degrowth and recession the same or different? daniel w. o’neill sustainability research institute...
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Degrowth and Recession
The Same or Different?
Daniel W. O’NeillSustainability Research Institute
University of Leeds
Economic Degrowth for Ecological Sustainability and Social Equity
18 April 2008
2
Motivating Questions “The US might be heading into a recession but think of how
much pollution will be kept out of the landfills as fewer shoppers cruise the malls 24-7 for something to do.” (Recent comment on CBC News) Are recessions good for the environment?
“As it happens, the country has just gone through a real-life tryout of ‘zero growth’… The period is remembered, of course, not as an episode of zero growth but as the worst recession since the 1930s.” (Fortune Magazine, 1976) Is a Steady State or Degrowth Economy
different from a recession?
3
To Answer These Questions… Comparison of recessions in the U.S. with
examples of “pseudo steady state” economies
Quantitative analysis using indicators Economic
Gross Domestic Product (GDP) Unemployment Inflation
Social Life expectancy Self-reported wellbeing
Environmental Per capita CO2 emissions Per capita Ecological Footprint Population growth
4
Recession: Some Definitions Two consecutive quarters of decline in real GDP
“[A] significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.” (NBER 2003)
“A recession is when your neighbor loses his job; a depression is when you lose your job.” (Sidney J. Harris)
5
Recessions in the U.S. (1950–2007)
-4
-2
0
2
4
6
8
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
Ch
ang
e in
Per
Cap
ita
Rea
l G
DP
(%
)
0
2
4
6
8
10
12
Mo
nth
s of R
ecession
in Y
ear
Source: U.S. Bureau of Economic Analysis
6
Recent Recessions in the U.S.
Start End Months Cause
Nov 1973 Mar 1975 16 - Oil shock
Jan 1980 Jul 1980 6 - Oil shock
Jul 1981 Nov 1982 16 - Tight monetary policy to combat inflation- High interest rates
Jul 1990 Mar 1991 8 - Tight monetary policy- Savings-and-loan crisis- Fall in consumer confidence
Mar 2001 Nov 2001 8 - Bursting of the dot-com bubble- 9/11 terrorist attacks- Scandals (Enron/WorldCom)
2008 ? ? ? - Sub-prime mortgage crisis - Housing market correction
7
Recession and Unemployment (U.S.)
Jobs are lost during recessions “Okun’s Law”
0
2
4
6
8
10
12
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
Un
emp
loym
ent R
ate
(% o
f Lab
ou
r F
orc
e)
y = -0.1475x + 0.3393
R2 = 0.101
-3
-2
-1
0
1
2
3
4
-4 -2 0 2 4 6 8
Change in Per Capita GDP (%)
Ch
an
ge
in U
ne
mp
loy
me
nt
Ra
te (
%)
Source: U.S. Bureau of Labor Statistics
8
Recession and Prices (U.S.)
Prices may increase or decrease during a recession (i.e. inflation or deflation)
-15
-10
-5
0
5
10
15
20
1915
1920
1925
1930
1935
1940
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
Infl
atio
n R
ate
(%)
Source: InflationData.com
9
Recession and Happiness (U.S.)
There is no clear relationship between recessions and self-reported happiness
0
1
2
3
4
5
6
7
8
9
10
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
Sel
f-R
epo
rted
Hap
pin
ess
(0-1
0)
-8
-6
-4
-2
0
2
4
6
8
10
12
14
-4 -2 0 2 4 6 8
Change in Per Capita GDP (%)C
han
ge
in S
elf-
Rep
ort
ed
Hap
pin
ess
(%)
Avg ≈ 7.4
Source: World Database of Happiness
10
Recession and CO2 Emissions (U.S.)
Energy use and CO2 emissions decrease during recessions
0
5
10
15
20
25
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005P
er C
apita
CO
2 E
mis
sio
ns
(to
nn
es/p
erso
n)
y = 1.0557x - 1.7797
R2 = 0.6184
-8
-6
-4
-2
0
2
4
6
8
10
-4 -2 0 2 4 6 8
Change in Per Capita GDP (%)
Ch
ang
e in
Per
Cap
ita
CO
2 E
mis
sio
ns
(%)
Source: Energy Information Administration
11
Recession and Ecol. Footprint (U.S.)
