The De-growth Movement: Can We Live Without Economic Growth?

In 2019 the UN Environment Programme published their annual Emissions Gap Report which catalogues the gap between the emissions and warming goals of the 2015 Paris Accords and the actions of national governments. Unfortunately, countries have fallen far short of global emissions agreements. 

Time is running low to keep warming below the 1.5°C agreement threshold. As of 2019 countries need to cut emissions by 7.9%-- if they wait until 2025 that number rises to 15.4%, which would be impossible given current trends. Without action, climate change will cause  continued extreme and costly weather patterns, famine, wars over ever-diminishing resources, and mass migration.

The predominant international response is sustainable or green growth. This is the central thrust of the Green New Deal proposed by Representative Alexandria Ocasio-Cortez and Senator Ed Markey. Other countries have proposed similar policies which partner environmental protection with economic growth. 

Still other politicians--most notably President Trump--deny the very existence of climate change and view climate policy as a zero-sum game. Many of these politicians claim you cannot have both growth and environmentalism. 

In fact, they might be right. A 2020 UN advisory board of climate researchers found that environmental sustainability is incompatible with capitalism's demand for infinite economic growth.

Enter the "de-growth" movement. 

The De-growth Movement

In 1971, economist Nicholas Georgescu-Roegen argued in his book, The Entropy Law and the Economic Process that eternal growth and environmental sustainability were at cross-purposes. As you might guess by the title, Georgescu-Roegen proposed that the entropy law (the second law of thermodynamics) applies to the global economic system. 

The second law of Thermodynamics is expressed in the following equation:

ΔS ≥ 0

In this equation "S" is the level of general entropy in a closed subsystem (our environment). The equation dictates that the change in entropy in a system is always either zero or higher. Systems tend toward stasis or higher levels of disorder, never toward lower levels of disorder. This is also true of our environment. Because we use more energy than the equilibrium level of energy to create goods and services and consume goods and services, the level of entropy must necessarily grow as economic activity grows.

Hence, economic growth is necessarily entropic. 

There are exceptions. In many de-growth models, materials like minerals and fossil fuels are finite and thus any use of them is entropy-increasing. However, other resources like trees, wildlife, and crops are only entropy increasing if they are used above their natural levels of regeneration. 

This axiomatic argument of thermodynamic equilibrium by Georgescu-Roegen began the "de-growth" movement in earnest.

Other prominent economists have taken the same tack. In his essay Economics in a Full World, economist Herman Daly states that neoclassical economics has largely ignored the implications of finite resources for their models of growth. Rather, they continue to propose models of infinite growth, only considering finite resources in individual preference structures for goods and services.

Instead, Daly argues the economy must reach a "steady-state" where, "[b]irth rates must equal death rates, and production rates of commodities must equal depreciation rates". The steady state will reign-in harm to the environment by reducing growth to nearly zero and dampening entropic effects.

The steady state proposal begs the question: what should the economy do if not grow?

Daly proposes three things: improve efficiency without increasing quantitative production of goods above the rate of their depreciation; use resources within the ecosystem's ability to replenish said use (in an entropic sense); and maintain an equilibrium balance between man-made capital stock and natural capital stock, i.e not expanding man-made capital (fishing boats) if natural capital cannot keep pace (the rate at which fish replenish).

If an economy can do these, it can supply people with necessary goods and services while minimizing entropy.

We now have a basic framework for de-growth economics. Obviously there is deeper analysis available, which you can get by reading Daly's book of collected essays: Ecological Economics and Sustainable Development and/or Nicholas Georgescu-Roegen's, The Entropy Law and the Economic Process. 

This all sounds good, but what are the limitations? After all, economics is never without tradeoffs. Let's examine two significant limitations to better understand de-growth and its implications.

Financial Structure

Investments and finance would have to play a key role in transitioning to a de-growth economy. However, Daly's writing on the financial sector is vague. He assumes that financial speculation would not play a large role in a de-growth economy. Instead, investment would go toward replacing old goods and improving the efficiency of good production. 

This is all fine in theory, but how could such strict investment rules be enforced? Further, how would one incentivize this investment behavior? What this amounts to is a normative claim about what should be done, rather than a positive claim about what could or would be done.

Ultimately, as investment reward decreased from low volatility and growth, investors might pull capital from the financial sector entirely-- opting instead for government securities or real assets.

This financial conundrum remains a vital flaw in the de-growth model.

Developing Countries

Perhaps the most glaring problem with de-growth is it has little to say about developing countries. These countries rely on economic growth driven by highly entropic fossil fuels to raise incomes and living standards. 

These countries may need to wait until they are productive enough to maintain a steady state economy. This idea is not new. John Maynard Keynes proposed that by the 21st century, productivity in western economies would be so high that people would only work 15 hours a week. Because of issues like extreme wealth inequality this never happened-- even though western economies are likely productive enough.

As developing countries become more productive they could enact more sustainable policies. This might make the transition to a de-growth economy easier. Hence, the more realistic path right now is sustainable growth, with an eventual transition. However reaching a steady state economy at current levels of productivity would be impossible for most developing countries.

Is Economic Growth Destined to Continue?

There is little to indicate the infinite growth doctrine will change soon. Neoliberal capitalism predominates and has been highly adaptive. What's more, sustainable growth is the more popular alternative. But if de-growth experts are to be believed, sustainable growth will not suffice. 

Regardless, world governments must act in the next 10 years or risk irreparable damage to the world ecosystem. This is not subject to theoretical debate. Recent extreme weather and millions of dollars in damages have already been linked to human-induced climate change.

At the very least, proponents of the de-growth economy have rigorously demonstrated it is possible to live without constant economic growth.

Perhaps the better question is, can we continue to live with it?