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Earth image via shutterstock.
Earth image via shutterstock.

How to Shrink the Economy without Crashing It: A Ten-Point Plan

November 4, 2014

The human economy is currently too big to be sustainable. We know this because Global Footprint Network, which methodically tracks the relevant data, informs us that humanity is now using 1.5 Earths’ worth of resources.

We can temporarily use resources faster than Earth regenerates them only by borrowing from the future productivity of the planet, leaving less for our descendants. But we cannot do this for long. One way or another, the economy (and here we are talking mostly about the economies of industrial nations) must shrink until it subsists on what Earth can provide long-term.

Saying “one way or another” implies that this process can occur either advertently or inadvertently: that is, if we do not shrink the economy deliberately, it will contract of its own accord after reaching non-negotiable limits. As I explained in my book The End of Growth, there are reasons to think that such limits are already starting to bite. Indeed, most industrial economies are either slowing or finding it difficult to grow at rates customary during the second half of the last century. Modern economies have been constructed to require growth, so that shrinkage causes defaults and layoffs; mere lack of growth is perceived as a serious problem requiring immediate application of economic stimulus. If nothing is done deliberately to reverse growth or pre-adapt to inevitable economic stagnation and contraction, the likely result will be an episodic, protracted, and chaotic process of collapse continuing for many decades or perhaps centuries, with innumerable human and non-human casualties. This may in fact be the most likely path forward.

Is it possible, at least in principle, to manage the process of economic contraction so as to avert chaotic collapse? Such a course of action would face daunting obstacles. Business, labor, and government all want more growth in order to expand tax revenues, create more jobs, and provide returns on investments. There is no significant constituency within society advocating a deliberate, policy-led process of degrowth, while there are powerful interests seeking to maintain growth and to deny evidence that expansion is no longer feasible.

Nevertheless, managed contraction would almost certainly yield better outcomes than chaotic collapse—for everyone, elites included. If there is a theoretical pathway to a significantly smaller economy that does not pass through the harrowing wasteland of conflict, decay, and dissolution, we should try to identify it. The following modest ten-point plan is an attempt to do so.

1. Energy: cap, reduce, and ration it. Energy is what makes the economy go, and expanded energy consumption is what makes it grow. Climate scientists advocate capping and reducing carbon emissions to prevent planetary disaster, and cutting carbon emissions inevitably entails reducing energy from fossil fuels. However, if we aim to shrink the size of the economy, we should restrain not just fossil energy, but all energy consumption. The fairest way to do that would probably be with tradable energy quotas.

2. Make it renewable. As we reduce overall energy production and consumption, we must rapidly reduce the proportion of our energy coming from fossil sources while increasing the proportion from renewable sources in order to avert catastrophic climate change—which, if allowed to run its current course, will itself result in chaotic economic collapse. However, this is a complicated process. It will not be possible merely to unplug coal power plants, plug in solar panels, and continue with business as usual: we have built our immense modern industrial infrastructure of cities, suburbs, highways, airports, and factories to take advantage of the unique qualities and characteristics of fossil fuels. Thus, as we transition to alternative energy sources, the ways we use energy will have to adapt, often in profound ways. For example, our food system—which is currently overwhelmingly dependent on fossil fuels for transport, fertilizers, pesticides, and herbicides—will have to become far more localized. In the best instance, it would transition to an ecological, perennial-based agriculture designed for the long haul.

3. Restore the commons. As Karl Polanyi pointed out in the 1940s, it was the commodification of land, labor, and money that drove the “great transformation” leading to the market economy we know today. Without continued economic growth, the market economy probably can’t function long. This suggests we should run the transformational process in reverse by decommodifying land, labor, and money. Decommodification effectively translates to a reduction in the use of money to mediate human interactions. We could decommodify labor by helping people establish professions and vocations, as opposed to seeking jobs (“slavery on the installment plan”), and by promoting worker ownership of companies. As economist Henry George said over a century ago, land—which people do not create by their labor—should be owned by the community, not by individuals or corporations; and access to land should be granted on the basis of need and the willingness to use it in the community’s interest.

4. Get rid of debt. Decommodifying money means letting it revert to its function as an inert medium of exchange and store of value, and reducing or eliminating the expectation that money should reproduce more of itself. This ultimately means doing away with interest and the trading or manipulation of currencies. Make investing a community-mediated process of directing capital toward projects that are of unquestioned collective benefit. The first step: cancel existing debt. Then ban derivatives, and tax and tightly regulate the buying and selling of financial instruments of all kinds.

