Managing Without Growth and the Economics of Flow

Peter Victor–eminent ecological economist, winner of the Canadian Council for the Arts’ prestigious Molson Award, and author of Managing Without Growth–challenges us to reframe our economic discussions to focus on managing material and energy flows rather than GDP growth.

This important interview of Canadian ecological economist Peter Victor is conducted by the BrainTrust / Capital Institute.

(Excerpts only, we recommend reading the original article in full.)

* In Managing Without Growth you explore a model that seeks to determine whether it is possible to achieve prosperity–defined as the eradication of poverty, full employment, and substantially reduced greenhouse gas emissions –in a slow or no growth economy. In your more recent work you push the envelope further–raising the possibility of degrowth and prosperity in the developed world.

Yes, in the book I explored alternative scenarios for an advanced economy to simply relying on continual economic growth. I looked at what happens if the growth rate is slowed until the economy is not growing and at what is possible under those conditions. When I was writing the book I was not aware of the discussions in Europe about degrowth and had not really thought about the possibilities. The first international conference on degrowth was held in 2008 and I completed Managing without Growth in 2007.

After the book was published I was invited to speak at the second international degrowth conference in Barcelona. I used my original macro model to examine a degrowth scenario for Canada. What would be possible in a smaller economy? I found I could use the model to generate degrowth, defined for this purpose as reduced GDP per capita, and still have full employment, much lower levels of poverty, reduced greenhouse gas emissions, and still maintain fiscal balance, but it was not easy.

However, the reaction at the conference intrigued me–few questioned how difficult it would be to achieve the results. It was more, ‘isn’t it good news that it is possible?’ For many degrowth enthusiasts a reduced level of GDP is incidental. There are many in the degrowth movement who are rightly questioning what life is about. They are looking to rebalance work and leisure and build community. I talk about some of these things in my book but they are a more central focus in degrowth discussions.

* That takes us to the internal consciousness shifts that have to happen at the individual and societal level to enable the corresponding shift to a no growth or degrowth economy.

Many years ago I read William Leiss’ The Limits of Satisfaction where he talks about how advertisers put their products in settings that have nothing to do with the products. For instance, motor vehicles are shown on cliff tops or on beaches where people can’t drive. It’s ironic that advertisers know that people value the natural environment, and use that to sell their products, but I don’t think the rest of us have learned this lesson or fully appreciate what it will take to protect nature from our excesses.These changes will not happen in our society unless people want. It isn’t likely that politicians will lead the change without public support. For example, it will be people saying we do not want to work so much and realizing that North America has fallen behind Europe in this respect. We work many more hours than Europeans over a year, yet a reduction in average hours worked is a way of reconciling a slower rate of growth with an increasing level of employment. We should look at ways to make this possible through changes in policy in the public and private sectors. It is certainly worth talking about. More leisure time with a decent standard of living seems like an attractive scenario to me.

* Although you use the term no growth and degrowth you emphasize that policy makers should focus not on containing or managing GDP growth but on managing material and energy flows.

I would emphasize the following: the real area we need degrowth is in material and energy flows and land use. What the economy is capable of doing within those constraints remains uncertain. I think we will find that by the traditional measure, growth can’t continue if total material and energy flows are going down. Policy measures should focus on containing material and energy flows, and land use rather than low or no growth in GDP. But in the absence of good, comprehensive data about the biophysical requirements and impacts of the economy, GDP serves as a proxy, though an imperfect one.

I deliberately called the book “Managing without Growth” instead of “zero growth” because I wanted to shift attention away from growth as a policy goal. I don’t think we should try to adopt zero economic growth as a policy goal. In my experience in various policymaking roles proposals to tackle environmental protection, social justice and so on are tested against their impact on growth rate. Very often this is an inappropriate test. So I am trying to show that if we could manage without growth we don’t have to worry about these growth impacts if we are thoughtful about it. We should think instead about more sensible measures of success in our society and how best to pursue them.

