Martin Ravallion, a former World Bank economist, recently wrote a blog post attacking de-growth. I will respond here in the hope of clarifying a few matters that he seems to have misunderstood.
Ecological economists argue that high levels of human well-being can be achieved without high levels of aggregate GDP and material/energy throughput. Costa Rica is often cited as an example. With a life expectancy of 80.4 years and levels of wellbeing in the top 7% of the world, Costa Rica matches many Scandinavian nations in these areas and significantly outperforms the United States, despite a GDP per capita of only $12,000, one-fifth that of the US. In this sense, Costa Rica is one of the most efficient economies in the world: it produces high levels of human development with minimal pressure on the environment (see the Sustainable Development Index).
The secret to Costa Rica’s success has to do with the country’s longstanding commitment to social policy, with universal access to high-quality healthcare, education and social security.
But Ravallion objects. He writes: “The problem in this argument is that better social outcomes are not only attributable to better social policies. Higher average incomes have also played a role, both directly (through poor people’s greater command over commodities that matter to those outcomes) and indirectly (by creating the resource availability needed to finance better social policies).”
Ravallion’s argument is levelled against a straw man. Yes, higher average incomes play a role in achieving better social outcomes, for both of the reasons he mentions. My argument is not that social outcomes have nothing to do with income (I’m not aware of anyone in ecological economics who has claimed such a thing), but rather that strong social outcomes can be achieved with relatively modest income – and certainly much less than rich nations currently command. Costa Rica does better than, say, my home country of Eswatini, which has a per capita income of only $3,800. It is unlikely that Eswatini could match Costa Rica’s outcomes with this level of income. And yet even so, the importance of social policy becomes clear when we compare Eswatini to Sri Lanka. They have the same GDP per capita, but Sri Lanka’s life expectancy is seventeen years longer (77.1 years), thanks in large part to its universal healthcare and education system.
Ravallion goes on to say that the story of Costa Rica is not just a story of good social policy. It is also a story of growth: after all, its real GDP per capita has tripled since 1960. So he concludes: “Costa Rica is definitely not an example of how good social outcomes are possible without economic growth.”
There’s another straw man here. Degrowthers have never argued that poor countries don’t need to grow. Growth may indeed be necessary for very poor countries (like Eswatini) to generate the resources necessary to build social policy and achieve strong social outcomes. But this does not require perpetual growth; it requires growth to the point of reaching a sufficient level of income. It's not growth as such that matters, but sufficiency. Ravallion confuses the two. Yes, growth is part of Costa Rica’s story. Strong, state-led development policies brought Costa Rica’s income from less than $3,000 in 1960 to $5,000 in 1980 (in constant 2010 dollars). And with that modest level of income they built up strong social policy and raised their life expectancy from just 61 years (way behind the US) to 71, nearly matching that of the richest nations in the world at the time.
There is more to Costa Rica’s story. During the 1980s, the US leveraged the Third World debt crisis to destroy state-led development programs and social policy across the global South, with structural adjustment programs imposed by the IMF and World Bank. Incomes collapsed virtually everywhere as a result. In Costa Rica, GDP per capita declined from 1979 to 1983, and didn’t recover its pre-crisis levels until 1992, more than a decade later. Yet during that period, Costa Rica’s life expectancy continued to rise at a world-leading rate, from 71 years to 76, catching up to and surpassing the United States with a GDP per capita that was one-seventh the size.
If growth as such is necessary to improve social outcomes – as Ravallion claims – how did Costa Rica manage this miracle? It was because, thanks to savvy political maneuvering, the government was able to defy the Washington Consensus and keep its social policy system intact. It was one of the only countries in the South that managed to do so: a rare beacon amid the wreckage of structural adjustment.
Of course, Costa Rica is not a de-growth economy. We point to Costa Rica not as an example of de-growth, but as an example of what can be achieved with relatively modest levels of mean income. This is an important distinction.
But all of this is somewhat beside the point. Again, calls for degrowth are not directed at poor countries, but rich countries Ecological economists argue that rich countries have grown too much, and that they could maintain or even improve their social indicators with vastly fewer resources than they presently consume.
Ravallion claims that this is a fallacy: "The fact that some countries have better social outcomes at a given level of mean income does not imply that richer countries can attain the same social outcomes at lower mean income," he writes. But why not? Unfortunately he doesn't explain. Meanwhile, Europe achieves better social indicators than the US with 40% less income. Portugal outperforms the US with 65% less income. And we know that the US in the 1970s had better wages, higher levels of happiness, and lower poverty than it does today, with roughly half the real GDP per capita.
Ravallion's response: "One must seriously doubt that halving today’s average income in the US will restore the social outcomes of 50 years ago.” This is another straw man. Nobody has argued that cutting the average income of rich nations would automatically produce better social outcomes. Ravallion has invented this idea out of thin air. By contrast, ecological economists focus specifically on the policies that would be necessary in order to maintain and improve social outcomes while scaling down aggregate economic activity (universal public services, shorter working hours, a job guarantee, a fairer distribution of national income, debt cancellation, etc.). We do not, as Ravallion claimed in a tweet, blindly “hope that economic contraction comes with pro-poor redistribution”.
The research on this is robust. In Managing Without Growth, Peter Victor runs a standard economic model that shows that if you stop or reduce GDP growth, then poverty and unemployment shoot up. This happens because our economies are structurally dependent on growth. But they needn't be. Victor shows that by introducing new policies into the model (such as the ones I indicate above) you can prevent these negative social impacts. More recently, researchers have demonstrated that we could end global poverty and ensure flourishing lives for everyone on the planet (for 10 billion people by the middle of the century) with 60% less energy than we presently use (150 EJ, well within what is considered compatible with 1.5C). As for resource use, we know that high-income nations could meet their citizens’ material needs at a high standard, with up to 80% less resource use, bringing them back within the sustainable threshold.
Unfortunately, Ravallion seems uninterested in such research. Instead, he says (in another tweet), let’s stick with growth and “try harder on the environmental policies”.
Yes, we need to get the environmental policies right. But unfortunately this, in and of itself, is not going to be enough. Schandl et al (2016) show that even if we (a) impose a carbon price of $50 per ton, rising by an extraordinary 4% per year to $250 per ton, and (b) somehow miraculously manage to double the material efficiency of our economies more or less immediately, rich nations will still only be able to achieve decarbonization of max 4.7% per year. This doesn’t get us anywhere near the emissions reductions required to stay within safe carbon budgets (viz, 10-12% per year). Plus, with a background growth rate of 2%, nearly half of that decarbonization will be wiped out. Schandl et al also find that the same best-case scenario achieves no absolute reduction in material footprint in the long term.
We have reviewed the relevant empirical evidence here (“Is green growth possible?”), looking at both emissions and resource use. The literature has expanded since. This review examines 835 empirical studies and finds that decoupling alone is not adequate to achieve climate and ecological goals; it requires what the authors themselves refer to as “degrowth” scenarios. This paper in Nature Sustainability comes to similar conclusions. Also see here and here… the latter paper reviews 179 studies on decoupling published since 1990 and finds “no evidence of economy-wide, national or international absolute resource decoupling, and no evidence of the kind of decoupling needed for ecological sustainability.”
The empirical evidence is clear. Averting climate catastrophe and ecological collapse is going to require that rich countries scale down aggregate throughput. Our task now is to figure out how to make that happen in a way that enhances - rather than erodes - human flourishing. This is the biggest challenge of the 21st century, and I hope that Ravallion will join us in rising to it.
*This post was updated in 2020.