The European Venue for Green Ideas

De-growth: can Croatia afford less work and less consumption?

By Igor Matutinovic

Recent research suggests that humanity surpassed the capacity of the Earth to supply enough essential resources to sustain even the current population and level of socioeconomic development. Our economic activities transgressed or approached the boundaries of several critical earth-system processes, including global climate. The notion that unbounded economic growth and sustainability cannot be reconciled has been with us since the early writing of Herman Daly.

Historical accounts of the rebound effect suggest that technological improvements in energy and manufacturing sectors cannot guarantee dematerialisation of industrialised economies, nor substantially reduce greenhouse emissions. There is a growing recognition among scientists that a solution to the sustainability problem lies not in the technology or free markets but in large scale behavioural changes at the societal level.

In a world of seven billion people, marked by harsh inequality in the material standard of living, it looks logical, considering the above mentioned constraints, that countries of the rich, industrialised West may begin to consider shrinking their ecological footprint in order to permit billions of people to rise from absolute poverty. But, what can it possibly mean to shrink the ecological footprint of Western countries? Serge Latouche, one of the prominent de-growth theorist, suggest returning to the level of material production of the 1960s/70s. However, he stresses that this may be possible only in a “de-growth society”, based on an entirely different logic than the present one and oriented towards a better life with less work and less consumption . How attractive is this prospect of less work and less consumption for a country like Croatia?

There is a growing recognition among scientists that a solution to the sustainability problem lies not in the technology or free markets but in large scale behavioural changes at the societal level.

In the 1990, Croatia welcomed quite unanimously its political independence and the prospect of reverting to capitalism. The ex-Yugoslavia socialist model of workers self-management had lost its impetus to create growth for nearly a decade and it seems that people were ready to trade “less work and less consumption” for a new phase of economic growth and a rapid increase in the material standard of living. What followed instead was a toxic combination of war and ill-conceived privatisation, which in a decade destroyed at least a hundred thousand jobs and shrank the industrial sector of the economy, which never reached the pre-transition level. After a decade of mild recovery, the world financial crisis and the worst post-WWII recession brought a return to economic woes. In three years since the 2008, real GDP in Croatia shrank by 7.2%, industrial production fell by 12% and unemployment reached 18%, and even higher among young people. As a consequence personal consumption fell by 10%. These negative trends continue into 2012. On the other hand, public debt reached 45% and foreign debt 103% of GDP. Is the idea of “less work and less consumption” politically acceptable under these conditions providing that Croatia keeps its democratic political system and capitalist institutions?

Degrowth – a return to instability?

One does not need much imagination to reach a negative answer. If the present weak economic growth continues indefinitely, the economy will be unable to service its external debt, obtain new loans in the financial markets, and its imports of energy and food, to name the most important, may shrink to a socially unacceptable level. As output, sales and employment contract this creates problems for the socially acceptable functioning of state-controlled services – from social safety nets, pension system, educational system, to defence. Finally, if the present level and structure of unemployment would continue for an extended period of time it would be impossible to maintain social peace – the country may endure street riots and a growth in extreme political options.

The danger of extreme political options should not be underestimated – since the breakup of Yugoslavia, Croatian citizens passed through an unsettling period that saw the loss of job security, impoverishment of the middle class, an extremely unjust and corrupted privatisation process and an unprecedented increase in income inequality. War and transition crisis in the nineties and the current, four-year long, recession have been corroding the social fabric and thinning the patience of the voters. Expectations for a better life did not materialise for many, and the younger generation, like their counterparts in Serbia, Bosnia-Herzegovina, and recently in Greece, and Spain is becoming exasperated by the absence of job opportunities and a lack of vision of a better tomorrow. Besides its internal socioeconomic problems, Croatia is situated in a politically fragile environment. The Dayton Agreements in Bosnia-Herzegovina, for example, did not manage to establish a politically stable and economically functional country. Recent presidential elections in Serbia, which saw success for right-wing nationalists, indicate that the country has not yet reached political maturity and stability while its economic problems are mounting. In such a context economic growth with its unequal “lifting of all boats” is the only, even if temporary, way out – a necessary buying of time until social fabric gets stronger and political stability and democracy stand on firmer grounds – in Croatia as well as in its close neighbourhood.

