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The Minsky moment of finance: Embracing post growth is the only answer

In a world where the relentless pursuit of growth has led us to the brink of ecological collapse, it is needed to rethink our economic models. Mainstream economists, entrenched in their dogmatic adherence to growth-at-all-costs ideologies, are failing us spectacularly. Their unwavering faith in perpetual economic expansion blinds them to the glaring empirical evidence of our planet's finite resources and the ecological limits we have already breached. These outdated paradigms, championing short-term gains over long-term sustainability, lead us down a path of environmental degradation and social inequity. 

With six of nine planetary boundaries already breached, we are staring into the abyss of ecological collapse. Our Earth, our home, is gasping for breath, suffocated by the relentless pursuit of profit. No EU country meets the needs of its residents within ecological limits, and there is no empirical evidence of decoupling emissions from economic growth at the required speed and scale. In this post-growth world, we must urgently reimagine our investments to prioritize social and ecological impact over profit if we are to secure a future worth living.

Facing the economic realities of climate change

Ignoring the post-growth reality is a gamble for businesses. Climate change threatens to cost institutional investors a staggering $25 trillion on real estate investments over the next 25 years. Our global economy is on track for a 19% reduction in income by 2049, regardless of future emission decisions. Mitigating these effects and limiting global warming to 2°C is six times less costly than the projected damages. A 1°C increase in global temperatures results in a 12% decrease in world GDP, and the financial repercussions from extreme climate events are expected to escalate dramatically. The conclusion is unequivocal: unilateral decarbonization benefits both the planet and the economy. Taking proactive steps now is crucial to securing a sustainable and prosperous future.

The illusion of technocratic solutions

Relying on technocratic adjustments, such as price mechanisms and technical change, is akin to placing our faith in an illusion. These solutions demand the deployment of highly speculative negative emissions technologies, a gamble described by economist Jason Hickel as 

"Jumping off a cliff while hoping someone at the bottom will figure out how to build a device to catch you before you crash into the rocks below." 

This stark analogy highlights the problem of clinging to outdated economic paradigms.

The role of business in the transition

Businesses must integrate degrowth and post-growth principles into their strategies. This means identifying and protecting transitional assets, building new forms of value, and discarding practices that no longer serve society. This reorientation around limits to growth is not merely a moral imperative but a strategic necessity.

To future-proof investments, businesses must prioritize companies that focus on social and ecological impact over profit. This shift is essential, as ignoring climate change and inequality could lead to a 50% reduction in GDP according to a recent paper published by the University of Exeter, collapsing the very system on which the elite rely. 

Degrowth by force—manifesting as decay and destruction—leads to economic and financial system collapse. In contrast, degrowth by design offers a 'third way' that transcends the growth vs. no-growth dualism.

A vision for a new economy

Degrowth by design means reducing high-income countries, excessive energy and material use drives climate change and environmental degradation, while basic needs like housing, healthcare, and nutrition often go unmet. To tackle this dual challenge, a new economic approach is essential. We must urgently deconstruct monopolies, decommodify essential goods, democratize production, and redistribute wealth. High-income countries must reduce non-essential production and consumption to lower environmental impacts and accelerate decarbonization. This approach involves a different understanding of love for all life, balancing environmental capacity with human wellbeing. It requires rethinking bioregions, collaboration and governance structures that prioritize life. 

We must understand that the ultimate goal of business must shift from profit maximization to prioritizing social and ecological well-being. Wealth inequality persists because our current system enforces wage stagnation and wealth accumulation by a few business owners. To deliver profits to their owners, businesses must constantly sell more, relying on advertising, planned obsolescence, and poor product design to persuade consumers to purchase unnecessary items. This relentless drive for growth perpetuates a cycle of overconsumption and environmental degradation. 

The absurdity of the current system becomes evident when we consider the fact that overproduction and overconsumption have entrenched themselves as systemic issues, leading to a multitude of alarming consequences. From 2016 to 2021, we globally consumed over 75% of what we did throughout the entire 20th century. Since 1970, the global population has doubled, yet resource extraction has tripled. 

The extraction of raw materials is projected to increase by 60%, reaching 167 billion metric tons by 2060. Humans are now using 1.7 times the amount of Earth’s resources. High-income countries are responsible for 74% of global excess resource use from 1970 to 2017, and the United Nations has highlighted that overconsumption in high-income countries is causing severe environmental damage to children globally. Despite this overconsumption, research teaches us that consumption does not enhance personal well-being and may, in fact, contribute to decreased happiness.

Our overconsuming lifestyle is based on the exploitation of low-emitting nations; therefore, ending colonialism is vital for addressing global inequality and ensuring an equitable transition towards a new economy. Currently, the Global South subsidizes the development of the Global North. According to a peer-reviewed study, the Global North annually extracts value equivalent to $2.2 trillion from the Global South. For every dollar provided by the Global North in investment and aid, the Global South incurs a loss of $30. From 1990 to 2015, the drain from the Global South through unequal exchange was equivalent to a quarter of the Northern GDP.

We must strive for a more equitable global economy that does not rely on imperialist appropriation. Addressing these deep-seated issues is crucial for creating a sustainable and just future for all.

We must transition our economy from monetary-based goals to public health goals, aiming to create a healthy society that ensures high levels of public health. This includes maintaining a healthy ecosystem and a safe habitat for all living beings, as we cannot have healthy people without a healthy planet. To achieve this, we need to shift support from for-profit companies to non-profit organizations by redistributing profit and wealth.

Additionally, we must redirect pension funds from the stock market into green and social bonds, investing in the real economy that fosters a post-growth world. By making these changes, we can create a sustainable and equitable future where businesses serve the greater good and contribute to the well-being of people and the planet.

