The week of July 1, 2024: Degrowth, still growing, the administrative state, France, labor, antitrust, and much, much more.
The week of July 1, 2024: Degrowth, still growing, the administrative state, France, labor, antitrust, and much, much more.
Writing in a recent Capital Letter about degrowth — an ideology revolving around the reorientation of the global (particularly in richer parts of the world) economy away from the pursuit of growth — I wanted to stress that this is not an outlier viewpoint shared only by the straitjacketed, which could be safely ignored.
And so I modestly repeated a point I had made in an earlier article on degrowth:
[D]egrowth has made inroads into the thinking of a significant cohort of scientists, economists, NGOs, activists, and writers. Signs of interest in it, if only at the periphery, can be detected in both bureaucratic and political circles, including the European Union and the United Nation’s Intergovernmental Panel on Climate Change…[F]ormer Obama energy secretary (and Nobel laureate) Steven Chu…has argued for “an economy based on no growth or even shrinking growth.”
On July 2, the Guardian published an article by Olivier De Schutter. He is a Belgian academic, the UN Special Rapporteur on extreme poverty and human rights. He wants us to “shift our focus from growth to humanity.”
De Schutter stood (unsuccessfully) as a candidate for Belgium’s Ecolo party (the French-speaking green party, the equivalent of the Flemish Groen) in the recent elections to the European Union parliament. Like Kohei Saito, the “degrowth communist” whose Slow Down: The Degrowth Manifesto I discussed in that Capital Letter, Ecolo wants to “improve” on that old-fashioned one person-one-vote democracy. One of the party’s proposals in this area (another involves tighter censorship) is the introduction of citizen’s assemblies’ (which would include resident non-citizens. Its members would be chosen by lot and guided by “experts.”
This is an idea that Saito supports, as does, among others, Extinction Rebellion, an organization of climate fundamentalists with little obvious fondness for democracy, which makes sense: Climate fundamentalism and democracy are not reconcilable. In the highly unlikely event that any electorate ever opted for it, the ensuing pauperization would quickly lead to political revolt, a rejection that a regime based on the assumption that the alternative to its dogma is environmental apocalypse could never accept.
De Schutter’s latest book is The Poverty of Growth. Its publisher, Pluto Press describes themselves as “independent publisher of radical, left‐wing non‐fiction books.” That Pluto is publishing De Schutter is another reminder of the way that red and green are coming together.
Pluto:
How do we combat poverty and rising inequality? In our age of impending climate catastrophe, the conventional wisdom around GDP and economic growth is no longer fit for purpose; a rising tide sinks all boats.
Oliver De Schutter argues that we must rethink the fight against poverty. The quest for economic growth not only clashes with the need to remain within planetary boundaries, but in fact creates the very social exclusion it is intended to cure: deteriorating human rights, widening the gap between the richest and the poorest, and merely modernising poverty without eliminating it.
The Poverty of Growth makes a clarion call to social movements, trade unions and environmental NGOs alike to forge a new pathway towards a ‘post-growth’ development, and a narrative of progress that is no longer orientated around wealth and profit.
The reference to “planetary boundaries” is worth noting, as it is an idea that is fundamental to degrowth thinking. As I explained in that earlier Capital Letter, these “boundaries,” an idea first systematized by a team of scientists in 2009, are not confined to the quantity of greenhouse gases in the atmosphere, but:
[I]ncluded, for doomsayers, a satisfying list of constraints that must be respected, essentially for all time. This is an argument that could only convince an audience so blinkered by apocalypticism, guilt or self-righteousness that history’s lessons about our species’ extraordinary ingenuity are ignored.
They are a prescription for permanent authoritarian control.
The foreword to The Poverty of Growth was written by Kate Raworth. She is the author of Doughnut Economics: Seven Ways to Think Like a 21st Century Economist and a Senior Associate at Oxford University’s Environmental Change Institute. The University of York, KU Leuven, and Business School Lausanne have awarded her honorary doctorates. Even though Raworth describes herself as a “renegade economist,” her job(s), her honors, and the success she has had with Doughnut Economics show her to be far from a fringe figure. She is also a member of the Club of Rome, the organization that in 1972, issued The Limits to Growth, one of the seminal works from the eco-panic of that era. Its authors politely conceded that there was “ample evidence of mankind’s ingenuity,” but they were either unwilling or unable to grasp its significance.
