Our current economic models are not fit for purpose. They fail to tackle the social-ecological crisis.
And people know this.
Since 2008, a pattern has emerged. From Brexit in 2016, to Boris’ victory in 2019, to Labour’s victory in 2024, the Greens and Reform’s ongoing political boom, all these political phenomena share one common thread.
Frustration. Anger. Resentment towards the status quo.
And rightly so.
Our political leaders, regardless of political party (excluding the Greens), all talk about “going for growth”. We blindly chase economic growth, but we never seem to ask the question: at what cost? Who does economic growth really serve?
By following neoclassical economic theory, we create an economic system that can exist in a spectrum between two states: recession or growth.
Our current economic system is designed so that when both extreme states occur, the most powerful benefit the most, and the poorest suffer the most whilst benefitting the least.
We are sold the idea that anyone can invest in the stock market, invest successfully, and achieve monetary returns. But not everyone has the luxury to afford an investment portfolio, most people are barely scraping by. So when these companies grow, the returns mostly end up concentrated amongst those who have the largest and most diversified investment portfolios, disproportionately benefitting the richest and most powerful.
When there is a crash, we are told that “the big banks cannot fail”. Large corporations obfuscate by arguing they are the ‘engines’ of economic growth. Such power means they exert sizable influence over our political leaders, because they have the monetary power to significantly influence a country’s economic outcomes.
So we bail them out. More of our public money goes into private hands.
What we are witnessing globally is a gradual, systemic transfer of wealth. Such an economic system is not inevitable. But when we choose to design our economies by following neoclassical, and more specifically neoliberal macroeconomic models, the system strongly reinforces the positions of the richest and most powerful. Such an economy denies the poorest and most vulnerable freedom, and is deeply illiberal.
It can be said that economic growth has taken people out of poverty. “There are millions who are no longer in poverty because of growth”, is a narrative frequently cheered by so-called “think tanks” such as the IEA. They would be right in some developing economies, but to what extent is this true in the UK?
Certainly in our western, developed economies, there are many across the country who are yet to feel the benefits of economic growth. The Global Inequality Report 2026 paints a sobering picture of increasing global inequality. Trends clearly show increasing wealth inequality in the UK.
In neoclassical economic models, the Solow-Swan growth model shows how economies can theoretically deliver exponential economic growth. This is the dream scenario for our political leaders, because it means they can postpone making the much harder political choice of redistribution of wealth.
However, the Solow-Swan model is incomplete. It does not account for the importance of exergy to growth, and largely omits the flows of material resources within an economy, which are subject to strict thermodynamic limits. Such a model suggests that economies can grow independently of material flows, with the economy being able to expand ex nihilo, which does not align with physical reality.
Our economy is a physical, thermodynamic, non-equilibrium system that exists within the biosphere, transforming natural resources into useful products for human consumption.
The steady-state economy offers a realistic and just alternative grounded in science. It does not reject markets, markets can allocate resources efficiently, albeit with some limitations. What the steady-state economy offers is stability. No booms, no busts. No “growth for growth’s sake”. Growth is only sought with evidence-based, scientific analysis to seek whether it is truly desirable.
We have clearly hit a stage where growth is no longer socially nor environmentally desirable. But we currently exist within an economic system in which growth is intrinsic to success. And this needs to change.
In order to reach a steady state economy, we require:
– The redistribution of wealth to the poorest in our society to have a socially just economy.
– A period of degrowth to have an economy within planetary limits.
Degrowth is a means to an end. It is not recession, nor is it austerity. Such analyses are based on the assumption that our economic system cannot be changed. That is not true. The need is clear, all we require is the political will. There are just and sensible policies which can be pursued to ensure that people’s social and material condition remains stable.
The steady-state economy offers hope. It offers a realistic alternative to the broken status quo. Most importantly, it offers freedom.
Freedom from rising global authoritarianism and populism.
Freedom from suffering for the poorest and most vulnerable.
