I want to make a brief intervention here to highlight an aspect of degrowth climate mitigation strategy that has so far been inadequately developed. It is widely understood that scaling down less-necessary forms of production can contribute substantially to decarbonization, in two direct and obvious ways. First, it directly reduces emissions in addition to what can be achieved through efficiency improvements and renewable energy deployment. Second, it reduces total energy demand and therefore makes it possible to decarbonize the energy system much more quickly, because it is not necessary to install as much new infrastructure, and the process of doing it involves less extraction and emissions. These are powerful benefits.
But there are several other benefits to a degrowth scenario that are less widely understood and are worth considering.
Here’s the main thing. If high-income countries are to decarbonize fast enough to stay within their fair-share of Paris-compliant carbon budgets, then urgent climate mitigation tasks – like building renewable energy capacity, insulating buildings, expanding public transit, innovating and distributing more efficient technologies, regenerating land, etc – need to happen very quickly. This “green production” requires mobilizing massive amounts of labour, factories, materials, engineering talent, and so on. In a growth-oriented scenario, this is difficult to do because our productive capacities are already devoted to other activities (activities that are organized around profit and which may not contribute to social and ecological objectives). So we need to either compete with existing forms of production (for labour, materials, energy etc, which can drive prices up), or otherwise increase total productive capacity (i.e., grow the economy). This cannot be done at just any desired speed. Under these conditions, there are very real physical limits to how fast we can decarbonize.
Scaling down less-necessary production solves this problem, not only because of the two benefits indicated above, but also because it liberates productive capacities (factories, labour, materials) which can then be remobilized to do the production and innovation required for rapid decarbonization. For example, factories that are presently devoted to producing SUVs can produce solar panels instead. Engineers that are presently developing private jets can work on innovating more efficient trains and wind turbines instead. Labour that is presently employed by fast fashion firms can be liberated to train and contribute to installing renewable capacity, insulating buildings, or a wide range of other necessary objectives depending on their interests, through a public job guarantee program linked to green public works.
This helps us rethink a longstanding question in ecological economics. Some ecomodernists have in the past argued that it is easier to achieve green transition in a bigger economy than in a smaller economy, because it means we have more capacity to devote to green production. But this fails to grasp the nature of the problem. Yes, a bigger economy may have more capacity, but in a growth-oriented scenario that capacity is already allocated. In this respect bigger economies face the same problem as smaller economies. But a degrowth scenario is not a “smaller economy” (i.e., a low-capacity economy). It is a high-capacity economy which is reducing less-necessary production, and therefore is suddenly endowed with spare capacity that can be redirected for necessary purposes. This is a unique situation that carries significant potential: it enables acceleration in the speed of green production and innovation at a rate faster than what can be achieved in a growth-oriented scenario.
By the way, this spare capacity can also be directed toward urgent social goals, too—for example to provision universal public services—in order to end the needless misery and deprivation that so many people suffer in our existing economy.
Of course, we need some way of mobilizing the spare capacity. This requires finance. And this brings us to another problem. Whoever controls finance determines what we produce, and therefore how our productive capacity is allocated. In our existing economy, finance is controlled by capital, and capital invests in producing what is most profitable rather than what is most necessary. This is why we get substantial investment in fossil fuels, SUVs and fast fashion (which are highly profitable) and insufficient investment in renewable energy, public transit and insulation (which are either not as profitable, or not profitable at all). Under capitalism, then, there are real limits to how quickly we can scale up green production and innovation. Capital would rather do other things.
To deal with this problem, we need a greater role for public finance. Instead of waiting for capital to make the necessary investments, governments that have sufficient monetary sovereignty can issue currency to do it directly, in the manner that we describe in this recent article in Ecological Economics (and see here for a discussion of options within the Eurozone). Of course, there are limits to this process: if the new demand exceeds the productive capacity of the economy, it will drive inflation. But this problem is mitigated in a degrowth scenario, where we are reducing less-necessary production and therefore liberating capacity. Furthermore, inflationary pressures can be controlled by using taxation to cut the purchasing power of the rich, and by regulating private money creation in both quantitative and qualitative ways.
It helps to recognize that when we talk about “investment”, money is just the vehicle. The real investment actually takes the form of allocating real productive capacity: real labour, materials, energy etc. Once we understand this fact, it becomes clear that a degrowth scenario enables investment in green production and innovation, by making real productive capacity available.
This represents an important rebuttal to the claim made by many economists that the only way to “fund” the green transition is first to increase growth. The assumption here is that we need higher GDP in order to obtain higher tax revenues to finance green production (in other words, increase corporate production of stuff, and then take some of the money from this to spend on green production). From this point of view, degrowth is self-defeating: less GDP, less tax revenue, less green production. But the flaw in this thinking should be immediately clear. Corporations do not produce money. They produce things. To say that we need to increase growth (i.e., increase production of existing things) in order to “fund” green production is tantamount to saying we need to increase production of SUVs, fast fashion and private jets in order to increase production of solar panels and public transit. Clearly this is absurd. We can increase green production directly, with public finance. And indeed this process is enabled – not inhibited – by reducing less-necessary forms of production and thus liberating productive capacity to be redirected for other purposes.
If this approach to public finance is so straightforward, why don’t governments do it? The short answer is: because they are capitalist. The approach I have described here represents an increase in democratic public control over productive capacity. This is good. We should have greater control over the allocation of our own collective labour and resources, so that we can direct it toward necessary objectives (compared to the existing arrangement, where capital controls our productive capacity, in a non-democratic way, and directs it toward what is profitable to capital). But this necessarily requires reducing capitalist control over productive capacity, which of course runs directly against the interests of capital accumulation. This is why capitalist governments tend to reproduce narratives like “we have to tax before we can spend” and “we must reduce the deficit”, even while knowing these claims to be false, because myths like these reign in our expectations for how much public production we can do, and indeed justify curtailing public production in order to ensure that a larger share of our productive capacity remains in the hands of private capital.
Of course, in high-income countries the remobilization of production to achieve ecological objectives must occur within an overall aggregate reduction of energy and material throughput to sustainable levels (degrowth), as ecological economists have established. We should also be clear that what I have described above need not reinscribe productivist or growthist visions. Yes, accelerated production of certain things is necessary to accomplish urgent social and ecological tasks (building sufficient renewable energy capacity and establishing universal public services, for instance), but these tasks are not indefinite and – unlike the objective of capitalist growth – do not require perpetually increasing production. Once necessary objectives are achieved, the level of production can be adjusted in a democratic way according to what is socially and ecologically necessary.
The power of this approach is extraordinary. Those who wish to unleash technological innovation and production to achieve ecological objectives often hitch their wagon to capitalist growth. But capitalism and growthism limit what we can achieve, for the reasons I’ve described here. Degrowth, combined with a robust public finance strategy, can enable us to overcome these limits, improve our potential for green production and innovation, and enable us to achieve rapid decarbonization.