Growth through innovation will help fight climate change

By Robert D. Atkinson

In the past decade a growing number of activists and pundits have argued that if we want to save the planet, particularly from global warming, the world can no longer afford growth. Many go further and call for degrowth: via shrinking the global gross domestic product (GDP).

Examples are rife. Four natural scientists warned in an article in Nature that we need, "An equitable downscaling of throughput with a concomitant securing of wellbeing, aimed at a subsequent downscaled steady-state economic system that is socially just and in balance with ecological limits."

Kate Raworth's award-winning book, "Doughnut Economics," argues that too much growth is bad for the plant. She wants us to get over our "addiction to growth." There is even an 8th Annual Degrowth Conference. It appears that Korea too is susceptible to this seemingly unconventional idea.

Park Seong-won, a research fellow at Korea's Science and Technology Policy Institute, writes that, "In a survey of more than 2,000 South Koreans in September 2014, more than half said they were attracted to a degrowth future."

Growth rejectors argue that growth is exponential and therefore needs to be curbed. Scientists Chirag Dhara and Vandana Singh write that, "Economic growth is required to be exponential; that is, the size of the economy must double in a fixed period."

In fact, global growth is increasing around 3 percent a year. Dhara and Singh argue that past growth has been bad. Some even argue that countries like South Korea shouldn't have grown, because they achieved their growth by "sacrificing their environment" and "exploiting their workers."

Try telling that to a middle-class Korean whose parents were poor. Dhara and Singh also claim that technology is the problem, not the solution. U.S. economists Banerjee and Duflo argue that there may not be that many "free lunches" in our growth-centered models of development. In other words, following growth-centered models, technological innovations simply allow clean energy to be produced more cheaply than dirty energy.

Shifting to better technologies may not do the trick. Rather, people's consumption will need to fall. We may have to be content not only with cleaner cars, but also with smaller cars, or no cars at all. I wonder if most degrowth advocates have actually sold their own cars, or are they just hectoring at the poor people who dream of being able to afford one?

The notion of getting the poor to sacrifice to save the planet suffers from three main problems. First, few people are willing to consume less to save the planet, certainly not the 3 billion people who live on less than $2.50 per day.

Second, even if the global GDP were cut in half ― consigning billions of people to a much worse life ― carbon emissions would be cut by only half at best, which is not enough to stop climate change. The only way to solve climate change is through cheap zero-carbon technologies, such as better batteries, cheaper renewables, carbon capture, nuclear power and more ― all of which depend on technological progress, which in turn depends on investment in R&D, which depends on growth.

In other words, growth powered by innovation is the solution to climate change, as it generates cleaner technologies and enables people with higher incomes to afford more expensive clean energy alternatives, such as electric cars or carbon capture systems.

Third, when degrowth advocates claim that there are resource constraints to growth, they ignore innovation. If they point out that there are water shortages; I would counter that claim by saying that we have the oceans. Higher rates of growth, coupled with technological innovation, would enable widespread desalinization if it's needed. We are not running out of energy, and dirty energy can be produced if it is coupled with carbon capture and sequestration.

Materials innovation can address materials shortages. Interestingly, growth rejectors' concern for the environment helps explain the new idolatry of small businesses, including in Korea. This is why Tim Jackson, author of "Prosperity Without Growth," proposes higher taxes (to limit "pathological" consumption by the masses), with the money to be spent on "less productive" social services.

In an economy with a much larger share of spending devoted to social services ― the arts, care, nutrition and recreation ― we can limit growth, "precisely because the nature of these economic activities resists labor productivity growth." Likewise, Banerjee and Duflo want the government to increase taxes and spend the money "to increase the demand of labor-intensive public services."

Baumol's disease (a rise in the salaries of jobs that have experienced no or low productivity increases hurting growth) now becomes Baumol's cure (a rise in the salaries of jobs that have experienced no or low productivity increases helping growth). To be sure, more growth doesn't mean working more hours. In fact, Koreans probably should be working fewer hours, especially if labor productivity can grow to allow the same or even higher incomes with fewer work hours. But advocating no growth or degrowth is not only too simplistic, doing so presents dangerous illusions that divert attention from real, more nuanced solutions to global warming.

Robert D. Atkinson (@RobAtkinsonITIF) is president of the Information Technology and Innovation Foundation (ITIF), an independent, nonpartisan research and educational institute focusing on the intersection of technological innovation and public policy.