Degrowth and Recession
The Same or Different?
Daniel W. O’Neill
Sustainability Research Institute
University of Leeds
Economic Degrowth for Ecological
Sustainability and Social Equity
18 April 2008
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 reallife 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?
2
To Answer These Questions…

Comparison of recessions in the U.S. with
examples of “pseudo steady state” economies

Quantitative analysis using indicators

Economic




Social



Gross Domestic Product (GDP)
Unemployment
Inflation
Life expectancy
Self-reported wellbeing
Environmental



Per capita CO2 emissions
Per capita Ecological Footprint
Population growth
3
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)
4
Recessions in the U.S. (1950–2007)
Source: U.S. Bureau of Economic Analysis
12
2005
0
2000
-4
1995
2
1990
-2
1985
4
1980
0
1975
6
1970
2
1965
8
1960
4
1955
10
1950
6
Months of Recession in Year
Change in Per Capita Real GDP (%)
8
5
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
6
Recession and Unemployment (U.S.)
12
4

Change in Unemployment
Rate (%)
10
8
6
4
2
y = -0.1475x + 0.3393
R2 = 0.101
3
2
1
0
-4
-2
0
2
4
6
8
-1
-2
-3
2005
2000
1995
1990
1985
1980
1975
1970
1965
1960
1955
0
1950
Unemployment Rate (% of Labour Force)
Source: U.S. Bureau of Labor Statistics
Change in Per Capita GDP (%)
Jobs are lost during recessions

“Okun’s Law”
7
Recession and Prices (U.S.)
Source: InflationData.com
20
Inflation Rate (%)
15
10
5
0
-5
-10

2005
2000
1995
1990
1985
1980
1975
1970
1965
1960
1955
1950
1945
1940
1935
1930
1925
1920
1915
-15
Prices may increase or decrease during a
recession (i.e. inflation or deflation)
8
Recession and Happiness (U.S.)
Source: World Database of Happiness

14
Avg ≈ 7.4
9
12
Change in Self-Reported
Happiness (%)
8
7
6
5
4
3
2
10
8
6
4
2
0
-4
-2
-2
2005
2000
1995
1990
1985
1980
1975
1970
-8
1965
0
1960
-6
1955
0
2
4
6
8
-4
1
1950
Self-Reported Happiness (0-10)
10
Change in Per Capita GDP (%)
There is no clear relationship between
recessions and self-reported happiness
9
Source: Energy Information Administration
25
10
8
Change in Per Capita CO2
Emissions (%)
20
15
10

5
6
4
2
0
-4
-2
-2
0
2
4
6
8
-4
-6
y = 1.0557x - 1.7797
R2 = 0.6184
-8
2005
2000
1995
1990
1985
1980
1975
1970
1965
1960
1955
0
1950
Per Capita CO2 Emissions (tonnes/person)
Recession and CO2 Emissions (U.S.)
Change in Per Capita GDP (%)
Energy use and CO2 emissions decrease
during recessions
10
Recession and Ecol. Footprint (U.S.)
Per Capita Ecological Footprint (gha/person)
Source: Global Footprint Network
12

Ecological footprint decreases during
recessions
Change in Per Capita Ecological
Footprint (%)
10
10
8
6
4
2
8
6
4
2
0
-4
-2
-2
-4
-6
0
2
4
6
8
y = 1.2215x - 1.2624
R2 = 0.5534
-8
2005
2000
1995
1990
1985
1980
1975
1970
1965
1960
1955
1950
0
Change in Per Capita GDP (%)
11
Recession and Population Growth (U.S.)
Source: Economic Report of the President
2.5
300
Population Growth Rate (%)
Total Population (millions)
350
250
200
150
100
50
1.5
1.0
0.5
0.0
-4
2005
2000
1995
1990
1985
1980
1975
1970
1965
1960
1955
1950
0

2.0
-2
0
2
4
6
8
Change in Per Capita GDP (%)
Population continues to increase during
recessions (mainly through immigration)
12
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 minimized
and within ecological limits
Daly’s
Definition
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
13
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


Stable or decreasing energy/material throughput



Population growth rate < 0.5%/year
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
14
Countries Satisfying these Criteria
Population
Growth
Rate
(%/Year)
Energy Use
Growth
Rate
(%/Year)
Ecological
Footprint
Growth Rate
(%/Year)
Life
Expectancy
(Years)
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
..
..
..
76.8
6.6
10.3
23,148
4.0
Country
Germany
Average
Life
Satisfaction
(0-10)
Unemployment Rate
(%)
GDP
(2005$
PPP)
Ecological
Footprint
(gha)
- 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
15
SSE and GDP
Annual Change in Real GDP (%)
10
8
6
Germany
Poland
Romania
Slovakia
Sweden
Switzerland
4
2
0
-2
-4
Source: UN Common Database
-6

