The Sustainability Council of TU Berlin had the Canadian scientist Peter Victor on 18.05.2018 in the context of the lecture series “prosperity without growth” to a lecture on new findings from the revision process of his 2008 published book Managing without Growth. Slower by design, not invited disaster . The renowned economist, Emeritus Professor of Environmental Research at York University in Toronto, Canada, looks back on an eventful, nearly fifty-year career dedicated to investigating the interaction between the economy and the environment.
The limits of growth
Peter Victor began his talk by stating that economics was telling a story in which progress was equated with economic growth that helped us to greater prosperity. Although this definition of progress is still very young, growth has become a priority policy objective. Like him – in addition to numerous other authors – in his book Managing without Growth. Slower by Design, not Disaster , this growth is limited. As a justification Victor listed three aspects:
- Long-term growth is impossible on a planet with finite resources and sinks.
- Economic growth does not make happy, as the decoupling of income and satisfaction in the industrialized nations shows.
- Economic growth is disappointing as it can not solve macroeconomic problems such as unemployment.
These findings are now hardly doubted why many players on the search for a “different” growth, as the inflationary occurrence of terms such as Green Growth , Sustainable Growth or Clean Growth show. Commenting on Victor’s Green Growth OCED definition, “Nice definition – but how do we get there?” Says that with an annual growth rate of 3%, reducing the CO 2 emission intensity by 8% would be necessary to reduce greenhouse gases reduce it by 85% within 35 years, thus ensuring sustainable development.
Ecological macroeconomics as the basis for an alternative economic future
Against this background, Peter Victor called for the time to come up with a new story and came back to his initial statement that economics, which had previously ignored the environment in its standard models, needed to be rethought. The question that moves him is: can we achieve full employment, poverty reduction and a balanced state budget while reducing CO 2 emissions? In short, can we steer the economy in our favor without having to keep growing?
At this point, Victor quoted Nobel laureate Richard Solow, who replied in 2008 to the question of whether capitalist economics is possible with little or no growth: “It is possible that the United States and Europe wants to […] continue to grow in the form of leisure time … “.
Below, Peter Victor reported that he had met with Tim Jackson after the publication of his book Prosperity without Growth , in order to communicate on the development of an ecological macroeconomics, which should form the basis for an alternative economic future. It expands the economic cycle between households and businesses by exchanging labor, land and capital and goods and services by embedding them in a biophysical cycle, extracting resources, using natural services and having an impact on human economic activity , Thus, they combined the approach of ecological economics, which considers the interactions between the real economy and the environment, with modern monetary theory, which deals with money, credit and debt.
A better future is possible
On this basis, Victor and Jackson developed the ecological macroeconomic model LowGrow SFC ( LowGrow Stock-Flow Consistent Model ). In his talk, Victor explained the simulation model used by the two economists to draw three scenarios for the development of the Canadian economy by 2067. In the base case, current developments and relationships are updated. In the second case, greenhouse gas emissions are significantly reduced by pricing emissions in energy production, favoring environmentally friendly industries, and reversing mobility. In the third case of sustainable prosperity, there are the following measures: switching from brown to green investment, redistribution to reduce income inequality and poverty, lower population growth, and reduced working hours. Peter Victor presented the behavior of economic, social and environmental indicators in the three different scenarios, showing that economic growth, unemployment, public debt, inequality, working hours and household debt would be relatively similar in the first two cases. While the environmental impact would decrease in the second case, only the path of sustainable prosperity, the third scenario, would bring significant environmental and social benefits. This is also reflected in the aggregated Sustainable Prosperity Index . At the same time, Peter Victor showed that the third scenario would be economically viable.
On the question of whether little or no economic growth was compatible with capitalism, Victor presented two graphs illustrating the development of the share of capital and the rate of profit. The former would fall from just under 35% to 30% within 60 years, with the share of capital in the other two scenarios remaining fairly constant over the years. The drop in the rate of profit from 6% to 4-5% would also be modest, while it would increase only slightly in the other two scenarios. Against the background of these results, Victor joined the second sentence of Richard Solow’s quote: “There is no reason why capitalism could not survive with slow or even no growth.”
His closing words were used by Peter Victor to emphasize that a better future is possible. It is now up to us to decide which path we will take: either we will continue to strive for economic growth, which will give us a bleak future in the medium term, or we will embark on the alternative path of sustainable prosperity. However, Victor notes that the Window of Opportunity has shrunk ten years after the first issue of his book, so action is needed soon.
How can sustainable prosperity be achieved?
After a long round of applause, the round was opened to questions and discussions that focused on how to make a change to a better future possible. Thus, a listener spoke with the question of the incentives for change, which Peter Victor saw above all in the praise of natural consumption and the telling of new stories. Another participant inquired about concrete measures for change, with Victor pointing to the need for interplay between different disciplines, approaches and measures that could advance economic and social change. I was concerned with the question of the likelihood of implementing measures such as regulation in the face of power structures, avoiding Victor’s intention of using his model to highlight ways to improve the system. Whether the system we live in as part of the Sustainable Prosperity Path would still be called capitalism, or whether we would find entirely new ownership and production structures, would not be foreseeable.
After further discussions, in which Peter Victor emphasized, among other things, that he was modeling not degrowth but a stabilization of our economic activity, a young girl finally spoke up and asked Victor about his idea of the relationship between humans and nature. After a short pause of reflection, he replied in simple language that he considered the present relationship of humans to nature, which is reflected in our economics, to be unhealthy. One of the reasons for this is that economics saw people as being independent of nature and defined nature exclusively as resources to be used. Peter Victor himself wanted to understand nature, that is, all human and non-human beings, as their own actors and respect their respective interests.