Policy Research in Macroeconomics

From efficiency to sufficiency – the path to a just transformation

Image with acknowledgments to Coterra Impact https://coterraimpact.com/the-ecological-crisis-and-the-failure-of-our-elders/
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PRIME has from the start intended to rethink economic theory to take on board the ecological crisis and its human impacts. It has played an important role in developing the idea of a Green New Deal, the radical strategy to combine decarbonisation and other practices to ensure the integrity of the natural environment alongside the advancement of human wellbeing and greater equality. Much GND thinking has focused on making production and consumption more eco-efficient by decoupling economic activity from planetary damage. I want to argue here that while this is essential, it cannot be enough. The vast scale of the decoupling required, and the tiny timescale within which it must be achieved, rule this out as the sole means of transition to a sustainable economy. We must move from efficiency to sufficiency, for reasons of both ecological sustainability and social justice.

Thus we in the rich world must also question consumption and the structure of demand. This need not entail embracing a degrowth strategy, though there are many overlaps. Rather, as I argue in Heat, Greed and Human Need, we must recompose consumption away from high carbon luxuries while at the same time ensuring that minimum decent living standards are enhanced.

This means embracing demand-side climate policies alongside the full spectrum of technological supply-side programmes. It would focus on services essential for wellbeing, especially the ‘Big 3’ sectors responsible for more than half of all GHG emissions – Food, Housing, Transport. In each of these domains we need to move from ‘ImprovetoShifttoAvoid’. In transport, for example, this would entail transitioning from improvement such as electric vehicles, to a shift towards walking, cycling and public transit, to avoidance of some travel altogether via teleworking and teleshopping. Research shows that recomposing demand in similar ways could achieve big reductions in global GHG emissions in the food sector, via reducing food waste while encouraging vegetarian and vegan diets, and in housing, for example by adjusting heating/cooling set-points and shorter showers.

Demand-side approaches also reduce reliance on risky negative emission technologies, such as Bio-Energy with Carbon Capture and Storage (BECCS) – which currently feature in all zero-carbon scenarios. And crucially they foster synergy with the agenda of the UN Sustainable Development Goals (SDGs). Future mitigation scenarios must be consistent with minimum thresholds of energy demand necessary to satisfy basic human needs. The work of the Living within Limits research group at Leeds demonstrates clearly that this can be achieved on a global scale.

Advancing and spreading a sufficiency approach means overcoming three challenges: conventional economic theory, ‘market democracy’, and inequality.

First, the idea of sufficiency has no meaning in orthodox economic theory. Market demand is driven by consumer preferences backed with money; the theorised goal is individuals maximising utility, or nowadays ‘happiness’.  To make sense of sufficiency requires a different ontology, one based on the idea of universal human needs. These are goals of life found across different cultures that entail common need satisfiers to be available, such as food, shelter, affiliation and security. With this theoretical grounding we can expect such needs and need satisfiers to exist in the future. We can envisage what ‘sufficiency’ will mean for our children and future generations. Sufficiency implies a normative rule: sufficiency for all trumps maximisation of utility for some. In an era of extreme environmental stress sufficiency is also a more precautionary economic rule than maximisation.

The second challenge is how to rethink sufficiency and human wellbeing in our current, market-driven, hyper-consumption – and democratic – societies. Does it not entail bureaucrats, politicians and experts telling people what their true needs are? Can pursuing ‘sufficiency’ avoid either utopian fantasy or dystopian reality? To do so it clearly implies new forms of participatory, informed and inclusive democracy. Fortunately, we have recent real-life examples in the UK Citizen’s Climate Assembly and the French Convention Citoyenne pour le Climat, both of which have reported in the past few months. I will concentrate on the latter because the French government committed from the start to put forward its proposals for legal adoption – without changes – via referendum, parliamentary vote, or executive order. This is an unprecedented commitment for a citizen’s assembly and makes it a leading example of introducing dialogic democracy into determining climate action, though we should not be naïve about the obstacles on the way.

The French Convention was tasked to decide on policies to achieve a 40% reduction in France’s GHG emissions by 2030. It comprised 150 randomly selected but representative citizens advised by a series of experts and it met over nine months. By the end it had achieved consensus on 149 proposals. Some of these signal a road to sufficiency, including the fast and mandatory retrofit of the least energy efficient buildings by 2030, the implementation of a ban on high-emission vehicles by 2025, a mandate to display GHG emissions on all goods in shops and advertisements, a prohibition on advertising high GHG products, and limits on the use of heating and air conditioning in housing, public spaces and all other buildings. It should be stressed that every recommendation was backed by a consensus of all convention members and that these were representative of all major social, demographic and economic groups in France, including those initially sceptical of climate change.

But to ensure such a transition is just requires one more difficult challenge. Egregious levels of inequality today would mean that recomposing consumption could hurt low income regions, communities and households, while leaving the affluent and rich relatively untouched. The effectiveness of price signals is relative to incomes and wealth – a truth so often overlooked by conventional economic theory. The policies must ensure social justice alongside environmental sustainability. To tackle this I argue that we must envisage, alongside a floor of decent living standards, ceilings to wealth, income and consumption. Earlier debates between necessities and luxuries need to resurface. The Covid crisis has revealed a glaring distinction between essential work, often low paid, and inessential work, often highly paid (alongside a wide range of ‘neutral’ occupations).  

Two recent discourses and strategies are relevant here. First, the idea of ‘consumption corridors’ to limit excessive, luxury or wasteful personal consumption, such as the surge in demand for SUVs. There is growing research showing some consensus on how much income and consumption citizens regard as ‘too much’. Second, the movement for Universal Basic Services points to the eco-social benefits of existing public services in kind, such as health and education, and the gains from extending this to new areas of need such as housing, care, transport and digital access. Public consumption through free or subsidised provision has clear distributive benefits and much greater potential to move to zero carbon.

To move the goals and practices of rich but hugely unequal nations from efficiency to sufficiency is a radical agenda, no doubt. But it is essential to a just transformation of our economic system, and emerging research is discovering that it is possible. 

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