Freedom from the social-ecological crisis.
Now, more than ever, is the time for us as Liberal Democrats to build this liberal steady-state vision.
* Rodrigo is a Liberal Democrat party member and a Young Liberal.
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38 Comments
The solution to poverty is to make everyone poorer – tough sell on the doorstep Rodrigo – if you’ve ever knocked on a door ? …
This degrowth theory sounds like campus BS to me. We’ll all be sat around a camp fire eating chick peas and knitting blankets. Human progress is now the enemy !
Thank you fot an excellent analytical article!
Yes, it is becoming even more screamingly obvious that Neoliberalism/Austerity has and does destabilise society.
Such is inevitable because Neoliberalism is, as it is intended to be, parasitic.
Might the L. D. leadership help its society and its party by energeically opposing this anti-social policy and go for equitable sustainability, possibly starting by working to make our wealth favouring tax set ups much more equitable and transparent?
https://www.google.com/search?q=richard+murphy+on+the+destabilising+nature+of+neoliberalism&oq=richard+murphy+on+the+destabili
The BS is that we can continue to have an economy that doubles in size every 35 years (2%pa growth) on a finite planet. Things that cannot continue are going to stop, and one thing that cannot continue is continued increasing extraction of fossil fuels.
So it would be a good idea to work out how to share what we are producing now more fairly, rather than hope that the magic growth fairy will stop us having to make hard choices. Real difficult decisions would increase taxes on the rich.
80% of the worlds energy comes from fossil fuels. We must do something brigade – enjoy the materialistic benefits that come with a free market economy but are not prepared to make the sacrifices themselves. It’s a wonder they don’t hurt themselves climbing down from that high horse.
” The redistribution of wealth to the poorest in our society to have a socially just economy.”
Achieving a socially just economy isn’t going to be easy. We all have different ideas about how that might work. Whatever society we might create, we will always find better and more efficient ways of doing the same thing. It’s what humans are fairly good at. The number of labour hours, to build a car, for example, is lower now than it was 20 years ago which in turn is lower than it was 20 years before that.
So the problem which the present capitalist society faces is one of increasing unemployment as fewer labour hours are required for essential productive processes but the same number of hours, or maybe just slightly fewer, are required for other essential work such as teaching the young. So the current mainstream answer is to expand the economy to make more things to be able to afford more nurses, more teachers etc.
It won’t work because teachers and nurses become more expensive as the economy grows.
If we decide to keep the economy at the same size as it currently is we’ll need to ensure that those with more will have to make do with less if we want those with not very much to have an improved living standard.
Not an easy sell for a political party which relies on winning over former Tory voters in relatively affluent constituencies to secure Parliamentary representation.
What are the practical benefits for regular citizens and their children resulting from some 40 years of Neoliberalism/Free Markets?
The point is to decouple Economic Growth (Growth in Value) from physical growth. That is going to be hard but we should not decide in advance that it’s impossible. Home insulation, solar panels, wind farms all contribute to Economic growth while cutting our use of fossil fuels. We can decide to re-use & recycle instead of throwing stuff away, it takes Political will & legislation & we need to be a lot more honest with Voters about the inconvenience & the inevitable consequences of doing nothing.
if you dont like growth you must love Brexit.
The author wants not just no growth but de growth.
Less money for the NHS. less money for defence.less money for renewables. less money for better homes.
People with marketable skills would leave.
Frankly this article is nonsense.
Without the capitalist transformation associated with the industrial revolution, Britons would have remained extremely poor, as they were in say 1650. It is free market capitalism that transformed the fortunes of Britain, Western Europe, North America, and Japan after the Meiji Restoration, to name just a few.
China and India remained poor until they embraced free market capitalism in the 1980’s for China and early 1990’s for India. Since then they have lifted more people out of poverty than has ever happened anywhere in human history.
What Britain needs is much more economic growth, not less. Furthermore as our economy has grown, it has also become less intensive in its use of energy and basic materials. That again is true everywhere.