We need to rebuild our financial sector to serve life rather than finance. The growth-based economy actively endorses a trajectory toward ecological and social turmoil. Once in overshoot, the planet's sustainable carrying capacity can only be re-established through managed decline or collapse. Business, banks and investors must recognize that the post-growth economy is inevitable and integrate its principles into their strategies.

The power of sufficiency

Yet, there is hope. We can meet human needs with significantly lower energy use in the Global North. A good life for all within planetary boundaries is possible, but it requires a profound shift towards sufficiency, equity, and eco-social policies. This shift means countering inequality measures, challenging entrenched interests, and dismantling climate-delay discourses.

Sufficiency—meaning "enough"—is not merely a strategy but a revolutionary concept that can counteract ecological overshoot and eradicate unmet needs. The German Advisory Council on the Environment poignantly notes that:

"for people living in poverty, 'enough' can also mean 'more'" 

Global justice demands sufficiency to end imperialist appropriation and unequal exchange relations. Sufficiency involves curbing excessive demand for energy, materials, land, and water, offering the least risky path to reducing geopolitical tensions, resource conflicts, and militarization.

Embracing sufficiency requires us to challenge deeply ingrained societal norms that equate more with better. It necessitates a cultural shift towards valuing quality over quantity, well-being over consumption, and long-term sustainability over short-term profits. This paradigm shift is not only morally imperative but also economically rational. By reducing our dependence on finite resources, we decrease vulnerability to resource scarcity and price volatility.

Those who mock and misrepresent the sufficiency debate retreat from a conversation they can no longer win through empirical evidence. These discussions, published in leading journals and held at conferences like Beyond Growth, are pivotal to our future. They provide a robust scientific foundation for rethinking our economic goals and adopting policies that prioritize ecological balance and social equity.

Most people intuitively understand the basics of sufficiency, highlighted by the famous meme

“If a monkey hoarded more bananas than it could eat, while most of the other monkeys starved, scientists would try to figure out what's wrong, when humans do it we put them on cover of Forbes”

We must recognize the futility of endless consumption and the profound satisfaction that comes from meeting our needs in harmony with the planet's limits. The concept of "enough" resonates with a fundamental human sense of balance and justice. By aligning our economic practices with this principle, we can foster a more resilient, equitable, and sustainable world. Sufficiency means recognizing that the economy should never overshoot biocapacity nor undershoot decent living standards.

Embracing degrowth

Science tells us that degrowth is not a choice but an inevitability. We can opt for a deliberate, democratic reduction of economic activity or face unplanned, disastrous contraction. Degrowth and post-growth perspectives offer a vision of a new economy, one that businesses must embrace to adapt and thrive. Ignoring these realities risks catastrophic economic collapse.

Our financial system must grasp that money is a claim on finite energy and resources. As these resources deplete, financial collapse looms. Today, gains are privatized, and losses are socialized, making it nearly impossible to prioritize social and ecological impact over financial returns. 

A post-growth economy is inevitable, and the businesses that will thrive are those still essential when the money stream dries up.

Embracing the post-growth compass

“In the land of the blind, the one-eyed man is king”

Desiderius Erasmus

In the world of business, foresight is essential. The ability to predict market trends isn't just useful; it's crucial for long-term success. The precarious truth is that we actually do know what lies ahead: the science is unequivocally clear. A post-growth economy is inevitable when money is tied to finite resources. This understanding offers us a compass—post-growth and degrowth principles—that can guide us toward steering money in the direction that is not only needed but also financially prudent.

Imagine if Nokia had foreseen the revolutionary impact of Apple's iPhone release. They could have pivoted, innovated, and remained a dominant force in the mobile industry. 

Similarly, understanding the impending shift to a post-growth economy enables companies to make the most financially beneficial business decisions today by prioritizing investments that emphasize social and ecological impact over mere profit. This isn't just the right thing to do; it's the financially smartest thing to do, since there is no business to do on a dead planet.

We're moving from a life of abundance to a life of constraints. In this new reality, only businesses that focus on social and environmental responsibility will not only survive but thrive. As resources become scarcer, the companies that prioritize sustainability and ethical practices will be the ones to flourish. In a post-growth world where limits are enforced, our collective survival depends on restoring the planet and ensuring the well-being of all. These responsible companies are the only ones we can afford to support. We must therefore collectively understand that degrowth and post-growth principles are essential. Since investments that focus on regeneration, resilience, and equity will yield long-term benefits and be better positioned to navigate the risks associated with climate change, resource scarcity, and shifting consumer preferences. As the world transitions to a post-growth economy, these companies will be the only ones that survive.

Because in a world where finite resources dictate economic realities, the post-growth and degrowth principles offer us a compass to navigate the future. By understanding and embracing these principles, the financial sector can make decisions that are not only right for the planet but also smart for business.

The time for just mitigation and adaptation is over, all investment now must now mitigate and regenerate at the same time, therefore prioritizing social and ecological impact over profit is the key to futureproofing our investments and ensuring a prosperous, sustainable future for all.

Let us steer our financial strategies with this new compass, embracing the transformative change needed to build a resilient, equitable, and sustainable world. Together, we can build a future where businesses of the future serves both people and the planet.

illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.

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About the authors

Kasper Benjamin Reimer Bjørkskov is an architect who specializes in converting complex environmental and social challenges into innovative, sustainable architectural solutions, promoting inclusive design that spurs societal change. He has actively engaged in numerous architectural projects dedicated to minimizing CO2 emissions, demonstrating the feasibility of constructing buildings and simultaneously reducing CO2 with no additional costs.

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