Shrinking the economy wouldn’t give the world the resources it needs to stop climate change or to lift billions out of poverty.
Opinion By Peter Morici
for Market Watch
December 28, 2022 -- Climate
change, pandemics, Putin’s madness and China’s ambitions threaten humanity with
droughts and floods of biblical proportions, nonnavigable rivers and
disappearing island nations, fractured global supply chains and shortages of
vital resources like commercial fertilizer, and famine and mass migrations.
Much of this has been
enabled or exacerbated by industrialization and globalization.
Prior to the industrial
revolution per capita incomes grew very slowly—perhaps 0.2% or 0.3% a year.
Even with late Middle Ages innovations like the three-part plow and horse
harness, aggregate economic growth was largely tethered to population increase.
Progress and growth
The degrowth movement is
amorphous with contributions from both the physical and social sciences. But it
appears unified by a criticism of modern economics, which tends to associate
human progress with GDP growth.
The movement generally
asserts that climate change and inequality could be better addressed by shrinking
the global economy—perhaps, a modest 0.5% a year, which would imply average per
capita incomes losses of more than 1% a year.
This does not stand up
well against the record of advanced market economies. From 2005 until the
pandemic, those enjoyed GDP growth and substantially cut CO2 emissions.
Green electricity will
prove more expensive than fossil-fuel generation because even when it can be
had cheaply, it requires expensive fossil fuel and battery backups to cope with
severe cold and heat.
EVs are more expensive
to produce because the batteries and electric motors require lots of lithium,
copper, cobalt and other metals. Global capacity to produce those is often in politically
and geographically awkward locations—the Congo, South America and China.
Progress means better
lives
Without growth,
adopting green technologies, building infrastructure to access vital resources
and protecting against associated risks would require significant reductions in
living standards and simply not be politically sustainable.
The pathogens that
attack mankind are always mutating and posing new threats. Producing new
vaccines and medicines—and making those transnationally available to rich and
poor alike—is terribly expensive.
Even with NATO devoting
over $1 trillion a year to defense, Russia, China, Iran and others are spending
enough to create mischief that could end badly for democracy.
Unless we surrender to
disease, capitulate to dictatorship, and let millions die or be enslaved, the
United States and its allies must spend more, not less, money and manpower on
health care and defense. That will require economic growth to be politically
palatable.
Social and economic
justice politicians are not buying into warnings about the dangers posed by
rising autocratic power. While their views are not popular within the wider
Democratic Party, if the United States and other rich countries undertook to
shrink their economies to lower emissions, the left would likely seek
concessions that imposed dramatically redistributive taxes on income and wealth
to meet public health and security challenges to avoid impoverishing the bottom
half of their populations.
Dividends of markets
The degrowth movement
advocates smaller homes, eating less meat and more leisure to spend with
children—all benefits simple GDP accounting does not capture. But indicators of
well-being like infant mortality and leisure time improve as per capita incomes
rise, and those are dividends of free-market dynamics.
Shrinking GDP without
losing ground would require abandoning capitalism and markets for state
planning. It’s doubtful personal liberty and democracy could survive all that.
It bears mentioning autocracies and countries sympathetic toward them—like China
and India—are burning more, not less coal these days.
The degrowth folks are
remarkably silent on realistic policy prescriptions for downsizing advanced
industrialized economies while simultaneously leveling up the poor in the
developing world.
That process would
require much more than a 0.5% per annual downshift in OECD GDP, while enabling
developing countries to continue growing to improve the conditions of the poor,
purchase CO2 abatement technologies, and mitigate against coastal flooding and
unbearable heat.
We can’t go back
Developing country
access to technology and growth are dependent on trade with and the growth of
industrialized countries, but degrowth activists correctly point out that much
North-South trade is based on resource extraction.
Weaning from that
commerce would require fewer developing country imports of food from places
like Ukraine, North America and prodigious developing country producers like
Brazil, less dependence on commercial fertilizer produced from natural gas and
mined potash from places like Russia and Canada and massive donations of CO2
abatement and mitigation hardware from richer countries.
With developed
countries shrinking their economies, expecting such generosity would be naive,
and alternative food supplies through sustainable local agriculture is a
nostalgic fantasy.
Just prior to the
industrial revolution the global population was about 1 billion. Today, at
8 billion, it is ludicrous to think developing countries could produce enough
food relying on cow-dung fertilizer. Anyway, cattle exhale CO2, and the
degrowth folks see virtue in us all becoming vegetarians.
Peter Morici is
an economist and emeritus business professor at the University of Maryland, and
a national columnist.
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