Martin Ravallion, a former World Bank economist, recently wrote a blog post attacking my views on de-growth as “fallacious”. Since his post seems to be offered in good faith, I thought I would take a few minutes to respond. I admire Ravallion’s work. He’s an impressive scholar. But I’m afraid his argument about de-growth is a bit muddled. Let me see if I can clarify things, in the spirit of mutual learning.
Ravallion questions a central tenet of de-growth theory, namely, that the ecology-busting levels of income and consumption characteristic of rich nations are not necessary in order to maintain their strong social outcomes. We can say this because there are a number of countries that are able to achieve equally strong social outcomes with vastly less income and consumption.
Costa Rica is one of them. With a life expectancy of 79.1 years and levels of wellbeing in the top 7% of the world, Costa Rica matches many Scandinavian nations in these areas and far outperforms the United States. And it manages all of this with a GDP per capita of only $11,000, one fifth that of the US. In this sense, Costa Rica is one of the most efficient economies on Earth: it produces high standards of living with low GDP and minimal pressure on the environment.
How do they do it? Professors Martínez-Franzoni and Sánchez-Ancochea argue that it has to do with Costa Rica’s longstanding commitment to strong social policy, which guarantees everyone equal access to generous, high-quality healthcare, education and social security, regardless of income.
Examples like Costa Rica are important. We know that if we want to avert climate catastrophe, rich nations are going to have to scale down their bloated economies to get back in sync with the planet’s ecology. The science on this is clear. Fortunately, Costa Rica proves that this needn’t entail immizeration; it simply requires that we share our resources more fairly, and find ways to efficiently convert those resources into human flourishing. We can do it; we know it’s possible. And this is good news.
But Ravallion doesn’t think so. He writes: “The problem in this argument is that better social outcomes are not only attributable to better social policies. Higher average incomes have also played a role, both directly (through poor people’s greater command over commodities that matter to those outcomes) and indirectly (by creating the resource availability needed to finance better social policies).”
Ravallion’s attack is leveled against a straw man. Of course higher average incomes play a role in achieving better social outcomes! That’s why Costa Rica does better than, say, my home country of Swaziland, which has a per capita income of only $3,000. Regardless of how much Swaziland invests its meager resources in social policy, it probably won’t be able to match Costa Rica’s outcomes.
My argument is not that social outcomes have nothing to do with income (indeed, no de-growther has ever claimed such a thing!). My argument is that high social outcomes can be achieved with relatively modest income – and certainly much less than rich nations currently command.
Ravallion’s second point is more interesting. He says that the story of Costa Rica is not just a story of good social policy. It is also a story of growth: after all, its real GDP per capita has tripled since 1960. So he concludes: “Costa Rica is definitely not an example of how good social outcomes are possible without economic growth.”
Once again, Ravallion misses my argument. Of course growth is part of Costa Rica’s story! Strong, state-led development policies brought Costa Rica’s income from less than $3,000 in 1960 to $5,000 in 1980. And with that very modest level of income they built up strong social policy and raised their life expectancy from just 61 years (way behind the US) all the way up to 71, nearly matching that of the richest nations in the world at the time.
Herein lies Ravallion’s mistake. Degrowthers have never argued that poor countries don’t need to grow. Growth may indeed be necessary for very poor countries (like Swaziland) to generate the resources necessary to build social policy and achieve strong social outcomes. But this does not require endless growth; it requires sufficient growth – in other words, growth up to a point of sufficient income. It’s not growth as such that matters, but sufficiency. Ravallion confuses the two.
In fact, Costa Rica proves that growth past a certain a point is not necessary for continued improvement in social outcomes. Here’s the story:
During the 1980s, the US leveraged the Third World debt crisis to destroy state-led development programs and social policy all across the global South through structural adjustment programs imposed by the IMF and World Bank. Incomes collapsed virtually everywhere as a result. In Costa Rica, GDP per capita plunged from 1980 to 1983, and didn’t recover until 1991, more than a decade later. Yet during that decade, Costa Rica’s life expectancy continued to rise at a world-leading rate, from 71 years to 76, catching up to and surpassing the United States with a GDP per capita that was one-seventh the size, and stagnant.
If growth as such is necessary to improve social outcomes – as Ravallion claims – how did Costa Rica manage this miracle? Presumably not by magic. No, it was because Costa Rica – thanks to savvy political maneuvering – was able to defy the Washington Consensus and keep its social policy system intact. It was one of the only countries in the South that managed to do so: a rare beacon amid the wreckage of structural adjustment.
Of course, Costa Rica is not a de-growth economy. We point to Costa Rica not as an example of de-growth, but as an example of what can be achieved with relatively modest levels of mean income. That’s an important distinction.
But all of this is really beside the point. Again, we de-growthers do not target our critique at poor countries. We target rich countries. We argue that rich countries have grown too much, and that they could maintain or even improve their social indicators with vastly fewer resources than they presently consume.
Ravallion insists that this is a fallacy: “The fact that some countries have better social outcomes at a given level of mean income does not imply that richer countries can attain the same social outcomes at lower mean income,” he writes. But why not? Unfortunately he doesn’t explain. Meanwhile, Europe achieves better social indicators than the US with 40% less income. And we know that the US in the 1970s had better wages, higher levels of happiness, and lower poverty than it does today, with roughly half the real GDP per capita.
Ravallion’s response? “One must seriously doubt that halving today’s average income in the US will restore the social outcomes of 50 years ago.” But this is another straw man. Literally nobody has ever argued that cutting the average income of rich nations would automatically produce better social outcomes. That Ravallion makes this strange assertion leads me to worry that he is not serious about engaging with the literature on de-growth and ecological economics. If he was, he would find that we carefully and studiously think through the policies that would be necessary in order to maintain and improve social outcomes while scaling down economic activity. We do not, as Ravallion claimed in a tweet, blindly “hope that economic contraction comes with pro-poor redistribution”.
Take Peter Victor’s work, for example. In Managing Without Growth, Victor runs a standard economic model that shows that if you stop or reduce GDP growth, then poverty and unemployment suddenly shoot up. That’s obviously bad. It happens because our economies are structurally dependent on growth. But they needn’t be. Victor shows that if we introduce new policies into the model, like new measures of economic progress; a carbon price; more generous social policies; limits on material, energy, waste and land use; a shorter working week; etc., then you can actually reduce poverty and unemployment in a zero-growth scenario.
Strangely, for a man who has devoted much of his career to thinking about how to achieve human flourishing, Ravallion seems uninterested in such research. Instead, he says (in another tweet), let’s stick with growth and “try harder on the environmental policies”.
Yes, we need to get the environmental policies right. But unfortunately this, in and of itself, is not going to be enough. Schandl et al (2016)show that even if we (a) impose a carbon price of $50 per ton, rising by an extraordinary 4% per year to $250 per ton, and (b) somehow miraculously manage to double the material efficiency of our economies more or less immediately, rich nations will still only be able to achieve decarbonization of max 4.7% per year. But this doesn’t get us anywhere near the emissions reductions we need to keep from blowing the 2C carbon budget (viz, 10-12% per year). Plus, with a background growth rate of 2%, nearly half of that decarbonization will be wiped out. Schandl et al also find that the same best-case scenario achieves no absolute reduction in material footprint in the long term.
There’s no way around it. Averting climate catastrophe and ecological collapse is going to require that rich countries right-size their economies. Our task now is to figure out how to make that happen in a way that enhances – rather than erodes – human flourishing. This is the single biggest challenge of the 21st century, and I hope that Ravallion will join us in rising to it.
Teaser photo credit:By Donar Reiskoffer, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=1957466