Degrowth necessitates voluntary scarcity—that triggers authoritarianism. Only a green transition solves

[Alex Katsomitros and Alessio Terzi, 1-9-2023, "“Degrowth would lead to authoritarianism"," European Magazine, ] WL

European Commission economist Alessio Terzi speaks to Alex Katsomitros about his vision for green capitalism, and explains why degrowth would be a bad idea Is continuous economic growth compatible with keeping our planet habitable? It’s an old question that has preoccupied economic science ever since the beginning of the industrial revolution, and has now come back to haunt a new generation of economists courtesy of climate change. One of them is Alessio Terzi, an Italian economist who works for the European Commission. In his book Growth for Good: Reshaping Capitalism to Save Humanity from Climate Catastrophe, Terzi charts a path for the transition to a green economy that is both geopolitically realistic and fair, while lambasting radicals who advocate for a reversal of economic development. And Terzi is not afraid of using his own country as an example of the perils of anaemic growth. I recently caught up with him to speak about the inevitability of carbon border taxes, the necessary overlap between policies tackling inequality and climate change, and why economists and scientists need to talk to each other more. Alex Katsomitros: A big part of your book is a critique of “degrowth”, a rather fringe economic theory. Why do you think that degrowth would lead to authoritarianism? Alessio Terzi: It is a fringe, but increasingly popular theory. Greta Thunberg’s new book includes articles from degrowth theorists who see capitalism as the root cause of climate change. Usually economists dismiss degrowth on the grounds that it will cause a recession, which people would never vote for. This is rather shallow, because the degrowth movement argues that it’s only involuntarily shrinking of the economy that generates bad effects like unemployment. My theory is that degrowth rests on the idea of voluntary scarcity, an old concept that starts with Plato’s theory of finding happiness in human relationships, rather than material consumption. Many religions, including Christianity, use similar rhetoric. So degrowth scholars believe they will succeed where Jesus Christ didn’t. If you cannot persuade people that this is good for them, you need a government to dictate what they are allowed to do in granular detail, because every activity generates CO2 emissions. That’s where authoritarianism comes in. AK: A counter-argument would be that we cannot go on like that, because our resources are finite. We only have one planet. How would you respond? AT: I agree. I am not defending the status quo – my book’s subtitle is Reshaping Capitalism. We cannot keep pumping up emissions. We have to solve the problem within planetary boundaries, but that does not necessitate degrowth, because every activity has an impact on nature. It’s about managing this relationship and finding a balance. If a resource becomes scarce, we substitute it. When England ran out of trees, people switched to coal, which led to the Industrial Revolution. We will follow a similar path to address modern scarcity and switch away from fossil fuels. AK: Many pro-degrowth economists believe that it can solve two problems: climate change and inequality. What’s your take? Can we tackle climate change without exacerbating inequality? AT: If we leave it to market forces alone, the green transition will exacerbate inequality. Currently, we are trying to jumpstart a new green industrial revolution: reinventing the whole of production, consumption, transport, agriculture. Past industrial revolutions rendered whole sectors, professions and skills irrelevant. So it is fundamental to use policy to contain inequality. If not, people will oppose it, even if this goes against their interests, because climate change affects the poorest the most. We saw that with the Yellow Vest movement, and also Brexit – regions that voted for Leave were receiving EU cohesion funds. So policy must be used to offer these regions a clear role in the green economy. AK: You argue that economic growth is the answer to both climate change and inequality. What about digital growth, which is relatively carbon-free. Is that a solution? AT: We do see rapid dematerialisation. An example is Netflix – we used to have VHS cassettes. It will help, but it is not the main solution. We cannot switch to the Metaverse and detach ourselves from material reality. These sectors also require energy, so we still need to invest in renewables. It’s complementary, but not a substitute for green policies. AK: In the book you discuss Italy as an example of a country where the lack of growth has had grave consequences. It’s also one of the few countries where some form of universal basic income has been tested. Was this experiment successful? AT: It’s hard to say, given the short timeframe. The general perception is that it mostly went to people in need and decreased extreme poverty. But it wasn’t a game-changer for the economy, so I am agnostic about it. Having a “citizens’ income” programme is not at odds with our economic system, but just an alternative social welfare policy. I don’t have anything against it, unless it is used to argue that we don’t need economic growth, just redistribution. That’s not a revolution in welfare policy, especially in a country like Italy. Redistribution is not a substitute for growth. With no growth you have fewer resources, so redistribution becomes harder, because you have to persuade some people that it’s worth taking from them. Redistribution is always a zero-sum game. In an expanding economy, you can redistribute the extra income. Slow growth was the norm before the Industrial Revolution and there was not much redistribution, or if there was it was from the poor to the rich. So in a slow-growth economy, power relations become more entrenched. AK: You claim that global cooperation is a pipedream and suggest that we should focus on national policies. Why is that? Is there something wrong with the Paris Agreement? AT: Ideally, we want a globally coordinated green transition. But we don’t have a global government, and climate change makes it even less possible. People say that global problems require global solutions, but these are difficult to implement. Tensions between countries will increase, including between rich and poor countries. At the COP27 conference, developing countries argued that floods ravaged Pakistan although it generates little carbon emissions, and that developed economies created the problem and should pay for it. Rich countries will pay a bit, but that will not solve the problem, due to constrained budgets. Take the UK: during a crisis, the first thing governments cut is foreign aid. So the more global cooperation the better, but don’t count on it to be the main avenue to address climate change.