It is also important to point out that developed countries have had tremendous economic growth yet the record in terms of other objectives has not been that great. For example, in the past three or four decades poverty has not declined in Canada, incomes and wealth have become more unequal, we have not had full employment, and our greenhouse gas emissions have risen. We need to change the focus of the debate.

* You avoid expressing a point of view about whether capitalism is compatible with a world where material inputs into the economy are declining.

This is an important question. I believe the best way to resolve it is to focus in on the changes we have to make to our use of resources, creation and disposal of waste, and land use. We have to be very disciplined about these matters and then we will see if capitalism is compatible with the required changes.

I think 50 or 100 years from now when people look back at what happened, whatever the system is they will be living in it will look very different from what we have today. Whether it is a further evolution of something called capitalism or if the capitalist era will be over I can’t predict. But we are clearly in a process of significant change and I think it will continue.

* To what extent is our financial system compatible with an economy that requires degrowth in materials and energy throughput?

While I didn’t really examine the financial implications of our current predicament in Managing without Growth the recent and ongoing financial crisis has led me to think more about them. I believe we went wrong when the financial economy began to run the real economy instead of serving it. What will be required now if we are to set things right is that financial institutions need to be attuned to serving the real economy, by which I mean the production and distribution of goods and services. If that means slower real growth rates, monetary policy should deliver it. I don’t fully understand the obstacles to that happening, but it will take at least a redefinition of the goals of monetary policy and I suspect a redesign of our monetary institutions. The current fragility of the financial system is having repercussions on the real economy, and hence on the natural environment, which will force changes in any event.

* You are concerned about the lack of rigor in the prevailing definitions of “green” growth. How can we address the definition with more rigor?

There is much talk about green growth without it being properly defined. Clearly, a reduction in environmental impact per unit of output, which we refer to as intensity, is insufficient if the gain is wiped out by increases in total output.

I became really interested in the interplay between scale and intensity and out of that interest emerged a definition of green growth: increases in scale that are slower than reductions in intensity. Only this combination of changes in scale and intensity guarantees a reduction in environmental impact. Once green growth is defined in this way it becomes apparent that you can have other combinations of scale and intensity. Some people focus on the decline in intensity and call that green growth without looking at the overall impact. But what if intensity declines but not as fast as scale? Then you have an increase in total impact, which is brown growth.

So I think green growth has to mean an absolute reduction in a wide range of environmental impacts while the economy expands, if that is possible.

* Can you talk more about how we can realize a dynamic economy without material and energy growth?

An economy that is not pursuing rapid growth can still be dynamic. It is not just a question of slowing growth rates. We also have to change the composition of what we produce and consume, how they are shared, and how we dispose of waste. There has to be a lot of technological change geared more to increased leisure time and protecting the environment than increasing output. It could open up some very attractive investment opportunities for companies committed to this direction of change but it would be hard on those that resist it.

I sometimes like to draw an analogy to a forest that is in some respects in equilibrium—the total biomass is constant but there is still continual change. Some trees are growing and others are dying but the total stock doesn’t keep rising so the requirements that are put on the rest of biosphere are also in balance. The trouble is that our current system of economics is based not on biological principles but more on physics. We can learn a lot from the natural world when trying to understand the economy.

* You make the point that if we prepare for slower growth we stand a reasonable chance of experiencing less disruption and more security than if we don’t.

When you propose the sort of changes I do you are put on the defensive. You have to defend them against a rosy “business as usual” future that I do not think will be possible. It’s an unfair and misleading comparison.

For me the starting point is how things will unfold if we don’t consciously and thoughtfully try to prepare for a future that will be very different from the past. Proceeding blindly, we will see a period of great uncertainty and instability, wild fluctuations and environmental decline. That to me is the proper point of comparison. The question is, what are our best options given that we have entered an era of instability and insecurity? I do not think that the frantic pursuit of continued economic growth is our best bet.”

Leave A Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.