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To Be or Not to Be: Is the European Degrowth Movement Courting an Identity Crisis?

Published by Anonymous (not verified) on Thu, 02/07/2020 - 3:59am in

By Brian Czech

 

To be or not to be

Shakespeare and degrowth

Shakespeare would have a question for degrowthers. (Image: CC0 1.0, Credit: The Washington Times)

for lowering GDP.

Deciding is the fee

for degrowthers to be free!

(Free of confusion, that is, and degrees of self-defeat.)

 

In the heart of the Cold War, John F. Kennedy proclaimed, “Ich bin ein Berliner.” More than halfway to a century later, my solidarity is with a different European ideology, which traces its roots to the French scholar Serge Latouche. I say, “Je suis pour la décroissance.”

Yes, I am a degrowther, secondarily at least. I prefer to identify primarily as a steady stater, but by now—well into the 21st century—we steady staters realize the global economy is almost certainly beyond its long-term capacity. No one in steady-state economics is advancing the notion of a perpetual, pre-covid $88 trillion economy. In other words, we’re all for “degrowth toward a steady state economy.”

In many ways, steady staters were the original degrowthers, with Herman Daly at the forefront since the 1960s. I joined the pack around 1995, in the midst of my Ph.D. research, which included an interpretation of the Endangered Species Act as an unintended prescription for a steady state economy. As the author of the CASSE position on economic growth (with input from Daly and others), and as alluded in the last two clauses thereof, degrowth was on my radar more than 20 years ago.

In the “old days,” though, the degrowth movement in English-speaking circles often went by another slogan, “contraction and convergence.” Informed by yet other steady staters—notably the ecological footprint trackers Bill Rees and Mathis Wackernagel—scholars started calling for a contraction of the global economy before striving for a steady state. Knowing such contraction wasn’t politically viable globally without the spreading of some wealth from richer to poorer nations, they coupled the concept of contraction with the concept of convergence. A convergence of wealth, income, and opportunity was required if there was to be any hope for “steady statesmanship” in international diplomacy.

Why bother with the mini-history? Because there seems to be a peculiar notion (to be explored shortly) coming out of pockets of the degrowth movement, particularly in Western Europe. In my opinion, it’s a notion that threatens the credibility and effectiveness of the broader non-growth or post-growth movement. Therefore, it becomes important at this stage to wrangle a bit on the identity and future of the movement.

Such wrangling should start with the realization that no one has a monopoly over the word “degrowth.” While the socially constructed Wikipedia might relay the notion that “degrowth” is “a political, economic, and social movement,” in reality, “degrowth” is a word, and a word with a perfectly clear meaning. The political, economic, and social program entailing degrowth can rightly be called a “degrowth movement,” but not “degrowth” per se.

Degrowth: The Meaning vs. the Movement

Hearkening back to our Shakespearian poem, and speaking as an original degrowther, I for one don’t have any doubt. Why of course I’m for lowering GDP! Not recklessly, draconianly, or stupidly. But certainly and significantly. Why deny it?Commoner's dictionary

Yet many degrowthers—or many who identify themselves thusly—seem quite agnostic about GDP degrowth. Some readers are probably wondering, “Seriously? Can there actually be degrowthers—people calling for degrowth—who deny that degrowth entails a declining GDP?” And who could blame the poor reader, as the very first metric that would come to most minds, when thinking of degrowth, would indeed be GDP. From the Cold War to Brundtland Commission win-win rhetoric to Trumpian politics identifying GDP growth as Goal #1, growth has always been about GDP! When growth is all about GDP, why certainly degrowth would be all about GDP, or at a minimum decisively in favor of declining GDP!

Might I be making a mountain of a molehill? I don’t think so. Maybe a knoll from a hummock, but even a hummock is an obstacle, and hummocks have potential for growing into knolls.

As evidence for the hummock, I would like to quote a degrowther (who shall remain anonymous) who replied to a tweet in which CASSE polled the Twittersphere, “What should the priority be in the post-COVID economy?” First, let’s consider the poll results:

Twitter poll

Of course the poll was not conducted with Pew-like research methods and standards. CASSE is followed on Twitter largely by those who get it about limits to growth, so no one would claim the results to be representative of the general public. Furthermore, the difference between steady-state and degrowth votes is statistically insignificant. The key point here, though, is not so much the tally, but rather some verbal responses to the poll and to the covid-caused recession in general, starting with the aforementioned, anonymous degrowther.

