Should we get rid of the obsession with growth? The uncomfortable questions of alternative economists

“A growth model based on fossil energy sources is simply outdated.” With these words, Ursula Von der Leyen, President of the European Commission, cleverly tried to captivate her audience at the opening of the Beyond Growth conference in Brussels on Monday.

Von der Leyen spoke in the plenary hall of the European Parliament, but her audience this time was not made up of MEPs. The conference room was packed with mostly people in their twenties and early thirties who had traveled to Brussels from all over Europe to spend three days discussing alternative models to the traditional, focused on economic growth.

On the last morning, one of the conference speakers already spoke of ‘the Woodstock of Beyond Growth’. At the top of the bill for speakers were economic rock stars such as degrowth economist Jason Hickel and Kate Raworth, renowned for her donut model, which shows how the economies of rich countries are over-taxing the planet while meeting the social needs of many of its inhabitants are not satisfied.

Von der Leyen referred extensively to the report in her speech Limits to Growth of the Club of Rome, from 51 years ago. The Club of Rome, founded by scientists and entrepreneurs, warned in the early 1970s that an economic model that relies on growth from fossil fuels, combined with population growth, would destroy the planet.

Politicians of the era didn’t end up doing much with that report, von der Leyen noted. “They did not change their growth paradigm, but continued to rely on oil. And the following generations have paid the price for that.” By pointing to her own EU policy programmes, such as the European Green Deal, she wanted to indicate that the current generation of European politicians is willing to break new ground.

On the last morning, one of the conference speakers already spoke of ‘the Woodstock of Beyond Growth’

But for this audience, von der Leyen did not go far enough. The economic policies of the EU member states are still aimed at growth in gross domestic product (GDP), and thus at growth in material production and consumption. The current president of the Club of Rome, Sandrine Dixson Declève, has pointed out that the “growth narrative” has not disappeared yet, and is based on an obsession with technology. “But the only technology that can fix this is a time machine that takes us back 50 years,” she said. “We need a new economic paradigm. People don’t want economic growth, they want economic security.”

Standing ovations were given to economists who advocate degrowth models like Hickel’s. The core of these models is that material production and consumption in the rich countries must be drastically reduced. Much more investment must go to education and health care, while inequalities in income and wealth must be combated. The emphasis on work should disappear due to shorter work hours, everyone should receive a basic income.

Also read this interview with degrowth economist Jason Hickel

These ideas are radical and a far cry from the EU’s economic growth plans, which these critics say is clinging to “growth obsession” and too focused on technological progress.

The European Commissioners moved among a selection of economists and scientists, such as 2002 Nobel Prize winner in Economics Joseph Stiglitz, founder of the cradle-to-cradle philosophy Michael Braungart and Johann Rockström, renowned for his research into how human behavior transcends the boundaries of this planet and endanger human life. The group of speakers included many post-growth and de-growth economists. While post-growth economists are mainly concerned with economic models to put the goals of sustainability and social well-being before growth, the de-growth economists say that the only way to get there is to shrink production and consumption.

Both groups ask uncomfortable questions that can make anyone think, even people for whom these solutions go too far. Some of those uncomfortable questions.

Should we get rid of our obsession with GDP?

Are we still measuring economic growth correctly? Is GDP, which is central to the reports of all government statistics and institutes such as the IMF and OECD, still the correct benchmark? And does constant reliance on that standard lead to an obsession or fetishism that hinders sound economic policies?

Ursula von der Leyen herself expressed her doubts about this in Brussels. She quoted Bobby Kennedy as a presidential candidate in 1968, who then said that GDP “measures everything except what makes life worth living: the health of our children, or the joy of their play.” Von der Leyen: “I am sure that if he had given his speech today, Kennedy would have mentioned the sound of birdsong and the joy of breathing clean air. Today, at a very fundamental level, we understand the wisdom of Kennedy. That economic growth is not an end in itself.”

GDP has (only) been used as a benchmark since the 1940s. The figure represents everything that is produced and services provided in a country. With that growth statistic you can compare countries. But GDP also provides the basis for all kinds of economic ratios, such as the ratio between government debt and GDP, which play a crucial role in government policy-making.

According to the critics, this has major consequences. “We have to stop the GDP fetishism,” said Lucas Chancel, a Paris professor and director of the World Inequality Lab. “We need to let go of our obsession with GDP,” said Dan O’Neill, professor at Leeds University and author of the book Enough is Enough. “Then we can focus on what really matters. Social well-being and sustainable life on the planet.”

