If chasing GDP and consumption is bad for the climate, what are the alternative economic models?
- When even the fashion industry seeks new metrics, it’s time to look at alternatives – from green growth’s clean energy transition to ‘agnostic’ growth’s ignoring of GDP
The earth and its resources are finite. If solely chasing GDP growth has been damaging to our planet and threatens our ability to thrive in the future, what could be the alternative economic models?
Green growth is all about transitioning energy to renewable sources and capturing emissions with technology and carbon sinks. It focuses on shifting to less energy-intensive consumption without necessarily seeking to reduce demand.
Ultimately, the green growth ambition is to decouple economic expansion from resource use. Although there are some signs of validity in the most developed markets, it would require a truly massive increase in the adoption of renewable technologies if it were to succeed worldwide.
The ideas has also broken through into mainstream thinking, with Wall Street investment banks starting to alert their clients that the concept may gather steam. It remains a fluid debate – some of its champions argue it should be solely about reducing energy and resources use, rather than seeking to shrink GDP.
There are many unanswered questions, not least about the impact on manufacturing-based developing economies if richer nations rapidly cut their consumption of imported goods. There are also doubts about how developing nations can “develop” without growing their own economies.
And then there is “agrowth”. Sometimes known as the “agnostic growth”, this sister model to degrowth envisages an approach to economic development that prioritises social and environmental outcomes. GDP is effectively ignored while other goals such as improved air and water quality, increases in leisure time, better healthcare and equality dictate policy and define success.
It won’t be a surprise that we’ll probably end up with a hybrid approach – all these models bleed into each other to some extent. Green growth is deeply appealing as it feels familiar – a tweak to our economic orthodoxy. But in truth, as we head towards the middle of this century, it may not be enough to ensure societies can thrive if it fails to directly tackle the fundamental question of absolute resource consumption.
At best guess, our future economic reality will be drawn mostly from the green growth model, incorporate key elements of the agrowth, circular philosophy with a nod to the idea of degrowth in the active moderation of excess consumption and waste.
Chris Iggo is chair of AXA Investment Managers Investment Institute and chief investment officer of AXA IM Core