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A Post-Growth Economy in France?

by Dan O’Neill

Dan O'NeillI’ve recently returned from France’s first high-level “beyond growth” event, entitled An Innovative Society for the 21st Century. The conference, which included five separate sessions for the 250 or so attendees, was officially sponsored by François Hollande, President of the French Republic. It is one of only a handful of events that has received official government support for the topic of building a post-growth economy. The event was organised by IDDRI, the Institute for Sustainable Development and International Relations, and was held in one of the historic buildings of the French National Assembly.

A number of politicians spoke at the event, including Claude Bartolone, the President of the National Assembly, who gave the opening address. Mr. Bartolone was more to the point than I was expecting and seemed to accept the end of the era of economic growth in France. He was careful to say that low growth does not mean an end to progress, and that the “social economy” could provide answers to the problems that we face. He made the particularly strong statement that “we can accept a 4 percent deficit, but we cannot accept 4 degrees of global warming”. To close, he said that “we must invent the world we want, starting now”.

The session that followed, entitled “Have our models of growth entered into an exhaustion phase?”, included talks by both Nicholas Stern (author of The Stern Review) and Andrew Simms (the unofficial ambassador of the New Economics Foundation). Stern opened by saying that he was not going to talk about “growth indefinitely”, because — in the words of Woody Allen — “eternity is a very long time, especially towards the end”. He did, however, say that he believed growth is needed over the next twenty to thirty years to drive investment and innovation to avoid climate change.

Stern’s reasoning was challenged by Andrew Simms, who provided one of the liveliest talks of the event. He emphasised that relying on economic growth to solve our problems is not a scientifically credible strategy due to the multiple planetary boundaries that we face. Simms also highlighted the diminishing social returns of growth, and the appearance of “jobless, voiceless, and futureless growth”. He likened our situation to a man falling from a 100-storey building. The man will pass the first 99 storeys unscathed, and may become increasingly confident about his predicament, until he passes the final floor and his fall is abruptly ended. In closing, Simms suggested that economic policy should pass three tests: Does it reduce the pressure that we put on the environment? Does it make society more equal? And does it contribute to human well-being?

The second panel of the day moved on to ask the question, “Can we build a post-growth society?” The first speaker was Laurent Baumel, a French MP and member of the governing Socialist Party. He said it was useful to question the need for growth, and to challenge GDP as a measure of progress. However, he claimed that growth still remains necessary for the functioning of society. He seemed particularly concerned about what a lack of growth would mean for the government’s ability to reduce inequality and fight unemployment.

Claude Bartolone

Claude Bartolone at the post-growth conference, “An Innovative Society for the 21st Century” (photo credit/copyright: M. Brun)

Baumel’s talk was followed by my own contribution, in which I described some of the policy changes needed to achieve a prosperous economy without growth (ideas that are discussed in Enough Is Enough). I pointed to the weak relationship between economic growth and the level of employment and to the ways that greater equality may act as a substitute for growth. I also discussed the importance of financial reform, in particular the need for a full-reserve banking system. Finally, I stressed that the goal of a steady-state economy is not zero GDP growth. The goal is to achieve a high quality of life for all people within ecological limits, something that GDP can’t possibly measure.

My talk was followed by a contribution from Jean Pisani-Ferry, the director of the French Prime Minister’s economic policy planning staff. Pisani-Ferry claimed that a post-growth perspective was “fatalistic and Malthusian”, but did not respond to any of the policy proposals that I made, despite an attempt from the chair to get his opinion on these issues. Instead, he focused on the price system and the need to invest in low-carbon infrastructure while interest rates remain low.

The final speaker of the session, the former Swedish Environment Minister Lena Sommestad, emphasised the role of human capital and the need to invest in social programs. She made the important point that more equal societies are better at dealing with environmental problems like climate change.

The next two sessions focussed less on growth and more on social innovation, and I did not find them as engaging overall. One exception was a talk by Rob Hopkins, founder of the Transition Towns movement. Hopkins discussed what a bottom-up response to the challenges of a post-growth society might look like, drawing on examples from the Transition movement. He stressed that the main reason people are engaging in Transition projects is not the environmental benefit of these projects, but the social connections and greater sense of community that people gain from them.

The final session of the conference, which was entitled “What development model for the 21st Century?”, included contributions from Pascal Canfin (the French Deputy Minister for Development), George Papandreou, (the former Prime Minister of Greece), and Jeffrey Sachs (the well-known economist from Columbia University).

To my surprise, Sachs led with what was probably the most direct criticism of the pursuit of growth at the conference. He said that it’s a hard reality to accept, but growth is no longer a viable strategy for the planet, and politicians need to accept this. He said that even the notion of allowing developing countries to “catch up” before beginning the transition to a new development model is unrealistic. Instead, he emphasised that all countries need to pursue a new model of development, and not just “follow the one in front”. He was also the only speaker to raise the issue of the need to stabilise global population.

