Economy of Degrowth: Theories and Perspectives

Michele Castaldo
Introduction
The concept of growth has always been presented with a positive meaning. In policy making it 
is a means to assure stability, socially desirable effects and accumulation of wealth. In political 
economy, growth is a tool to attract foreing investments, to reach full  employment and break-
even (or surplus) in public budget. In public speechs “growth” is always mentioned as 
something desirable and essential. The success of an economic policy is measured basing on the 
positive effect on GDP , production, consumption and so on. The general tendency  in world 
society is to associate the term growth with other terms like development, well-beiing, success, 
and happiness. In this period of crisis, where crisis  basically means negative growth, many 
countries are facing several social problems like unemployment, crisis of small medium 
entreprises, public debt and so on. This situation has enforced the belief that growth is the pillar 
of a healthy economy without which the system would collapse.
The question that many economists are working on is whether growth can be unlimited in a 
planet which is, with no doubt, not infinite. If the answer to the question is no, the second issue 
is to consider whether the economic system can prescind from the system of growth, i.e. if it 
possible to conceive a different model able to assure equilibrium. The object of this paper is to 
try to answer these questions referring to a new model in which many ideas have been collected 
under the term economy of degrowth. The first chapter presents a whole series of arguments 
which find in the economy of growth the responsible for the modern economic failure and 
which see the crisis as an opportunity to change. The main argument is that the economy of 
massive exploitation has generated several environmental problems and it is necessary to slow 
down the economy. Second chapter illustrates a series of alternatives and reforms in different 
social spheres which can be associated to the slogan “degrowth”. Degrowth consists in a set of 
guidelines which are concerned with different spheres (economic, social, political) but follows a 
common pattern of ideas which support and integrate each others. It is important to consider 
these reforms as a whole because giving up the system of growth requires changes and 
interventions in different contexts.
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The second part of the job is more specific and concentrates in the most important principle of 
degrowth which is relocating. Analyzing economics models and empirical evidences together 
with degrowth supporters' arguments and theories is the aim of third chapter. In 
countertendency with globalization, the purpose is to empower citizens shifting political and 
economical dymanics closer to them. Forth chapter presents some case studies on relocation: 
local food production in north-east Germany, local currency in Bavaria and participatory budget 
in Brazil. The last chapter is dedicated to critics and comments on the theory of degrowth and 
on localization.
Chapter I – The crisis of the economy of growth
1.1 -  The infinite growth
The origin of the society of growth can be found in the rise of bourgeois class (XIV century). 
Since that moment, the common belief of generating more and more surplus started to spread. 
Since XVII century, with the rising of mercantilism, the wealth of a nation was measured basing 
on exportation exceeding importation, i.e. in money instead of goods. The modern concept of 
growth, however, comes from the post-industrial period. Mechanization, assembly line, big 
factories: everything was leading to produce more and more in a shorter time and at a lower 
cost. The boundless production lead to post-industrial crisis in which basically the demand was 
unable to match that huge supply. After the Second World War, European countries knew a 
period of great development, what in France is knew as the Glorious Thirties (1945-1975). The 
optimism and the great expectations toward the system of growth are probably related with 
that experience. The modern crisis, started in 2008, is showing all the social inconveniences of an 
economy of growth with negative growth. Unemployment, public deficit, lack of investments, 
bankrupt of small-medium enterprises, are the result of a system which needs a constant source 
of incrementation in order to reach its equilibrium. The question that rises is: is growth always 
reachable? Or, better, is unlimited growth possible in a limited planet?
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One of the strictest objectors of growth, Serge Latouche, compares our economic system with 
the case of the seaweed. “The seaweed, keeps on occupying space without caring about the 
limits, because apparently the space available is huge. However, a geometric progression of 
factor 2 can occupy 3% of a space in 24 years and the remaining 97% in just 5 years”. Then he 
specifies: “ at the moment we are in the same situation of the seaweed that has occupied just 
48% of the sea but if it doesn't slow down in one year the space will be over”. Briefly, Latouche 
argues that the resources in this planet are limited, thus an unlimited growth is not possible. 
Even thought this statement can sound obvious, it looks like it is not considered. “ I have the 
feeling of being trivial and revolutionary at the same time” (Latouche, 2008, p. 58) he wrote, 
concluding the metaphor of the seaweed.
Perplexities in the idea of an unlimited growth have been raised quite earlier. The first report of 
the Club of Rome in 1972 pointed out that natural resources were going to run out soon. 
