books growth politics

Book Review: The Post-Growth Project

cover_post_growth_project1The Green House is a new think tank, established in 2011 to explore green political ideas. One of its main initiatives has been the Post Growth Project, aimed at exploring alternatives to the austerity and growth boosting that has followed the financial crisis. I’ve browsed various reports along the way, and they’ve now been compiled into a book.

The Post-Growth Project: How the end of growth could bring a fairer and happier society is a ‘second wave’ postgrowth book. It assumes that you understand the problems with the growth model and are interested in what comes next, building into the conversational space created by Tim Jackson’s Prosperity Without Growth. What would life in a post-growth Britain actually be like? And how do we move towards it?

It’s an ambitious brief and it doesn’t get all the way there, but it does contribute some key insights. As I’ve outlined before, there are a lot of unanswered questions and four key blindspots in particular. It’s easy enough to say that infinite growth on an finite planet is impossible, but our entire economy is predicated on that false goal and a post growth economy is thus a completely different animal.

One of my own questions has been about debt. If economic growth pauses or goes into reverse, the share of our income going towards debt repayments would grow into a crippling burden. Richard Heinberg suggests a jubilee approach, but other postgrowth books have skirted round it. I was pleased to see that economist and Green MEP Molly Scott Cato gives the issue a chapter to itself here.

Her approach to public debt is to convene a ‘Citizen’s Debt Audit’, which would examine what is owed to whom, and who would lose out if the debts were not paid. From there, debts could be reduced or rescheduled as appropriate. Any debt that was “incurred without the consent of the people and was not for their benefit” would be deemed odious and could be cancelled. This is not speculative – a number of Latin American countries have done this successfully, freeing themselves from debts that were a serious drag on the economy without the reputational loss that comes from default.

A little light is shed on some of the other holes in post-growth thinking. The issue of language is one, the vague nature of the term ‘post-growth’ and the negative connotations. These are tackled in a final chapter by Rupert Read, who I keep voting for in vain as MEP. He reflects on moving things away from economics and towards a broader understanding of a post-growth society, but comes to no conclusions over what we should call it.

Other chapters here deal with construction and the built environment, how to pay for public services in a post-growth scenario, and the politics of post-growth. Some contributors are more engaging than others and it’s not the most scintillating read – if you’re new to the idea, I’d recommend starting with Prosperity Without Growth and/or Enough is Enough, by Rob Dietz and Dan O-Neill. But if you’re serious about the question of growth and looking to fill out the picture, particularly in a British context, then it’s very helpful.

24 comments

  1. I read Molly Scott Cato’s article on the SSRN. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2071675

    Her ideas basically are a selective default. Her main problem is that she is concerned about the stock of debt but not the flow. Default works for countries with a primary budget surplus since without the interest payment the budget is balanced and there is no need for borrowing when markets are effectively closed. Ms Cato doesn’t seem to want to balance budgets with the spending cuts that would require even if all UK debt was cancelled. So the result would be inflation from the money printed to pay the government’s spending. She only mentions inflation once in her article, you will have to tell me if she addresses it in this book. In fact inflation in a post growth economy would be a major problem – is that covered here?

    The idea of odious debt is hard to use in the context of Europe. Much of the debt stems from consumer debt. The government’s that took on their debts were democratically elected and the proceeds spent on social spending, not arms or corruption. Why lenders would lend in future is not considered.

    1. Molly Scott Cato is explaining the concept of a citizen’s debt audit, not attempting to outline an entire economic strategy or draw up a budget. So taxes and spending cuts aren’t pertinent.

      The dynamics of inflation in a postgrowth economy would be completely different, because money would be created differently.

      1. We going on the gold standard in a post growth world or will maths be changed so increasing the number of pounds won’t cause inflation. Does anyone in this book point to the need to run a balanced budget in a post growth economy?

        A citizen’s audit is, as she has drawn it, a pretext to walk away from legitimate debts because we don’t fancy paying them. As I said, you had better have a primary budget surplus before you do that.

        I guess this is why there is such opposition to TTIP. They don’t want to honour freely entered into contracts. Not very moral from my point of view.

        1. That’s a matter for discussion, but there does seem to be a consensus that interest-bearing money is not going to work.

          And yes, there’s a whole chapter on how we could afford public services without growing the economy or going into debt.

          The citizen’s audit isn’t about whether you ‘fancy’ paying debts. I think you’ll find creditors don’t respond well to that. If that’s the line being taken, why not just default and be done with the whole lot of it? An audit is to work out what should be repaid to whom, at what schedule. Scott Cato says quite plainly that developed countries may well do an audit and find nothing that classifies as odious that can be legitimately scrapped. But similar exercises in other countries have significantly reduced debts and made them manageable. That would be crucial in an economy that wasn’t growing.

          1. How would you deal with time/cost of money or lending risk without interest or something effectively the same?

          2. There are a variety of options. I imagine you’d need money creation to go primarily through a central bank rather than commercial banks. Commercial banking could still exist, running more along Islamic finance principles. Not for profit banking may be a potential solution, where interest is charged at a low rate that will cover losses, but no more. A more diverse range of forms of money would help, rather than having one currency trying to do everything.

