What might degrowth mean for angel investors?

by  Johnny Stormonth-Darling

​Many will now be familiar with emerging ideas and political movements around so-called green growth beginning to appear in the policies and manifestos of mainstream political parties around the world, often in the form of a Green New Deal. These tend to be visions of society-wide reforms, not only to tackle environmental issues such as resource use and global warming, but also social problems like wealth inequality which are increasingly being highlighted as intrinsic to the neoliberal capitalist project.[1–3] Putting those aside for a moment and focussing on ideas of green innovation, syndicates like Green Angel Syndicate are clearly in line with this leading edge of political thought seeking to transform our GDP lifeblood into something compatible with the planet’s biophysical limits; delivering wealth and prosperity and restoring the environment at the same time.

​​It sounds great doesn’t it? If we just green all our industries we can keep the economy rolling and save the planet at the same time, right? Well, perhaps not. Studies are beginning to show that this may not be enough. Looking at GDP’s relationship with carbon emissions and material throughputs, Hickel and Kallis [4] are forced to conclude that it is incredibly unlikely that a green growth programme will reduce carbon emissions by enough to meet IPCC targets, even with the highly speculative carbon capture technologies upon which the majority of the UN’s forecasts rely. They also show that material throughput may decrease in the short term but, with economic rebound effects and a rising population, it will begin to rise again in the 2nd half of the century. More recently, Vadén et al [5] have calculated that, under a modest 2% growth rate, sufficient absolute resource decoupling could only be achieved by improving the efficiency of translating resources into GDP by 2.6 times; something for which “no realistic scenario exists.”

If this is indeed the case, that carbon emissions and resource use cannot be sufficiently decoupled from GDP growth, then we need a whole new model. We need degrowth.
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In a degrowth world, economic activity (as measured by GDP) is actively kept at a steady state; zero growth…on purpose![6] This is obviously anathema to all the economic theory we have ever been taught but, as open minded green angels, we can hopefully imagine that there is a way around the devastating recession which first springs to mind when we consider such a proposal. Certainly, the changes required would be highly disruptive and require us to get used to an existence of dramatically lower consumption than that to which we are accustomed. However, looking at a list of degrowth economy characteristics (see table below), it doesn’t appear to be too far removed from much of what is proposed by the green growth agenda, suggesting that green growth might be a suitable stepping stone to a steady state system which furnishes us with the socioeconomic tools we would need to make the transition less disruptive.

​9 principals of the steady state economy:	​A degrowth “policy package”:
​ an end to exploitation	​GDP being abolished and substituted with other indicators of human and ecological well-being
​direct democracy	​work being shared, with a reduction of working hours to create employment in the absence of growth
​ localised production	​universal income or a guaranteed bundle of public services, ensuring that everyone has enough to get by without depending on money
​​sharing	​universal income or a guaranteed bundle of public services, ensuring that everyone has enough to get by without depending on money
​stronger interpersonal and intracommunity relationships	​redistributive taxation to increase equality and the establishment of maximum income to arrest competition for positional consumption
​more unproductive expenditures (e.g. festivals and other communitarian and creative gatherings)	​a redirection of public investments from the private sector to the public, and from infrastructure and activities that increase productivity to expenditures that green the economy and reclaim the commons
​care	​environmental limits and taxes to finance low-income groups.
​​a diverse economy	-
​​decommodification of land, labour and value	-

Source: ​9 principals paraphrased and "policy package" quoted directly from Kallis (2018) [7]

Now, if we save the criticisms of fairy tale Marxist utopias for another day, we can consider the role of angel investment in this growthless world characterised by reduced work, guaranteed incomes and strict adherence to biophysical limits. Does this leave angel investors, even green ones, in a sticky situation? As cogs who have benefitted from the capitalist regime and continue to drive it, do we need to start questioning our role as facilitators of value in a transition to this more materialistically frugal and egalitarian society?

​At first glance there might appear to be no role for entrepreneurial activity at all. Indeed, some degrowthers do call for “a moratorium on technoscientific innovation,”[8] but I prefer to think about the steady state economy like a forest.

An established forest doesn’t appear to grow. While it started small, it has achieved its appropriate size vertically and found its natural borders with the surrounding environments. Despite this apparent finality, the forest supports a vast and ever renewing circular ecosystem taking only solar radiation as its feedstock and recycling and exchanging nutrients through decomposition and subterranean mycelial networks. Crucially though, within this steady state monolith there is still growth. Every day new seeds germinate on the forest floor and slowly grow to fill their appropriate place in the ecosystem; whether they are destined to tower high in the canopy or perform a smaller function down below, there is still growth. And fortunately for angel investors, it happens to be the kind of small business growth which we like to talk about and not the macroeconomic type which is destroying the planet.

If the analogy (I might call it Ecosystem-nomics!) holds then, in the steady state future economy, there will still be a need to nurture these seedlings such that they might grow and deliver value to society, as we at GAS presently help to grow small businesses for the same purpose. The main difference is that we might not be simultaneously growing value in our own pockets quite as we do today. In the highly redistributive degrowth economy, high net worth individuals will most likely be a thing of the past. As such, angel investing might evolve into something more akin to the way that public research and innovation grants are allocated today, but hopefully in such a way that still engages the entrepreneurial spirit. At least it’s nice to know that, in a world where productive work is minimised for fear of inciting too much macro-growth, there will still be something to do!
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For now, a green growth pathway, even if not sufficient to alleviate the existential threat, can at least provide a route towards a system which might, so it is a worthy thing to align with. But it is also worth casting an eye beyond that to consider if and how technological development for the useful innovations we will continue to need might be driven in a post growth future.

References

​[1]        J. E. Stiglitz, The Price of Inequality: How Today’s Divided Society Endangers Our Future. W.W. Norton & Co., 2013.
[2]        M. Mazzucato, The Value of Everything: Making and Taking in the Global Economy, 2nd ed. Penguin, 2019.
[3]        K. Raworth, Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist. Random House, 2017.
[4]        J. Hickel and G. Kallis, Is Green Growth Possible?, New Political Economy, pp. 1–18, 2019.
[5]        T. Vadén, V. Lähde, A. Majava, P. Järvensivu, T. Toivanen, and J. T. Eronen, Raising the bar: on the type, size and timeline of a ‘successful’ decoupling, Environmental Politics., pp. 1–15, 2020.
[6]        T. Jackson, Prosperity Without Growth: Foundations for the Economy of Tomorrow, 2nd ed. Routledge, 2017.
[7]        G. Kallis, “Chapter 5: The Utopia of Growth,” in Degrowth, 2018.
[8]        S. Latouche, Farewell to Growth. Cambridge: Polity, 2009.
 

Johnny Stormonth-Darling is a long-standing member of Green Angel Syndicate and the syndicate's only Nano-technologist. An Academic with a deep commitment to fighting climate change, whose influence and contribution to GAS is much valued.
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Green Angel Syndicate is the only angel investment syndicate in the UK specialising in the fight against Climate Change and Global Warming. For regular updates follow Green Angel Syndicate on LinkedIn and Twitter.