Between the supporters of zero growth economy a prominent position is up to Nicholas 
Georgescu-Roegen who tried to create an economic model  without growth: “sustainable 
development is a contradictory expression. It is impossible to grow forever and all the politic 
plans based on this concept are dangerous”
 
(Roegen, 1976 cited in Latouche, 2008 p.28). Roegen 
argues that the idea of sustainable development is just a way to avoid or, in the best case, 
procrastinate the problem. Roegen analyzed that the economic cycle has an entropic nature, that 
is to say that the energies used in that cycle are not re-convertible in the original form. If the 
system doesn’t slow down, a crash will be unavoidable. Serge Latouche, briefly simplifies: “Our 
situation is comparable to a car with no driver, no brakes and no reverse gear that is up to crash 
against the limits of the planet” (Latouche, 2008, p. 5). 
With regard to this discussion, the analysis of Denis and Donella Meadows (2006) in their Limits 
to growth is very significant. By one side, they support Latouche's arguments: “Growth can solve 
some problems but create others. [..] The Earth is finite. Growth of anything physical, including 
human population and its cars and houses and factories, cannot continue forever. [..] There are 
limits to the rate at which humanity can extract resources (crops, grass, wood, fish) and emit 
wastes (greenhouse gases, toxic substances) without exceeding the productive or absorption 
capacities of the world ” (Meadows, 2006, p. 8). On the other side, the authors point out that 
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growth does not need to be denied, instead it should re-conceptualized: “questioning growth 
does not mean denying growth. [..] A sustainable society would be interested in qualitative 
development, not physical expansion. It would use material growth as a considered tool, not a 
perpetual mandate” (Meadows, 2006, p.255). Thus two important points arise: first considering 
growth exclusively as material expansion is a mistake and second growth can become a positive 
tool as long as it is considered as a means for social purposes.
Finding an equilibrium, slowing down the exploitation of Earth planet and limiting growth 
cannot abstract, unfortunately, from regulating population growth. “if an infinite growth is 
incompatible with a finite planet, this stands for democratic growth as well. [..] A society of 
degrowth cannot abstract from a sustainable demographic regime” (Latouche, 2009, p.89). 
Despite it is a delicate issue to treat as it involves religious principles and the right to live, the 
number of individuals in this planet cannot grow endlessly. Many economists do not rely on the 
capacity of the system to find an equilibrium spontaneously without any intervention: 
population will grow well beyond the limits before it starts reducing. David Nicholson-Lord 
explains that improve efficiency and reducing wastes is a very positive approach, but it is vane 
if it is not supported with a control of population growth: “there is no doubt that changes in 
lifestyle are important, but a zero-impact existence is a chimera and the number of individuals in 
the planet is crucial. Andrew Ferguson, member of Optimum Population Trust, making 
researches on ecologic footprints found out that, even if 6 billions Earth's inhabitants had a low-
impact life based on renewable energies we would need 1,8 Earth planets”
1
 (Ferguson, 2004 
cited in Latouche, 2008 p.20). The number of individuals that the planet can sustain is very 
difficult to determine as it is strictly connected to the ecological footprint which differs 
enormously among different countries. Figure 1.1a
2
 shows how many planets would be needed 
if the ecological impact of every individual would be the same of the residents of the country 
indicated. In any case, many experts agree that at the current conditions, population is well 
beyond the limits of the biosphere. Jean Briere, chairman of Demographie et Ecologie explains that 
basing on computations of ecological footprint it is possible to state that the limits of the system 
1
Available on http://populationmatters.org/journal/j41.pdf 
2
Available on http://www.cadoinpiedi.it/2012/08/23/la_terra_e_in_riserva_risorse_finite_il_22_agosto.html 
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Michele Castaldo
have been crossed already in early 60s when Earth population counted 3 billions people.
3
 Figure 1.1a source:  http://www.cadoinpiedi.it/2012   /   
08/23/la_terra_e_in_riserva_risorse_finite_il_22_agosto.html 
The problem is more complicated than it may look like at first sight. The increase in life-
expectancy is rising the average age of the population especially in developed countries. 
Governments oppose to a politic of birth-rationing and instead try to boost proliferation: society 
needs more working people to sustain retirements. However, as Latouche explains, this kind of 
policy is not effective in the long period: sixty years later the situation would not change at all, it 
would instead probably worsen.
