Secular stagnation good---key to degrowth

“Rates of growth across member states of Organisation for Economic Co-operation and Development (OECD) have been in decline since the 1970s, a phenomenon known as ‘secular stagnation’. The average growth in gross domestic product (GDP) per capita fell from over 4 percent in the mid-1960s to little more than 1 percent in the pre-pandemic years. The International Monetary Fund expects global GDP to decline by 5 percent this year alone (2020) with a contraction of 3 percent likely even in the emerging and developing market economies.”

Other authors, like Dr Tim Morgan, think there are reasons to believe that secular stagnation will, in the future, not only be an issue in the OECD countries. Secular stagnation, and then worse, is the fate of countries like China too. Biophysical limits to growth are increasingly being reached everywhere. The depletion of oil, gas and coal means it is necessary to tap higher cost sources of energy – including in China.

Nor will the enormous credit expansion used by policy makers to address falling growth rates help any more – such “financial adventurism” will make the crisis worse. Tim Morgan describes all of this in his blog and does not believe that it is necessary “to make a case for degrowth”. In April of this year he wrote:

““de-growth” has now arrived. This is not something that we have chosen, however compelling may have been the environmental or the human case for kicking our growth addiction. There’s nothing noble, voluntary or selected about the onset of de-growth which, rather, is a straightforward consequence of the unwinding of an energy dynamic which, courtesy of fossil fuels, has powered dramatic expansion ever since the first efficient heat-engine was unveiled back in 1760.

The necessity now is to understand de-growth, and to make the best of it. Those who have considered this likelihood have started to understand processes such as loss of critical mass, the threat posed by falling utilization rates, the inevitability both of simplification and of de-layering, and the equal inevitability that, just as economies became more complex as they expanded, they will be subject to a process of de-complexification now that prior growth in prosperity has gone into reverse. As shown below, these components of de-growth give us an outline taxonomy of the very different economic world of the future.

It doesn’t require a Pollyanna approach to understand that, just as “growth” has been a mixed blessing, de-growth offers opportunities as well as threats.

If you really valued ‘business as usual’, were looking forward to a world of widening inequalities and worsening insecurity of employment, enjoyed the glitz of promotion-drenched consumerism, and were unconcerned about what a never-ending pursuit of “growth” might do to the environment, you might find the onset of de-growth a cause for lament.

If, on the other hand, you understand that our world is not defined by material values alone, you might see opportunities where others see only regrets….”

There are similarities between the Tim Morgan view and the book that I am reviewing here…but there is a subtle difference.

In “the Case for Degrowth” we have a book which assumes that a more elaborate version of “degrowth” must be fought for against a mainstream growth consensus. It requires a non-consumerist and collectivist counter culture combined with green economic policies – like a Green New Deal, but with the growth taken out, combined with policies to throttle back carbon emissions, tax high incomes, natural resource use and pollution.

At the same time other authors, like Morgan, using a more limited definition of degrowth to mean involuntary economic contraction, clearly believe that this kind of degrowth has already arrived.

When I scan the essays on the website of the Centre for Understanding Sustainable Prosperity there is a similar point of view. For CUSP authors current political and cultural issues need to be thought of in the context of “secular stagnation” which is set to deepen. According to evidence on the CUSP website even the UK Ministry of Defence has cottoned on to degrowth.

Secular stagnation is not a straight line process of decline. As the growth rate declines the economy becomes more unstable, taking longer and longer to put itself back together when it suffers a shock. Rather like a bike that is slowing down it becomes more difficult to keep in balance. There is evidence of “critical slowing down” which means that it takes longer to put things back together after knocks like covid 19. The slow recovery means a tipping point is close.

A period of economic shocks and disasters – which we should prepare for

Economic activity is more vulnerable to shocks: extreme weather events, public health crises like covid 19 and crises in which problems from one sector cascade into another. “Contagion” becomes ubiquitous because of interdependency – an extreme weather event may paralyse the power grid so that, without electric power, electronic transactions are paralysed with further devastating effects – unless break downs are put right quickly.

A tipping point might entail the onset of general paralysis.

The “Case for Degrowth” is advocating degrowth to help achieve a better life on a bedrock of caring and commoning. Its authors recognise that unexpected events open new possibilities and violently close others. They fear what the future may look like and so they should. They acknowledge the way that disasters like the covid epidemic can move situations on in ways that are unplanned, unwilled and messy. However, specific responses to disasters is not a focus of their book.

That is unfortunate because these unplanned, unwilled and messy developments are more likely than book publications to influence what happens. The more we prepare for them, the less unplanned they are, the more we steer the aftermath of these messy and unwilled happenings.

Here’s an example – the organisation Occupy Wall Street, which was the grass roots movement at the time of the 2008 financial crash, reappeared at the time that hurricane Sandy hit New York. People from Occupy Wall Street resurrected their organisation as “Occupy Sandy”. They demonstrated how horizontal mutual aid, disaster collectivism, could be a powerful aid to poor communities with a lasting impact. The way I see it disaster collectivism could turn out to be a part of the degrowth story.