5. Rethink money. Virtually all of today’s national currencies are loaned into existence (usually by banks). Debt-based monetary systems assume both the growing need for debt, and the near-universal ability to repay it, with interest—relatively safe assumptions when economies are stable and expanding. But debt-based money probably won’t work in an economy that is steadily contracting: as the amount of outstanding debt ebbs in tandem with rising numbers of defaults, so does the money supply, leading to a deflationary collapse. In recent years the panic to prevent such a collapse has led central banks in the US, Japan, China, and the UK to inject trillions of dollars, yen, yuan, and pounds into their respective national economies. Such extreme measures cannot be maintained indefinitely, nor reverted to repeatedly. When debt-based currencies do fail, alternatives will be needed. Nations and communities should pre-adapt by developing an ecosystem of currencies serving complementary functions, as advocated by alternative monetary theorists such as Thomas Greco and Michael Linton.

6. Promote equity. In a shrinking economy, extreme inequality is a social time bomb whose explosion often takes the form of rebellion and revolt. Reducing economic inequality requires two simultaneous lines of action: First, reduce the surplus of those who have the most by taxing wealth and instituting a maximum income rate. Second, improve the lot of those who have least by making it easier for people to get by with minimal use of money (prevent evictions; subsidize food and make it easier for people to grow their own). This effort can be helped through the widespread cultural glorification of the virtue of material modesty (the reverse of most current advertising messages).

7. Reduce population. If the economy shrinks but population continues to expand, there will be a smaller pie to divide among more people. On the other hand, economic contraction will entail much less hardship if population ceases growing and starts to decline. Population growth leads to overcrowding and hyper-competition anyway. How to achieve population decline without violating basic human rights? Enact non-coercive policies to promote small families and non-reproduction; wherever possible, employ social incentives rather than monetary ones.

8. Re-localize. One of the difficulties in the transition to renewable energy is that liquid fuels are hard to substitute. Oil drives nearly all transportation currently, and it is highly unlikely that alternative fuels will enable anything like current levels of mobility (electric airliners and cargo ships are non-starters; massive production of biofuels is a mere fantasy). That means communities will be obtaining fewer provisions from far-off places. Of course trade will continue in some form: even hunter-gatherers trade. Re-localization will merely reverse the recent globalizing trade trend until most necessities are once again produced close by, so that we—like our ancestors only a century ago—are once again acquainted with the people who make our shoes and grow our food.

9. Re-ruralize. Urbanization was the dominant demographic trend of the 20th century, but it cannot be sustained. Indeed, without cheap transport and abundant energy, megacities will become increasingly dysfunctional. Meanwhile, we’ll need lots more farmers. Solution: dedicate more societal resources to towns and villages, make land available to young farmers, and work to revitalize rural culture.

10. Promote the pursuit of social and inner sources of happiness. Consumerism was a solution to the problem of overproduction; it entailed engineering the human psyche to become more individualistic and to demand ever more material stimulation. Beyond a certain point this doesn’t make us happier (in fact, just the opposite), and it can’t go on much longer. When people’s ability to afford consumer products wanes, as does the economy’s ability to produce and deliver those products, people must be encouraged to enjoy more traditional and innately satisfying rewards—including philosophical contemplation and the appreciation of nature. Music, dance, art, oratory, poetry, participatory sports, and theater can all be produced locally and featured at seasonal festivals: fun for the whole family!

*          *          *

More recommendations could certainly be fielded, but ten is a nice round number.

Surely many readers will wonder: Isn’t this just running “progress” in reverse, and isn’t doing so antithetical to our core value as a society? Yes, during the past few centuries we have become hooked on the idea of progress, and we have come to define progress almost entirely in terms of technological innovation and economic growth—two trends that are approaching dead ends. If we wish to avoid the cognitive pain of having to relinquish our deep-seated infatuation with progress, we could redefine that word in social or ecological terms. Similarly, many people who judge that society is far too wedded to the pursuit of economic growth to be persuaded to give it up advocate redefining “growth” in terms of increasing human happiness and societal sustainability. Such efforts at redefinition have some limited usefulness. Certainly the act of collective self-limitation involved in deliberately shrinking the economy would denote a new level of species maturity that would likely be reflected throughout our culture. Socially and spiritually, this would be a step forward—and is hence perhaps describable as progress or growth. But it is hard to monopolize the redefinition of terms like “progress” or “growth”: there are already powerful interests hard at work tying new meanings of the latter to inventive interpretations of manicured and manipulated GDP, employment, and stock market data.

