Degrowth capitalism — Oxymoron or blind spot?

In the persistent controversy over the necessity and possibility of ongoing economic growth for ecological sustainability and societal well-being, growth critics gather around Serge Latouche’s décroissance — degrowth. Being sort of a degrowth economist myself, I started to wonder about something you might wish to call “degrowth capitalism”. Having my disciplinary background in management science, it always appeared to me as a strange blind spot in the degrowth debate. The level of the firm is all too easily neglected, with the minor exceptions of social entrepreneurship. All other forms of enterprise are most likely viewed as part of capitalism’s inherent problem: its excessive overuse and neglecting of natural, societal and human resources.

I am not intending to question the necessity of abandoning our fixation and dependence on growth. But as much as it is important to discuss issue like money and interest, regional economic cycles and social innovation, the acceptance of degrowth as a new economic paradigm, in fact as something politics can start to embrace, can only be gained by connecting to central ideas of economic sciences in a positive way. Enterprises as the basic level of economic value creation and entrepreneurship as the basic economic function are such central ideas with which the degrowth debate needs to establish some common ground.

What I question within discussions on degrowth is in what form a predominantly small-scale, locally organized economy with small businesses and low capital, preferably all co-ops, can sustain a high-technology society like ours — and that in an economic and ecological efficient way. Without global networks of distributed production, comparative economic advantages of cost, and all its necessary logistics it will hardly going to work. Most likely we will need much less of those but we will still need some of them. And we need capital, which implies a capital market, also on the global scale, and this further implies businesses of a certain size that can provide a certain economic return on investment. But much more important is the simple truth that never on this planet and in our history, a top-down approach succeeded implementing a new economic and social paradigm that was viable in the long term — democratic aspects let aside. The real world is way too complex for that and “systemic changes” run very high risks of ruining everything. It was John Stuart Mill, maybe the last broadly educated and interested political economist, who argued in the 19th century that the ability of a society to prosper and adapt in the light of an uncertain future lies within its willingness to allow for diverse and small-scale social experiments bottom-up. Such an approach is much more tolerant to mistake than a systemic one, although the latter might sound more fashionable.

A bottom-up approach to degrowth explicitly takes into account businesses beyond social businesses and, moreover, capitalist entrepreneurs themselves, including them as active participants and agents of economic change. In general there is no company that could not somehow integrate degrowth at the core of its business model — the question always is: at what “price” i.e. the impact on a company’s value creation potential and its employment base.

We have conducted a model-based scenario analysis on the economic and ecological impacts of alternative business models in the automotive industry, comparing ecological footprint and gross value added. One of the most striking results was that a mix between classical car business (selling of cars) and alternative models (carsharing, selling of services) can actually lead to less ecological impact with only minor forms of degrowth in gross value added of about two percent in comparison with the present situation. As much as these findings are preliminary and based on a very simple model, they show that by expanding the classical engineering view on physical products towards product-based services and mobile communication-based access, a new form of degrowth capitalism can emerge. Such a degrowth capitalism would not only entail ecological negative-sum games — reducing energy and resource use as well as installed product base — but also economic zero-sum games i.e. increase competition dramatically. This will foster the best in entrepreneurial spirit and creativity that capitalism so uniquely brings about. It is exactly this kind of increased competition that is needed to spur innovation in technology, social arrangements and consumer behavior for the great transformation towards a sustainable society.

Entrepreneurs thereby are the central element driving change through implementing new ideas in the classical Schumpeterian sense of creative destruction. Entrepreneurs are not driven by rent-seeking desires alone, however economic rent is needed even in a degrowth economy. An entrepreneur is enthusiastic about his or her ideas that might lead to profit. You cannot imagine entrepreneurship and true entrepreneurial spirit without joy and passion about taking risks. Without it the transformation towards a society that gets off its fixation on growth is hardly conceivable. In fact, these entrepreneurs create it with the introduction of new products and technologies, new business models, social innovations and by discovering different ways how we manage and perceive our daily life. If Steve Jobs would have been obsessed with degrowth as source for a business model, how would the world look like today? Maybe it would have saved as some debates about the future of capitalism and the sustainability of society.