The degrowther stated in an email, “What this tweet suggests is that the current situation of economic crisis corresponds to degrowth. The problem is not just that this statement is inaccurate since degrowth does not equal less GDP, but also that it is damaging to the advocacy work that we do here…” (emphasis added).

The full email suggested that the quotee is no muddleheaded green growther, but rather a reputable and scholarly degrowther, and perhaps something of a leader in the field. Therefore, I do not think the quotee was implying, much less believing, that degrowth is congruent with a growing GDP. Rather, I think the quotee was striving to emphasize—and wanted others to strive likewise—that, in the European degrowth movement, “degrowth” is supposed to connote far more than a decreasing GDP, including a thorough political package of social justice. Unfortunately, however, the language used to de-emphasize GDP is often confusing and too inconclusive about the need for lowering GDP.

Giorgos Kallis and the degrowth movement

Giorgos Kallis, European degrowth leader. A Shakespearean steady stater might opine, “Kallis doth protest too much, methinks.”  (Image: CC BY-SA 4.0, Credit: Riccardo Mastini)

One degrowth leader, Giorgos Kallis, doesn’t offer much clarity, at least not in writing, by insisting that “Degrowth is anything but a strategy to reduce the size of GDP.” Similar to the anonymous quotee, he surely doesn’t believe in “green growth,” as the corresponding video (and recent scholarship) helps to clarify. Yet he wants the degrowth movement “to be distinguished from recession or depression” so much that he downplays the need for declining GDP.

A similar lack of enthusiasm for lowering GDP is found in the article, “Their Recession Is Not Our Degrowth!” The author, Federico Demaria, wrote about degrowth, “Our proposal is not necessarily to reduce GDP (an arbitrary indicator), but rather to ask new questions and search for alternatives to today’s society based on a predatory, unjust and unsustainable capitalist economic system.”

The Significance of GDP in Growing, Degrowing, and Steady State Economies

If Mark Twain were a steady stater (which would not be surprising), he might apprise, “The reports of GDP’s arbitrariness are greatly exaggerated.” In fact, GDP is perhaps one of the least “arbitrary” of all the macro indicators on Earth. GDP growth has been soberly and deliberately (albeit unwisely in recent decades) selected as a central economic policy goal for close to a century. The outcomes are far from unclear, either. GDP serves as an indicator of dozens or hundreds of things, and it is a rock-solid indicator of at least five:

  • Energy and material throughput
  • Pollution
  • Biodiversity loss
  • Environmental impact
  • Ecological footprint

Now this isn’t the article for refuting the increasingly irrelevant neoclassical growth economists who believe in perpetual GDP growth. That can be and has been done in many other venues. This is an opportunity, on the other hand, for squaring up degrowth and steady-state messages. Let’s start with the five points noted above.

The trophic structure of the human economy establishes that a growing GDP requires increasing throughput, even with technological progress. Pollution is an inevitable function of the second law of thermodynamics, and increases with GDP. The causes of biodiversity loss are like a Who’s Who of the economy. Biodiversity is in turn the top indicator of ecological integrity and environmental health, which decline as the economy grows. We might even view the economy as an $82 trillion giant, stomping across the landscape, leaving its ecological footprint.

In addition to the five points above, it’s no stretch of common sense—much less sound science—to identify tight linkages between GDP and:

  • Noise
  • Traffic
  • Stress
  • Soil depletion
  • Water shortages
  • Competition for resources
  • International strife
  • War

Then, of course, we have greenhouse gas emissions, climate change, and sea-level rise. While neither Kallis nor myself think there’s a Thanksgiving turkey’s chance of decoupling today’s GDP from greenhouse gas emissions, even a “renewably” energized future is hellish enough, given the relentless efforts to push GDP perpetually upward. 

So, does anyone still feel like ignoring GDP? Or downplaying the importance of degrowing it? Here then is one last try to get us over the hump.

