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Post-Growth

Ending the EU’s Growth Mantra

By Margrethe Vestager

The European Union is seemingly fixated by economic growth. ‘Jobs, growth and investment’ is the European Commission’s headline priority and Eurozone budgets are carefully checked in the name of stability and growth. Yet is the pursuit of economic growth fueling climate change and environmental destruction? On the sidelines of the Post-Growth 2018 conference at the European Parliament, we asked Margrethe Vestager, the European Commissioner for Competition, if the time has come to leave growth behind.

Green European Journal: We are discussing post-growth, the once-alternative idea that our economies shouldn’t be growing and actually might even need to shrink, in the European Parliament with you, the European Commissioner for Competition. Why is growth as an idea and an objective being questioned today?

Margrethe Vestager: It is timely, today things are being questioned and considered in different ways: how do we understand growth, how do we measure it, what do we measure, and so on. Of course it is an interesting debate but the most important thing is how we can achieve many things all at the same time by taking action now, because I have a sense of urgency. My fear is that before we have concluded the debates about what kind of growth we want, on post-growth or degrowth, or on what growth is measuring, we’ll have wasted too much time.

All these are just means for a greater good. It would be very strange to say that we take a statistical tool that we use to relate to the world in all its complexity and make that our goal. To me growth is just how we relate to human activity and to what is going on in our society and economy. It will take a lot of human activities to clean the air or to have renewable energy instead of the energy mix that we have today. We are transitioning, not only in terms of the digital or tech revolution, to a climate-aware and climate-responsible society. In that respect, Commissioner Cañete, in charge of energy and climate, or Marianne Thyssen, in charge of labour market and social affairs, are basically commissioners for transition. That is much more important than saying, “Zero-growth is what we want.” My answer is “Well, why?”

Currently growth in the abstract seems to be the main objective of the EU and many European countries. So, to turn your question around, why growth?

If I invest in wind mills or in refurbishing wind mills, that is measured as growth. So growth enables things in the sense that it shows us that a human activity is enabling us to produce energy in a different way. Maybe sometimes we use shortcuts in our debate and so it seems like growth in of itself is what we want, which would be putting the cart before the horse. But it is very difficult to find anyone in public office who does not care about people’s well-being, and growth is a sort of short hand for that. It’s a good thing for Usain Bolt or the new marathon world record holder to be able to summarise their achievement in one number, one time, but for the average person it makes less sense. But that doesn’t mean we should get rid of the number, just that we should qualify what we are doing. Only then can we put systematic changes into effect.

If it’s not growth, what are the objectives we want from the economy then?

When we talk about the problems of our economy, the important thing is to have the full picture. Because the economy and all our other societal interactions are intertwined. Our societies today face big challenges, not only in Europe, but also globally. The majority of people you meet over this two-day conference will agree that we need to build a sustainable future and we need to build a future where people feel they have a fair chance. Over the years, research has shown us that our economies are getting more unequal and that too many people who work cannot be sure of getting fair pay for the work they do to create value. Nor can they be sure that their working conditions protect their health sufficiently. Part of solving those challenges is using the market where the market can help.

Doesn’t the market need a rethink if it is to solve challenges on this scale?

The founders of what is now the European Union took markets and put them in as part of the puzzle to make peace in Europe. Framing how this market worked was a way to improve people’s lives, to rebuild Europe, to develop peace and prosperity, and avoid a return to the 1930s.

Today there’s a lot to do but economic and societal interactions are almost everywhere. Sometimes I stop at one of the braderie street fairs held in Brussels neighbourhoods. These are lively occasions. Local businesses put out stalls in the streets, there is plenty to eat and drink, and spaces are setup for children to play. It’s both a modern mix of cultures and languages and the sort of thing that has been going on in Belgian villages for centuries. All this variety and life is also an expression of how miraculous an economy can be. Because it takes a lot of people for you or I to have a bite to eat from one of those stalls: farmers to grow the vegetables, truck drivers to deliver to the restaurant, designers to create the truck, and so on. All of those people doing their job, living their lives, are, in most cases, completely unaware of one another.

I wonder whether one of the basic principles of old-school economics, that people are economic agents acting for their own benefit, is really right. Because there is so much more to it than personal benefit. People take action, do their jobs, and try their best because of a whole range of human impulses. We are humans, not agents, and the concept of rationality has to be understood in a much broader way if we want to understand what changes we can set afloat when we have a true understanding of what makes human activity, or what a sustainable future is.

Temperatures soared for extended periods across Europe in the summer of 2018. How much can we expect from the market in a moment of climate emergency?