This criticism does not pass by the established institutions. The EU, the OECD, the UN development organization UNDP and the ECB are working hard on alternative indicators, their representatives said. From a multitude of indicators in the field of social welfare and sustainability, they select a small number on which countries should be comparable. “We want to go beyond GDP vigorously,” said Dutch ECB board member Frank Elderson. “We are doing our best to make the new indicators more robust and viable.”

Does growth go hand in hand with saving the planet?

Another tricky question: can economic growth still take place without further endangering the climate and exhausting the planet? Plans such as the European Green Deal assume that growth is possible, while the use of fossil energy and the massive use of raw materials can be reduced.

Policymakers in Europe, the US and other wealthy countries have assumed that decoupling is possible. In fact, without economic growth it is impossible to achieve climate and environmental goals, because growth must yield the investments required for new technological developments. Or, as European Commissioner Paolo Gentiloni put it, to loud cheers from the audience: “Growth can be a force for good. A positive engine for change, enabling investments in renewable energy and the circular economy.”

However, there is great skepticism about whether technological developments are moving fast enough to prevent irreversible damage to the planet. And it is precisely the energy transition that is necessary to say goodbye to fossil sources that leads to a great need for raw materials and rare metals. Their extraction in turn causes new environmental pollution, high water consumption and exhaustion of the soil in the countries where these raw materials and metals are extracted.

According to degrowth and post-growth economists, there is no longer time to wait for technology, and a decrease in production and consumption is the only way to prevent further exhaustion of the earth. “We are losing precious time in a period when we cannot lose time,” said Timothée Parrique, a scientist at Lund University in Sweden. “The reductions in Europe are now very small. Calling it green is like being on a diet and losing 200 grams of weight. The story of decoupling is greenwashing, which is dangerous.”

The same skepticism also prevails among an economist like Michael Jacobs, professor at the University of Sheffield in England, who co-authored the OECD advice Beyond Growth: Towards a New Economic Approach from 2020. “If we simply deny the power of GDP growth, we are ignoring the people who need higher incomes. If you look at history, growth has been a good way to reduce poverty.”

But Jacobs also doubts whether the climate and environmental goals are still feasible with economic growth. “A green growth model is only possible if the input of energy and raw materials decreases. Only reduction of CO2 is not enough. We need a reduction of all emissions and environmental impact. And we are not succeeding at all.”

Can South only grow if North surrenders?

For the degrowth thinkers it is crystal clear. The rich countries in the ‘North’ will have to give up growth in order to give the countries in the ‘South’ room to grow towards a higher level of well-being of their population. Moreover, these are often countries where the rare metals and other raw materials that are needed for the batteries that play an important role in the energy transition are now being mined. The Southern countries themselves must be given the space to be able to have a greater grasp of what sources are still available.

The fact that the North has to give in is a painful message. But is there really an alternative? “The social and environmental costs of our growth are shifted to vulnerable communities in the South,” says Jason Hickel. “Rich countries must substantially reduce their use of energy and raw materials.” And: “Debts of the countries in the South must be written off.”

His message is expressed in other words by donut economist Kate Raworth: “In the rich countries we are massively crossing our planetary boundaries, while in countries that do not, enormous numbers of people cannot meet their basic needs. We will have to surrender and figure out how to outgrow. Only then can countries such as Nigeria, Kenya or Mali be given the space to make greater demands on the planet to meet the social needs of their population.”

She advocated a shift from an obsession with wealth to an emphasis on well-being. “From private luxury and public poverty” to “public luxury and private sufficiency.”

Should taxes be raised significantly?

If governments have to invest heavily and redistribute wealth because inequality has gone too far, can they avoid raising taxes? The proceeds will be needed for the green transition, Joseph Stiglitz said in Brussels: “Profit tax, wealth tax, financial transaction tax, they can all be raised.”

The statistics most referred to at the conference are those of Oxfam Novib: studies showing that the richest spend by far the most CO2emissions concerns. Above all, their overconsumption should be curbed.

And that idea is not that crazy, especially if you look at the past, argued various economists. Until the 1970s, tax systems in both Europe and the US were quite progressive. This enabled all kinds of social services to be financed, which made that era into the period of the welfare society. Lucas Chancel: “In a post-growth society you have to redistribute. That is only possible with a much more progressive tax system, in which the wealthiest will pay more tax.”