2005
2004
2003
2002
2001
2000
1999
1998
1997
Most countries still show positive growth in GDP


1996
1995
-8
SSE ≠ Recession
In a SSE, GDP can grow (temporarily) through efficiency
gains. After this, only qualitative growth is possible
16
SSE and Inflation
50
45
40
35
Inflation Rate (%)
Germany
Poland
Romania
Slovakia
Sweden
Switzerland
30
25
20
15
10
Source: UN Common Database
5

2005
2004
2003
2002
2001
2000
1999
1998
1997
Inflation varies widely between more affluent and less
affluent countries


1996
1995
0
Transition from communism to capitalism; unrelated to SSE?
Convergence to low inflation?
17
SSE and Unemployment
Unemployment Rate (%)
25
20
Germany
Poland
Romania
Slovakia
Sweden
Switzerland
15
10
5
Source: UN Common Database


2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
0
Wide variation in unemployment rates
Some countries have low unemployment, so it is possible in
a SSE
18
12
10
Germany
Poland
Romania
Slovakia
Sweden
Switzerland
8
6
4
Source: Energy Information
Administration
2
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
0
1995
Per Capita CO2 Emissions (tonnes/person)
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)
19


4.0
Germany
Poland
Romania
Slovakia
Sweden
Switzerland
3.5
3.0
2.5
2.0
1.5
Sustainability
Threshold?
1.0
0.5
Source: Global Footprint Network
2003
2002
2001
2000
1999
1998
1997
1996
0.0
1995
Ratio of Ecological Footprint to Biocapacity
SSE and Ecological Footprint
Only Sweden and Romania have ecological footprints less
than their national areas
Stable does not mean sustainable!
20
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
21
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
22
Merci!
Questions?
Characteristics of Recession

Economic





Social



GDP decreases
Production and consumption decrease
Investment decreases substantially
Prices may increase or decrease (i.e. inflation or
deflation)
Unemployment increases (Okun’s Law)
Happiness is unaffected?
Environmental



CO2 emissions decrease (energy use decreases)
Ecological footprint decreases
Population continues to increase
24
Characteristics of SSE

Economic




Social



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?)
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
25
120
10
100
Change in Per Capita
Energy Use (%)
8
80
60
40
20

6
4
2
0
-4
-2
-2
0
2
4
6
8
-4
-6
y = 0.9452x - 1.2426
R2 = 0.5959
-8
2005
2000
1995
1990
1985
1980
1975
1970
1965
1960
1955
0
1950
Per Capita Energy Use (MWh/person)
Recession and Energy Use
Change in Per Capita GDP (%)
Energy use decreases during recessions
26
Recession and Poverty
2
y = -0.2782x + 0.3958
R2 = 0.5455
20
Change in Persons in
Poverty (%)
1
15
10
5

0
-4
-2
0
2
4
6
8
-1
-2
-3
2005
2000
1995
1990
1985
1980
1975
1970
1965
1960
1955
0
1950
Persons in Poverty (% of Population)
25
Change in Per Capita GDP (%)
Recessions increase the number of people
living in poverty (based on income)
27
Recession and Happiness (1-3 Scale)
25
20
Change in Self-Reported
Happiness (%)
Self-Reported Happiness (1-3)
3.0
2.5
2.0
1.5
15
10
5
0
-4
-2
0
2
4
6
8
-5
-10
-15

2005
2000
1995
1990
1985
1980
1975
1970
1965
1960
1955
1950
1.0
Change in Per Capita GDP (%)
There is no clear relationship between
recessions and self-reported happiness
28
GDP and Energy Supply
5.0
y = 0.9846x + 0.7195
4.0
2
R = 0.8967
GDP (Log)
3.0
2.0
1.0
0.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
-1.0
Total Primary Energy Supply (Log)
29
Ecological Footprint and GDP
1.2
Per Capita Ecological Footprint (Log)
1.0
y = 0.5881x - 1.9464
2
R = 0.8019
0.8
0.6
0.4
0.2
0.0
2.0
2.5
3.0
3.5
4.0
4.5
5.0
-0.2
-0.4
Per Capita GDP (Log)
30
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)
31
Institutions in a SSE (Daly)

Stable population



Constant stock of physical artefacts
sustained with minimum throughput


Transferable birth licences
Immigration policy
Depletion quotas
Just distribution


Minimum income
Maximum income and maximum wealth
32