The role of consumption in a sustainable economic recovery

Economic thinking needs to adapt to the new realities of climate change

Dan Bailey
Dan Bailey

Five years on from the global financial crash, the (often undefended) assumption that economic growth will eventually and ‘naturally’ return remains an implicit and prominent facet of current political discourse. Yet, in light of a discredited Anglo-Liberal growth model, there is great uncertainty as to what dynamics and institutions the next wave of growth will be based upon. There is also considerable doubt that the mechanisms by which this prosperity will be generated will be both environmentally and economically sustainable.

In deliberating over the framework of a sustainable economic recovery through the forums of SPERI, we should take into consideration the ramifications of de-carbonisation on the traditional economic strategies of capital accumulation and perhaps even GDP growth itself.

As we know, mainstream economic debate in Britain is centred upon the contending antidotes to the crisis of austerity and Keynesianism. On the one hand, there are those, mainly located within or in support of the Coalition Government, who believe that growth is best generated through supply-side methods rooted in a neoliberal philosophy of unleashing the private sector via state retrenchment and deregulation. On the other hand, there are quasi-Keynesian progressives who believe in a more expansionary fiscal policy intended to stimulate domestic demand.

Yet there is a dimension of the current crisis that calls into question both of these economic approaches and, perhaps because of this, has been marginalised during these five years. It is the elephant in the room: climate change.

Britain has committed itself to legally-binding carbon reduction targets to help offset the unsustainable usage of the planet’s bio-capacity. Nicholas Stern, in his seminal report, stated that if carbon output were to continue at current levels then the processes of climate change may frustrate economic efficiency going forward. This could lead, he suggested, to a permanent reduction in global GDP of up to 20%.  Acquiescing and thus reinforcing the marginalisation of the environment in political economy discourse is therefore surely not an option in this key moment of reconstruction.

However, if we do recognise climate change as one of the principal challenges facing the global economy, there are significant ramifications for those economic approaches designed to promote ever-higher levels of consumption.

The carbon-intensive character of modern consumer goods has led many to declare that it is impossible significantly to mitigate the worst excesses of environmental degradation without altering our consumption patterns.  Even the House of Commons Energy and Climate Change Parliamentary Select Committee has argued that Britain has to ‘address its consumption if it is to make an effective contribution to a global reduction of greenhouse gas emissions’. Yet, as we have seen, raising consumer spending remains central to the logic of both mainstream economic approaches.

When climate change is considered as part of the policy response to current economic turmoil, it is clear that consumption holds a paradoxical role.  It is both the obvious remedy for our economic troubles, and yet it also sits at the heart of processes of anthropogenic environmental degradation.

One approach immediately comes up when climate change is highlighted as a prominent challenge to modern political economy and an attempt is made to harmonise this tension between the environmental and the economic.  This is the notion of ‘green growth’. The idea that we can ‘green’ the ‘shoots of recovery’ through investment in energy and infrastructure projects has become the primary hope of those wanting to maintain the status quo of our consumerist lifestyle.

Unfortunately, as Tim Jackson has eloquently noted, achieving growth without increasing carbon output has no historical precedent and, thus far, decoupling growth from carbon on the scale required has failed to materialise. Any improvement in carbon efficiency has been entirely overshadowed by the effects of further growth.

Britain has, to date, only achieved such impressive levels of carbon reduction through outsourcing production to countries such as China. As Dieter Helm highlights, ‘between 1990 and 2005, carbon production [in Britain] fell an impressive 15%, but its carbon consumption – its real carbon footprint – went up 19%’.  Unsustainable consumption has consequently overwhelmed attempts to mitigate environmental degradation.

If, then, we are to take the threat of climate change seriously, greater analytical attention needs to be given to re-orienting the economy around more environmentally sustainable and less consumption-centric mechanisms of generating prosperity.

In the long run, consumption will have to cease to be the central driver of capital accumulation in the post-industrial world. This has implications for export-led designs for recovery, as well as for strategies focused on stimulating consumerism domestically. The consequence of this, however, may be that we are not able to stimulate GDP growth at all.

It is certainly possible that future industrial innovations will make low-carbon waves of economic growth possible. But, until we know that they can, we may need to be far more discriminating in our nurturing of further consumption. The central question should perhaps be: what type of demand is conducive to an economic recovery which is sustainable?

This means that academic political economists need to be theorising more intensely the implications of an economy based upon a more nuanced view of demand.  In all probability, this means sustaining far lower levels of consumption and, quite possibly, stagnant levels of economic growth (with all the consequences this carries for industry, jobs and the tax base of the welfare state).

The corollary of this argument is simple but striking: to appropriate a phrase from Hall and Soskice, it’s time to engage with varieties of post-growth capitalism.

Dan Bailey
Dan Bailey

About the guest author

Daniel Bailey, PhD student at the University of Sheffield