            I don’t claim to have any great solution, but there are all kinds of ways to create money.

          3. This isn’t about money creation but the value to the holder.

            Even without any inflation a pound today is worth more than a pound tomorrow and that is worth more than a pound in two years time. This is because I can not spend that money now. To a hungry man a loaf of bread today is worth 5 tomorrow.

            There is also risk. If I lend £1000 to 100 different projects it is likely at least one will fail. So even if I’m only looking to get my £100,000 back with no profit (assuming again no inflation either) I would have to charge 1% interest. If the Ms Catos of the world were in charge I’d want a much higher rate in case my loan is suddenly ruled odious.

            When you look at financial markets risk adjusted returns are very similar for different instruments. Interest is just one method of return. Islamic finance is instructive when you see they are structured to provide a return very similar to interest, just but another name.

            If you want the constructive part of finance that channels savings to productive investment you need give a return either via interest or something very similar. Call interest by another name but you need it.

          4. If we’re talking savings, sure. That’s not the main way that money is created though – that’s through mortgages and loans from commercial banks. I’m not against interest on principle, by the way, I’m just aware that it’s a big part of the growth imperative and it needs to be defused somehow.

            If you were a lender and you were worried that your loan could be seen as odious, you’d need to look at your lending practices. It’s a pretty clear definition and not something you could blunder into. Unlike governments, who can take on debts and impose them on taxpayers, lenders can’t force people into debt, so I’m not sure how it would even apply.

            I’m not going to pretend I can explain how it would work, but I expect inflation would operate differently in an economy with a stable population, stable or declining use of materials, increases in efficiency taken as leisure time rather than profit, and a no or low interest money.

          5. Again, I’m not talking about money creation but return. As I said Islamic Finance is in effect interest. How can commercial lending on Islamic terms be good while interest is bad when they both generate similar returns?

            The time cost of money is a general economic concept which seems totally forgotten here. It applies to business lending as well as to savings.

            If a government thinks it can renage on some debts, why not others? Ms Cato’s article makes it plain she feels ‘democracy’ can trump everything. If debts mean cuts to public services couldn’t they be deemed ‘odious’?

          6. You have come across the idea of odious debt before, I presume? It doesn’t seem like rocket science to say that debts accrued without consent and with no benefit to those who have to pay them back should not be repaid. They are a form of financial slavery. They are also very specific, and not something one can randomly claim. Molly Scott Cato, in the book (the paper you’re referring to isn’t the book, and I haven’t read the one your citing) makes it clear that developed countries can’t play the odious debt card. So I’m not sure why you’re going on about it.

            Is the time cost of money a problem that needs to be solved?

            You can’t separate money creation and return, because the importance of return determines how you create money. In our current system profit and growth must be maximised, and therefore money is created (lent) at interest. If profit is not essential, you can create money in different ways.

          7. Well l it appears Ms Cato is saying slightly different things in different places. Since odious debt isn’t a fixed legal terms it can mean whatever the writer says they want it to mean. If you look at the wider literature about odious debt it is clear the term is quite elastic and could be used to default on debts whose burden is forcing cuts to social spending.

            The time cost of money isn’t a problem, it is an economic principle. Cash flow in a business shows the principle at work.

            Similarly profit isn’t optional in a business. Either you are running at a loss and destroying value or you are making a profit and protecting existing value. You can’t plan to run a business on breakeven, it’s too hard to know what the actual results will be. (That is before the question why investors would risk their money for no return)

            That such basic economics such as the need for profit or the time cost of money appears missing makes this seem rather fantasy economics. From what I have read of post growth economics there is little understanding of business or business people. An example is the recent discussion here on philanthropy when several posters said they don’t understand the very rich.

          8. Not sure how many times I have to say that nobody is claiming Britain should ditch its debts. If you don’t want to debate what’s actually being proposed, you’re just wasting everybody’s time.

            Same on business. We are talking about money creation, since that is currently done commercially and at interest. Under a postgrowth system, more money would probably be created by a central bank. The right to create money is a privilege. Why you’re assuming nobody understands the basics of profit is just odd to me. You seem to be airing your prejudices more than anything.

            I know the time cost of money is a principle, which is why I’m puzzled that you keep saying ‘nobody’s talking about it’ as if it’s a problem to be solved.

          9. It simply isn’t true that “nobody is claiming Britain should ditch its debts”. Ms Cato’s report on the Green House website: ‘Can’t Pay? Won’t Pay! Debt, the Myth of Austerity and the Failure of Green Investment’ from which her chapter will have been based has her pondering renouncing UK debts incurred in bailing out the banks and for PFI. She also thinks there is a case for Europe to refuse to repay IMF debts. All could be ‘odious’.

            “The reason the focus of this paper is on government debt is that it is there that the argument about the debt being odious can be most clearly made: the relationship between an implicit guarantee to the banking sector that most citizens were unaware of but are now paying for is clear. But what about the less direct ways in which we have been inveigled into paying off long-term and expensive debts via the PPP arrangements that have funded so many schools and hospitals? Might they also be considered odious debts?” Page 19.
            http://www.greenhousethinktank.org/files/greenhouse/home/Debt_Audit_2_col_4.pdf

            Five minutes research on the most obvious website refutes your complacent claim. If you don’t know what’s actually being proposed, you’re just wasting everybody’s time.