Political environment aside, the sole idea to shrink the average material standard of living achieved in the first decade of the 21st century would very likely be unacceptable for the majority of the population: the motive to break at any cost with the “socialism with the human face” was primarily to get closer to material consumption of its rich capitalist neighbours, Austria and Italy. And Croatia is not the exemption – what other country of the ex-Soviet bloc would support the idea of shrinking their material standard of living?

On the other hand, why would a small country like Croatia, with its negligible impact on natural resources, energy, and climate, be willing to undertake proactively any step that would lead in the direction of “less work and less consumption”? The Croatian environment is in a relatively healthy state compared to the rest of the continent and most Croatians have priorities other than reducing their impact on nature. Recent public opinion survey showed that only 2% of Croatians consider environment as the most important problem in Croatia . Finally, Croatia will be joining EU in July 2013, and, therefore it will partake in its political and institutional choices. Does EU consider de-growth as a political option?

A model that could work for Croatia

Drawing from the general system theory, it is possible to advance the hypothesis that capitalist society is an immature system intrinsically poised to grow until it is stopped by a negative feedback from a higher level system – natural environment. Only after the physical shock has been received the prevailing worldview of capitalist societies may undergo a radical change after which a comprehensive institutional reform of economy becomes possible. Such a spontaneous change in the prevailing worldview is the precondition for a new society in which better life may be realised with less work and less consumption, at least in the industrialised West.

In the meantime, Croatia has other options to follow rather than de-growth. In the first place Croatia is consistently importing about half of its food needs. Its natural endowments are substantial – 56% of its land is agricultural land. However, it is poorly exploited: there are an estimated 900,000 ha of unutilised agricultural land, or an incredible 70% of the total of 1.3 million ha officially registered. Even the utilised land is used inefficiently as the average size of a family farm is 1.9 ha only. The large amount of unutilised land offers opportunity, among other things, for organic farming because being unused it is most likely to be also uncontaminated and thus subject for quick organic produce certification. Putting together the available land for cultivation, the opportunity for using EU funds and the large market – from substituting current imports to exporting organic food to EU – clearly shows one of the avenues for a relatively green growth. And it is not only the case of physical growth of crops – substantial investments in irrigation and crop management in the light of climate change are needed – tasks that require structural changes in the agricultural sector and employment of young and educated talents. Further development of food processing industry is the natural follow-up to growth in domestic agricultural production.

On the other hand, why would a small country like Croatia, with its negligible impact on natural resources, energy, and climate, be willing to undertake proactively any step that would lead in the direction of “less work and less consumption”?

Another window of opportunity based on natural endowments is forestry – 48% of Croatia is under forests, most of it naturally grown. This natural wealth can be sustainably exploited in a variety of industries – from wood processing for furniture and construction industries to renewable energy. Development of industrial clusters around forestry may open thousands of new jobs in extraction, tools building, manufacturing, and biomass power plants.

Finally, Croatia imports 80% of its energy needs and besides biomass extracted from forests there are considerable unused opportunities in solar and wind energy. Putting these opportunities to use may open new jobs in industry and at the same time reduce import dependency.

This brief and incomplete overview shows that there exist considerable opportunity for job creation and growth in the green economy. Whether it will realise and how fast depends primarily on the capacity of national policy makers to spur investments and entrepreneurs into afore mentioned sectors. In any cases, the choice between de-growth and relatively green growth for Croatia seems to be quite straightforward: for the time being Croatia needs more, not less, work and consumption in order to achieve a better life for its citizens.