1.2 – The problem of measuring development
While “growth” can be interpreted as physical expansion and incrementation of human 
exploitation (purpose of this chapter) but some can mean it as social, cultural, political, ethical 
improvements of humanity, there is no doubt that what GDP measures is the first definition. 
The inadequacy of this measure of performances is not something cropped up with the current 
3
Cit. Latouche, 2008.
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crisis: critics to GDP date back to 50s-60s.  However, many efforts of establishments and 
political authorities concentrate on the increase of aggregate production and because of that the 
topic is still matter of contentions: “despite the huge literature on its inadequacy as a measure of 
economical success, GDP is still the most important barometer of political success” (Martini, 
2003, p.198). Claudio Martini detects the source of the problem in the pressure of statistical 
institutes toward policy makers about GDP performances. “However” he proceeds “we have 
the chance to counterbalance the power of GDP redefining the concept of good governance 
basing on a new, wide range of indicators which measure what is really important for societies” 
(Martini, 2003, p.199).
In 1990, the economist Mahbub ul Haq introduced a new indicator measuring human 
development which was composed by three variables: literacy, life expectancy and GDP per 
capita. Three years later, UN began to use this indicator to evaluate quality of life in national 
States. So, for the first time, GDP was not the sole number took into consideration. However, 
that appears to be not enough. The Human Development Index does not solve many of the 
problems arising by an economy based on production measurement. First, it does not consider 
sustainability, from economical to environmental ones. Second, it completely ignores equity and 
distribution of resources. For these reasons, at the beginning of 2008 French president N. 
Sarkozy decided to institute the Stiglitz commission  to deal with these matters. The analysis of 
the commission on limits of GDP can be summarized in these points:
 - non-market activities
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 are evaluated at the sum of the related costs. 
 - capital depreciation is not considered
 - no importance is attributed to income distribution
- It counts defensive expenditure, i.e. all the expenses sustained to maintain the functioning    of 
society: there is not a direct benefit.
 - It does not take into account household activities
For these reasons GDP is to be considered as a distort measure of economic performances. Thus, 
it needs to be integrated. Anyway, the main problem of this measure is that it doesn't take into 
account many aspects of social life and it is far away from measuring well-being. It is just a 
4
 The notion of non-market activity has to be intended as all the goods and services provided by the public sector 
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measure of quantities, of aggregate production and exchanges, no weight is given to how this 
wealth is used and how products or services are useful for the collectivity. GDP measures 
production of weapons as well as the investment on reconstruction of buildings destroyed by 
natural disasters.  It includes pollution and products sold through marketing persuasion. GDP 
grows with consumerism, with obesity and with sicknesses. Hence, the main issue is not the 
index itself (except for the lacks provided above) but the fact that many other variables have to 
be considered or, rather, GDP is given a wrong interpretation and an excessive importance. 
Actually, there already exist a lot of indicators measuring social, environmental, educational 
performance provided by OECD. But the problem is that the main part of these indicators 
present lacks and imperfections and most of all they are simply indicators, so they are many, 
small, quite insignificant numbers that needs to be combined to construct a significant index. 
For instance, it may be controversial whether the number of personal computer per capita is a 
good indicator of technology or whether the number of newspapers sold could be an estimate 
of people's information. Hence, the main task is to create valid indexes in order to have reliable 
information about real life: “What we measure affects what we do; and if our measurements are 
flawed, decisions may be distorted” (Stiglitz commission 2009 report, p.14).
1.3 - The ecologic debit
The available bio-productive space in this planet is about 12 billion of hectares. That is to say 1,8 
hectares per individual. (Wackernagel, 2005). According to the Californian institute Redefining 
Progress and to WWF, considering the hole consumption of materials and energy and the 
impact of buildings, the average consumption of a human being is 2.2 fertile hectares. 
Furthermore, there are several differences between individuals from different countries: every 
United States citizen exploits an average of 9.6 hectares, Canadian 7.2, European 4.5 (Gadrey, 
2008 cited in Latouche, 2009 p. 38). This means that humanity is absorbing almost 25% of Earth 
regeneration capacity. Figure 1.3
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 shows the date in which the natural resources that Earth can 
generate in a year have been consumed. That date is called the Global overshoot day: the left side 
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Available on http://www.cadoinpiedi.it/2012/08/23/la_terra_e_in_riserva_risorse_finite_il_22_agosto.html 
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