I wrote more about this “club” in my original article on degrowth:
The authors of The Limits to Growth thought that then-current growth trends in population, industrialization, pollution, and resource depletion would lead to disaster “within the next hundred years.” But these trends could be “altered” by a “great transition” (talk of a “great reset” was still decades away) from “growth to global equilibrium,” a state “of ecological and economic stability . . . sustainable far into the future”…Such an economy would ensure that “the basic material needs of each person on earth” were satisfied and that “each person” had “an equal opportunity to realize his individual human potential” — if, presumably, he did not aim too high. This economy would naturally involve a bigger, more intrusive state. Certain “human freedoms, such as producing unlimited numbers of children or consuming uncontrolled amounts of resources,” would have to go.
Raworth also serves on the World Health Organisation Council on the Economics of Health for All. Other members include fashionable command-and-control economist Mariana Mazzucato and Stephanie Kelton of modern monetary theory infamy.
And what are doughnut economics?
Well, here’s an encomium from Time magazine’s Ciara Nugent, published in January 2021.
Some extracts:
In April 2020, during the first wave of COVID-19, Amsterdam’s city government announced it would recover from the crisis, and avoid future ones, by embracing the theory of “doughnut economics.” Laid out by British economist Kate Raworth in a 2017 book, the theory argues that 20th century economic thinking is not equipped to deal with the 21st century reality of a planet teetering on the edge of climate breakdown. Instead of equating a growing GDP with a successful society, our goal should be to fit all of human life into what Raworth calls the “sweet spot” between the “social foundation,” where everyone has what they need to live a good life, and the “environmental ceiling.” By and large, people in rich countries are living above the environmental ceiling. Those in poorer countries often fall below the social foundation. The space in between: that’s the doughnut.
I ended the Capital Letter on degrowth on the topic of planetary boundaries, concluding as follows:
This is not to deny — to use an unfortunate word — that scientists defining planetary boundaries are focused on challenges that should be taken seriously (scientific reality is what it is), but it is to disagree with the conclusions that humanity’s only option is to retreat into degrowth. We ought to be able to do better than that, and, given the opportunity, there’s a very good chance that we will.
Doughnut economics would almost certainly deny humanity that chance.
According to Time’s Nugent, other cities, including Copenhagen, decided to follow Amsterdam’s lead. Other doughnuts fans included Sir David Attenborough, a wildlife documentary-maker turned seer, and, with dreary predictability, Pope Francis, a left-wing Peronist (more or less) and a long-term enemy of prosperity.
When Raworth arrived at Oxford in 1990 to study economics she found “she was learning about ideas from decades and sometimes centuries ago: supply and demand, efficiency, rationality, and economic growth as the ultimate goal.” Good concepts all, but Raworth was drawn, it seems, to shamanistic junk:
The concepts of the 20th century emerged from an era in which humanity saw itself as separated from the web of life.
What the “web of life” did, for the most part, was to make sure that, if we made it past childhood, we didn’t hang around for too long. The great achievement of humanity over the millennia — and particularly since the industrial revolution — has been to allow us to get away from dependence on “nature.” The results have been, like any human enterprise, flawed, but also astoundingly successful.
Reading more of Nugent’s account the collision, once again, between degrowth (or ideologies adjacent to it) and democracy once again comes into view:
The theory doesn’t lay out specific policies or goals for countries. It requires stakeholders to decide what benchmarks would bring them inside the doughnut—emission limits, for example, or an end to homelessness.
When the word “stakeholder” makes an appearance, democrats, like shareholders, should be on alert. Just as stakeholder capitalism is the antithesis of shareholder rights, so stakeholderism, an ersatz, top-down version of civil society, is too closely linked to the authoritarian communitarianism of fascism for comfort.
Nugent:
Raworth argues that the goal of getting “into the doughnut” should replace governments’ and economists’ pursuit of never-ending GDP growth.
Again, notice the default to the top-down. GDP is something for governments and economists, not individual effort. If governments and economists want to encourage GDP growth, the best thing that they can do is, generally, to get out of the way. That’s not something Raworth would welcome.
