speri.comment: the political economy blog

Inequality Redux II

The ‘trilemma’ of equality, accumulation and ecology

Martin Craig, Research Fellow at SPERI

Martin CraigThe view that inequality is a barrier to economic performance, rather than a ‘social justice issue’ rendered moot by economic growth, has returned to public debate (if not, alas, the party-political agenda).  A growing chorus of voices considers greater equality to be a pre-condition of a more stable growth model, as this blog series attests.  This debate is, however, more complicated for environmentalist perspectives that hold economic growth irreconcilable with ecological sustainability.  In this post I examine the proposal for a ‘steady state’ market economy put forward by some of these ‘growth sceptics’ and point out a ‘trilemma’ between its entwined goals of profit-driven production, ecological healing and greater equality.

The connection of greater equality to improved economic performance, especially where it relates to enhanced capacity for economic growth, poses a unique problem for growth sceptical environmentalist perspectives: they deem the prospect of an improved growth model to represent as great a problem as austerity and inequality.  Accordingly, they advocate ‘degrowth’ of economies to an ecologically sustainable ‘steady state’ of physical throughput, with concomitant constraints on GDP and transformations of consumption, production and employment norms.

Such perspectives differ on the form of political economy implied by the vision.  A relatively conservative strand, common among ecological economists and environmentalist political parties, argues that it is compatible with the market coordination of production, providing that levels of inequality are managed and scarce resources (including the atmosphere’s ‘carrying capacity’) are rationed at an ecologically sustainable level.  They envision a market economy that is neither stagnant nor expanding, and within which profit-driven activity, greater equality and a healing ecology are reconciled.  With prominent climate scientists attributing massive risks to further economic growth, it is timely to assess this vision of a new macroeconomics and its implications for equality.

The growth sceptic’s case for greater equality addresses a tension arising from the competitive profit-driven behaviours of producers.  Because physical output cannot be expanded beyond exogenously imposed limits in this vision, firms are not necessarily able to expand production to capture economies of scale.  Consequently, cost savings become central to competition.  Investments in resource productivity (that is, investments to allow more units of output to be produced from the same amount of rationed resources) are one possibility.  Equally likely, however, is investment in labour-saving equipment, or simple wage repression.  Such strategies would undermine consumer demand, while the resulting unemployment and loss of income could render any such project politically unviable.

It’s here that greater income equality becomes integral to the vision.  The idea of a ‘basic income’ – a non-means-tested guaranteed minimum income paid to all citizens – is a prominent policy advocated to this end.  It compensates citizens for decreasing employment opportunities and ensures sufficient demand to purchase the economy’s product.  Meanwhile, the opportunities for creative self-fulfilment gained from the economy’s declining labour requirements are celebrated in their own right.

Not withstanding the Green Party’s recent equivocation on its proposal for a basic income (the ‘citizen’s income’), the idea is gaining prominence.  It finds intellectual support from across the political spectrum, uniting social democrats with the followers of Milton Friedman.  Yet, for growth sceptics, the policy exposes a ‘trilemma’ at the heart of their macroeconomic vision: put simply, one can have capital accumulation (which is implied by the market coordination of production), greater equality and a healing ecology, but in a vision that holds economic growth irreconcilable with ecology one cannot have all three at the same time.

What is not always acknowledged is that for the basic income to fulfil the growth sceptic’s purpose it implies a maximum income as well.  This is because of the need for producers and financiers to maintain a profitable return on capital.  Where such a return cannot be realised by unequally dividing up the proceeds of economic growth, profit becomes a zero-sum game between employees and owners (as has been seen during the recent experiment in austerity). Insofar as this upwardly redistributive dynamic is not arrested, ecology is pursued at the expense of equality.  Indeed, the growing inequality between owners and employees would be paralleled by a new form of inequality: between those able to compete in increasingly competitive labour markets and the growing number of citizens for whom the basic income would be their only income.

Preventing such a dynamic requires a point in relation to the basic income above which the incomes of individuals and firms (whether derived from high-earning employment or from assets and investments) are redistributed.  Proponents maintain that the resulting ‘bounded inequality’ would still provide a sufficient incentive for the market coordination of production.  Leaving aside the plausibility of this claim, we should note that this apparent resolution of equality and ecology has come about at the expense of capital accumulation: there is no compounding rate of profit return on investments in this vision, simply a static higher income band for those able and willing to coordinate production.  In other words, this vision takes us into the terrain of a post-capitalist economy, a fact about which its academic advocates are coy and its nominal parliamentary advocates are yet to comment.

At this point a tempting manoeuvre for environmentalists is to endorse so-called ‘green growth’.  One might argue that supply-side reforms promoting ecologically benign forms of production could reconcile accumulation, greater equality and ecology by allowing owners and employees to take a more equal share of an expanding ‘green’ output.  Yet this is precisely the move that the growth sceptic cannot make.  Why not?  Because, if ecology is necessarily opposed to physical economic growth (and if GDP growth remains tightly coupled to physical resource usage), this is to pursue capital accumulation and equality at the expense of ecology.

It’s unlikely that the Green Party’s equivocating policy statements reflect this trilemma, yet there are certain parallels with the logic that it imposes on growth sceptics engaged in the formal political process.  To put it mildly, the rapid transition to a post-capitalist economy is an ambitious undertaking.  Yet, without such a transition, parties professing growth scepticism will eventually have to re-order their political priorities: either loosening their commitment to equality so as to privilege ecology and capital accumulation or, more likely, revising their growth scepticism.

Where does this leave the debate on equality for committed growth sceptics?  Like the architects of austerity, those implementing such an agenda would prioritise the interests of one class at the expense of another, but unlike austerity’s advocates they are unable to call this a temporary state of affairs.  The confrontation with powerful interests entailed by a resolution of the trilemma in favour of equality and ecology would, as Naomi Klein has recently underlined, surely require the mobilisation of a mass movement.  This is no doubt a tall order, but environmentalists are no strangers to such odds.  The promise of expanding leisure-time bound up in the notion of a basic income could be a very useful place to begin such a project.

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Categories: Climate change, Inequality, SPERI Comment, Sustainability | Leave a comment

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