Why Economic Degrowth Is Terrible for Everyone—Especially the Poor

Two global strategies are being offered for the alleviation of poverty, but only one of them is politically viable.

The economic growth numbers have come in for the first quarter of this year, and they’re dismal. In the United States’ highly regulated economy, we’ve come to expect low growth rates. But negative growth is especially bad, occurring only during terrible economic conditions. And yet, degrowth is precisely what the US economy did in the first three months of 2022.

According to a statement by the Commerce Department, inflation-adjusted gross domestic product (GDP) declined 0.4 percent in this year’s first quarter, which is an annualized decline of 1.4 percent. That contraction makes Q1 of 2022 the weakest quarter for GDP growth since the pandemic-related recession of 2020.

Economic degrowth is terrible for almost everyone, but it endangers the poor most of all. Therefore, it is remarkable that the problems with degrowth are appreciated least by those who claim to be most focused on the interests of the lower classes.

The Downplaying of Degrowth

The New York Times reports that the White House was “dismissive” of the recent news from the Commerce Department, rebutting that “consumer spending, business investment, and residential investment increased at strong rates.”

If people are consoled by the Biden administration’s cherry-picked metrics of success within an economy that is suffering overall, it is likely in part because economic growth is considered a low priority at best among a substantial subset of the political commentariat.

Robert Pollin, Distinguished Professor of Economics and co-director of the Political Economy Research Institute at the University of Massachusetts Amherst who has helped draft legislation for Senator Bernie Sanders, has stated in an interview that, “To just have growth, unless you change the political environment and make economic policies more egalitarian, means all the growth is going to go into the pockets of the rich, which more or less has happened, certainly since the end of the recession. So, growth is bad if it’s more unequal.”

Ben Burgis, Jacobin columnist and adjunct professor of philosophy at Morehouse College, argues in favor of a worker-cooperative economy while admitting that, “probably in a co-op dominated economy, because people aren’t going to have the same kind of incentives to do that kind of rapid expansion that the owners of more traditional companies might have, I think that does mean you probably are going to have slower economic growth… But I’m not sure that’s an unambiguously bad thing, especially when you start to think about the ecological effects of constant growth for the sake of growth.”

Socialist political commentator Ian Kochinski, who goes by the pseudonym Vaush, has said that, “One of the unfortunate truths of being a socialist is you have to accept that your nation will not get to enjoy the skyrocket GDP growth that capitalist nations get to enjoy. There is going to be a sacrifice of some economic efficiency, to the benefit of hopefully making life better for everybody.”

Some growth critics go even further than to question the importance of growth as a policy target. For example, in her New York Times bestselling book This Changes Everything: Capitalism vs. The Climate, Naomi Klein calls economic growth “reckless and dirty” and advocates a policy of “radical and immediate degrowth” in order to reduce global carbon emissions to manageable levels.

Growth and the Poor

University of Oxford economist Max Roser has pointed out that the number of people in extreme poverty has fallen by roughly 137,000 individuals every single day for the past 25 years. That’s over a billion people—more people than there were on Earth just a couple centuries ago.

This miraculous occurrence has been called “the most important fact about wellbeing in the world since World War II” by the Nobel Prize winning Princeton University economist Angus Deaton in his book The Great Escape. And as CNN host and Washington Post columnist Fareed Zakaria has observed, these data indicate that more people have escaped extreme poverty in the last fifty years than had done so in the preceding five hundred.

Harvard University cognitive scientist Steven Pinker notes in his 2018 book Enlightenment Now that if this trend were to continue, the extreme poverty rate would reach zero by the year 2026. The COVID-19 pandemic and lockdowns set the global economy back a few years, but the virtual end of extreme poverty remains broadly within reach, which is an unprecedented circumstance to be in as a species.

As Deaton and Pinker delineate in their aforementioned books, and as Harvard University Department of Economics chairman Benjamin M. Friedman explains in his book The Moral Consequences of Economic Growth, improving the material fortunes of the poor causes their physical health, educational opportunities, life expectancies, safety from violence, trust in their neighbors, and countless other standards of living to improve. As Pinker writes, “Though it’s easy to sneer at national income as a shallow and materialistic measure, it correlates with every indicator of human flourishing.”

Notably, those brought out of extreme poverty, which have mostly been in places like China and India, were largely not helped by massive social programs but by a growing global market for their labor. If redistribution of pre-existing wealth were the cause of this phenomenon, then the reduction in extreme poverty would have been accompanied by a reduction in extreme wealth in some other subset of the population.

To the contrary, there is no significant demographic with massive losses to match those massive gains. Rather, as Americans and other denizens of wealthy countries have become wealthier on average, their increased demand for overseas labor has brought people from farms to factories, from factories to office parks, and so on. That has been made possible by gross world product roughly doubling since 1990.

This widespread growth has been unfolding ever since it began around the time of the industrial revolution, which is why over 90 percent of the human population lived in extreme poverty throughout all of human history before 1800, and why less than 10 percent live in extreme poverty today. It was economic growth, not redistribution programs, that has brought the masses out of extreme poverty like never before in human history.

Growth as a Policy Target

George Mason University economist Tyler Cowen explains in a Foreign Affairs article that, “In the medium to long term, even small changes in growth rates have significant consequences for living standards. An economy that grows at one percent doubles its average income approximately every 70 years, whereas an economy that grows at three percent doubles its average income about every 23 years—which, over time, makes a big difference in people’s lives.”

To concretize this point, Cowen proposes a thought experiment in his book Stubborn Attachments: “Redo U.S. history, but assume the country’s economy had grown one percentage point less each year between 1870 and 1990. In that scenario, the United States of 1990 would be no richer than the Mexico of 1990.”

It is not just wealthy Americans that would be worse off in such a scenario—the lower and middle classes of Mexico are much worse off than the lower and middle classes of the United States, and this is largely a function of the general success of each country’s economy.

In political and economic discourse today, there are two major strategies being proposed to alleviate poverty. One strategy is to redistribute wealth from those who have a lot, the most economically powerful members of society, to those who don’t, the most economically weak members of society. This zero-sum strategy is virtually destined to fail because it requires making enemies of the most economically powerful members of society, who are definitionally both incentivized and empowered to prevent the redistribution. This is largely why every major socialist experiment in history has resulted in some elite class taking control and enriching themselves to the enormous detriment of the lower classes.

The other strategy is to increase the abundance of wealth so much that an ever-expanding portion of the population can afford to meet their needs. This positive-sum strategy is built on economic growth. Just like increasing the supply of apples causes their price to come down, increasing the supply of wealth reduces the barriers to earning enough resources to get your needs met in a market economy.

As others become wealthier, they will be willing and able to pay more for your labor. And as the economy grows, more technological and scientific progress can be funded, which eventually increases the capabilities of the vast majority of humanity. Instead of making enemies out of the economic elite, this strategy makes allies out of them, which means it is far more likely to succeed in practice. And as we have seen, unlike any other strategy ever attempted, this has already proven effective at a global scale for reducing poverty and improving the human condition in other ways through technological and scientific progress.

In the fullness of time, even a small change in the economic growth rate means the difference between starvation and survival for millions or billions of people, not to mention the difference between humanity’s extinction and its ability to fund enough technological progress to eventually become sustainably multiplanetary.

The critics of growth are wrong about its environmental dangers, but they’re also wrong to downplay its role in the fight against poverty. If winning that fight is indeed their goal, policymakers should put reversing America’s dismal growth trend near the top of their priority list.