Skip to main content

The growth imperative (II)


The arguments of the “degrowth” adepts do not hold up. Armageddon-like theories of resource exhaustion and apocalyptic ecological degradation were again and again proven to be wrong. No growth is also a recipe for increased societal tensions and a weakening of democratic institutions.

Enthusiasm for the so-called “degrowth” theories has clearly been on the rise since Greta Thunberg, the leading diva of climate activism, in her September 2019 speech to the U.N. Climate Action Summit damned everybody who still believed in “the fairy tales of eternal economic growth”. The argumentation of the degrowth enthusiasts is basically twofold. Economic growth as we know it has to be brought to a stop because, first, growth exhausts our resources and destroys nature, and, second, growth fuels inequality and undermines democracy. Let’s take a closer look at both these arguments.

The Innovation Machine

The doomsday vision of economic growth goes back at least to 1865 when Stanley Jevons, one of the leading economists of that era, published his pamphlet The Coal Question. Great Britain's wealth during the early decades of the Industrial Revolution was heavily dependent on the availability of coal. Jevons argued that, because the known reserves of coal were limited, the country would soon face a significant loss of wealth. He warned that the depletion of these coal reserves could push the country back to the conditions of the Middle Ages.

A century later the Jevons-like doomsday vision reached a new level with the publication of the first report to the Club of Rome in 1972. In that report an apocalyptic picture was painted of eminent exhaustion of the available reserves of oil, gas, iron ore, copper, and many other raw materials. Simultaneously the world would soon be drowning according to this report in pollution and ecological destruction. Updates of the report to the Club of Rome published in 1992 and 2005 just kept repeating the same mantra. Only the Armageddon dates of exhaustion and massively destructive pollution were again and again pushed further in time.

Stanley Jevons, the rapporteurs to the Club of Rome and the many other doomsday forecasters that passed the revue in past decades all make the same mistake as the one committed by Thomas Malthus at the end of the 19th century. In his Essay on the Principles of Population (1798) Malthus argued that all hope for human betterment was in vain since human reproduction tends to follow a geometric series (1, 2, 4, 8, …) whereas food production tends to evolve along a more arithmetic series (1, 2, 3, 4, …). Humanity was caught in what came to be defined as the “Malthusian trap”. Thomas Malthus had however bad luck. The man gave an excellent description of how humanity had evolved up to his own lifetime. However, during his lifetime, things changed dramatically.


The driver of that change was the start of the industrial era, first in England. On the back of major institutional reforms and inspired by the spirit of the Enlightenment, knowledge and human ingenuity exploded and gave us steam power, trains, steam ships, and, in later phases, electricity, fertilizers, the internal combustion engine, indoor plumbing, computers, bio-engineering, digitalization and truckloads of other welfare-improving innovations that pushed the “Malthusian trap” into the dustbin of history.

But the massive human progress realized since the Industrial Revolution initially came to a substantial degree at the expense of the planet. It led to intense resource utilization, all kinds of pollution, species extinction, bloody colonization and slavery and child labor. Over time corrections occurred. Social legislation, decolonization, abolition of slavery, the ban on pesticides, the curing of the hole in the ozone layer and much more environmental legislation and regulation are examples of such corrections. This adjustment process went far from smoothly and was often incomplete, but nevertheless it did occur.

The historic betterment in the overall human condition over the last two centuries was made possible by human creativity in the context of a competition-driven market economy where prices act as determining signals for investments and innovation efforts and where governments take care of an incentivizing regulatory and tax environment. A large part of the impressive advancement of humanity in the last two centuries can be attributed to that innovative process driven by relative prices, scarcity, sound government incentives and the hunt for profits. There is no reason whatsoever to assume that this powerful innovation machine is stalling, on the contrary.

Has the process of human betterment through constant innovation and technological progress led to a perfect world? No, far from it. Inequality, poverty, war, and ecological issues remain pressing problems. But wealth, health, education and freedom have increased beyond what anyone on earth thought possible at, say, the end of the 19th century. This conclusion tends to be ignored all too easily in recent times.