Paul – all you are doing is outsourcing your carbon omissions & then importing them back into the UK. In doing so all you’ve achieved is to make our manufacturing base uncompetitive. All for what a feel good factor in trying to reach an illusionary goal. Utter madness
@Steve Trevethan. Like many people, I spent this Sunday morning at an out of town shopping centre. White goods seem to cost no more than they did 10, 15 years ago and I picked up a garden hose set for £25, made in China, of course. The car park was full of SUVs, EVs, BMWs and Mercs , putting my elderly Fiesta to shame. That is what global, neo liberal capitalism has done for us. We have more “stuff”. Whether this has made us happy is highly debatable, and of course there are many who have missed out on this jamboree. Let’s tell people they don’t need this shallow, materialistic, lifestyle. Go for walks in the countryside, call an old friend, read a book. Good luck.
People who think living standards havent gone up should take a look at central heating and average temperatures in the home. According to the FT in 1970, the average internal temperature in Britain was 12C by 2010, it had reached 16.9C.
https://giftarticle.ft.com/giftarticle/actions/redeem/d061f449-78a7-4789-ad1a-4a8f79efed5b
It’s more likely that the increasing use of fossil fuels:coal since about 1700, oil since 1940 and methane gas more recently is what helped create increasing prosperity. Roughly 2% pa increase in energy use and 2% pa economic growth. The current US war with Iran is likely to lead to a 20% economic contraction.
Hi @Paul Barker, thanks for your engagement with the article. I’m assuming that here you are talking about absolute decoupling from economic growth. You would be right that there are examples of successful relative decoupling, such as here in the UK.
When it comes to absolute decoupling, the EEB’s “Decoupling Debunked” report finds that “not only is there no empirical evidence supporting the existence of a decoupling of economic growth from environmental pressures on anywhere near the scale needed to deal with environmental breakdown, but also, and perhaps more importantly, such decoupling appears unlikely to happen in the future.” https://eeb.org/wp-content/uploads/2019/07/Decoupling-Debunked.pdf
I am also incredibly skeptical of absolute decoupling because when you zoom in, every economic service that produces value relies on some form of underlying material or energy flow. Services require a physical support system, which requires upkeep. You cannot create an economic service ex nihilo.
A service based economy may reduce intensity of material flows, but material intensity can never be reduced to 0 in a physical system. The problem isn’t how efficient the economy is, rather that the economy is using far too many resources at source. The scale of resource use under expectations of exponential growth is increasing above sustainable levels.
I’d hypothesise that this massive over depletion of the natural environment is a major contributing factor as to why the western world is seeing a trend of decreased growth rates over decades, due to decreasing EROI. Not only this, but environmental depletion is the one of the primary aggravators of the social-ecological crisis.
@Rodrigo: Your hypothesis that decreased growth rates is a result of environmental depletion immediately fails because it’s specifically the UK and Europe that has seen lower growth rates over the last 15-20 years – not World as a whole. The cause must therefore be something to do with how the UK and Western Europe is doing things. It’s not plausible that global over depletion of natural resources would cause lower growth only in one part of the World – especially when trade is so international. Also you’re making the mistake of assuming there’s something exceptional about growth in the last couple of decades. There isn’t. Throughout human history there have been periods when economies have done well and periods when economies have done badly.
“What are the practical benefits for regular citizens and their children resulting from some 40 years of Neoliberalism/Free Markets?”
“The number of labour hours, to build a car, for example, is lower now than it was 20 years ago which in turn is lower than it was 20 years before that.”
GDP per capita has roughly tripled since the 1950s and virtually every generation in the UK has benefitted from that increase in economic growth.