Nugent:
Not only is the primacy of GDP overinflated when we now have many other data sets to measure economic and social well-being, [Raworth] says, but also, endless growth powered by natural resources and fossil fuels will inevitably push the earth beyond its limits. “When we think in terms of health, and we think of something that tries to grow endlessly within our bodies, we recognize that immediately: that would be a cancer.”
That Raworth can compare the economic growth that has made possible the longer lives and greater health of so many billions of people to cancer is … quite something. And GDP growth is a good, relatively objective way of measuring economic progress and one, moreover, that correlates well with human flourishing.
To be fair, like many in the degrowth world, Raworth doesn’t oppose all growth.
Nugent:
In her book, Raworth acknowledges that for low- and middle-income countries to climb above the doughnut’s social foundation, “significant GDP growth is very much needed.” But that economic growth needs to be viewed as a means to reach social goals within ecological limits, she says, and not as an indicator of success in itself, or a goal for rich countries. In a doughnut world, the economy would sometimes be growing and sometimes shrinking.
But the growth that Raworth would allow must be within “ecological limits.” These will, in all probability, be set according to standards rather less scientific than their proponents would have the guillible believe.
In an article from 2017 for — surprise — the World Economic Forum (“Davos”), Raworth cites Thomas Piketty, author of Capital in the 21st Century, briefly the favorite unread economist for Gutmenschen on either side of the Atlantic, another sign of the way in which the ideas of the left and the ideas of environmental fundamentalists are merging. Perhaps some smarter leftists have realized that “saving the planet” is a more effective recruiting tool than the dictatorship of the proletariat.
Like degrowth communist Saito (who cites her favorably), Raworth is taken with the premodern idea of “the commons,” writing that:
Instead of focusing foremost on income, 21st-century economists will seek to redistribute the sources of wealth too – especially the wealth that lies in controlling land and resources, in controlling money creation, and in owning enterprise, technology and knowledge. And instead of turning solely to the market and state for solutions, they will harness the power of the commons to make it happen.
But her “solution” would be unenforceable without the coercive power of the state behind it.
Among those who may not have too much of a role to play in the doughnut are shareholders. Raworth writes:
[W]hat business design models – such as cooperatives and employee-owned companies – can best ensure that committed workers, not fickle shareholders, reap a far greater share of the value that they help to generate?
Fickle, selfish shareholders, just interested in the bottom line. Monsters.
But to return to Olivier De Schutter: In his article for the Guardian — which is where this piece began, a long, long time ago — he uses the boogeyman of “inequality” to take people’s minds of what his policies will involve. He ignores the immense contribution that growth has made in the reduction of global poverty. While still more needs doing in this area, throwing sand in the gears of the engines he disdains — capital and profit — will do nothing to help.
Naturally De Schutter frets that “the endless quest for growth at all costs, and the escalating use of the natural resources it demands, is pushing our planet way beyond its limits.” Indeed — wait for it — “Six of the nine ‘planetary boundaries’ — Earth’s life-support systems — have already been crossed.” If climate apocalypticism does not reorient the politics of the West in the direction that the greens would like, expect to hear a lot, lot more about these “boundaries.”
De Schutter wants a “human rights economy,” run presumably by the likes of him, that can (supposedly) “deliver for people and the planet because it shifts our focus from growth to humanity — grounding the purpose of the economy in fundamental, universal human values.” Presumably the technocrats in charge will decide what those “universal human values” might be.
“A growing movement,” writes De Schutter, “is rallying against our growth-driven economic model: climate activists, workers and trade unions, scientists and academics, young people, environmental and human rights defenders, Indigenous peoples, progressive economists, and activists fighting inequality, gender disparities and colonialism…”
“Stakeholders” all.
Early this month De Schutter, in his role as a U.N. Special Rapporteur, released a report he had written for the U.N.’s Human Rights Council (current members include China, Cuba, Eritrea, Somalia, Sudan and Vietnam).
On the report’s release, he commented that:
“For decades we have been following the same, tired recipe: grow the economy first, then use the wealth to combat poverty. This has served up an unpalatable dish: a world on the brink of climate collapse in which a tiny elite possesses an outrageous fortune while hundreds of millions of people wake up every day to the horrors of extreme poverty.”
