In a recent blog entry, Saamah Abdallah commented on some remarks made by Duncan Green on the Oxfam blogs, as regards degrowth policy. Duncan’s original post was critical on the practical conclusions of a workshop on degrowth in London earlier this year. Myself, I was giving a talk there on “Degrowth and the Firm” and tried to give some empirical substantiations as what a degrowth business model might look like.
Saamah gives three direct policy implications for degrowth:
- Reduction of working hours.
- Non-shareholder forms of corporate ownership.
- Alternative wealth measures beyond GDP.
I’d like to focus on the first to implications, because these are important for degrowth as a firm policy. As I pointed out in my talk in London, degrowth does not mean that businesses go out of business. The minimum condition of economic well-being, the ability to discharge liabilities at all times and to pay for all capital costs (including employers salary and things like R&D investment and so on), still holds in a degrowth economy. I also stressed that degrowth does not imply becoming unprofitable. There is nothing in the way of a degrowth firm to have its profits. The question is more on the right size of the profit, as it is general the question what is the right size of production capacities, employment levels, market share and customer size. These are all questions concerning sufficiency issues, what is enough — and how to make the customer accept this?
For a degrowth company, the right size of profit means, that it would not grow beyond that limit in real terms (sans inflation). Any technological progress made, e.g. reduction in production costs or increase in product quality = higher prices, would need to be canalized by two means:
- Reduction in working hours (with same salary) in order to keep employment at the same level.
- Reduction in “excess profit” by “doing away” with it without investing it inside the company (R&D) nor outside of it (capital market).
While a reduction in working hours is a means well understood and used by companies today, the second point seems a bit awkward at first glance. “Excess profit” is in fact everything beyond the firm’s ability to pay its capital costs. The notion of excess profit is not new, in fact it was Aristotle who distinguished between oikonomía and khrematistiké as two forms of acquisition. Whereas the former is ‘the “normal” way of making money, i.e. by producing and exchanging real goods, the latter is the “abnormal” way: speculation and lending money (nominal goods). In degrowth terms, excess profit is profit that would endanger ecological sustainability and social well-being of the firms environment. The calculation might be tricky, however there are methods like ecological footprinting that enable firms to look more carefully at their impact on the natural environment. The measuring of excess profit is clearly on the research agenda for corporate degrowth and I would be happy to throw in my two cents!
Regardless of that, the question remains, where “to do away” with excess profit. You could argue that there should be an excess profit tax and actually there have been taxes like that in the past, although not with a sustainable impetus. However, my standpoint here is aiming at Saamah’s second point. What we need in my opinion is a restructuring of ownership beyond the shareholder model. Just let our thoughts play for a second. If a company with its profit goals, organized legally as a limited e.g., is owned by a foundation with social-ecological goals, the excess profit would be transferred to that foundation, enabling it to sponsor e.g. projects in local neighbourhoods or in developing countries, improving both ecological sustainability as well as social-well being. Excess money would then benefit society not by inducing economic growth but real growth: growth in environmental standards, growth in empowerment of people, growth in community spirit. “Elevating the universal lot” as John Stuart Mill said, this then would resemble what can be termed a “Civil Economy”, moving profit organization along the continuum towards not-just-for-profit organizations.
These are just some fleeting thoughts and I invite anyone interested to join the discussion, write a paper with me or make a degrowth project proposal. Then we probably can satisfy Duncan’s demand of giving real practical solutions. It is about time!