One of the more pernicious ideas now coming into vogue is that societies should voluntarily halt their economic growth. In a recent New Yorker article, John Cassidy chronicles the rise of this so-called degrowth movement. The idea holds appeal for environmentalists concerned about planetary destruction, egalitarians who worry that growth leaves the poor behind, futurists who envision a leisure society and so on. Degrowth might even be a way for citizens of wealthy, declining nations to maintain their pride as hungrier up-and-coming societies catch up, since it recasts economic slowdown as virtue.
Although the degrowth movement does contain a few nuggets of insight, it’s based on a number of misconceptions about what economic growth is and why it’s desirable.
First, it’s important to understand why politicians care about growth. For developing countries, yes, it’s about raising living standards. But for rich countries such as the U.S., the biggest reason elected leaders like growth is that it’s correlated with low unemployment. Faster growth – more consumption and investment – means more demand for labor, which means more jobs and rising wages. So when U.S. presidents or legislators talk about growth, it’s usually not about visions of eternally rising living standards; it’s about jobs.
Faster growth … means more demand for labor.
A second misconception is that growth requires feeding ever more of the Earth’s resources into the hungry maw of manufacturing industries. In recent decades, even as the U.S. economy has continued to grow, extraction of many natural resources has remained constant or gone down.
This is happening for several reasons. Consumer demands are shifting from physical goods to services, including online ones. Innovation allows more-efficient resource use. And sustainable technologies such as solar power can replace polluting, non-renewable ones such as coal and gas. Sometimes growth is even what causes declining resource use, such as when farmers implement better irrigation technologies or when coal plants are replaced with solar farms.
This is why the idea that economic growth can’t continue forever is wrongheaded. Eventually the sun will explode, but in the meantime growth might continue for a very long time.
But just because growth can be sustainable doesn’t mean trying to maximize it is always wise. Gross domestic product is only one of many measures of human well-being; often it makes sense for a society to focus on improving health, fighting inequality or promoting leisure. As economist Dietrich Vollrath explains, slowing growth can be a sign of economic maturity rather than weakness; in a healthy global economy, developed countries tend to grow more slowly than developing ones. And services such as health care and education, which people in rich countries tend to want more of, have low productivity growth.
Nevertheless, there is one important reason to pursue economic growth: Poor countries need it. Many of those who live in those countries still have living standards that would be seen as unconscionably low in developed countries.
So for the sake of their people, developing countries need to keep growing. And also for the sake of the environment. Wealthier countries can more easily afford to cut pollution, stop burning down forests and ban chemicals that poison marine life. The less wealthy a country is, the more economic needs tend to take priority over environmental protection.
But poor countries don’t grow in a vacuum. Developed economies provide a crucial source of demand for goods produced in nations such as Bangladesh, Vietnam and Ethiopia, helping these nations to boost productivity and make the transition to rich-world status. Growth in advanced countries also creates the technologies that let developing nations do more with less.
Although slower growth in rich countries isn’t cause for alarm, calls for intentionally shutting off growth are misguided.
Noah Smith is a Bloomberg Opinion columnist.
