DEMANDING CHANGE
BY CHANGING DEMANDPart four: Global justice - shifting thescale of consumption

Global justice - shifting thescale of consumption
For much of the last thirty years or so, progressive economists have argued thatmacroeconomic policy is too tight. In simpler terms, this means that some combination ofhigher government spending, lower taxation, and lower interest rates will lead to morejobs and higher incomes.
Such arguments are sometimes presented as part of advocacy for initiatives responding
to the environmental crisis, such as the Green New Deal. For the most part, however, theenvironmental implications of higher near-term economic activity in rich countries do not
attract much attention – it is taken as given that higher economic activity, as measured
by gross domestic product (GDP), is unequivocally positive.
The current situation of high inflation, driven
by energy shortages, war and climatechange, serves as a sharp reminder that
there is something missing in analysis whichsees higher growth as an entirely free lunch.
Almost all economic activity depletes scarcephysical resources and generates carbonemissions. Higher employment usually comesat the cost of higher emissions. Furthermore,
it is possible that we are now also reaching
the end of the historic period in which
physical resources were usually immediately
available – so that economic activity could
quickly rise in response to higher overall
spending. The era of the Keynesian free lunch may be ending, replaced by a regime
characterised by recurring inflationary episodes.
This puts progressive economists like me, who believe that the economies of richcountries are predominantly demand driven – meaning that higher overall spendingmeans more jobs and higher incomes – in an uncomfortable position.

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The prevailing progressive economic view relies partly on the idea of the “multiplier”.
This is the claim, which is well supported by empirical evidence, that every pound of newspending in the economy will generate additional income and spending over and above
the initial pound spent.
The mechanism works, to a large extent, by stimulating consumption spending: if a
new government investment project is initiated – to provide additional green energy, forexample – the money spent on the project – on wages, transport and materials – will bereceived by individuals and businesses as income. Some of this additional income willbe spent on consumption, generating a second round of additional new incomes.
Similarly, the argument that redistribution from those on higher incomes to those on
lower incomes is good for growth relies on the fact that those on lower incomes spend
a greater proportion of their incomes on consumption goods – redistribution from rich topoor thus raises total consumption expenditure and economic activity.
How are progressive economists to respond to the now inescapable fact that current
resource use greatly exceeds planetary limits, and “decoupling” – the trend for energy
and resource use per dollar of spending to fall as GDP rises – will not be sufficient to staywithin planetary boundaries if steady GDP growth continues?
There is no single answer to this question– the appropriate response will require
action on many fronts simultaneously.
However, economists are beginning toconsider whether we need to introduce
constraints on consumption, at least
for those on higher incomes in richcountries, as part of the solution. Ratherthan relying only on voluntary consumer
choice and natural shifts in consumption
patterns – such as the trend towards
lower consumption of meat in some richcountries – it may be that state intervention
is required to influence both overall levelsof consumption and its distribution.

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There are two main arguments in favour of constraining consumption. The first is
straightforward: all consumption, whether of food, transport, clothing or shelter, involves
carbon emissions and resource depletion. Reduced consumption growth shouldtranslate directly into lower emissions growth.
The other relates to the need to reallocate current resources, including labour, towards
the investment needed to fundamentally reshape our economic systems. Lower
consumption means fewer people working in industries which provide for consumption
spending, and fewer raw materials devoted to the production of consumption goods.
This frees up resources for green investment: people and materials can be re-deployed
towards the investment projects which are urgently needed.
This raises some thorny questions: what policy tools can be used to shift the compositionand scale of consumption? Which groups should face incentives – or compulsion – toreduce consumption and what form should these measures take? How will voluntary
shifts in consumption interact with more direct measures to reduce consumption? And
crucially, how can jobs and incomes be protected without relying on consumption as akey driver?
Much of this comes down to issues of distribution. Statistics on poverty make clearthat large numbers of people in rich nations are unable to consume sufficient basic
necessities. Basic justice dictates that the average incomes and consumption of those inlower income countries be allowed to catch up with those of richer countries. The needfor redistribution of income within countries, and income catch-up across countries isundeniable – yet such redistribution, if it were to occur without other changes, will lead toincreased overall consumption and emissions.
It is therefore hard to avoid the conclusion that
taxation and regulation will be required to limit
some part of the energy-intensive consumptionof those on higher incomes in rich countries,
particularly consumption which can be considered“luxury” consumption.
One plausible response to such suggestions is toclaim that voluntary shifts in the kinds of things
produced and consumed will naturally lead to
reduced emissions, even while “consumption”, asmeasured by the national accounts, continues togrow. This kind of voluntary behavioural and consumption change – buying fewer cheap
clothes, holidaying by rail rather than plane, switching to electric cars – will have a partto play in the transition to a low carbon economy, alongside reorientation from goods
consumption to a more services-driven “foundational” economy. It is unlikely, however,that such changes will be sufficient.
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The politics of consumption constraints are daunting. Managing competing distributional
claims in the face of opposition from increasingly concentrated wealth and power ishard enough when the overall pie is growing. As we move towards a world of potential
genuine scarcity, the politics of redistribution will become even more malign. This only
emphasises the importance of getting the economics right.
Any successful response to the climate and wider ecological crisis will inevitably
involve action and change at all levels – from local organising and “organic” shifts in
consumption to reform of financial systems and action to tame corporate power andconcentrated wealth. Constraints on the consumption of the relatively well-off should bepart of such a response. A debate about the economics and politics of these constraints
is overdue.

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About the author
Jo Michell, Associate Professor in Economics, UWE Bristol
Jo Michell is Associate Professor in Economics at UWEBristol. His research interests include macroeconomics,
banking and finance and political economy. He has
published widely in academic journals and for nonacademic audiences. He has worked with internationalorganisations including the United Nations Conference
on Trade and Development (UNCTAD) and theInternational Labour Organisation (ILO). He regularly
collaborates with progressive UK thinktanks such as
NEF and IPPR. He is Secretary of the Post Keynesian
Economics Society.

Global Action Plan 2022