A regular green claim is that, for the sake of the planet, we can’t afford any more economic growth. How many times have you heard something like the following:
The other tough reality demanding more honest business reflection is the incompatibility of further, orthodox economic growth in the OECD with the 2C target. The structure of markets relying on the shareholder model also demands that companies must grow. But the best analysis available suggests that growth in OECD countries cannot be squared with halting warming at 2C, 3C or even 4C.
Where are the companies brave enough to even ask the question of what the optimal size of a company might be, after which it should grow no further, and how that company should be governed and function with regard to investors?
What would a world without economic growth really be like?
At first we probably wouldn’t notice. Next year would be much the same as this year. But there would be an important but subtle difference, which would become more apparent with every passing day.
Capitalism is not a zero sum game, because of growth. It is possible for me to become wealthy, without harming anyone, because the total sum of all wealth can be expanded. If someone creates a new wonder drug which helps cure cancer, or a new educational game for your kids which dramatically improves their school results, nobody is hurt – everyone benefits. The sum of global wealth is increased, because there are fewer sick people, or because you have more leisure time to spend with your kids, rather than nagging them to do more homework. That is the essence of wealth creation.
Remove the growth, and something terrible happens. People can still become wealthy – but only at the expense of everyone else. The economy is not allowed to grow. You can’t stop people from innovating – but to suppress growth, you have to make everyone poorer, every time an innovation arises which in the normal scheme of things would have caused economic growth. An enforced zero growth economy turns achievement and success into exploitation.
How can growth be suppressed? The simplest way is to put a price on carbon.
For example, consider the EU emissions trading scheme. All businesses over a certain capitalisation were allocated a ration of carbon credits, based on their history of energy usage.
This created a myriad of perverse incentives. For example, any business which created a new product, had to pay a penalty for their achievement, by buying more carbon credits off less innovative competitors.
Thankfully these destructive practices mostly ground to a halt, when the European carbon price collapsed – in my opinion, most likely because many of the EU member states tried to cheat, to give their own national markets an unfair advantage, which resulted in an embarrassing oversupply of carbon credits across the EU.
However, even a pure auction system would in my opinion act as a growth suppressant – under an auction system, big businesses which control large pools of carbon credits get to gang up on small innovators, by forcing them to pay a premium for the carbon credits they would need, to profit from their innovations.
Some innovation, energy efficiency related innovations, might still be possible – but at the very least carbon pricing takes the focus off product improvement, and refocusses businesses on reducing energy use, by any means possible – say by switching off the heating in winter, like a fairy tale scrooge callously mistreating their workers.
An enforced zero growth economy is a cruel economy. Because when economic growth is suppressed, individual innovation, thought, humanity’s greatest asset, is turned into an instrument of pain. In an enforced zero growth economy, the ambitious only become wealthy, by making everyone else a little poorer.