Ecological footprint decreases during recessions
0
2
4
6
8
10
12
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
Per
Cap
ita E
colo
gic
al F
oo
tpri
nt (
gh
a/p
erso
n)
y = 1.2215x - 1.2624
R2 = 0.5534
-8
-6
-4
-2
0
2
4
6
8
10
-4 -2 0 2 4 6 8
Change in Per Capita GDP (%)
Ch
ang
e in
Per
Cap
ita
Eco
log
ical
F
oo
tpri
nt
(%)
Source: Global Footprint Network
12
Recession and Population Growth (U.S.)
Population continues to increase during recessions (mainly through immigration)
0
50
100
150
200
250
300
350
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
To
tal P
op
ula
tion
(mill
ion
s)
0.0
0.5
1.0
1.5
2.0
2.5
-4 -2 0 2 4 6 8
Change in Per Capita GDP (%)
Po
pu
lati
on
Gro
wth
Rat
e (%
)
Source: Economic Report of the President
13
The Alternative: SSE or Degrowth What is a Steady State Economy (SSE)?
Constant population Constant stock of physical artefacts Constant rate of maintenance throughput
Energy and material flows are minimizedand within ecological limits
What is Degrowth? My definition: the transition to a Steady State Economy Developed countries need to reduce their population,
stocks, and throughput to: Become environmentally sustainable Make room for developing countries
Daly’sDefinition
14
In Search of a SSE or Degrowth… Are there any countries that come close to a
Steady State Economy or Degrowth?
My criteria: Stable or decreasing population
Population growth rate < 0.5%/year Stable or decreasing energy/material throughput
Change in per capita energy use < 0.5%/year Change in per capita ecological footprint < 0.5%/year
Politically stable World Bank “Index of Political Stability” > 0
15
Countries Satisfying these Criteria
- Data are for the period 1995-2005, and are per capita- Averages are weighted by population
- Sources: UN Common Database, Energy Information Administration, Global Footprint Network, World Database of Happiness
Country
Population Growth Rate (%/Year)
Energy Use Growth Rate (%/Year)
Ecological Footprint Growth Rate (%/Year)
Life Expectancy (Years)
Life Satisfaction (0-10)
Unemploy-ment Rate (%)
GDP(2005$ PPP)
Ecological Footprint (gha)
Germany 0.1 0.0 -0.8 78.7 7.2 9.4 29,461 4.5
Poland -0.1 -0.1 -1.2 74.6 5.9 15.6 13,847 3.3
Romania -0.5 -1.2 -0.7 71.3 5.0 7.1 9,060 2.4
Slovakia 0.0 -0.2 0.4 73.8 5.5 15.7 15,871 3.2
Sweden 0.2 0.3 0.3 80.1 7.7 5.9 32,525 6.1
Switzerland 0.4 -0.2 0.3 80.7 8.1 3.5 35,633 5.1
Average .. .. .. 76.8 6.6 10.3 23,148 4.0
16
SSE and GDP
Most countries still show positive growth in GDP SSE ≠ Recession
In a SSE, GDP can grow (temporarily) through efficiency gains. After this, only qualitative growth is possible
-8
-6
-4
-2
0
2
4
6
8
10
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
An
nu
al C
ha
ng
e in
Re
al G
DP
(%
)
Germany
Poland
Romania
Slovakia
Sweden
Switzerland
Source: UN Common Database
17
SSE and Inflation
Inflation varies widely between more affluent and less affluent countries Transition from communism to capitalism; unrelated to SSE?
Convergence to low inflation?
0
5
10
15
20
25
30
35
40
45
50
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
Infl
ati
on
Ra
te (
%) Germany
Poland
Romania
Slovakia
Sweden
Switzerland
Source: UN Common Database
18
SSE and Unemployment
0
5
10
15
20
25
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
Un
em
plo
ym
en
t R
ate
(%
)
Germany
Poland
Romania
Slovakia
Sweden
Switzerland
Wide variation in unemployment rates Some countries have low unemployment, so it is possible in a SSE
Source: UN Common Database
19
SSE and CO2 Emissions
CO2 emissions are relatively constant or decreasing Limiting the material/energy input to the economy results in a limit on emissions (1st Law of
Thermodynamics)
0
2
4
6
8
10
12
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
Pe
r C
ap
ita
CO
2 E
mis
sio
ns
(to
nn
es
/pe
rso
n)
Germany
Poland
Romania
Slovakia
Sweden
Switzerland
Source: Energy Information Administration
20
SSE and Ecological Footprint
Only Sweden and Romania have ecological footprints less than their national areas Stable does not mean sustainable!
