Managing without growth: slower by design not disaster (2nd Edition), by Peter A. Victor

Since the Great Crash of 2008, and the ensuing Great Recession, the previously dominant neoliberal economic paradigm has been on the defensive in the economics profession. Liberal Keynesianism has undergone a significant revival, as have democratic socialist critiques of capitalism, and Marxist economic commentators have begun once again to envision post-capitalist models of political economy. But equally prominent has been a flourishing of green economic theory – fuelled both by the Crash and by the manifestations of anthropogenic climate damage – to the extent that it is now possible to speak in terms of an ecological macroeconomics.

Much of contemporary green economic analysis has been enlisted in support of the Green New Deal (GND). Inspired by Franklin Roosevelt’s New Deal of the 1930s, the GND is a government stimulus package designed to promote environmentally sustainable growth and social justice through financial re-regulation and the encouragement of green technological innovation, especially in the areas of carbon reduction and sequestration, energy efficiency, and the development of renewables. Its goal is the creation of a green capitalism.

But there is a rival school of green macroeconomics for which growth is an integral part of the ecological crisis and therefore cannot be the solution to it. Green growth, from this perspective, is a contradiction in terms – a case stated robustly in George Monbiot’s polemical Out of the Wreckage (2017). In Managing Without Growth, Peter A. Victor has produced an authoritative economics textbook for the de-growth school. Drawing on H.W. Arndt’s The Rise and Fall of Economic Growth (1978), Victor shows how the preoccupation with growth has its origins in the Enlightenment concept of progress: growth was adopted as the measure of progress and, following the work of Simon Kuznets on national income accounts in the 1930s, gross domestic product (GDP) was adopted as the measure of growth. This erroneous equation of growth in GDP with human flourishing has been well understood since the 1950s and has been critiqued in landmark works such as J.K Galbraith’s The Affluent Society (1958) and Fred Hirsch’s The Social Limits to Growth (1976). Yet it is an equation that persists and is still promoted today in the guise of free trade, competitiveness, productivity and, since the publication of the Brundtland Report in 1987, even sustainable development.

Victor attacks the growth paradigm on two levels: analytical fundamentals and claimed empirical achievements. At the analytical level, he distinguishes between open and closed systems: an open system requires ‘an inflow and outflow of energy from and to its environment’, while a closed system ‘exchanges energy with its environment but not material’ (p.45). Economies are open systems but they are dependent upon the planet, which is a closed system. Rendered more simply, economies are bound by biophysical limitations, and these limitations are not accounted for in the growth paradigm. This omission leads to a proliferation of analytical errors in conventional economic theory. For example, the price mechanism is held up as the principal transmitter of information in a market economy. Yet petrol prices reflect the relationship between the supply of and demand for petrol but do not reflect the externality of environmental damage caused by car use. Similarly, economists cannot price the ecosystem services on which humans depend, such as pollination, or the sequestration of carbon in soils, even though human pressures on those services now constitute a more pressing limitation to growth than do shortages of raw materials.

In terms of empirical achievements, Victor concedes that people in developed countries live longer and healthier lives. But growth always entails environmental costs such as spoliation, waste disposal, and the depletion of habitat and species. And then there are the social costs, including community breakdown, alienation, overcrowding, and crime. Drawing on Richard Layard’s Happiness: Lessons from a New Science (2005), Victor disputes the connection between income growth and increases in the human sense of wellbeing and goes on to challenge other claimed benefits of growth in respect of full employment and of income and wealth distribution.

This book will appeal to both technical economists and to general readers. It advances a compelling case for the abandonment of growth as a policy objective for rich countries, while acknowledging that more growth is still essential in poorer ones. But, as GND advocate Robert Pollin (‘De-Growth Vs A Green New Deal,’ New Left Review, Vol.112, July/August 2018) has pointed out, the anti-growth school needs to consider the merits of growth in some sectors, such as clean energy, whilst making the case for de-growth in others, such as the fossil fuel industries.