Select a language
It’s September 2021, leaving nine and a half years in the “decisive decade” to change our economic world from top to bottom, to avoid ecological collapse and the consequent humanitarian catastrophe. In this context, continuing to pursue infinite growth is clearly a self-destructive and irrational economic strategy. The recent joint IPCC-IPBES report recommends “moving away from a conception of economic progress based solely on GDP growth” to preserve biodiversity and ecosystems. The new IPCC report posits a viable climate scenario (the shared socio-economic pathway 1) that envisions a world where “the emphasis on economic growth shifts toward a broader emphasis on human well-being”.
But isn’t GDP growth essential to sustaining purchasing power, social policy and overall prosperity, especially in Europe? While moving beyond growth is in our own best interest, can we really afford such a move? In a recent paper for the European Trade Union Institute, I argue that we really can.
Managing climate transition with GDP as a compass is like trying to grab hold of an object with your hands while continuing to push it further away with your foot.
A widely shared view among policymakers goes something like this: economic growth may be increasingly destabilizing for the Biosphere, but it is stabilizing for the welfare state. In fact, they say, without growth, there would be no welfare state.
This supposed co-dependency between the welfare state and growth is mediated by two key nodes: growth and employment, and growth and income. In theory, the first node guarantees that when Gross Domestic Product (GDP) grows, so does employment, allowing social contributions to increase and social policy to be properly financed. However, this is no longer the case: Germany has been widely considered the European success story when it comes to employment and growth for at least the past thirty years, yet the longest and strongest employment upswing in the country of the past half-century between 2006 and 2018 was accompanied by a decline in real GDP.
This absolute decoupling is also true for the euro area as a whole, with real GDP growing and employment declining (for example, between 2002 and 2005 or between 2010 and 2012). This is even more pronounced for the European Union as a whole: the largest increase in the employment rate of the past two decades in the region (which occurred between 2013 and 2019, from 64 to 69.3 percent) occurred while GDP growth was only moderate (around 2 percent) and experiencing ups and downs. By the same token, there is a disconnect between national income and personal income due to the rise in inequality, as well as between GDP and fiscal capacity, due to fierce European social and fiscal competition.
A conversation with investigative reporters Stefano Valentino and Giorgio Michalopoulos, who have dissected the dark underbelly of green finance for Voxeurop and won several awards for their work.
Go to the event >