Inequality Redux II 

The view that inequality is a barrier to economic performance, rather than a ‘social justice issue’ rendered moot by economic growth, has returned to public debate (if not, alas, the party-political agenda).  A growing chorus of voices considers greater equality to be a pre-condition of a more stable growth model, as this blog series attests.  This debate is, however, more complicated for environmentalist perspectives that hold economic growth irreconcilable with ecological sustainability.  In this post I examine the proposal for a ‘steady state’ market economy put forward by some of these ‘growth sceptics’ and point out a ‘trilemma’ between its entwined goals of profit-driven production, ecological healing and greater equality.

The connection of greater equality to improved economic performance, especially where it relates to enhanced capacity for economic growth, poses a unique problem for growth sceptical environmentalist perspectives: they deem the prospect of an improved growth model to represent as great a problem as austerity and inequality.  Accordingly, they advocate ‘degrowth’ of economies to an ecologically sustainable ‘steady state’ of physical throughput, with concomitant constraints on GDP and transformations of consumption, production and employment norms.

Such perspectives differ on the form of political economy implied by the vision.  A relatively conservative strand, common among ecological economists and environmentalist political parties, argues that it is compatible with the market coordination of production, providing that levels of inequality are managed and scarce resources (including the atmosphere’s ‘carrying capacity’) are rationed at an ecologically sustainable level.  They envision a market economy that is neither stagnant nor expanding, and within which profit-driven activity, greater equality and a healing ecology are reconciled.  With prominent climate scientists attributing massive risks to further economic growth, it is timely to assess this vision of a new macroeconomics and its implications for equality.

The growth sceptic’s case for greater equality addresses a tension arising from the competitive profit-driven behaviours of producers.  Because physical output cannot be expanded beyond exogenously imposed limits in this vision, firms are not necessarily able to expand production to capture economies of scale.  Consequently, cost savings become central to competition.  Investments in resource productivity (that is, investments to allow more units of output to be produced from the same amount of rationed resources) are one possibility.  Equally likely, however, is investment in labour-saving equipment, or simple wage repression.  Such strategies would undermine consumer demand, while the resulting unemployment and loss of income could render any such project politically unviable.

It’s here that greater income equality becomes integral to the vision.  The idea of a ‘basic income’ – a non-means-tested guaranteed minimum income paid to all citizens – is a prominent policy advocated to this end.  It compensates citizens for decreasing employment opportunities and ensures sufficient demand to purchase the economy’s product.  Meanwhile, the opportunities for creative self-fulfilment gained from the economy’s declining labour requirements are celebrated in their own right.

Not withstanding the Green Party’s recent equivocation on its proposal for a basic income (the ‘citizen’s income’), the idea is gaining prominence.  It finds intellectual support from across the political spectrum, uniting social democrats with the followers of Milton Friedman.  Yet, for growth sceptics, the policy exposes a ‘trilemma’ at the heart of their macroeconomic vision: put simply, one can have capital accumulation (which is implied by the market coordination of production), greater equality and a healing ecology, but in a vision that holds economic growth irreconcilable with ecology one cannot have all three at the same time.