Shrink the economy to stabilise the climate, says Andrew Simms

Slavish devotion to growth is charting a course for catastrophe, says Andrew Simms.

Ancient mariners sailed in fear of falling over the edge of the world. They needn’t have worried because, back then, there wasn’t one. By contrast, modern economists have confidently plotted the course that will take us there.

If the best assessments of available biocapacity are correct, then the ship of the global economy is already nearly vertical, pointing down and sliding. We are overshooting natural limits; running up ever increasing amounts of ecological debt.

Can we haul back the pendulous ship? Possibly. But, to do so we will have to disregard the compass normally relied upon by our captains of state. Their navigation has one True North: a dogmatic, unswerving devotion to orthodox economic growth.

Ever since the publication nearly four decades ago of Limits To Growth, a report by scientists from MIT working for the Club of Rome, this slavish adherence has been called into question by environmentalists. For years, it was fashionable to dismiss it as an exercise in ‘crying wolf’. Now it seems it was right all along. A recent detailed academic study found a solid correlation between its projections and subsequent actual trends*. Today, senior figures in politics and economics, from Adair Turner to Nicholas Stern, are finally daring to question the growth imperative, at least where rich countries are concerned.

Now new research from nef (the new economics foundation) suggests that a widespread, rapid economic transformation could bring huge benefits, even as the economy itself shrinks in overall size. We need to deliver ‘a great transition’, and to do it before we become locked in to irreversible climatic upheaval. History has precedents for such transitions. Consider Britain and others during the Second World War; or Cuba after the Cold War. Now the challenge is whether we can choose to make the change, even while the brutal reality of catastrophic global warming is still seen as a distant prospect.

“We can cut social and environmental costs, while improving quality of life”

The nef plan for a great transition takes a two-pronged approach: on one hand reducing inequality in the UK to levels found in Denmark, and on the other putting the economy onto a path of rapid decarbonisation. There is growing evidence that more equal societies deliver better outcomes across a whole range of indicators, including environmental ones. Overall, the plan would lead to huge cuts in social and environmental costs, at the same time as improving the quality of life for the majority. The key elements of the Great Transition include:

• A Great Revaluing – to make the building of social and environmental value the economy’s core objective, rather than the simple maximisation of GDP growth.
• A Great Redistribution – to build a fairer economy that is more efficient at reducing social ills and improving wellbeing. Specifically, we need to redistribute a combination of ownership, in terms of corporate governance and the growth of mutuals (such as co-operatives and social enterprises); of wealth and income through taxation; and of time through the length of the working week.
• A Great Rebalancing – to set the market within social and environmental parameters – using price mechanisms and a broader definition of ‘public goods’.
• A Great Localisation – reducing ecologically wasteful trade, especially between rich countries, with more goods and services produced closer to their point of consumption.
• A Great Reskilling – to support the new green economy.
• A Great Economic Irrigation – tackling major distortions arising from land prices and the perverse flow of investment to climate-damaging industries like coal, oil and gas.
• A Great Interdependence – re-aligning economic relationships between rich and poor countries to shift away from exploitative patterns of dependence, towards positive co-operation for a smooth transition to a low carbon global economy.

Measured conservatively, the changes outlined in the Great Transition will avoid £0.4 trillion-£1.3 trillion in environmental costs between now and 2050, and could generate £7.35 trillion of social value. These gains more than compensate for an expected drop in GDP as over-consumption is reduced.

This is a win-win that could not only mend so-called ‘broken Britain’, but help stabilise a chaotic climate system. Together, it offers a policy maker’s holy grail – or rather, perhaps, a golden compass.

*Turner, Graham M (2008), ‘A Comparison of The Limits to Growth with 30 years
of Reality’, Global Environmental Change 18.

Andrew Simms is policy director of nef, and co-author with David Boyle of 'The New Economics: A Bigger Picture' (Earthscan, 2009).

5 February 2010

Andrew Simms