The GDP Question in the Politics of Degrowth: We Can Handle It

Assuming we truly do want a decreasing GDP—which we desperately need for the sake of environmental protection, economic sustainability, national security, and international stability—we must strive for it as politically effectively as possible. For degrowthers in western Europe, apparently this entails assuaging the concerns of those who want “degrowth” to automatically connote goodness, or at least improvement from current badness. Connoting goodness or improvement is a tough sell when the public is accustomed to thinking of improvement (if not goodness) in terms of a growing GDP. But that’s our job!

One subtle approach is Timothée Parrique’s proposal (page 326 of his Ph.D. dissertation) for distinguishing linguistically, and thus connotatively, between “degrowth” and “de-growth.” The unhyphenated “degrowth,” then, would connote the broader degrowth movement and all it stands for. “De-growth,” on the other hand, would be limited to the trend in GDP.

Parrique’s approach resonates with CASSE, as we have long distinguished between the “steady-state economy” of neoclassical economics and the “steady state economy” of ecological economics. In the hyphenated phrase of neoclassical economics, “steady-state economy” connotes simply a stabilized capital:labor ratio, and almost always with growing GDP! In the non-hyphenated phrase favored by CASSE, “steady” modifies “state,” and “state” modifies “economy.” In other words, “steady state economy” connotes a political state in which GDP is stabilized.

Our attempt to distinguish, via hyphen, between neoclassical and sustainable concepts would be well understood in only a tiny corner of academia where political science and ecological economics meet (and where neoclassical economists rarely interlope). Outside of that corner, any effects would be marginal. The hope, though, is that neoclassical growth theory will fade far enough away as to leave the “steady state economy” as the only entry that really matters for purposes of politics and policy, even if “steady state” is occasionally or inadvertently hyphenated.

Similarly, I suspect Parrique’s distinction will be understood only within the tight confines of the academic degrowth literature. Outside those confines, especially all the way into public dialogue, “degrowth” will be used just as it sounds and—pursuant to the “Commoner’s Dictionary”—just as it means: Decreasing and, in particular, decreasing GDP.

The bigger point is, that’s not a bad thing! It is decidedly, decisively a good thing in the 21st century. We want GDP degrowth, all the way back to a sustainable and ideally an optimal steady state economy. Of course, it’s not the ultimate end-all goal, but it’s much more than a trivial means to an arguable end. GDP degrowth is such a necessary condition for sustainable wellbeing, it’s crucial that we strive for it.

So, if degrowthers are worried about the tarnishing of their message with the connotations associated with recession, coronavirus, or a covid-caused recession, my response is: That’s life. It’s not easy. It will take plenty of political prudence, and tireless determination, to advance the steady state economy—or degrowth toward a steady state economy—as the central economic policy of the 21st century. We have to learn how to communicate, with clarity if not flair, what Herman Daly has long emphasized; namely that a failed growth economy is not the same as a successful steady state (or successfully degrowing) economy. I think we can do it, but not if we waffle on the need to degrow GDP, which only confuses observers and allows for the persistence of “green growth” fantasies.

Je suis pour la décroissance. That’s right, I am a degrowther. And I’m all for GDP degrowth!

Brian Czech

Brian Czech is the Executive Director of the Center for the Advancement of the Steady State Economy.

The post To Be or Not to Be: Is the European Degrowth Movement Courting an Identity Crisis? appeared first on Center for the Advancement of the Steady State Economy.


NEWS: Trump Just Fulfilled His Billionaire Pal’s Dream

Published by Anonymous (not verified) on Tue, 16/06/2020 - 4:40am in

A Labor Department letter could help Trump’s private equity donors fleece 100 million workers. The letter follows a $3 million super PAC donation from a Wall Street titan pushing for the change. Continue reading

The post NEWS: Trump Just Fulfilled His Billionaire Pal’s Dream appeared first on BillMoyers.com.

Pandemic Billionaires Still Raking It In

Published by Anonymous (not verified) on Fri, 05/06/2020 - 5:45am in

In April 2020 we reported on the release of the report “Wealth Windfalls, Tumbling Taxes, and Pandemic Profiteers” from Institute for Policy Studies. That study showed that between January 1, 2020 and April 10, 2020, 34 of the nation’s wealthiest … Continue reading

The post Pandemic Billionaires Still Raking It In appeared first on BillMoyers.com.

