We can’t let Degrowth win

Our kids’ future depends on it

Dear Rational Optimist,

If rational optimism has an inverse, it’s “Degrowth.”

Degrowthers look at the same curve of human progress we celebrate… and say “we’ve come far enough.”

They think we should cap GDP (seriously) and create a global authority to tax and restrain all human activity.

Unfortunately, Degrowth is a popular idea among elites. Economists like Thomas Piketty have made it to the New York Times bestseller list by championing Degrowth. Piketty is now out with a new “Global Justice Report,” doubling down on his worldview that humans are the problem.

It needs a response from a rational optimist. So, I asked the great Dr. Kristian Niemietz of the Institute of Economic Affairs to evaluate and respond to the ideas in the Global Justice Report. His original essay follows.

—Dan Steinhart

The expression “chasing the dragon” describes the behaviour of an artist who peaks too early in their career, and who then spends the rest of their life chasing that early fame, never quite able to reach it again. A dragon-chaser is not the same as a one-hit wonder. A one-hit wonder fades into obscurity after a short peak, but a dragon-chaser never quite goes away. They can be around for decades after their initial peak, still enjoying moderate levels of fame and recognition. It is just that, having tasted superstardom once, moderate success no longer cuts it for the dragon-chaser. They want to relive that early moment of peak glory, and they will do anything to get it back.     

Thomas Piketty is the economics profession’s equivalent of a dragon-chaser. In the mid-2010s, Piketty was widely hailed as a ‘rock star economist’. It was no exaggeration. Capital in the Twenty-First Century was a genuine sensation: a dense economics book that topped the New York Times bestseller list for weeks in a row, selling millions of copies.

But after about a year, the hype began to fade, and Piketty has been ‘chasing the dragon’—or rather, chasing the Zeitgeist—ever since. His subsequent books were much more nakedly political, quite clearly geared towards the fashionable opinions of the day. But none of them came anywhere near the success of Capital in the Twenty-First Century.

The recent Global Justice Report, of which Piketty is a lead author and coordinator, is an even more desperate attempt at dragon-chasing. It is a veritable greatest hits album of fashionable opinions, containing everything from Degrowth to wealth taxes, from Greta Thunberg-style climate alarmism to anti-colonialism.

Piketty et al insist that what they advocate for is not really ‘Degrowth’, because no major economy would actually be ‘de-growing’, under their plans. They want to cap GDP per capita at €60,000 per annum, which is just above the level currently enjoyed by the richest major economies, so it is more of an ‘until here, but no further’ than literal Degrowth. But it amounts to the same thing.

Suppose an economy with a current GDP per capita of €55,000 grows at an average rate of 1.5% per annum. After five years, that economy would reach the Piketty cap, and after 17 years, it would be one-fifth poorer than it would have been without the cap. After 43 years, it would be only half as rich as it otherwise would have been.

Or alternatively, imagine Piketty had been around in 1960, and he had convinced world leaders to cap GDP per capita at the level then enjoyed by the United States. This would be roughly equivalent to the level of Belarus and Iran today. For Britain, it would have become a binding constraint in the early 1970s.

Even so, for most people, the prospect of an economy where the average household earns around €60,000 per year will not sound terribly scary. But don’t make the mistake of thinking in terms of what a €60,000 salary can buy today. Piketty et al also advocate a forced sectoral restructuring of the economy, away from ‘material’ sectors (by which they mean sectors that use energy and physical inputs) and towards ‘immaterial’ ones such as education. More precisely, they want the share of labour hours dedicated to education and healthcare to go up from 11% today to 43% (yes, 43%—not 41% or 42%, just to be clear) by the end of this century. The share of labour hours dedicated to leisure services will decline by three percentage points, housing construction by four, and manufacturing by eight percentage points. So if you think you will get to spend your €60,000 on a nice flat, dining out, or manufactured goods—no, you will not. You will, however, be able to attend lots of lectures on Degrowth, gender and postcolonial studies instead. 

How does a GDP cap work in practice? That’s easy: you just ration input factors, including working hours, in such a way that the economy cannot grow beyond that level. Under the Piketty plan, global working hours would fall to just under half of their present-day level. This is not really that big a deal, they assure us, because working hours have already been falling since the late 19^th century. So they have—but for completely different reasons.

Thus far, the pattern was that economic growth came first, and reductions in working hours followed, as people felt that they now could afford more leisure. Under Piketty et al.’s plan, the reduction in working hours would not follow growth; it would happen specifically to prevent growth. 

The GDP cap is a ‘solution’ in search of a problem. Piketty et al. assert that without it, “the world is heading for a climate catastrophe, with global warming above 4°C by 2100.” 

This is not at all what serious climate scientists are saying. As the European Commission’s Directorate-General for Climate Action reports: “Based on current policy choices, scientists have recently said that the previous ‘worst-case scenario’ […] is now off the table. That scenario, which had foreseen a 3.5-5.5°C rise in global temperatures by 2100, is no longer considered plausible.” 

One could add that even if such a scenario were remotely plausible, it would, at most, justify a tighter cap on carbon emissions under the current cap-and-trade schemes, not a cap on economic growth per se. A GDP cap prevents all growth, even Net Zero-compatible growth. The Global Justice Report has nothing to do with climate science. It is a mix of Malthusianism with aesthetic anti-consumerism.

It would be tempting to dismiss it all as attention-seeking, fashionable nonsense, and at a global scale, one can indeed read it in that way. There is no way that China, India, Russia or the Gulf states are ever going to sign up to a plan like this, and the US is not an especially likely candidate either. I would not entirely put it past the EU or the UK, though. Of course it is fashionable nonsense, but fashionable nonsense matters. A lot. Because European elites—and that very much includes British elites—are frustratingly susceptible to it. Look at how easy it was for Extinction Rebellion and the Greta Thunberg movement to impose Net Zero on Britain, based on nothing but vibes: can you confidently say that a country which does that is immune to Piketty’s fallacies?

The ideas contained in the Global Justice Report are, in one sense, very radical, in that they would require a complete restructuring of economic life. But they are also, at the same time, boringly mainstream, because they are so perfectly in line with elite opinion.

The Global Justice Report essentially just reads like a very long Guardian article, and that is the real reason why Thomas Piketty fails to regain his former fame: he does not, in a meaningful way, stand out. Among the elites, his ideas have already won.

If we want a bright and prosperous future for our kids, we must make sure Degrowth doesn’t win the hearts and minds of everyone else.

Dr Kristian Niemietz is the Editorial Director and Head of Political Economy at the Institute of Economic Affairs (IEA), London.