Degrowth

Credit guidance was used extensively in the post-war period. The policy helped states build up their industrial capacity, expand their welfare systems, and accelerate technological innovation in key sectors where rapid development was needed. It is a central pillar of any successful industrial policy framework. And with the ecological crisis, it is gaining renewed attention: A recent report produced by the University College London’s Institute for Innovation and Public Purpose shows how credit guidance can be used to accelerate an effective green transition.

This approach can also be used to offset inflationary pressure. In a scenario where we need to increase public investment in necessary social projects—such as health care, housing, and transit—credit controls can be used to reduce commercial investments elsewhere in the economy (again, specifically in damaging and unnecessary industries that we need to scale down), thus regulating aggregate demand. This is a much more rational strategy for inflation control than using broad-brush interest-rate policy, which can have a devastating impact on people’s livelihoods and on socially important sectors.

Wielding the power of credit, commercial banks get to determine the allocation of investment and therefore determine what gets produced.  They make these decisions based on whatever production is most profitable, regardless of whether it is beneficial or destructive. As a result, we get massive investment in things like fossil fuels, beef and SUVs, because these things are highly profitable to capital, and chronic underinvestment in necessary sectors like renewable energy, regenerative agriculture and public transit, because these are less profitable or not profitable at all.  

This dynamic is what explains the fact that high-income countries – like the United States and Britain – are characterized by extremely high levels of resource use and yet still fail to meet many basic human needs. It is because investment is controlled in an undemocratic way, and is totally unaccountable to society.

Credit guidance can help deal with this problem.  We need a democratically ratified framework to guide private investment in line with social and ecological objectives rather than just profit maximization. What are our main goals and values as a society? What do we need to accomplish? What forms of production should be increased in order to improve human well-being?  What forms of production are destructive and unnecessary and should be scaled down?  These questions should be democratically determined and a credit guidance framework should be established accordingly.

When it comes to our sustainability problems, striving for greater resource efficiency seems like an obvious solution. For example, if you buy a new car that’s twice as efficient as your old one, it should cut your gasoline use in half. And if your new computer is four times more efficient than your last one, it should cut your computer’s electric bill fourfold.

In short, boosting efficiency seems like a straightforward way to reduce your use of natural resources. And for you personally, efficiency gains may do exactly that. But collectively, efficiency seems to have the opposite effect As technology gets more efficient, we tend to consume more resources. This backfire effect is known as the ‘Jevons paradox’, and it occurs for a simple reason. At a social level, efficiency is not a tool for conservation; it’s a catalyst for technological sprawl.

Here’s how it works. As technology gets more efficient, it cheapens the service that it provides. And when services get cheaper, we tend to use more of them. Hence, efficiency ends up catalyzing greater consumption.

Imagine designing one of our great cities from scratch. You would quickly discover that there is enough physical space for magnificent parks, playing fields, public swimming pools, urban nature reserves and allotments sufficient to meet the needs of everyone. Alternatively, you could designate the same space to a small proportion of its people – the richest citizens – who can afford large gardens, perhaps with their own swimming pools. The only way of securing space for both is to allow the suburbs to sprawl until the city becomes dysfunctional: impossible to supply with efficient services, lacking a sense of civic cohesion, and permanently snarled in traffic: Los Angeles for all.

[…]

It is impossible to deliver a magnificent life for everyone by securing private space through private spending. Attempts to do so are highly inefficient, producing ridiculous levels of redundancy and replication. Look at roads, in which individual people, each encased in a tonne of metal, each taking up (at 70mph) 90 metres of lane, travel in parallel to the same destination. The expansion of public wealth creates more space for everyone; the expansion of private wealth reduces it, eventually damaging most people’s quality of life.

The final plenary of the 2021 ISEE, ESEE & Degrowth International Conference was given by renowned investigative journalist, author, environmental campaigner and self-proclaimed 'professional trouble-maker' George Monbiot. He is columnist for the Guardian where he writes on environmental and social justice issues. He is also the author of Feral: Rewilding the Land, Sea and Human Life; The Age of Consent; and Heat: How to Stop the Planet Burning. His latest book is Out of the Wreckage: A New Politics for an Age of Crisis.

Now is not the time for anyone to announce that their city will become “bigger and better”. Cities don’t have to get bigger to evolve, and sooner or later all will have to reckon with the concept of degrowth.

Australia must become less reliant on imports of skilled workers, students, tourists and materials. We can make better use of local resources and produce much more of what we need here.

Australian cities have very good bones. They have amazing cultural scenes. Their biomedical capabilities are among the world’s best. Our education sector remains eminently exportable online and via existing overseas campuses. The manufacturing sector still has a base to build on and provide many more of the products Australians need. And our renewable energy capacity is unlimited.

We can support our local hospitality and cultural venues better, and increase intercity and interstate patronage. We can invest in research and development and maintain wealth through innovation and production, rather than the eternal consumption of land.

Degrowth lacks a theory of how the state can finance ambitious social-ecological policies and public provisioning systems while maintaining macroeconomic stability during a reduction of economic activity. Addressing this question, we present a synthesis of degrowth scholarship and Modern Monetary Theory (MMT) rooted in their shared understanding of money as a public good and their common opposition to artificial scarcity. We present two arguments. First, we draw on MMT to argue that states with sufficient monetary sovereignty face no obstacle to funding the policies necessary for a just and sustainable degrowth transition. Increased public spending neither requires nor implies GDP growth. Second, we draw on degrowth research to bring MMT in line with ecological reality. MMT posits that fiscal spending is limited only by inflation, and thus the productive capacity of the economy. We argue that efforts to deal with this constraint must also pay attention to social and ecological limits. Based on this synthesis we propose a set of monetary and fiscal policies suitable for a stable degrowth transition, including a stronger regulation of private finance, tax reforms, price controls, public provisioning systems and an emancipatory job guarantee. This approach can support broad democratic mobilization for a degrowth transition.