It might be more honest to refer to the program outlined above as a simple reversion to sanity. It is also our best chance for preserving the best of civilization’s scientific, cultural, and technological achievements over the last few centuries—achievements that could be lost altogether if society collapses in a way similar to past civilizations.

The recommendations above imply the ability and willingness of elites to turn the ship around. But both their ability and willingness to do this are questionable. Our current political system seems designed to prevent collective self-limitation, and also to resist serious attempts at reform. The plainest gauge of the likelihood of the implementation of my ten-point plan is a simple thought exercise: name a single prominent politician, financier, or industrialist who would propose or advocate even a small portion of it.

Still, there’s a deep irony here. While there’s no support for degrowth among elites, many if not most of the elements of the above plan have a very large real or potential constituency among the populace in general. How many people would prefer life in a small, stable community to existence in an overcrowded, hyper-competitive megacity; a profession to a job; debt-free life to the chains of onerous financial obligations? Maybe by articulating the plan and its objectives, and exploring the implications in more detail, we can help this constituency coalesce and grow.

(A talk given at a Teach-in on Techno-Utopianism and the Fate of the Earth, http://www.brownpapertickets.com/event/821939 organized by International Forum on Globalization, October 26, 2014, at The Great Hall at The Cooper Union, New York City)

  • EVHappy

    I vote for point #7 – population control. This is the biggest factor leading to all the pain and suffering of humans. I causes fighting, rationing, stealing and the justification to treat humans at the same consideration given to livestock.

    Until the population numbers are reduced to sustainable levels, approximately seven times less than today, assuming the fossil fuel crutch is gone, there is only going to be all the problems listed above.

    When resources become scarce, civility is the first thing that is thrown out the window.

    Once you have reasonable population numbers and limit-based resource management (like speed limits on highways – people understand these and do not feel overly controlled by these limits), most of the other problems will fade away or be much easier to manage.

    Until humans stop acting like yeast, spreading out mindlessly to the edges of the Petri dish, most of our other efforts will be a waste of time.

    Very easy to understand yet impossible to implement due to cultural and religious ideologies. We basically have to wait until humanity learns this the very hard way.

  • Christiane Kliemann

    It is more than worrying that only few recognize the importance of solutions such as the above if we want to avoid a catastrophic global situation in the very near future. Or, as Ashish Kothari from India puts it: “An economic policy that assumes that growth will magically transform into the poor rising above the poverty line and everyone getting productive jobs, is so fundamentally flawed that it is breathtaking that economists in decision-making positions still stick to it.”

    If we were able to understand terms like “progress” and “innovation” in a much broader than a merely technological sense, we would no longer ask “how can we keep up our economic system and way of life in the face of the multiple crises?, but rather “what do we need to change? About ourselves and the way we are organized? How do we create a healthy balance between a regionalized, non-resource-intensive economy including elements of modern subsistence, and intelligent technologies that can help us keep up and further develop our civilizatory achievements? Which technologies do we need in the future and to which extent? Which do we have to improve or even invent and which do we have to let go? How can we dismantle unnecessary structures? How can regional economic cycles be linked to each other and how do we organize social security, democratic participation and gender equality in a post-growth economy? And how could the institutional infrastructures of such societies possibly look like?

    We do not need to know in detail how an equitable and sustainable post-growth society could exactly look like in order to take a firm collective decision: towards fulfilling everyone’s basic needs within the given natural boundaries while ensuring global solidarity, social equity, individual liberty and democratic participation. If the goal is set, there is enough creativity around to shape a meaningful transition process. Surely most of the intelligent and creative people who currently spend their time and energy on creating, advertising and marketing products which nobody really needs just for the sake of keeping the economy running – thereby destroying the biosphere – would rather be involved in a promising transformation process for a better future.

  • Christiane Kliemann

    I disagree here: the term population “control” has quite an undemocratic connotation as opposed to “non-coercive policies” and if population reduction were the primary measure of choice, the underlying problem, namely the systemic overconsumption of natural and social resources in an expansive capitalistic growth-economy, remained unaddressed.

  • EVHappy

    Yes, I am well aware of the nasty PC use of anything that has “population” and “control” in it. However, without humane policies for population management (is that more pleasing to your delicate sensitivities, Christiane?) everything else is dead in the water.

