In recent weeks, a heated debate has emerged regarding sustainability and growth, specifically focusing on the clash between green growth and degrowth. Those advocating for degrowth fail to recognise people’s inherent desire for progress and growth. It is argued that growth is essential, particularly for financing the necessary investments to achieve a sustainable transition. As The Economist argued in an article about degrowth: “Finding suitable solutions will require hard graft and much human ingenuity. That’s the very stuff that economic growth is made of. The more of it, the better.”
The belief in the importance of growth is deeply ingrained in the mindset of most economists, as emphasised by The Economist once again. It is in their DNA. From their perspective, the concept of 'degrowth' is founded on a misconception. From our standpoint, degrowth primarily implies that reducing economic activities may be a consequence of implementing sustainability policies in a serious commitment to respecting ecological limits.
There is a general consensus on the crucial issue at hand: addressing climate change and biodiversity loss is imperative. The difference of opinion lies in the prioritisation of goals. The degrowth movement places ecological objectives at the forefront. Without respecting planetary boundaries, we are jeopardising the possibility of a liveable world, thereby endangering our own prosperity. The harsh reality is that we have already exceeded six out of nine planetary boundaries: climate change, biodiversity loss, nitrogen surplus, green water shortage, plastic pollution and land change.
In our view, the idea of degrowth recognises those planetary boundaries and is working towards recovery as the main goal. Because if we don't, the economy will collapse on its own. That's degrowth by disaster.
We would be thrilled if this recovery could be achieved through innovation. Ideally, policy measures should be implemented in the most efficient manner possible, utilising pricing mechanisms, establishing standards where feasible, and resorting to prohibition only when absolutely necessary.
However, we must also be realistic. Experts in materials science warn that there are insufficient raw materials to fulfil all the plans for producing the wind turbines, solar panels, and batteries needed for renewable energy. If we genuinely aim to operate within ecological limits, the material pressure exerted on the Earth must decrease. To accomplish this, material efficiency (the amount of natural resources required for economic activity) will need to increase significantly. Such a historical shift has never occurred before and it is unlikely to transpire in the future.
Diminishing growth is not an end, but rather a potential outcome of respecting planetary boundaries. Growth is a means to an end, as proponents of green growth also argue. However, they assert that it is an indispensable means, which transforms it into an end. It is also entirely conceivable that we will witness a shift within the paradigm of economic growth, where non-material aspects are given more value. Furthermore, even if growth slows down, it does not necessarily equate to a decline in prosperity. For instance, if a refrigerator lasts twice as long and costs the same as a less durable appliance, the economy may shrink. Nevertheless, the user of the refrigerator would experience the same level of prosperity.
Green growth advocates rightly note that other parts of the world want to grow so that they can enjoy minimum prosperity too. Redistribution is then important, not only nationally but also internationally. Indeed, redistribution and international justice are key elements of why it is precisely here in the richest part of the world that we need to think about less growth. After all, rich countries have the largest ecological footprint, and they don't need growth to be happier either.
Because that is another basic reason why growth does not warrant a place in the economists' DNA. Ultimately, growth is a means to achieve prosperity (read: happiness). Today, in rich countries, the subjective experience of happiness is completely disconnected from economic growth. This is exactly what great economists like Keynes predicted: a time is coming when more economic growth is not necessary for the most fundamental economic problem - our fight for a living wage.
Economy within limits
Back to the priority of our goals. Economists firmly believe in the significance of growth. The growth formula serves to prevent unrest among those who may need to reduce their consumption, facilitates the provision of collective services, and fosters prosperity in various aspects. Growth takes precedence because our system is built upon it, with the intention of subsequently addressing ecological challenges through wholehearted innovation. However, the challenge lies within the growth system itself, encapsulated by the Jevons paradox: efficiency gains resulting from innovations are often outweighed by increased usage. Despite the worldwide increase in renewable energy, the use of fossil fuels remains persistent. We find ourselves living luxuriously, with soaring energy consumption due to our electric cars and data centres for AI and cloud computing.
The debate can go on indefinitely, but ultimately, it boils down to the prioritisation of our goals. Should we persist in placing economic growth as our foremost objective, or should we acknowledge the imperative for our economic system to function within the confines of planetary boundaries? If we opt for the latter, we must genuinely embrace these limits and confront the potential necessity of relinquishing our addiction to perpetual growth. As economists, we understand the necessity of making choices.
About the authors
Dirk Schoenmaker is a professor of finance at Erasmus University. Hans Stegeman is chief economist at Triodos Bank.
This is a free translation of the authors' opinion article in Dutch newspaper NRC, published 4 July 2023.