“Both the ongoing ecological degradation and the rising inequality stem from the relentless pursuit of economic growth", says Triodos Bank Chief Economist Hans Stegeman. “Therefore, a discourse on growth itself and the exploration of alternative routes to a flourishing and future-proof society should inherently form a core aspect of a long-term vision for an institution like ours, which champions the transition to a sustainable economy.”
Modest growth ahead
After tumultuous years marked by the COVID-19 crisis, energy challenges and the ongoing war in Ukraine, the global economy has entered a relatively stable phase. The Triodos Bank global outlook anticipates modest economic growth next year at 3.1%. This forecast takes recessions in the US and UK into account, combined with struggling economies in the eurozone and Japan.
While this growth is insufficient for improving the lives of people in emerging markets, it aligns with the intentional efforts of central banks to combat inflation by raising interest rates. This results in increased lending costs and subsequently reduced investments. Additionally, persistent geopolitical concerns, such as the ongoing war in Ukraine, escalation of violence in the Middle East, and trade tensions between China and the US, contribute to the challenges.
The resulting meagre growth falls below investors' expectations. Higher investor demands about return, driven primarily by market growth, prompt companies to focus on efficiency, stock buybacks, or other value-enhancing strategies.
Exceeding planetary boundaries
However, this low global growth still adds economic activity the size of the UK's economy. According to Triodos Bank, this poses a significant concern. As the COP28 climate conference approaches, it becomes increasingly evident that globally, we are still unable to decouple economic activity from adverse effects on the ecosystem. Planetary boundaries are already being exceeded.
This leads to the predicament that the growth-dependent economic system is not growing enough. At the same time, it is evident that increased economic activities will harm the ecosystem.
Towards a post-growth economy
In its outlook, Triodos Bank advocates for and elaborates on pathways towards post-growth. This involves reshaping the economy to be less dependent on growth while ensuring prosperity for all. For affluent countries, Triodos Bank believes it is important to acknowledge that additional material prosperity does not necessarily contribute to overall well-being. At the same time no growth or even a decline of economic activity in affluent countries will allow less affluent countries to progress, because there higher inclusive growth can positively impact living conditions.
The pathways towards post-growth require radical shifts. Some sectors need to phase out, while others must thrive. Sectors with high pollution levels, such as fossil fuels, fast fashion, and industrial agriculture, may generate financial value, but they erode ecological and social values, subtracting from (future) wealth.
In a post-growth economy, there is room for restorative businesses that create net-positive value to flourish. Facilitating this transformation requires significant changes, spanning from policies to behaviours. Triodos Bank believes this is a plausible undertaking.