What we experienced this summer made it obvious to anyone that still had doubts that climate change is not some remote thing, it’s right here, it’s right now. And we know that if everything else stays the same, growth could make the problem worse. We know that as more things are produced and consumed, unless we change things we will end up with even more carbon emissions, more air pollution, and more plastic ruining our oceans. But are we discussing the right thing if we are discussing how to slow down growth? The risk is that we have more to lose than to gain.

There are obvious things that need to be done to meet the energy efficiency targets set by a majority in the European Parliament and Council. These targets are equivalent to turning off 400 power stations. That takes innovation. Renewable energy is more and more affordable thanks to innovation, which has already cut the cost of generating electricity with solar panels by 85 per cent over the last seven years. We cannot answer the problems we face by throwing away our growing market economies. It just all depends on how you define growth. That way we can steer our economies in the right direction to build a sustainable economy.

Before I became Commissioner for Competition, I was the Minister for Economic Affairs and the Interior in Denmark. One of the things that we put in place was the development of a green GDP to have a better and more forward-looking view of the resources being used. We also developed a poverty line, both relative and in absolute terms, so that we would actually know how the most vulnerable people in society were doing to then make policy choices based on these insights. The current Danish government has closed these projects but a Danish foundation has stepped in to finance continuing work on a green GDP. This is a very good example of how things aren’t done by this government or that government; things get done when people come together.

But just because things are possible, it’s not a necessary condition for them to be put into action. The laws that improved working conditions or that protect our environment only happened because people fought for them. Politicians, governments, NGOs, campaigners, and unions never stopped campaigning for better ways of doing things. That is a lesson learned. We can only change things if we really want to do it, not just because it is doable. I’m a practical sort of person – we need systematic change, and so let’s do something about it. Of course as individuals we need to do what we can, but first and foremost, we need systematic change and that takes time to put into motion in our democracies. A conference like PostGrowth 2018 can make an enormous contribution by bringing together economists and policy experts to think about a better, fairer, more sustainable economy and what it should look like.

Doesn’t the European Union need a real industrial policy to achieve the scale of systematic change necessary for the energy transition?

Sometimes I take part in discussions about industrial policies that unfortunately are basically about how we can make European companies bigger. That discussion about industrial policy is very much alive and it jars with me, because I think it is important for big European companies to be challenged by competitors in Europe too. But there is another debate about industrial policy around circular economy and commons. Today we have built a communications society, and we think that these common tools provide some of the sustainable ideas we need. But the other side of that coin is that firms such as Uber and Airbnb, who use common resources, have to be members of our society. They have to pay taxes, take care of their customers, and compete on fair terms with others in the same business. It’s a very good thing that housing and cars can be used more, but everything has a limit.

The Commission has proposed a European Union budget for the next seven years. Climate-related spending would increase to 25 per cent of the total. Then one of the things I really care about is investing more into research, innovation, and development and so we want to go from 60-70 billion to a 100 billion euros over seven years. Of course, the budget has not been passed yet and now it’s up for debate, but actually we are pushing for it now.

How can competition policy support action on climate change?

A cartel can be about much more than just agreeing on prices and so competition law enforcement has a role to play beyond enabling choice, affordable prices, and innovation. We have recently opened a case against certain German carmakers, because we suspect that they have colluded to avoid using the best possible technology to limit air pollution. This is new, because this is not suspicion of collusion over price-setting or restricting choice as such, this is a case of saying we suspect you have agreed not to use the best possible emissions technology for diesel and petrol cars. Very concentrated markets are more difficult to govern in terms of environment, sustainability, working conditions, and health and so strong competition law enforcement can make sure you don’t end up with this situation.

With the rise today of authoritarian and populist strongmen all over the world, can the EU continue to present free trade and globalisation as an uncontested part of our world order?

Well, if we were doing that, we have stopped. My colleague Cecilia Malmström is responsible for trade and she has retired the old concept of free trade so to speak. Trade doesn’t make sense if it just means to import despicable working conditions, awful animal or non-animal welfare, or environmental ruin. That does not make any sense in a modern society. The kind of trade deals that she is now doing are based on ‘I know what you do’ when it comes to working conditions, environment, human rights, and animal welfare. These trade relationships are value-based. Because we share one planet, we are committed to multilateralism, to trying to solve things, and to shaping our common fate around one table. So in that respect, globalisation is a thing, but it’s not a solution and it’s not an all-time big achievement. There’s not only a change in rhetoric, but definitely on the ground too.

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Ending the EU’s Growth Mantra

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