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Towards a postgrowth economics: A viable postgrowth economy without increasing inequality

Periodic Reporting for period 1 - PostGro (Towards a postgrowth economics: A viable postgrowth economy without increasing inequality)

Reporting period: 2020-04-15 to 2022-04-14

GDP growth is declining in industrial economies, and there is increasing evidence that growth may be environmentally unsustainable. But we currently do not have a plan of how to manage a postgrowth economy. This represents a major impediment to formulating policies for how the EU may best pursue its objectives for development, environmental protection, and the elimination of poverty in a future postgrowth economy. Current models show that if growth falls below returns to wealth then inequalities increase. This poses a challenge to managing slow and/or negative growth. Longstanding work also suggests a conflict between an economy with positive interest rates where compounding results in exponentially growing debt, and a real economy that is subject to environmental and resource limits. There is continuing debate over whether our current economic system based on interest-bearing debt can be made viable postgrowth, and evidence that even slowing growth leads to increasing inequality. The projects objectives were to integrate existing theoretical models of viable postgrowth economies with theoretical modelling into how to prevent spiralling inequality and unpayable debts. Since no industrial economy has yet experienced prolonged periods of very slow or negative growth, we illustrate the predictions of these theories using historical case studies. The project has achieved four objectives: to identify the parameters in which a postgrowth economy is viable; to identify the parameters in which continually increasing inequality can also avoided; to identify policies that avoid or mitigate spiralling debts in ten historical case studies; and to draw on these results to evaluate policies for producing a postgrowth economy that is both viable and avoids inexorably increasing inequality and debt.
We performed an analysis of the existing models and verbal theoretical arguments to establish the conditions in which they predict that a viable economy can be made compatible with zero and negative growth. This included a comprehensive and critical review of the literature to compile and assess the models that examine the conditions in which an economic system is found to be viable postgrowth, and to categorise them in terms of their theoretical frameworks, the modellers stated intentions, and their outcomes. This culminated in the construction of an integrated model that identifies the conditions in which these combined analyses suggest an economic system that is both viable and in which the continual increase of inequality is prevented; correspondingly, it also defines those parameters within which a postgrowth economic system will not be viable, and the conditions in which a postgrowth inequality is predicted to increase. We published our theoretical findings in the Review of Political Economy, presenting a simple framework identifying three types of policies for equality in postgrowth economies. One proposes redistributing wealth so that declining growth does not lead to rising inequality. A second strategy relies on decreasing rates of savings, through more spending or higher taxes on wealth. The third strategy relies on decreasing rates of returns to wealth, either as a deliberate policy goal or as an incidental result of measures that provide a minimum standard of living for the worst off. Our framework yields two main findings. First, in the absence of complete wealth equality, any strategy to prevent greater income inequality must reduce the income of the wealthy. Second, shifting to industries with a lower elasticity of substitution from capital to labour may prevent rising inequality for low-growth economies. We list a wide variety of specific policies that are already applied to some extent in various countries and which, in conjunction, could help prevent rising income inequality in a future non-growing economy. We published our empirical findings in Ecological Economics. For that publication, we conducted analysis of unpayable debts in slow- and non-growing economies compiling literature on ten different historical cases drawn from across Eurasia, Oceania, and the Americas, their dates ranging from bronze age societies of the 3rd millennium BCE up to the 19th century CE when the period of modern economic growth was just beginning. We found four main solutions to the problem of unpayable debts in historical economies: cancelling debts, banning the charging of interest, banning the compounding of interest, and various other limits to the size or length of loans. In none of our cases was a condition of zero net saving imposed upon the population; the condition which renders positive rates of interest compatible with zero growth in recent theoretical models. Though no website has been developed for the project, an ebook, a podcast, and a video explainer were produced to communicate the results to the general public.
All research for this project has been successfully published in peer reviewed journals. Our theoretical publication is the first to integrate and evaluate existing models of equality policies for a future slow, zero, or negatively growing economy, and to compare a range of strategies including debt cancellations, a global tax on wealth, the elimination of returns to wealth altogether, decreasing the savings rate of the wealthy, introducing stronger labour protections and more labour intensive industries, establishing a basic income, setting up public employment programs such as a Job Guarantee, increasing worker ownership, and creating incentives for workers to increase their holdings of more diversified shareholding portfolio. The paper has been cited seven times to date, including in peer reviewed publications by two influential scholars who have built on our framework and critique, and is on reading lists for graduate students at two universities. Our more recently published empirical paper is cited in two journal articles and a working paper, the latter again by influential scholars. It has innovated the use of historical case studies in postgrowth research. The wider societal impact of the project has been to further debates into which policy packages might be the most promising for managing a future postgrowth economy.