Once again, note how this member of one elite focuses attention on the “outrageous fortune” enjoyed by some members of another elite. That’s designed to poison understanding of the success of the growth model, but also to distract attention from the way that his arguments provide cover for a technocratic power grab that would impoverish rather than enrich.
De Schutter’s report covers familiar ground. Growth is finite. The hegemony of “growthism” should be challenged. Wealthier “countries have grown far beyond what is necessary to allow people to flourish; they have become obese.” Who decides what is “necessary?” I think we know.
De Schutter:
Ensuring well-being as grounded in the fulfilment of human rights cannot be confused with the satisfaction of limitless desires for more, manufactured by companies’ marketing strategies and fuelled by status competition and the search for “positional goods.”
So once again we are back to the argument, seen also in Saito’s work, that humans, weak creatures that they are, have been gulled into buying goods that they don’t really need. Like Saito, De Schutter would ban advertising. It’s not a great leap from banning materials designed to stop gullible humans from buying the wrong goods to banning materials that might lead them to think the wrong thoughts.
Instead, a human rights-based norm of sufficiency should replace unrealistic expectations grounded in consumer sovereignty.
This won’t be popular. Steering “societies away from the search for growth” will, De Schutter admits, “be met with resistance as long as people equate economic growth with progress and improved well-being.” Democracy will have to be “strengthened.” He mentions “participatory forms of democracy.” A footnote points to, yes, citizen assemblies.
But even if a “strengthened” democracy can be manipulated enough to agree to the redirected economy that De Schutter would like to see, consent will not last for long in the unnecessarily drab, unnecessarily constrained existence that hobbled economy would provide. At some point, there would have to be a choice between degrowth and democracy.
De Schutter recognizes that financing the transition he has in mind won’t be cheap, especially as this must be done “without relying on growth, and in a macroeconomic environment that will gradually abandon its focus on increasing the value of total output.” Part of the answer will be a massive increase in capital taxation, including a wealth tax. What happens, I wonder, when the capital runs out?
At the end of his article in The Guardian, De Schutter writes that world leaders will be gathering for “the Summit of the Future in September – a UN initiative that aims to forge a global consensus around what our future should look like”, a post-democratic summit of which you have probably been unaware (well I was anyway). In his report, De Schutter writes that he would like “the transition to a post-growth development trajectory, focused on the realization of human rights rather than on an increase in the aggregate levels of production and consumption, [to] be explicitly mentioned in A Pact for the Future.”
You may not have plans for degrowth, but degrowth has plans for you.
The Capital Record
We released the latest of our series of podcasts, the Capital Record. Follow the link to see how to subscribe (it’s free!). The Capital Record, which appears weekly, makes use of another medium to deliver Capital Matters’ defense of free markets. Financier and National Review Institute trustee, David L. Bahnsen hosts discussions on economics and finance in this National Review Capital Matters podcast, sponsored by the National Review Institute. Episodes feature interviews with the nation’s top business leaders, entrepreneurs, investment professionals, and financial commentators.
In the 177th episode, David is joined by Andrew Crapuchettes, CEO and founder of RedBalloon.work, the leading job search and recruitment platform in the country for employers and employees who believe that — wait for it — an employee’s merit and ability are primary. They talk about the role DEI, ESG, and the worst of them all, HR, is having in today’s job market. In fact, they even talk a little about today’s job market. This is an episode for all who believe work is the verb of economics!
Capital Writing
As part of a project for Capital Matters called Capital Writing, Dominic Pino interviews authors of economics books for the National Review Institute’s YouTube channel. This time, he talked with Scott Hodge of the Tax Foundation about his book Taxocracy: What You Don’t Know about Taxes & How They Rule Your Daily Life. You can find an edited transcript of a few key parts of their conversation as well as the full video of our interview here.
The Capital Matters week that was . . .
Labor
The leadership of Teamsters has maintained far-left values, even as its members have drifted right. In 2016, 43 percent of union households voted for Donald Trump. GOP leaders, including Trump, understandably want to win even more union voters in 2024. Some, like Senator Josh Hawley (R., Mo.), have even turned their back on Republican priorities like right-to-work laws.
