• SEEKonomics

Research Review: The UK’s path to a doughnut-shaped recovery

New report from leading post-growth researchers explores how to reduce the UK’s growth-dependence whilst recovering from the covid-19 pandemic.


Image credit: © Andy Wilson ('Overcooked')


The report, written by University of Leeds academics Beth Stratford and Dan O’Neill, revolves around four key focuses of a so called "doughnut-shaped recovery". That is an economic recovery, which, following Kate Raworth's doughnut economy concept, would bring humanity back within a safe operating space where social needs are met without detriment to the wider ecosystem. These four focuses are:

1. safeguarding basic needs

2. empowering and protecting workers

3. reducing our exposure to debt crises and

4. reducing rent extraction.


Each strand comes with a set of complementary policy proposals. We won't review the full list of policies here, but will give a brief overview on why each of these four areas of policy-making is necessary to move towards a post-growth economy and an ecologically sound and fair society.



Providing for our basic needs


Improving and expanding the social safety net which so many are relying on during the pandemic is arguably one of the most urgent tasks facing the UK. After ten years of austerity, social services have been stripped bare and continue to be chronically underfunded. The transfer of previously publicly-owned companies to private contractors has not only reduced the quality of services, such as transport (bus and rail services), education or health, but it has also made access to these services much more expensive. Private ownership also acts to skew company focus away from improving social provision towards profiteering and increasing shareholder value. As with any business, profitability is achieved by increasing levels of productivity demanded from people, nature or both. This is problematic as it contributes to the exploitation of people at work and the deterioration of the planet.


Reversing the privatisation of essential services is a crucial first step in building a post-growth economy. Having profit-driven private enterprises in charge of what are ultimately common resources not only fuels our dependence on economic growth, but it deprives people’s sovereignty over the means to provide their basic needs.


Moreover, a public ownership model provides additional scope to bring about socially-just and environmentally positive changes such as keeping bus and rail fares in check and pushing for the electrification of public transport.


A common proposal to reduce excessive consumption is to tax resource use. However, without fixing the social safety net and raising the minimum income floor,

these measures can backfire. For example, in 2018 in France the imposition of eco-taxes on petrol or energy use led to widespread civil unrest, headed by the infamous Gilets Jaunes protests .


A potential solution which has gained traction over the last decade is Universal Basic Income (UBI). This involves directly handing cash to citizens as a means to liberate people from the “work & spend cycle” and provide them with the freedom to participate in social activities outside remunerated work.



Workers’ rights and freedoms


Back in 1930, celebrated economist John-Maynard Keynes predicted that with rising productivity growth, people would only be required to work a 15 hour working week by 2030. However, Keynes’ prediction did not account for the fact that powerful economic actors would capture these economic gains and accrue their own wealth rather than distribute them as free time. The neoliberal turn of the 1970’s led to a rupture between steady economic growth and the proportional decrease in working hours. This trend has not only had huge implications for driving social inequality but it plays a key role in fuelling the growth-based economy. As discussed by Dario Leoni, unemployment resulting from technological progress (i.e. automation) will necessarily demand ever-greater levels of economic growth to absorb the resulting “technological unemployment”.


If progress means that we can now produce the same amount of economic output with less time, the fair and ecologically sound solution would be to redistribute these gains via reduced working hours. Workers’ unions were instrumental in bringing about the 8-hour working day and won the right for a two-day weekend. They certainly have a similar role to play in leading present work-time reduction (without a loss in pay) across different sectors of the economy. Furthermore, strengthening workers’ rights and freedoms is central to enabling a green and just transition for workers in high-carbon industries towards renewable and low-carbon sectors.


The strengthening of workers’ rights should include the reversal of anti-union and anti-strike laws and promote the benefits of collective bargaining to workers. But to fully democratise the workplace, reforms must give workers co-ownership of the companies they work for. This would give employees a say on matters of corporate governance and ensure that money is channelled to the benefit of workers rather than external shareholders.