Debt Monetization and Inflation Ideology

Published by Anonymous (not verified) on Mon, 11/05/2020 - 8:51pm in

Few common economic phenomena are as misunderstood and misrepresented as “inflation”.  Unemployment represents a concrete event that manifests itself in a straight-forward manner, loss of work, application for benefits and subsequent job search.  We can contrast this to inflation.  Economists struggle to define what inflation is. 

A “rise in the general price level” comes across as the preferred definition, but is ambiguous concept.  In actual economies with their many goods and services, the “general price level” exists as a measurement concept that no one directly perceives.  In addition, we have many statistical measures of inflation.  I focus on the commonly used consumer price index.

If we asked the proverbial person on the street, “are you unemployed”, we are likely to receive one of three replies — no, yes or “between jobs”.  Few if any adults would reply “I don’t know” or none of those”. 

We could ask the same person, “was your standard of living affected by inflation last month”?  There are many reasons why the person may find it difficult to answer.  If the Bank of England through intention or accident kept average price increase close to its 2% target, the rise might prove insufficient for the respondent to notice.  At least three characteristics of the “general price level” reinforce ambiguities of perception:  people have different consumption habits; all prices increases are not inflation; and in practice price determination falls into different processes.

To take obvious examples of the first, someone who rents accommodation will be unaffected by an increase in mortgage rates, changes in the fare for the London tube will go unnoticed by  a rural bus rider, and vegetarians will care little about meat prices. 

More important, consumer price indices use average consumption weights.  The substantial difference between average and median (mid-piont) income implies that the consumption pattern of the typical person differs substantially from the weights used by the Office of National Statistics.  ONS also calculates Indices by income deciles but these are rarely used in the media. Since 2006 when the indices began, average price increases for the population in the second decile (tenth) have differed each month from those of the ninth decile by an annual equivalent of 0.3 percentage points (ONS compares deciles 2 through 9 to avoid extreme values encountered at the ends of the distribution)). 

When people in the high ninth decile show no change, prices for those in the low second decile consistently show a small annual increase (calculated from ONS statistics for 2006-2019).  The distribution bias provides sufficient reason to make individual perception of inflation differ by income groups over several months’ periods of time.  And, of course, higher income groups may not notice small changes at all.

This ambiguity is substantially increased because (my second point), in time of low inflation quality change and new products have a calculated price impact well in excess of inflation itself.  The items people purchase continuously undergo quality change as well as being joined by new products.  Over twenty years ago the United States Congress commissioned a detailed investigation into the effect on inflation measurement of such changes. 

That study, the Boskin Report, concluded that new products and product improvement contribute about one percentage point to consumer prices each year.  While we have no equivalent UK study, the internationalisation of production and consumption suggests a similar impact.  If so, when the ONS reports an annual general price increase of two percent, what we normally mean by inflation — the same thing costs more — is actually one percent or less.

Perhaps the most important problem with measuring the general price level and inflation is a third complication.  The prices in our economy fall into three distinct categories: 1) goods and services who prices are determined in international markets, 2) those whose prices result from contact arrangements of varying time lengths (including public sector prices), and 3) prices determined in short term domestic markets processes (“spot market” prices).

With this complexity of price determination in mind, we can reconsider orthodox monetary policy.  For example if the ONS measured rate of price increases goes to 3.5%, the Bank of England is mandated, on advice of the Monetary Policy Committee, to act to reduce the rate down toward 2%.  An increase in the rate at which the Bank of England lends to private banks provides the conventional tool to archive this outcome.  Finding it more expensive to access funds, banks raise their lending rates.  Businesses then find their operating costs higher and reduce output.  Slower private expansion reduces pressure on wages and prices, bringing inflation down.

If this logic were sound, it would mean that the slow down in price increases would concentrate in domestic markets, leaving international prices such as petroleum unchanged, as well as having little impact on prices under contracts of various lengths.  The most flexible prices arise in markets with unregulated wages, such as retail and wholesale trade, where pay is also quite low. 

