Economic ‘degrowth’ during Corona

The economic activity has decreased dramatically during Corona. We see it in our everyday life since we’re not consuming the way we used to, for example going to shows, eating out and traveling. Neither are we producing the way we used to and are instead working from home at a different pace, on temporary leave or asked to use saved vacation days. GDP, gross domestic product, summarises our consumption and production and has thus decreased during Corona. To be precise, Swedish GDP decreased 8.6% in the second quarter of the year. It is the largest single quarterly drop in modern history in Sweden, larger than the last financial crisis. We have, during Corona, a form of degrowth of our GDP.

Degrowth of economic activity is an interesting phenomenon. There are those that think GDP degrowth is at some point inevitable. In fact, GDP growth in western countries has slowed since the 1960th, especially GDP per capita. Degrowth might at some point become our new normal. A key question in a future without GDP growth is how we will finance the welfare state, which this research project discussed. Consumption taxes is one of the state’s largest income sources. Decreasing consumption and production means decreasing tax revenues. Even without actual degrowth, a slowing GDP growth might mean that the welfare state cannot expand anymore.

There are, however, those that consider degrowth desireable. One of my summer reads is the book “Degrowth: a vocabulary for a new era” by editors Giacomo D’Alisa, Federico Demaria and Giorgos Kallis. I was curious about the book after reading a Harvard Business Review article by related scholars, encouraging companies to embrace the degrowth movement. Reading both the book and HBR article, you see that the degrowth movement is diverse, partly incoherent, what we sometimes call an umbrella concept i.e. it joins together a range of more or less coherent ideas. Some of these ideas are basic income, back to the land and occupy movements. Some of the degrowth proponents even want to abolish capitalism. Others, like Thomas Roulet and Joel Bothello in HBR are really proposing circular economy ideas under a trendy degrowth heading. As you might suspect, there is a clear political left wing tendency, especially in the book.

I find it really valuable to discuss these ideas about limited economic growth in a serious way. While many are critical of expanding production, pursuit of growth and misuse of our natural resources, few outline what the alternative would be. In this sense, the Degrowth book is a bit of a disappointment as it suggests trendy ideas that I’m sure may appeal to conscious young middle class people in western cities, but are unlikely to be embraced the rest of the world. Similarly, the scenarios sketched out by the KTH-lead researchers in the Formas project ‘Futures beyond GDP growth‘ are also more utopian than pragmatic. In my opinion, good solutions for stagnated GDP growth are still missing.

Moreover, as Giorgos Kallis notes in his chapter, if you enforce self-limitation, simplicity and equality from the top, citizens will not be loyal to the ruling power. Arguably, the reason our voluntary simplicity during Corona has worked so well is because it is perceived as something inevitable, caused by an uncontrollable virus. If political leaders had asked us to limit our consumption this way, even for the benefit of the climate, not everyone would obey. On the positive side, we have now experienced a level of voluntary simplicity and some of these habits might survive after the Corona crisis. It would be interesting to study.

On the pessimistic side, despite the sharp reduction of economic activity, CO2 emissions during this period have not decreased sufficiently. It underlines what the book also highlights, GDP degrowth is not a solution in itself. GDP as a measure does not tell you whether the economic activity that has decreased is ‘good’ or ‘bad’ for the climate. Simply put, despite the reduced economic activity, CO2 intense activity has not decreased sufficiently during Corona. However, there are likely some activities, with only limited climate impact, that do not need to decrease to the extent that they have during Corona.

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