But there’s a simpler — and more principled — way to win union voters.
Republicans should appeal directly to union members with commonsense policies.
Working-class Americans are among the hardest hit by Bidenomics and its painful inflation. Republicans should reach them with policies that will reduce the cost of living and increase job opportunities.
France
As I mentioned the other day, France has a debt/GDP ratio of 110 percent and is running a budget deficit of 5 percent, awkward numbers made more awkward still by the fact that France’s currency is the euro, a “foreign” currency, meaning that, a wrinkle or two aside, it cannot simply print more money to pay its debt. Some have been talking about this triggering a(nother) eurozone crisis. I don’t think so, but it may be that financial constraints (as in the case of Mitterrand’s first term) will act as a brake…
The Administrative State
Imagine that you have run afoul of some federal agency’s rule that makes no sense to you. Then consider what it would be like if you could find no basis for the rule in the laws passed by Congress. Then imagine that the agency decided to try you in its own court under its own judge — and then if the agency didn’t like its judge’s ruling it could appeal to itself! Does that sound like justice to you? Until last week, however, that was the reality for too many Americans caught in the bureaucratic web. Thankfully, in a one-two punch of decisions, the Supreme Court restored due process and the rule of law.
The Supreme Court’s decision in Loper Bright to overturn the Chevron doctrine, which said that courts had to defer to administrative agencies’ interpretations of the law when a statute was ambiguous, has prompted freak-outs from the environmentalist Left. It has also been characterized as being good for big business, notably by the supposedly neutral Associated Press, which said in its news article on the decision that the Supreme Court had delivered “a far-reaching and potentially lucrative victory to business interests.”
Central Banking
In an article from early last year, I quoted then late MIT economist Rudi Dornbusch, who remarked of the Bank of Mexico’s board members that he could understand their mistakes. After all, they were human.
However, what he could not understand was how they could make the same mistake repeatedly.
Whoever first said — it almost certainly was not Einstein — that insanity is doing the same thing over and over again and expecting different results might have come up with an unflattering explanation….
Tax
Economist Milton Friedman famously said, “I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible. The reason I am is because I believe the big problem is not taxes, the big problem is spending.” …
The Tax Cuts and Jobs Act contained many provisions that expire at the end of 2025. The individual income-tax rates, the increase in the standard deduction, the expanded child tax credit, and more will revert to their pre-2017 levels if Congress does not extend them past the end of next year.
That is not true of the law’s reduction in the corporate-tax rate. The TCJA lowered the rate from 35 percent to 21 percent. Under current law, it will remain 21 percent whether Congress does or does not extend the other provisions.
Somebody should tell the press. I have noticed news reports suggesting that the corporate-rate cut needs to be extended….
Congestion Tax
When I wrote about London’s congestion tax in 2003, I warned “that some American municipality will probably give this dumb idea a try.” In the event, it took a while and it was New York State that tried to impose one on a part of Manhattan. To her credit, Governor Hochul recently had a last-minute change of mind. In the wake of her decision (which was influenced both by the proposed tax’s unpopularity and fears over what it might mean for Gotham’s downtown), CBS sent a reporter over to London to check out the effects of the congestion tax there. Some business owners . . . had views…
Banking
An ounce of prevention is worth a pound of cure. But what happens when the supposed prevention is the cause of the disease?
Since the collapse of both Silicon Valley Bank and Signature Bank in 2023, regulators at the Federal Deposit Insurance Corporation (FDIC) and elected officials have put forward various proposals to increase federal protections for deposit insurance in the hopes of preventing a future banking crisis. There are several bills being considered by Congress right now that would raise the FDIC limit beyond the current limit of $250,000 per account-holder per institution. The idea is that, if depositors know that their money is safe in the event that their bank fails, they’ll be less likely to hurriedly withdraw their money and trigger a bank run.
But increasing deposit insurance, far from preventing a potential crisis, may actually make a crisis more likely by worsening the moral hazard…
Antitrust
America’s system of government is founded on the protection of freedom in all aspects of life, including business. This freedom has fueled the nation’s prosperity, transforming it into a beacon of opportunity that millions worldwide aspire to join. Yet, under the Biden administration’s misguided approach to antitrust, this economic freedom is now under threat.
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