Sustainability and the faith in perpetual economic growth
Author: Jan Breitling
Sustainable development is the dominant approach to tackle environmental and social crises since the Brundtland report of the WCED (World Commission on Environment and Development) in 1987, where the term was officially coined. It assumes that economic growth and environmental sustainability can and must go hand in hand to assure social wellbeing, development, and a healthy environment for all.
Ostensibly, this is possible through the greening of the economy by an ever-increasing technological efficiency in production processes. Sustainable development thus is posited to allow us to opt for continued and increasing economic growth ignoring any environmental limits (Wanner, 2015; Brand, 2012; Hopwood et al., 2005).
I argue that the idea of infinite economic growth, and therefore of the mainstream sustainable development discourse, is based on two unstable foundations: the theory of decoupling economic growth from environmental impacts, and the theory of an environmental Kuznets curve. I first discuss the idea of infinite green growth and its main critiques, and then briefly describe and critically analyse the theories of decoupling and of the environmental Kuznets curve (EKC), before ending with a short conclusion.
Infinite growth in a finite system
Economic growth is still seen as the main goal by the international community, including development agencies, governments, NGOs and the United Nations, even though it has been identified, together with population growth, as one of the main drivers of environmental degradation and global environmental change (UNEP, 2017). The following textual quote of that same report is indicative:
“We don’t have to choose between a healthy environment and a healthy economy: we can have both,” said UN Environment head, Erik Solheim (UNEP, 2017).
Hopwood et al (2005) argue that the mainstream sustainable development approach instead of challenging the current economic system based on infinite growth, in fact allows businesses and governments to be in favour of sustainability without the need to change anything meaningful.
Instead of rethinking or addressing the infinite economic growth paradigm, mainstream proponents of sustainable development argue for a continuation of economic growth to address not both social and environmental problems, insisting on the “trickle-down” effect (Wijkman & Rockström, 2013), even though this had been and has been criticized by economists over the last 25 years (Stiglitz, 2016; Aghion & Bolton, 1997; Daly, 1996).
For instance, economist Hernan Daly argued that since we live in a world with finite ecosystems and limited natural resources, economic growth will at some point outstrip the world’s resources and its capacity to absorb waste and pollution streams (Daly, 1996).
Recognizing the existence of biophysical limits and the increasingly visible effects of human induced climate change and the continuing spread of deforestation, ocean acidification, biodiversity loss, among others, contributed to the vision of an ecologically friendly, or “green” form of economic growth.
While the initial debates around sustainable development and how to move towards a sustainable economic growth, increased wellbeing and a healthy environment were left to the imagination, by the time of Rio+20, the year 2012, the discussions focused on the term green economy and green growth (Wanner, 2015).
UNEP published a major report formalizing the concept and outlining the processes around a green economy and a green form of growth. This report attempted to debunk two common beliefs: first, that there is a trade-off between economic growth and environmental sustainability, and second, that greening the economy is limited to already developed countries.
The reason given is that technological innovation, adequate pricing of “natural capital” and a combination of marked-based policies can achieve ecological and economic sustainability. Underlying the green economy discourse is the faith in separating the process of economic growth from its natural resource base, in other words in decoupling economic growth from natural resource use and environmental degradation (UNEP, 2011).
Under this view, economic growth can be based on non-extractive activities, and on environmentally beneficial ones. As several authors have argued, this faith in absolute decoupling of economic growth from its natural resource base and from the environment in general is far from established and might be based less on facts and more on wishful thinking (Wanner, 2015; Alexander & Rutherford, 2019; Foster et al., 2011, Clark & York 2005). While relative decoupling has been observed for several countries and production processes, there is no indication of global absolute decoupling (Ward et al., 2016).
While it has been claimed that the green economy was a new form or a next step in the evolution of sustainable development (Brand, 2012), others see it as a simple rebranding of the same discourse based on continuous economic growth with environmental concerns at least formerly integrated (Wanner, 2015).