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03R
ati
o o
f E
co
log
ica
l Fo
otp
rin
t to
Bio
ca
pa
cit
y
Germany
Poland
Romania
Slovakia
Sweden
Switzerland
SustainabilityThreshold?
Source: Global Footprint Network
21
Comparison: SSE and Recession Similarities
Environmental pressure is reduced Lower energy use, CO2 emissions, ecological footprint
Differences Population increases in a growth economy,
exacerbating unemployment during recession GDP may continue to grow for some time in a
SSE (through efficiency gains) Low unemployment is possible in a SSE Recession is a transient phenomenon (the
failure of a growth economy), whereas SSE is a long term solution
22
Conclusions A few countries have managed to achieve
a “pseudo-SSE” Indicators for these countries are encouraging How would things look if the steady state were
an active policy instead of an incidental outcome?
Degrowth/SSE and Recession are not the same thing Need to educate policy makers, the media, and
the average citizen GDP is not a meaningful indicator in a SSE
Merci!
Questions?
24
Characteristics of Recession Economic
GDP decreases Production and consumption decrease Investment decreases substantially Prices may increase or decrease (i.e. inflation or
deflation) Social
Unemployment increases (Okun’s Law) Happiness is unaffected?
Environmental CO2 emissions decrease (energy use decreases) Ecological footprint decreases Population continues to increase
25
Characteristics of SSE Economic
Inputs to production (materials, energy, labour) are constant
GDP may continue to increase (in the short term) Inflation is low (driven by resource prices in long run?)
Social Unemployment can be low or high Life satisfaction ranges from average to high
Environmental CO2 emissions are constant or decreasing Ecological footprint is constant or decreasing Population is constant or decreasing
26
Recession and Energy Use
Energy use decreases during recessions
0
20
40
60
80
100
120
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
Per
Cap
ita E
ner
gy
Use
(MW
h/p
erso
n)
y = 0.9452x - 1.2426
R2 = 0.5959
-8
-6
-4
-2
0
2
4
6
8
10
-4 -2 0 2 4 6 8
Change in Per Capita GDP (%)C
han
ge
in P
er C
apit
aE
ner
gy
Use
(%
)
27
Recession and Poverty
Recessions increase the number of people living in poverty (based on income)
0
5
10
15
20
25
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
Per
son
s in
Po
vert
y (%
of P
op
ula
tion
)
y = -0.2782x + 0.3958
R2 = 0.5455
-3
-2
-1
0
1
2
-4 -2 0 2 4 6 8
Change in Per Capita GDP (%)
Ch
ang
e in
Per
son
s in
P
ove
rty
(%)
28
Recession and Happiness (1-3 Scale)
There is no clear relationship between recessions and self-reported happiness
1.0
1.5
2.0
2.5
3.0
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
Sel
f-R
epo
rted
Hap
pin
ess
(1-3
)
-15
-10
-5
0
5
10
15
20
25
-4 -2 0 2 4 6 8
Change in Per Capita GDP (%)
Ch
ang
e in
Sel
f-R
epo
rted
H
app
ines
s (%
)
29
GDP and Energy Supply
y = 0.9846x + 0.7195
R2 = 0.8967
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
-0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0
Total Primary Energy Supply (Log)
GD
P (
Log)
30
Ecological Footprint and GDP
y = 0.5881x - 1.9464
R2 = 0.8019
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
2.0 2.5 3.0 3.5 4.0 4.5 5.0
Per Capita GDP (Log)
Per
Cap
ita E
colo
gica
l Foo
tprin
t (L
og)
31
Recession as Motivator for SSE
“A situation of nongrowth can come about in two ways: as the failure of a growth economy to grow, or as the success of conscious policies aiming at a SSE. No one denies that when a growth economy fails to grow, the result is unemployment and suffering. The main reason for advocating a SSE is precisely to avoid the suffering of a failed growth economy.” (Daly 1993)
32
Institutions in a SSE (Daly)
Stable population Transferable birth licences Immigration policy
Constant stock of physical artefacts sustained with minimum throughput Depletion quotas
Just distribution Minimum income Maximum income and maximum wealth