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The Degrowth Fallacy

It has long been known that social outcomes in terms of poverty and human development vary across countries at given mean income, such as measured by GDP per capita. An early demonstration of this point is found in Amartya Sen’s 1981 paper “Public Action and the Quality of Life in Developing Countries” (Oxford Bulletin of Economics and Statistics 43(4): 287-319). Sen pointed to countries such as Sri Lanka that had used social policies to attain the social indicators (such as life expectancy) that are more typical of high-income countries. Costa Rica is another example.

There are hazards in inferring that social policies explain why some countries have better social outcomes at given mean income. This relates to a general class of problems in inferring “social efficiency” from regressions of outcomes on mean income, as explained in my paper “On Measuring Aggregate Social Efficiency” (Economic Development and Cultural Change 53:.273-92). However, let me put those problems to one side here, and assume that good social policies help explain cases such as Sri Lanka and Costa Rica.

Does this imply that rich countries can maintain their better social outcomes (in terms of health, education, absolute poverty) at a lower mean income? That is the claim made by the Degrowth Movement, which has argued that the way to improve environmental outcomes (and, in particular, to reach targets for carbon emissions) is to contract aggregate economic activity. Clearly, this would meet with near universal opposition if it was thought that social outcomes would worsen as a result. That is where the experience of countries such as Sri Lanka and Costa Rica becomes so important in the eyes of the Degrowth Movement, which points to those countries to support their claim that degrowth need not have a social cost.

The problem in this argument is that better social outcomes are not only attributable to better social policies. Higher average incomes have also played a role, both directly (through poor people’s greater command over commodities that matter to those outcomes) and indirectly (by creating the resource availability needed to finance better social policies). (Sudhir Anand and I elaborate this argument in our paper, “Human Development in Poor Countries,” Journal of Economic Perspectives 7(Winter 1993): 133-150.)

There lies the Degrowth Fallacy: The fact that some countries have better social outcomes at a given level of mean income does not imply that richer countries can attain the same social outcomes at lower mean income.

In an example of the Degrowth Fallacy, in a radio interview (posted today) Jason Hickel (introduced as an economist and anthropologist at the London School of Economics) points to Costa Rica to support his claim that rich countries can maintain their social outcomes at lower mean income. Yes, Costa Rica has had good social and environmental policies over many decades, and other countries can learn from that experience. However, the country did this in combination with economic growth. Indeed, mean income has tripled in real terms since 1960, and the average growth rate has been above average for Latin America (World Bank). By combining social policies with policies that directly supported economic growth, Costa Rica was able to attain over time good social outcomes for a country at its level of mean income. Costa Rica is definitely not an example of how good social outcomes are possible without economic growth.

The degrowth advocates have also disputed claims that social outcomes tend to improve with growth. For example, Item 3 of the Degrowth Manifesto says that “Global economic growth has not succeeded in reducing poverty.” I will grant that there are cases in which economic growth has by-passed poor people; there is no reason why growth will inevitably come with lower poverty or better outcomes in terms of human development. However, the bulk of country experiences have indicated that better social outcomes (including poverty reduction) generally come side-by-side with economic growth. In marked contrast to the Degrowth Manifesto, economic growth has succeeded in reducing poverty. Also, lower poverty has helped promote economic growth. (On all this see Chapter 8 of the Economics of Poverty.)

Of course, this does not mean that growth on its own, without good social policies, will improve social outcomes. There are also examples of countries that have squandered much of the social welfare gain from economic growth from this perspective—the gains have been largely captured by those who are already well-off, with modest benefit to the broader society. The US today is an example.

As Hickel also argues, many social outcomes were better in the US in the 1970s, when mean income was roughly half what it is today. But one must seriously doubt that halving today’s average income in the US will restore the social outcomes of 50 years ago.


4 thoughts on “The Degrowth Fallacy

  1. “The problem in this argument is that better social outcomes are not only attributable to better social policies. ”

    -No one argues this.

    “Costa Rica is definitely not an example of how good social outcomes are possible without economic growth.”

    -No one says it is.

    “But one must seriously doubt that halving today’s average income in the US will restore the social outcomes of 50 years ago.”

    -No one is asserting this.

    You need to try harder at making honest arguments and listen to what people in the de-growth movement are saying.

    Posted by 35mm sprockets (@ddmcguire) | December 25, 2017, 3:21 pm
    • Thanks for your comment. There is nothing dishonest about my claims, and I am listening to the movement. Indeed, it was literally listening to that radio interview with Jason Hickel that promoted my post.

      All I am really saying is that the Degrowth Movement will not convince rich countries that they can maintain their social outcomes with lower mean income by pointing to examples such as Costa Rica. You need to make much better arguments than that.

      The DM will not get far with the faulty logic of these dubious cross-country comparisons and demonstrably deceptive claims such as in Item 3 of the “Degrowth Manifesto.” You will not be taken seriously that way.

      Posted by Martin Ravallion | December 25, 2017, 3:48 pm
  2. If you are honest as you claim, you should make an effort to read “The Divide” by your opponent, Jason Hickel. In my opinion he there presents a very convincing description of the historical and structural reasons behind global poverty, where the world bank plays a false and destructive role. And he also adresses the problem of global warming, the ultimate proof of the current economic system’s incapability to solve todays big world problems. He also has answered your critique in this post: . It would be interesting to follow a continuing discussion!

    Posted by Jens Rundberg | March 18, 2018, 12:11 pm
    • Jens, thanks for your comment. I had promised myself to get back to this topic; like everyone, I have to prioritize among competing tasks! Rest assured, I have a copy of Jason’s book, and I have read some of it. Nothing has so far has led me to question what I say in this post.

      There is now a large body of evidence on the positive role that economic growth has played in overall poverty reduction in the developing world, and can play in the future; if you have not yet read Chapter 8 of EOP, to which this website is devoted, I humbly recommend it. Claims such as “Global economic growth has not succeeded in reducing poverty” (to quote the Degrowth Manifesto) fall flat in the light of the evidence.

      So there is likely to be a trade-off between poverty reduction and reducing carbon emissions and other pollutants. We cannot ignore this tradeoff, though we should also look for ways in which our efforts can improve the terms of the tradeoff, notably through new technologies and smarter policies. I think the World Bank has played a positive role in these respects, as well as in promoting global poverty reduction. I grant that the Bank could do better, but I am sorry you and Jason have such a negative view of the institution.

      In short, the tradeoff is likely to be there, and there are hard choices ahead. There is much that people like us, who care about both poverty reduction and the environment, can do to help without agreeing on the dubious claims made by this “Degrowth Movement” or their strategy for development policy.


      Posted by Martin Ravallion | March 18, 2018, 1:06 pm

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