Degrowth: A Useful Obstacle for Saving the Planet
Tagged: essay coordination
I was busy writing a post about why Degrowth is an unworkable idea when Noah Smith published his own critical take on it. I think it's worth reading as he makes some excellent arguments. One of them points out Degrowth's dependency on the idea of central planning:
(...) implementing the kind of reallocation schemes that degrowthers throw around with abandon would require global economic planning that would put Gosplan to shame.
Smith spends little time on this, but I actually think it's Degrowth's fatal flaw. Consider how the only way to limit GDP is to limit all economic activity across the whole of society. And the only way to go about that is to give government complete power over private companies to decide what they produce and how much. Doing so also entails empowering the government to decide where everyone works. In other words, the only way to implement Degrowth would be to switch to centrally planned economies.
Now, this sounds good on paper–picture dedicated officials carefully pouring over production plans and job placements, striving to create a better, more fair tomorrow for everyone–except that never happens. Instead, you get a bunch of bureaucrats playing petty political games while everything around them slowly falls apart, like it did in Cuba, China, and the Soviet Union.
The USSR tried to make central planning work through an all-powerful bureaucracy and multiple n-year plans. And it had some persuasive victories! The country industrialized rapidly, turning from a feudal empire into a modern nation state, bringing such wonders as electricity and modern dentistry to all. But after that growth spurt, the system reached the limit of its complexity: with politics instead of prices guiding consumption and investment, huge amounts of resources were being misallocated and wasted. On the ground, it showed up in apparent paradoxes like sending people into space while tens of millions dealt with shortages of everything from food and clothing to cars and housing.
A similar story played out in Mao's China. Not long after WW2, Mao launched the Great Leap Forward, a five-year plan aimed at forcing rapid industrialization. This time around, the mismanagement was so extreme that it kicked off the largest famine in human history, killing between 15 and 55 million. And all for nought, because China's GDP failed to increase meaningfully.
Then, ten years after the famine, Mao's successor Deng Xiaoping initiated a set of market reforms that lifted price controls and allowed people to own private property and operate businesses. And even though the government retained strict political control by placing loyal party officers inside every company, the economy boomed, growing at an average 9.5% per year between 1978 and 2013. This lifted hundreds of millions of Chinese out of poverty and caused many people to reconsider the merits of a "socialist market economy", especially when faced with a string of recessions in the West.
Unlike China, Cuba chose to remain a centrally planned economy, suffering all the predictable consequences: meager growth, little access to new technologies, poor agricultural output, and recurring food shortages despite decades of rationing. Actually, there's another Noah Smith post about this–he starts off with describing the current crisis and then goes onto place it in historical context, highlighting the many bad decisions made by government planners. Smith also points out that, contrary to popular opinion, the U.S. embargo that has been in place since around 1960 has little to do with these problems.
So why does central planning always fail in the same way?
I'm no expert, but I suspect it's because of the idea at its core: that people and work can be abstracted away into uniform, sterile "units", all completely interchangeable. Only when you do that, when you simplify people down into "level-pulls per hour" or "shoes used per year", can you as a Planner assign people to work as if you were playing a video game. Otherwise, there's too many variables, too much variety. And when you still go ahead with your Plan, reality will assert itself, and you'll end up with a country full of people in the wrong positions, producing the wrong goods, wasting resources on a massive scale.
Then comes along some bad event like a draught or a strike and the whole system falls apart, of