    You cannot have civility with resource scarcity and you cannot have every one of the seven billion people on earth living comfortably with the resources we currently have. Now take away the fossil fuels and their 120 year trend of exponential growth in net energy production and you simply have chaos. I think that is the point most people are not conceptualizing.

    Putting up a nice farming community in this environment would be like having a chicken coop in the middle of a den of starving wolves. It will end quickly and predictably.

    As I have already mentioned, in the yeast example, we humans have to fundamentally change our primitive and pre-programmed nature of expansion. This old way of thinking worked well when Earth seemed limitless but now the strain is showing for this type of programming, as we near the Petri dish walls.

    The only real question is, can humanity evolve fast enough to agree on a planned power down to reach sustainability on a global basis or will we have to go through numerous cycles of economic bubbles and pops, never reaching the obvious and simple solutions?

    I am dubious that humans have the capabilities to make such a transition. Our emotions are so strong and controlling, especially jealousy, greed and anger… A nasty brew.

  • Christiane Kliemann

    I am more optimistic about the ablitiy of humans to make the transition from the fear-driven, egoistic “homo oeconomicus” to mindful beings who are aware that true personal well-being is deeply connected to the stability and balance of the whole system we are part of. It is true that our emotions are strong and controlling; however, at the same time humans also have the ability and the wish to cooperate. Which of the two sides – the egoistic or the cooperative one – takes the lead depends on the circumstances. High time to change them!

  • Poechewe

    Moving in the direction of nuts and bolts, there are many useful points above and I get that each one really requires several pages of explanation which would make for too long an explanation. In one respect, the points above take on the whole issue of the law. Today, we see the law manipulated in multiple ways for the benefit of very few people who happen to be able to afford many lawyers and accountants (shucks, we never did see Mitt Romney’s tax returns, did we?). It’s a difficult problem to make the law useful to the broad community in a way that is also not excessively coercive nor, of course, easily manipulated. I suspect sustainability and the laws that aid it will require time.

    This is one of the key problems of sustainability. If we simply move in the direction of sustainability, there are thousands of ways to make civilization more sustainable — at least temporarily — and many of those ways can easily be built upon and developed — and sustained, particularly if sustainable communities build themselves over time working out the various problems as they go. But such a method requires time and time is one of the issues that is difficult to nail down in sustainability discussions. How much time does the world have to turn to sustainability? A handful of years? Decades? A century? And what can we learn by understanding some of the possible scenarios?

  • mickey

    Lunatic.

  • Jason

    Brilliant stuff Heinburg! All we need to do is overthrow the entire globalization project of the last 35 years… no problem

  • Dmitry Chernikov

    You disgusting anti-human filth. Your values are misanthropic and evil. You want people to suffer. Why?

  • Jason

    Come on, don’t be shy tell the world how you REALLY feel!

  • Dmitry Chernikov

    Why waste time mincing words? Defend yourself, freak.

  • Jason

    Since you’re so concerned with “population management” then what you need to do is kill all of your family members and then kill yourself. Then us sane people can be left alone.

  • Honda Cbr

    As Monica says in one friends episode: “7, 7, 7, 7, 7, 7, 7, 7, 7….”. THAT’S where the crux is.

  • Jesús María Garijo Larumbe

    I agree completely with you:

    Best regards,

    AMADEUS

  • elley

    I like the last paragraph especially, but I would like to know more about the need for populations to move to rural settings and the inefficiency of city living. You state that as a given. My thought is that concentrated populations (not necessarily in mega cities, but in moderate size populations–two hundered thousand to five hundred thousand) provide more efficiency than strictly rural communities where supplies do have to be trucked in. Communities with incorporated mass transportation, food production, education, entertainment, services etc should be able to accomplish more with fewer resources it seems to me. On the point of population decrease, education and empowerment of women is the anti-dote to over-population. Treating people like livestock is treated today (which should also change), is counter-productive to a more advanced spiritual and moral human-being.