Thus, if the logic of conventional monetary policy holds, its distributional effect should prove quite unequal, its burden carried by the lowest pad.  The occasionally encountered argument that inflation disproportionately harms the poor is false; seeking to reduce inflation disproportionately harms the poor.

How did economic policy fall into this commitment to consistently inequitable monetary policy?  The alleged problem, excessive price increases, defies accurate measurement.  We have little evidence that the solution to this alleged problem, central bank manipulation of interest rates, would have any direct effect on it.  As I argued in my previous blog, underlying this mainstream monetary policy we find the belief in automatic adjustment to full employment — market economies naturally seek full employment, and government provoked inflation is the major source of instability.

A specific model of the economy provides the bridge from the belief in self-adjusting markets to mainstream monetary policy, the infamous Quantity Theory of Money.  In its simplest form that theory views the economy as generating one common output and money as created by governments.  In the simple neoliberal monetary world market economies automatically find full employment; only one output is produced; governments control the money supply; and inflation results from too much government created money chasing too little output.

But market economies tend to generate unemployment not full employment.  Real economies produce many goods and services with quite different process of price determination.  Governments and central banks at most influence not determine money in circulation.

Inflation is not the result of too much money.  That is its consequence.  In a third blog I focus on that issue — what causes a broad and persistent increases in prices, when that is a problem, and what policies to manage it.

picture credit : flickr:EpicTop10.com

The post Debt Monetization and Inflation Ideology appeared first on The Progressive Economy Forum.

Sequence Matters

Published by Anonymous (not verified) on Fri, 08/05/2020 - 2:11am in

By Herman Daly
Nuclear power plant and Planet of the Humans

When prioritized over sustainability, techno-fixes are often dangerous. (Image: CC0, Credit: Not available)

The main message of the controversial documentary, Planet of the Humans, is that unrestrained economic and population growth should be the target of environmentalists’ efforts, not technological fixes. Techno-fixes can be helpful, but belong in second place. If put in first place they are often dangerous (e.g., nuclear power, green revolution, biomass fuel, space colonization, etc.). Technocrats enjoy usurping first place and are not humble about it.

In reviews some have alleged that Michael Moore and Jeff Gibbs (producer and director, respectively) must be misanthropists, eco-fascists, racists and sexists, as well as shills for fossil fuel interests. Maybe they are just filmmakers who sometimes overstate an important truth that they are trying to present to an unreceptive audience. When the ideological dust settles maybe there can be a reasonable debate on the proper sequencing of limiting growth vs. accommodating growth by technical fixes.

Michael Moore and Planet of the Humans

Michael Moore, inveterate challenger
of the status quo; suddenly a shill for
fossil fuel interests?
(Image: CC BY-SA 2.0, Credit: Nicolas Genin)

Big Environmentalism had a reason to put techno-fixes in first place—to avoid confronting the Great God of Growth, and thereby offending wealthy contributors, politicians, and technocrats. Big Green suggests that a policy of complete substitution of fossil fuels by renewable energy is viable. It would surely be viable at some smaller scale of population and per capita resource use, but not at the present scale, not in a reasonable time period, and certainly impossible at the continually growing scale advocated by most economists and politicians. But neither Big Money nor Big Green can accept an end to economic growth, much less a decline.

However, technocrats should be given a chance and encouraged to prove their worth—in the proper sequence. Let us first limit growth in resource throughput, and then encourage the technologists to grow our wealth by increasing resource productivity, rather than growing the volume of resources depleted and transformed into polluting wastes. Sequence makes a difference. First put on your pants—then your shoes.

Tsonga

Big environmental NGOs: Time to change a losing game? (Image: CC BY-SA 2.0, Credit: Carine06)

A further challenge raised by the documentary is to recognize that the environmental movement is failing. We are losing the game—just read the newspapers! As my high school tennis coach frequently had to remind me, the first rule of strategy is to “always change a losing game.” The documentary invites us environmentalists to change our losing game. The invitation was dramatic, poignantly graphic, and forceful. It was also rude, ungenerous, and sometimes unfair. But if it had been polite and technically impeccable I’m afraid we would still be sleepily trying to pull our pants on over our shoes.

Herman Daly

Herman Daly is CASSE’s Chief Economist, Professor Emeritus (University of Maryland), and past World Bank senior economist.

