Welfare systems without economic growth: A review of the challenges and next steps for the field

Journal Paper by Christine Corlet Walker, Angela Druckman and Tim Jackson
Ecological Economics, Vol 186

Summary

Welfare systems across the OECD face many combined challenges, with rising inequality, demographic changes and environmental crises likely to drive up welfare demand in the coming decades. Economic growth is no longer a sustainable solution to these problems.

It is therefore imperative that we consider how welfare systems will cope with these challenges in the absence of economic growth. We review the literature tackling this complex problem.

We identify five interconnected dilemmas for a post-growth welfare system:

1) how to maintain funding for the welfare system in a non-growing economy; 2) how to manage the increasing relative costs of welfare; 3) how to overcome structural and behavioural growth dependencies within the welfare system; 4) how to manage increasing need on a finite planet; and 5) how to overcome political barriers to the transformation of the welfare state.

There is now need for further research investigating the macro-economic dynamics of post-growth welfare systems; trialling preventative, relational, low-resource models of welfare provision; and seeking to better understand political barriers to a post-growth welfare transition.

We also make the case for considering post-growth welfare studies as a field in its own right, with the aim of improving coherence and cross-fertilisation between disciplines.

Introduction

Current global social, economic, and ecological trends require that we consider what the future of welfare systems might look like without economic growth. Welfare systems across the OECD today provide a host of foundational goods and services, from education and healthcare to social security payments and housing. These programmes are often vital to the health and wellbeing of citizens, particularly those for whom private alternatives would be prohibitively expensive (although the level at which they are provided is often considered insufficient). However, these welfare systems now face a stark reality of multiple, interconnected challenges: deep and rising inequality (Denk and Cournede, 2015; Ruiz and Woloszko, 2016); burdensome demographic changes (Chłoń-Domińczak et al., 2014; Rouzet, 2019); increasingly palpable changes to our climate and ecological systems (IPCC, 2018; Díaz et al., 2019); and the ongoing social and economic challenges brought about by the COVID-19 pandemic. This paints a concerning picture for the fiscal sustainability of welfare systems, globally.

The traditional silver bullet for each of these problems has been economic growth. Growth, it is argued, brings greater resources to manage poverty and demographic pressures, and to mitigate and adapt to crises such as climate change and COVID-19. This outlook justifies economic growth as the central policy goal of most governments today. However, some prominent economists have begun again to explore the notion that wealthy nations across the OECD may be in a long-term economic slump, referred to in the literature as ‘secular stagnation’ (Gordon, 2012; Teulings and Baldwin, 2014; Summers, 2015; Jackson, 2017). Jackson (2019b) provides an up-to-date summary of the key debates around the drivers of secular stagnation. He pays particular attention to the tensions between supply-side explanations, such as reduced “supply potential” in the economy as a result of “a decline in the pace of innovation”, and demand-side explanations, such as “‘underconsumption’ by households in the context of rising personal debt and heightened political risk” (Jackson, 2019b, p. 237). Although the causes are still contested, Jackson argues that regardless of the balance between these factors, the growth rate in advanced economies appears to be continuing its steady decline, albeit punctuated with periods of post-crisis recovery (Jackson, 2019b, p. 237; OECD, 2019a). He therefore suggests that there “may be no growth at all in the per capita income of the OECD countries within less than a decade” (Jackson, 2019b, p. 237).

In this context, considering how welfare systems will cope in the absence of economic growth represents, at the very least, a sensible precaution. It may even be desirable, as economic growth continues to be tightly coupled to the greenhouse gas emissions and material throughput of our economies, with little to no evidence that we can decouple these factors quickly enough to meet the 1.5° global warming target set out in the 2015 Paris Agreement (Hickel and Kallis, 2019). Deprioritising economic growth is likely essential in order to avert catastrophic climate change and may offer more time and flexibility to make the necessary changes to our global production systems. Post-growth economics¹ is the main field of research looking to understand the dynamics and implications of a transition to a non-growing economy. Although it has its roots in the ‘limits to growth’ work of the 1970s (Georgescu-Roegen, 1971; Meadows et al., 1972; Daly, 1973), the field in its current formulation is still young. Many of the relevant tools to answer core questions about a post-growth transition are still in their nascent development, and areas like the welfare state have yet to be fully explored.

This review aims to provide a synthesis of the existing research looking at welfare systems without economic growth. We are focusing on OECD nations in the Global North, since the dynamics of growth and wellbeing are considerably different across countries in the Global South. In particular, economic growth may still support wellbeing advances in certain regions, whilst others might take entirely different, non-western paths that are not amenable to the framing of welfare and economic growth that we apply in this review paper. Further, it is worth distinguishing here ‘welfare systems without economic growth’ from ‘sustainable welfare’, for which there is a connected but conceptually different emerging literature. We focus in this review on articles that consider how welfare can be provided in a non-growing economy, and the challenges that entails. By contrast, the sustainable welfare literature focuses more closely on the twin problem of how social policy can be enacted in an ecologically sustainable way and, in turn, how environmental policy can be delivered in a socially just way.² There is evidently strong overlap between the two literatures; however, in the interest of clarity, we focus on the former.