The concept has been described as nonsensical since it tries to integrate different interests and simply pronounces them as coherent (Brand, 2012). Brand and other critical voices argue that truly sustainable changes would not be achieved under the so-called greening of our economy, because of the profit driven growth and development model of the capitalist market. They argue that even in a greener form of the capitalist economy the mandate of “growth at any cost” will always lead to increasing exploitation of nature and people, through resource use and pollution (Alexander & Rutherford, 2019; Wanner, 2015; Foster et al., 2011).
Blühdorn and Welsh (2007) argue that the green economy is simply an extension of the “techno-economic paradigm” to attempt to legitimize the global capitalist economic order. Economic growth was and still is seen as paramount for the continuation of consumer capitalism, blurring or eliminating the need to accept limits to growth stemming from a finite availability of natural resources and limited capacity of the global ecosphere to absorb pollution (Wanner, 2015; Rockström, 2009).
We know that the richest nations have the largest environmental impacts, the largest ecological footprint (Alexander & Rutherford, 2019; Sachs, 1999). How is it that we can keep on ignoring these issues, and keep on putting our faith in economic growth as the solution to the crises of development and environment? What, in other words, underlies the belief that economic growth leads to development and decreased environmental impacts?
In the following two parts I look at the two theories that underly the faith in perpetual economic growth discourse.
Since the early 1970s scientists have warned of the ecological consequences of a perpetually growing economy and population (Ward et al., 2016; Meadows et al., 2013). The only way to assure continued economic growth in a finite world system would be the decoupling of the production process from its material resource base. Technology is seen as the one key issue in achieving this, since with increased technological knowledge we increase the efficiency of production per unit (Alexander & Rutherford, 2019). There is, supposedly, no limit to the increase of efficiency we might reach, and the decrease of environmental impact per unit of production. Decoupling is therefore the idea of reducing the environmental consequences of our economic activities.
Nevertheless, there is a stark and fundamental difference between relative and absolute decoupling. Relative decoupling means a decline in resource use or environmental degradation per unit of economic production over time. Absolute decoupling means a decline in resource use and environmental degradation in absolute terms of economic output (Alexander & Rutherford, 2019; UNEP 2011b; Everett et al, 2010). This distinction is of outmost importance since it is the absolute decoupling, which is important.
Relative decoupling is a positive process of doing more with less and a common phenomenon in certain sectors or industries and even countries (Ward et al., 2016). The problem lies in the fact that any ecological gains from technological efficiency are offset by an overall increase in resource use and environmental degradation from economic growth globally (Wanner, 2015).
Absolute decoupling is what really matters, and it seems we are not nearly as close to achieving it as some might claim. Absolute decoupling, according to several authors, is a myth (Alexander & Rutherford, 2019; Ward et al., 2016; Fourcroy et al., 2012; Wälti, 2012) and a dangerous fantasy (Fletcher and Rammelt 2017). We are not reducing absolute GHG emissions (Wanner 2015), nor are we reducing total energy consumption while growing economically (Luzzati and Orsini 2009). We are not anywhere near to reducing general environmental impact on a global scale.
Even when considering the few examples where national economies have supposedly managed to reach absolute decoupling this is thwarted by what Wiedmann et al (2015) state about externalizing environmental impacts. When the externalized impacts from production and consumption are internalized into the accounting of data in the wealthy countries, their supposed dematerialization or decoupling disappears.
In other words, when one takes the real environmental impacts of a national economy into account, even when these impacts occur in other countries, these economies are not decoupled from the environmental resource base. Environmental impacts of many industrialized countries are simply outsourced elsewhere (Wiedmann et al., 2015).
A group of the most prestigious ecological economists have thus stated that: “It is (…) misleading to develop growth-oriented policy around the expectation that decoupling is possible” (Ward et al 2016, abstract, p1).
The second main reason why the faith in economic growth persists is linked to the environmental Kuznets curve discussed in the following section.
