Degrowth proponents wrong to claim capitalism causes climate change

Cost-of-living pressures have soared, and the aggressive action taken by the Reserve Bank to curb inflation has smashed mortgage-holders and economic growth. Figures released this week show Australia entered a per capita recession in the June quarter.

Our extended period of positive economic conditions no doubt made many complacent, but the turbulent past 18 months has underscored the importance of good economic management. Our quality of life is strongly connected to controlled and sustainable levels of inflation, rising productivity and strong economic growth.

The declining economy has also underscored the folly of those calling for a radical abandonment of the pursuit of economic growth in order to combat climate change.

These calls come from environmentalists, including activists in groups such as Extinction Rebellion, and some economists, particularly in the field of ecological economics.

Degrowth proponents say economic growth is to blame for climate change, pollution, species extinction, and resource exhaustion. They think the only solution is a contraction of economic activity and an acceptance of permanently lower living standards.

In short, they believe we must abandon capitalism and actively shrink our economy because continued growth is not, as one 'degrowther' put it, "compatible with the physical reality of the planet".

The degrowth movement is gaining attention worldwide, has international conferences dedicated to it, and tenured academics are supporting or contemplating it.

However, degrowth is based on several assumptions and conjectures that are highly suspect and lack evidence, particularly regarding a speculative ecological collapse or various catastrophes associated with climate change. These assumptions inform computer simulations which to a significant extent assume the doomsday they are forecasting.

Nor does degrowth consider the positive role markets play in ensuring efficient resource use. As resources become scarcer, the price increases, encouraging conservation or exploration for new resources or alternatives.

Market-based mechanisms, possibly including carbon taxes, can play a role in correcting external costs imposed on the environment by industry. Well-defined and enforced property rights are also important. For instance, rainforest conservation efforts in Brazil have been hampered by "lawlessness", as reported by The Economist earlier this year.

In addition, as the bulk of economic activity worldwide occurs in the private sector, achieving degrowth would require the implementation of a range of highly restrictive policy measures that would constrain private decision-making.

In effect, it would require central direction of how much people could work and consume. It may require restrictions on travel, such as bans on driving on allocated days if your number plate has particular digits, as been done in Beijing.

Climate lockdowns and 15-minute cities may be conspiracy theories for now, but it is very unlikely degrowth could be achieved without radical authoritarian policy measures - far more than was seen during the pandemic.

Even in wealthy countries like Australia, a policy of degrowth would cause widespread poverty from declining employment and consumption; with its related costs in social welfare and social ills such as crime and homelessness, among others.

There are real climate issues that need to be addressed, but degrowth is not the answer for several reasons.

First, credible modelling of climate change mitigation shows economies still growing as we transition to net zero, although substantial investments need to be made in decarbonisation. In other words, there is no need for as drastic a step as degrowth to meet the challenges identified.

In fact, the degrowth movement seemingly deliberately ignores the substantial progress that has been made to arrest environmental degradation worldwide, suggesting theirs is an ideological position rather than a practical one. It is perhaps not that surprising the idea has gained traction among those who have always been hostile to capitalism.

Second, economic growth is strongly connected to innovation, and it is to innovation we must look to solve complex problems like climate change.

Degrowth by contrast is a throwback to the ideas of Malthus and the kind pessimistic doom-mongering humanity has seen many times before. Productivity and innovation have repeatedly pushed us beyond what were previously considered hard constraints of growth.

Third, the degrowth movement would deny those living in poverty around the world the improvements in living standards that come with economic development.

One of the great achievements of the past 30 years has been the lifting of over 1 billion people out of poverty worldwide, particularly as China and India moved away from the anti-market economy and the Licence Raj, respectively.

Between 1990 and 2019, the proportion of the world's population living in the most extreme poverty, on no more than US$2 per day, has fallen from around 38 per cent to 8 per cent, World Bank data shows.

It is important to understand while degrowth itself remains something of a fringe position, the thinking underpinning it is far more widespread. The idea that capitalism is the cause of climate change, and we need to fundamentally remake the economy to combat it, has a lot of traction among young progressives, in particular.

READ MORE SIMON COWAN COLUMNS:

But this position is a good example of what Rob Henderson calls luxury beliefs: "Ideas and opinions that confer status on the rich at very little cost, while taking a toll on the lower class."

You could go further and suggest many holding this view simply do not understand how devastating this policy would be in practice. Our current economic hardship would pale in comparison.

Abandoning capitalism, growth and innovation in the name of ecological purity would condemn us all to poverty.