  • Remi Manso

    About the past, in a century (1890 to 1990), the population has increased by 3.4 and the individual consumption by 5.2. Finally, carbon emissions are due to 1/3 and population consumption to 2/3. For the future, by 2100, the population will increase by 40%. For that reason alone, equal to consumption, CO2 emissions will increase correspondingly. Proposal No. 7, that contain as many as possible of global population growth, seems to be common sense. This is also what provides the fancophone association “Demographie Responsable.”
    http://demographie-responsable.org/

  • michael e. v. knight
  • Blake Johnson

    I agree with most of that. Although I do agree that the empowerment of women does need to occur but not for the reason that it is the solution to overpopulation. I have known many independent women who want to excel in a career but I have also known countless other women whose only goal was to have a family with multiple children. Some are more passionate about their role in society than others, the same goes for men. All men want to do is breed (have sex) with as many women as possible. Its these urges that nature has given both genders to procreate and ensure the continual survival of our species. Its only when our population is becoming detrimental to our finite resources that this becomes a problem. Nature doesn’t consider these factors.
    In my opinion a one child policy world-wide for 2 generations would see to a much more manageable reduction in population. Those that don’t comply still have the right to produce as many children as they wish but are exempt from any assistance or benefits that the rest of the community provides like schooling and health care. If you don’t want to work towards the same goal as the worldwide community then why should you receive the benefits that community provides.
    China is a perfect example, yes they now have the highest GDP in the world but per capita they are still a very poor country, financially, ethically and socially.

  • russ

    Education is the biggest contraception. Look at the countries with the
    Largest families and largest populations… Notice the link between poverty and population size? Education and population size? Educating women, in particular here. This is what needs to be done. Education is the most effective social incentive for non reproduction.

  • nathanchattaway

    Any “world-wide policy” on anything is only possible in an energy-rich environment of globalisation. The solution to our problems will not come from a fascist top-down model, but rather from starving the empire (of taxes) by opting out of it, at a local level.

    I think fossil-fuelled agri-business and pharmaceuticals products are artificially propping population levels higher than they would otherwise be. Individual life expectancy is likely to reduce in the future, especially in Western countries. When a family economy switches back from net consumption to net production, a larger family makes economic sense. Before the industrial revolution, the way to wealth was to be blessed with a large and healthy family. This was also the only form of social security.

    We won’t need any impossible global 1 child policies, we will see populations decrease naturally when there are no alternatives.

    My wife and I are blessed with six children. We live on a permaculture homestead, working towards self-reliance and the agrarian way of life. We homeschool the children and we don’t have health insurance. We don’t take government funding but rather we pay as we go. Sure, we may end up being in that chicken coop surrounded by slavering wolves, but that’s not a certainty. I’d rather not be a chicken in the wolf’s den today.

  • nathanchattaway

    I’d say living in countries that have switched from family economies based on production to those based on consumption is the biggest contraception. When you don’t think you’ll depend on your kids to look after you in your twilight years, or when their labours cease to add to the household common wealth, they become a financial drain and a lifestyle stifler.
    “More than two kids? How will we fit them in the Porsche? How will we afford private school fees? How will we afford airfares and hotel bills for our annual overseas holiday? We’d need to live too far out if we have to buy a big house. We can’t afford for one of the parents to lose time at work.” etc

    Education is simply part of the rat race, to get the bits of paper needed to earn money in a job, so you can consume. And education is one of the industries that in itself offers manifold opportunities for consumption and debt.

  • Joseph Mccafferty

    “Saying “one way or another” implies that this process can occur either
    advertently or inadvertently: that is, if we do not shrink the economy
    deliberately, it will contract of its own accord after reaching
    non-negotiable limits.”

    This is very good because you are beginning to understand that the word ‘unsustainable’ has a meaning that has implications in the real world. I’m not having a go at you, because it is only recently that I have realized this as well. You see, we have been feeding ourselves a line that makes sustainablity a value judgement or a lifestyle choice, rather than a fact of life. We’ve kidded ourselves into thinking we can go on being unsustainable forever… that just isn’t going to happen.

    The truth is you get to the point where you want to do that unsustainable thing and you can’t, no matter how hard you try. Capitalist industrial civilization is that unsustainable thing. I have nothing against it personally, it puts food on the supermarket shelves and money in my wallet to buy it, but everything about it is unsustainable – from lending money at interest, to adding growing amounts of energy and materials to our activities.

    The cracks are beginning to show post-peak oil, But the rich and powerful are ‘all in’ on the growth paradigm, and the people they roll all their debts onto (everybody else) are too indebted to have any purchase on the behaviour of the corporations the rich and powerful hide behind.

    We need something to empower those indebted in civilization to shake off the un-payable usury it forces upon them, so what we need is a movement where everyone gives their money back to the central banks, and puts them and capitalist industrial civilization out of business.

  • Layne