Environmental Kuznets Curve (EKC)
The EKC is named after the economist Simon Kuznets, who observed and theorized that income inequality in developed societies did initially increase during economic development and then tended to decrease after reaching a higher state of modernization (Allen & Vasquez, 2017).
Related to the environment, this model argues that at initial increases of development and economic growth, the environmental impacts begin to increase as well, together with the rise of per capita use of natural resources, pollution, and general damages to the environment (Alexander & Rutherford, 2019). This trend is predicted to increment up to a certain threshold after which environmental degradation begins to slow and overall environmental impact decreases dramatically. Reaching a decline can be explained through the appearance of stronger regulation, increased environmental awareness due to higher education levels and higher affluence among the population (Perz, 2007).
The environmental Kuznets curve is based on observations in many parts of the global north but has been criticized as being a flawed model. The statistics on which the EKC is based are far from robust, and that there is little evidence for this model to be applicable to other indicators apart from the few that have been measured, and even those are suffering from methodological problems, though (Stern, 2004).
A second critique is that this EKC might work only for certain environmental indicators (Bo, 2011), but not for others (Stern, 2010). For instance, it has been shown that the EKC does not work for CO2 emissions (Luzzati & Orsini, 2009), nor biodiversity loss (Mills & Waite, 2009), which are considered as two of the most important environmental issues of our times (Matthew et al., 2010).
Regarding the claim that an economy based on services or other post-industrial types of economy presents lower environmental impacts, studies have demonstrated that due to the growth in importance of service sectors in the economy of the world’s developed countries, overall resource consumption has in fact increased (Holm & Englund 2009; Fourcroy et al., 2012).
This can be explained through the Jevon’s paradox, where supposed gains in resource efficiency are lost due to increased resource use from an overall increase in production and consumption (Wanner, 2015). This paradox was described by Jevon during the industrial revolution in England, where he observed how coal use increased with more efficient steam engine technology (Polimeni & Polimeni, 2006).
A third critique of the EKC theory is that the observed trends do not behave as it predicts. According to the EKC theory, the countries with the highest GDP should be the ones with the lowest environmental impact or ecological footprint. This is simply not true. We know that the wealthiest nations have the largest ecological footprint (Wijkman & Rockström, 2013; Wang et al., 2013).
A fourth key argument against the EKC is that this model ignores the realities of a globalized economy, of a connected and interrelated world. It completely disregards the outsourcing of manufacturing and other resource intense or high polluting economic activities.
Environmentally degrading activities like extractive and polluting industries as mining or logging are often moved to other regions of the planet, and this is not considered when presenting data on environmental impacts of countries supposedly depending increasingly on information or service economies (Wiedmann et al., 2015; Foster et al., 2011). Holm and Englund (2009) demonstrated that despite the growth of the service industry sector during the last decades in most of the world’s wealthier countries, global resource consumption has increased.
Therefore, any apparent decoupling at the national level can be due to dubious accounting, or simply ignoring the impact of national consumption that relies on environmental impacts, degradation and resource use, in other parts of the planet (Sachs 1999, Holm and Englund 2009).
The belief that technological efficiency will provide us with the means to grow the economy while also reaching environmental sustainability is based on two assumptions, the idea of decoupling our economy from the environmental and the natural resource base, and the theory of an environmental Kuznets curve.
Both theories have been shown to have serious challenges and are far from accepted by critical authors from several academic disciplines. Given the increasingly visible environmental impacts of our perpetual growth demanding economic system it is time we should at least consider that it might be naïve to insist on the status quo, and begin to imagine alternative ways towards meaningful social, economic, and environmental sustainability.
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Jan Breitling is an Assistant Professor in the Department of Environment and Development at University for Peace. He holds a BSc. in Tropical Forestry, from the Technological Institute of Costa Rica, and a MSc. in Environmental Sciences from WUR Wageningen University and Research Center, The Netherlands. His research interests include forest cover change, climate change governance, and conservation.