowth.
I see these types of transformations as being viable and not examples of what is known as ‘green growth’, which Jason Hickel considers to be a “fantasy”.
I agree with him.
‘Green growth’ is based on a belief that we really just need new technologies to maintain the scale of output at sustainable levels.
My own university tried to build a reputation on ‘clean coal’ (being located in the town with the largest coal export port in the world). It was never going to fly as a concept and other schemes – sequestration, etc – are all similarly flawed.
None of these ‘market’ solutions, which the green growth crowd, including most of the official Green political parties, will go close to achieving the transformation in production and consumption patterns that are needed.
We cannot go on producing high energy using products at ever increasing rates.
Buying some technology that makes producing these products cleaner doesn’t address the energy issue. We will have to leave coal in the ground rather than make it cleaner to use.
Any green transition progression has to deal with the energy extraction as the imperative rather than work out how to make the current levels of extraction cleaner or more renewable.
There is also the well-known (now) issue that renewables themselves come with ecological costs – so the challenge is not to substitute renewables for fossil fuel and continue happily thereafter.
There will be no thereafter if we do that.
We have to minimise even the need for renewable energy by reducing our consumption of energy.
Simple as that (although it will not be simple at all).
So degrowth is:
… a planned downscaling of energy and resource use to bring the economy back into balance with the living world in a safe, just and equitable way.
So it has a tranformative element in terms of production and consumption patterns and a distributive element which means produce and incomes are redistributed more equally.
Which brings us to how might that happen.
Jason Hickel considers the capitalist mode of production to be historically unique because:
… it’s organised around the imperative of constant expansion, or ‘growth’: ever-increasing levels of industrial extraction, production and consumption … Growth is the prime directive of capital. Not growth for any particular purpose, mind you, but growth for its own sake.
I differ a bit here.
In fact, capitalism is built on the imperative of the accumulation of capital through the realisation of surplus value as profit.
That is a subtle difference but an important one.
Capitalists don’t necessarily care whether GDP is growing at 2 or 3 per cent.
Even at lower GDP growth rates, if capital can increase its share of the pie at the expense of other claimants, then that will allow them to increase their capital accumulation.
It is easier to achieve that goal with GDP growing faster because the distributional conflict between labour and capital is likely to be less intense if all claimants are able to expand their nominal claims within the real output (income) envelope.
But his point is valid – industrial capitalism is about getting as much out of the accessible resource base and paying as little as possible to achieve that extraction.
That applies to labour, land, and other natural resources.
If that is the logic of Capitalism then the question that arises is whether shifting to a system of degrowth where we bring the extractive elements of our productive lives back into harmony with nature is possible within that mode of production.
I think not and so if we aim for a deep adaptation to our poly crisis (and all the sub crises that define that state) then it is likely that it has to encompass a notion of system change – whether managed or not.
That is one of the problems of the ‘green’ industry which proposes a sort of iterative, incremental change towards decarbonisation – like more electric cars, more compost heaps, etc – within the capitalist mode of production.
And as we are iterating, the financial elites that have really replaced the robber baron industrialists
Back to GDP for a moment.
Is there a way to decouple measured GDP from damaging extraction and energy usage?
Again, I think so – more musicians, teachers, philosophers, nurses, yogis (to push the extremes) – and a lot less heavy industry will result in some decoupling.
If we go back to the Introduction – where the moral dilemma was posed – some people need more material outputs while overall degrowth is necessary.
Jason Hickel writes:
… the ecological crisis is not being caused by everyone equally … low-income countries … need to increase energy and resource use in order to meet human needs. It’s high-income countries that are the problem here, where growth has become completely unhinged from any concept of need, and has long been vastly in excess of what is required for human flourishing.
So to achieve degrowth we also have to redistribute energy usage quite dramatically.
I will return to that in Part 3.
We have many questions left to discuss in this series.
Deep adaptation means creating a caring environment for people to live in balance with nature.
It might also mean that we just seek to minimise the social calamities as the environments spins out of control and beyond our capacity to fix the problem.
We also have to consider whether degrowth means system change.
And how MMT fits into all of this.
That is enough for today!
(c) Copyright 2022 William Mitchell. All Rights Reserved.