            The time cost of money is a problem for this post growth economics in that there is no scope in what is proposed to compensate for the cost of not having access to the money. I have asked you several times how this would be dealt with and other than wibble about money creation (return is why people invest, not money creation) you have made no answer.

          10. Scanning for quotes that look alarmist out of context is a poor substitute for debate. The whole chapter is speculative in its tone. It’s calling for the audit, not dismissing all of Britain’s debts. It’s a far more intelligent piece than you’re suggesting. If you can’t see that, then we disagree. Other readers can make up their own minds – perhaps, and here’s a novel idea, after actually reading the book.

            Tone is important here, come to think of it. You seem to see postgrowth theory as an alternative economic system that needs to be exposed as naive and half-baked. That kind of misses the point. It’s not a thought-out alternative, and those few voices in the conversation that claim it is probably aren’t worth reading. Books like this one are all about filling in the blind spots, trying to work out if and how things would work in a postgrowth situation. Can it be done?

            As I see it, if we can find a way around the growth imperative that dominates the current global economy, we may be able to solve a whole bunch of problems at once, including climate change, which is the most pressing. That makes this a potential creative solution, and it is in that spirit that I approach the whole topic.

          11. Oh yes, and on the time cost of money, wibble is in the eye of the beholder. As far as I’m concerned I have answered it several times already. Money creation is key, and you’re going to have to go away and read up on where money comes from if you don’t see it. Most commercial loans are made with money that is created by being loaned into existence, not by pooling existing wealth or savings. Therefore there is no loss to compensate. (This is something that the Positive Money campaign has been working hard to explain, and the Bank of England and others concede that this is how it works.)

          12. I can illustrate that the time cost of money isn’t about money creation simply. If Tearfund said they would pay for the reports you recently wrote them in 6 months time would you be happy? How about if they waited a year, or three?

            If you wouldn’t be happy to wait there must be some cost to you in not having that money and that is what you’d be right to expect to be compensated for. See no need to try and crowbar in the latest economic fad.

          13. I did not skim through looking for quotes. I read cover to cover two papers by Ms Cato to understand her view and have a good angle on her tone. You are the one who said “Ms Cato makes it clear that developed countries can’t play the odious debt card. ” when clearly she thinks they can. Who is skim reading? You don’t call for an audit to find something unless you think it likely it will be found. So I’m not sure if you have genuinely not understand what she was saying or if you were trying to pretend she doesn’t think that.

            I have genuinely tried to engage with post growth economics but whenever I discuss it with you it becomes clear it is naive and half-baked (perhaps its your explanations). It will hardly evolve if it is unable to deal with questioning by me, let alone serious economists or business people.

            Now I don’t get free review copies of books but you will find the reports that this book is based on at the Green House website. So I have a very good idea what is here.

            A new economics will not solve all ills. In fact it is likely that solutions to one problem will exacerbate others. Our present economic system has developed over several hundred years and is strong and flexible because of that. Attempting to work it out from first principles hasn’t worked out well before and I see not sign that this attempt is any better. You might put your faith in it but it’s faith, not reason.

          14. If you’ve read it so intently, then I am puzzled by your hostility. The whole thing is a ‘what if’? If you don’t see it that way, I don’t really know what more to say. Seemed obvious to me, but I guess these things are subjective.

            I didn’t think we were trying to work everything out from first principles here. That’s kind of my point in saying that it’s not pretending to be an alternative system ready to be adopted. It’s an evolution in the system, so that it might continue to develop for several hundred more years. If it doesn’t evolve further, those centuries are in doubt.

            And on that point, I’m done here. No reason to repeat myself ad infinitum.

          15. As ever your critical faculties are clouded. Ms Cato is hostile to markets . Having read her other work, including the tastefully titled ‘Arbeit Macht Frei and Other Lies about Work’ it is clear she is an anti-capitalist who would very happily dump the national debt. So perhaps you should stop priggishly telling me I’m wrong only to have your errors quoted back to you.

          16. You obviously dislike Molly Scott Cato. I haven’t read her other stuff, so I’m just going on this one idea, which looks like an interesting one to me. She is one of several contributors, just to remind you, in a book that explicitly says it is a contribution to a conversation, not a manifesto for change. I think you’re wrong about the whole tone of the project, but as say, that’s subjective and you’re perfectly entitled to remain on your free market high horse.

            So, can we agree to disagree, and I will take my priggish wibble somewhere else.

  2. Interesting article-The powers of financial capitalism have had far reaching aims, nothing less than to create a world system of financial control in private hands (example Rothschild) able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert by secret agreements arrived at in frequent private meeting & conferences (Bilderberger’s). Indeed a Citizen’s Debt Audit, would if ever accepted in Europe be the start of clearing away this muddy field of financial control, but in reality most unlikely to be brought into being. The controllers of the financial world of Europe quite definitely will be closed to any such debilitating scheme.

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