A last but crucial point to be made here is that the exhaustion of natural resources has recently been going in reverse in some parts of the world. Andrew McAfee, co-founder and co-director of the MIT Initiative on the Digital Economy, concluded that “America is post-peak in its exploitation of the earth” and aptly titled his book More From Less (Simon & Schuster, 2019). McAfee convincingly shows that in the United States the use of energy resources and raw materials has even gone into reverse: continuous economic growth goes hand in hand with lesser use of energy and raw materials. In Europe, so the graph at the end of this blog illustrates, the process of dematerialization is starting to become visible too.

Civil War

If the resource exhaustion-cum-ecological degradation argument does not hold up, how about the second pillar of the degrowth argument? Does continuous economic growth lead to forever increasing inequality, social disharmony and the undermining of democracy?

 A good place to start this inquiry is Benjamin Friedman’s 2006 landmark book The Moral Consequences of Economic Growth. On the basis of a broad historical investigation this Harvard economist concludes that economic growth tends to foster greater opportunity, more tolerance for diversity, greater social mobility, more dedication to democratic values and stronger commitment to fairness. Friedman’s conclusions are a huge historical back-up to Financial Times commentator Janesh Ganesh’s argument that absence of economic growth makes people “rediscover the foundational role of growth to almost everything they cherish”.

The societal case against degrowth does however not end with the Friedman-Ganesh-type discourse. Four further arguments can be summarized as follows. First, geopolitical power and economic growth travel hand-in-hand. The West, and more specifically the United States, has been able to achieve considerable geopolitical power through the momentum of strong economic growth. The Soviet Union disappeared from the geopolitical arena mainly because its economy was a basket case. The rise of China in the past few decades is also closely related to its strong economic growth. Do we want to lose geopolitical clout to the advantage of non-democratic entities that in no way will follow the degrowth logic?

Second, debt has become a major issue for a large parts of the Western world. Pure mathematics dictate that economic growth is an important factor in trying to contain the debt explosion and its social, economic and political consequences. If structural zero growth, let alone even negative growth, would be defined as the new policy norm, debt defaults would almost overnight be rampant. Markets would immediately realize that in degrowth scenarios debts just cannot be honored. Relationships within countries and between countries would become highly stressed.

Third, without economic growth redistribution within society can only take place by taking away from some to give it to others. Escalation of social conflicts and political tensions is then unavoidable. The former French socialist prime minister Michel Rocard does not mince his words. “Degrowth”, so Rocard argues, “will intensify inequalities and bring upon us something like a civil war. I totally exclude it for reasons of public order”. Degrowth will indeed unleash the “war of all against all” that 17th century political philosopher Thomas Hobbes was already very concerned about. 

Fourth and most important, one has to be straightforward about what imposing a degrowth policy imperative really means, i.e. stopping or eliminating the drivers of economic growth. The ultimate drivers of economic growth vary depending on the school of thought one follows. However, a comprehensive list that captures the different perspectives would include the following elements: institutional quality, rule of law, secure property rights, fair competition laws, well-protected personal freedoms, human capital development, scientific inquiry, and entrepreneurial dynamism.

The conclusion seems rather obvious. To stop economic growth in a structural way, democracy, personal freedom, human ingenuity and creativity and the very concept of individual and societal progress will have to be sacrificed on the degrowth altar. Degrowth as the new policy norm would require simply the restoration of a Soviet-style model of highly centralized economic and social control. Undeniably some individuals and groups within Western democracies would welcome such a scenario. However, such dreams neglect the dictatorship, massive suffering, poverty, inequality, ecological degradation, in short the sheer inhumanity, that a Soviet-type order inevitably causes. History teaches us that highly centralized, rigidly controlled systems often end up empowering not  democratically-inspired individuals, but rather tyrannical busybodies who are always ready for another round of authoritarian crackdowns.

Ultimately, degrowth can only be seen as the latest in a long series of harsh ideological attacks on capitalism and the market . A degrowth activist such as Nishikant Sheorey writes that degrowth is “a normal and logical extension of leftist principles … (and) .. a natural, inevitable outgrowth of an anti-capitalist perspective and generally aligns well with historical socialist theory”. I am reminded here of John Maynard Keynes arguing in 1931 that socialism is “little better than a dusty survival of a plan to meet the problems of fifty years ago, based on a misunderstanding of what someone said a hundred years ago”. Almost a century later, this description fits the degrowth narrative quite well. 


You may also be interested in