The post Sequence Matters appeared first on Center for the Advancement of the Steady State Economy.


The Role of Tax after the Pandemic

Published by Anonymous (not verified) on Tue, 05/05/2020 - 2:54am in

Richard Murphy

Recovery from the coronavirus crisis will be a complex issue. In many ways it is impossible to predict precisely what will be required. And yet, when it comes to the role of tax in this recovery some quite straightforward things can be said.

What is indisputable is that tax does withdraw money from circulation that might otherwise be spent within the economy. It does as a result suppress demand for consumption and, by reducing the overall resources available within the private sector, for investment as well.

If that is the case then it is likely that the last thing that will be required after the massive slump in demand that the coronavirus shut down has created will be any overall tax increases. It is likely that they would be deeply counter-productive because they would suck demand out of they economy just when that economy will need to be re-established as the recovery proceeds.The fact that the government will be spending more does not alter this fact.

Governments can fund themselves in three ways. They can tax. They can borrow. And they can create the money that they spend by borrowing from their own central bank (a process called direct monetary funding). The precise nuances of these arrangements are not of concern here: what is important is that what this means is that tax increases need not be in any mix relating to increased government spending for the time being.

That being said, there is very strong reason to reform tax after this crisis. That is because, as I argued in my 2015 book, The Joy of Tax, the choice between the tax policies available to a government is in many ways the most important decision that any government has to make if it is intent, as most governments are, on shaping society in particular ways to suit some interests over others.

The UK tax system has, as a matter of fact, been used for this purpose over time. In recent decades the bias that has been displayed has been very apparent: it has been towards wealth. The fact that we have no tax on wealth as such does prove this: after all, one is possible. But as importantly, the taxes on income derived from wealth and the support that the tax system provides to saving are the clearest indications possible of this bias.  And in addition, the taxes that we do have on transactions relating to wealth, such as capital gains tax and inheritance tax, have been steadily reduced

As example, in the case of capital gains tax its original role as a back stop to prevent abuse within the income tax system has been forgotten, and a blatant differential between the two has been opened up so that there is now considerable incentive to re-categorise income as gains, and a whole tax abuse industry supports this process.

The same back stop role for corporation tax, which was originally intended to prevent leakages from the income tax system, has also been forgotten. As a result the rate of corporation tax is now below the basic rate of income tax. The consequence  is that those who need not live off their income can hold it in a company and see it accumulate in a low tax environment right here in the UK: the need to go offshore to achieve this goal has almost disappeared.

At the same time there is also a deep bias against work within the tax system. Whilst those who work on what they earn have to pay national insurance on their earnings those who live off investment income do not, effectively saving considerable sums as a result.

There are also massive incentives to save for those with the ability to do so. Pensions are heavily subsidised, whilst ISA accounts, special tax exemptions for savings income and other arrangements all result in low tax rates for those do not work for their income when compared to those who do.

This then results in two further biases. One is against the young, who tend not to have wealth. And it also creates a massive gender divide within the tax system as wealth ownership remains male dominated.

On top of all these injustices, the chance that tax is not paid by those with wealth or who run their own businesses is much higher than it is amongst those who are employed: another bias is apparent then as a result of the decision of successive governments to cut funding for the work of HM Revenue & Customs.

There is as a result a need for massive reform of tax after the coronavirus crisis, which is what has motivated me to address these issues in the Tax After Coronavirus Project, which is being published in stages on the Tax Research UK blog. But that motivation is not promote the raising of revenue. It does instead arise for three other reasons.

One is to reduce inequality.

Another is to ensure that all tax due is collected.

And third, the aim is to make sure that the income of those who need support in our society is increased by reducing the tax that they pay whilst keeping an overall balance in tax paid by increasing  the tax due by those with the capacity to do so. The result is vital support for those we now call essential workers, which can be provided by those who we now realise are not nearly so important, after all. This is a policy that is much more useful in the long term than clapping. But the clapping of those whose work is essential, many of whom are on very low pay, proves just why tax reform is required now.  

Images credit flickr/ images of money

The post The Role of Tax after the Pandemic appeared first on The Progressive Economy Forum.