The strong speeches continued with George Papandreou, the former Prime Minister of Greece. Papandreou suggested that the collective response of policy makers to the Greek deficit, Lisbon Treaty, and Copenhagen Climate Change Conference had been wrong. These issues were dealt with separately, he lamented, when they should have been addressed together. He claimed that the Greek government had borrowed unsustainably in the name of increasing GDP, and the result was recession, unemployment, a democratic crisis, and no progress on climate change. He said that the financial crisis had happened too quickly for the political system to deal with, and that too much power now rested with institutions beyond national boundaries. He also said that politics had become unpopular and the trust of citizens had been lost, which made it difficult to implement big changes. Much like proponents of degrowth, he advocated a deepening of democracy as the solution. Finally, Papandreou suggested we need new indicators and new values, and that “maybe happiness is more important than GDP”.

Although the conference was high on rhetoric and low on solutions at times, I still believe it was a success. For the first time, politicians and researchers were discussing the possibility of a post-growth economy in the halls of the French National Assembly — no small achievement. It was clear from who was present, however, that the idea of a prosperous non-growing economy still resonates more with the left than the right. Moreover, it seemed like there were quite a few former left-wing parliamentarians offering their support. A more cynical person might question whether they would still do so if returned to power!

Nevertheless, as I was saying my goodbyes on the stairs of the National Assembly, Damien Demailly, the head of IDDRI’s New Prosperity program assured me, “This is only the beginning”.

Dan O’Neill is the coauthor of Enough Is Enough: Building a Sustainable Economy in a World of Finite Resources.  He is also a lecturer in ecological economics at the University of Leeds and the chief economist for the Center for the Advancement of the Steady State Economy.

How to Turn the Power of the Wall Street Protests into Real Reforms

by Brent Blackwelder

As the Wall Street protests have spread from New York City to the rest of the country, some media pundits have criticized the protesters for being unfocused — as if there were only one thing wrong with the financial sector of the U.S. economy. The protests have provided a welcome response to Wall Street’s massive takeover of governance, and continued opposition to the status quo could produce opportunities to enact real reforms.

Don’t expect Wall Street to undertake such reforms voluntarily — some of the shady practices are too profitable. It’s going to take new laws, and key legislation is pending in Congress that could provide important remedies. But new legislation won’t pass without the strongest pressure. That’s where the protesters could make a difference, especially with some forceful activity in the districts where the obstructionists, like House Majority Leader Eric Cantor from Virginia, reside. Cantor said to the conservative Values Voter conference: “I, for one, am increasingly concerned about the growing mobs occupying Wall Street” but he backtracked a week later when cautioned by his political finger-in-the-wind testers about the growing popularity of the protests.

Among all the morally bankrupt practices on Wall Street, there’s one in particular that would be easy to abolish. Easy, that is, if we can translate some the energy of the protests into pressure on lawmakers. Pending in Congress are powerful bills such as Senator Levin’s S. 1346 (Stop Tax Haven Abuse Act of 2011) that would strike hard at tax dodgers. But a bill like that has no prayer of passage unless representatives like Cantor feel the pressure.

Instead of reform, Congress is in fact poised to give another “one-time only” tax holiday to companies that stashed profits in tax havens. Huge and wealthy U.S. corporations are actively seeking what is known as a “repatriation holiday” because they say it would create jobs. Such a holiday would allow them to bring home offshore profits at a reduced rate — a nice holiday for the well-to-do CEOs and shareholders, while the rest of us taxpayers suffer the consequences of losing $80 billion of revenue.

The Tax Justice Network and a number of small business associations are trying to right this wrong. They have sent a letter to Congress to dispute this repatriation holiday, noting: “Too many corporations have turned their tax departments into profit centers, using aggressive accounting manipulation to disguise U.S. profits as foreign profits.”

Bloomberg Business Week has pointed out prime examples: Google reduced its income taxes by about $3.1 billion over three years — first by shifting income to Ireland, then to the Netherlands, and finally to Bermuda. Another example is Forest Laboratories, a company that sells over 99% of its drugs in the U.S. but attributes the bulk of its profits to a law office in Bermuda.

Corporate abuses are all the more frustrating in light of how the Congressional “Supercommittee” is discussing the deficit. The Supercommittee is poised to recommend draconian cuts in important programs, but its Republican members are unwilling to address tax havens and tax dodgers that cost the U.S. Treasury an estimated $100 billion per year. The two biggest banks benefiting from taxpayer bailouts are Citigroup with 427 subsidiaries in tax havens and Bank of America with 115.

A recent report  by the Institute for Policy Studies (IPS) adds more grist to the protesters’ mill. The report notes that the salary of chief executives (CEOs) of the S&P 500 soared 27.8% in 2010 to $10.8 million, making the ratio between average CEO pay and average U.S. worker pay now 325 to 1. Back in the good old days of 2009, the ratio was much more equitable at “only” 263 to 1. The IPS study found that 25 of the top 100 CEOs received more pay than their companies paid in federal income tax. Furthermore, 20 of these 25 companies spent more on lobbying than they paid in federal income tax.

One more recent analysis,  published in the journal of the Association for Psychological Science, provides new support for those advocating major reforms in the tax code. The analysis found that those countries with the most progressive tax codes (those that are the exact opposite of a flat tax where everyone regardless of income pays the same rate) had the highest happiness ratings.

Americans want a sustainable and fair economy. But we won’t get one without fundamental financial reforms and a clamp-down on tax dodgers.  And we won’t get that without applying pressure to lawmakers and corporations.  Now that’s a good focus for a protest.