The problem with debt


The vilification of debt in the public imaginary is certainly a result of the negative framing of government debt, promoted by both the media and politicians. This narrative is highly problematic and helped to excuse a decade of austerity policies - with the aim of reducing national debt - throughout Europe since the 2007/8 financial crisis.


There is, however, an important distinction to be made between public and private debt. Today our economies are ridden with high levels of private debt. Since people have little spare money left to purchase goods, they are evermore relying on credit from banks to buy houses, cars and other household items, on which they have to repay with high interest, reducing spare income further and compounding the problem


One problem with high levels of private debt is that it increases the growth dependency of the economy. As economist Ann Pettifor argues in her book “The Production of Money”, the law of compound interest means that debts growth is non-linear, and soon spirals out of control. By contrast, natural resources are finite and subject to decay rather than ever-increasing levels of growth. Private debts have to be repaid from income meaning that income must also grow at exponential rates, or a larger proportion of wages have to be put aside to pay down the debt, reducing money spent in the productive economy, leading to recession, and ultimately job losses.


Raising the social floor through policies like universal basic services and a guaranteed income would reduce the need to take out loans in order to live, and so help to reduce the level of private debt. Additionally, debts write-downs need to be facilitated especially for people caught in debt traps who are unable to repay them.


Public debt is different however. Whilst it seems logical to view the government's balance sheet as similar to that of a household - in which high levels of debt warrants a reduction in spending - the impact of reducing government debt likely has the opposite effect than that intended in times of recession (see Austerity - Mark Blyth). Public debt can be used to fund socially necessary, yet perhaps not economically profitable initiatives that private business can not. With interest rates at record lows, the UK government should be free to borrow and spend in order to finance social and health programs and green infrastructure projects essential to tackle climate breakdown.



Rentiers’ power


Rentiers are individuals or corporate entities who derive an income from their ownership and exploitation of scarce assets. Rentiers may not spend their incomes on consumption activities but rather leave it in the bank or reinvest it in the financial or property market. By keeping this income for financial or speculative purposes, rather than letting it circulate in the real economy, it deprives funding that could be allocated to important green and social infrastructure projects which are essential to build low-carbon societies.


The concentration of ownership is not only problematic for questions of fairness, but according to Beth Stratford’s earlier research the processes of “rent-seeking and rent extraction create a systemic growth dependency” (p.2). As discussed above, the benefits of labour productivity growth are being captured by rentiers - managers, shareholders, landowners - in the forms of economic gains rather than redistributed across the population as free time from paid work. If rentier power remains unchecked, the solutions to counter unemployment and reduce poverty will inevitably be growth-oriented policies.


To create the necessary conditions for a post-growth economy essentially calls for a redistribution of economic power from those who own wealth (rentiers) to those who create wealth (workers). To do so would require, among other measures, taxing capital gains and wealth more fairly, strengthening tenants’ rights and taxing monopolies. This wealth could be channelled via so-called “social wealth funds”, which could help finance long-term social or green investment projects and basic income programs.



Conclusion


This research illustrates how the pursuit of a post-growth path to economic recovery is actually less about reducing consumption via taxes and incentives but more about how to use political economy tools to rebalance power in the economy and redistribute resources and wealth democratically. Once this is in place, ecological taxes and other targeted incentives can be implemented more effectively. Environmentalists have almost entirely focussed on the latter but their popularity and efficiency is questionable. Therefore as long as rentier power and other economic structures remain in place, they will act as barriers to systemic change.


Also of note is the complementarity of different proposals mentioned above. For instance, the redistribution of rentier power could help fund basic income programmes, which coupled with other reforms, such as work-time reduction without a loss of pay, could do as much as secure a social safety net and increase workers’ bargaining power.


The most important take-away from this research is that the transition to a post- or degrowth economy demands that one actively tackles the drivers of growth within our economy. Failure to do so would constrain those ideals of a post-growth society - carefully drawn by countless scholars and activists - to the remit of the imagination.