That is reflected in the quality and number of cars in the typical household today even though the cost of an average car went from £1000 to £29,000 in 75 years . In 1986, the average car cost about 91% of the average UK annual wage, whereas in 2026, a typical car costs roughly 100% of the average annual wage, showing that people are prepared to devote more of their disposable income to motoring costs
There is no doubt that wealth production has increased tremendously and just as in the 19th Century during the heyday of the British Empire there are two economies – the productive economy where workers gain moderately over time as productivity increases and the extractive economy of a wealthy elite that extracts the lion’s share of productivity gains via essentials such as housing rents and mortgage interest, Utilities, energy, food production, communication across airwaves and other natural resources,.
A more equitable distribution of the economic rents extracted via natural resource monopolies across the wider population would reduce the scramble for exponential economic growth and allow for both a more rational husbanding of the planets resources and sustainable improvements in the quality of public services.
Thanks for an excellent article: that some feel challenged by it makes it all the more necessary.
We really do need to escape the neoliberal economic framework, with its invented fiscal rules that have seen the greater part of economic growth over the past 40 years channelled up to the rich.
In a recent paper on whether it is possible to raise everyone out of poverty without overstraining the world’s natural resources, Jason Hickel and Dylan Sullivan argue that the answer is yes, but only if we adopt a different economic model, based on human needs rather than the conventional economic growth approach. They estimate that the latter requires 2.5 times the planet’s sustainable resources, but that a needs-based approach should be possible that is well within the planet’s resources.
This needs-based approach is not so different from the ideas of the great Liberal William Beveridge that led to the creation of the welfare state, except that it is cast in positive terms rather than Beveridge’s five giants – Want, Disease, Ignorance, Squalor and Idleness. The needs-based approach estimates what resources are required to give everyone a good standard of nutrition, housing, hygiene, clothing, healthcare, education, communications and mobility. This approach would be well aligned with the values of our constitution, whose preamble includes ‘We will foster a strong and sustainable economy which enables people to thrive in their communities, assessing progress by measuring people’s wellbeing.’
“Post Growth” is present in the UK in many sectors. Apart from thermodynamic arguments and resource exhaustion, in some sectors things are “good enough” and there is no scope for another boom and super-profits. The one I know best is cellular mobile radio. There is little scope for improved use of the spectrum. This is known to engineers and physicists. However nVidia has invested $1 Bn in Nokia. With the narrative of “AI improvements”. A desperate play to boost growth?
Will there be a better fridge? (hint: no) A better petrol engine? The billionaire playbook (Zero to One by Peter Thiel) requires disruption, high-margins, monopolies, lock-in, rent and serfs. With a smaller and smaller set of new businesses. Eventually someone says that building rockets to go to Mars is the best use of the billions he has.
I find myself in agreement with Joe Burke. 🙂
Cars are technically more complex than they were 40 years ago so we aren’t comparing like with like. I think he’s saying they aren’t the best of examples to illustrate the how our productive capacity has increased over the decades.
Also Joe has it right with “..the extractive economy of a wealthy elite that extracts the lion’s share of productivity gains via essentials such as housing rents and mortgage interest, Utilities, energy, food production, communication across airwaves and other natural resources”
We’ve previously disagreed on the question of land, which always struck me as only addressing a small part of the problem, but I can’t disagree now that Joe is including a broader range of “rentierisms”. Of course the wealthy want to increase their wealth without risking what they already have. The economist Daniela Gabor is well known for her critical analysis of rentier capitalism.
She has been particularly critical of Labour’s plans to give them them what they wanted.
https://www.theguardian.com/commentisfree/article/2024/jul/02/labour-plans-britain-private-finance-blackrock
@Peter Chambers: Will there be a better fridge? Well over the last 50 years, fridges have become much more energy efficient and quieter. The mechanics at the back are now fully enclosed so less susceptible to dust etc. For freezers, self-defrosting models are now commonplace. And we’ve seen the gradual appearance of ice-cold water supplies fitted to fridges. Plausible future technologies include solid state cooling (fewer moving parts – even quieter and more energy efficient) and use of UV and anti-bacterial surfaces to keep food fresher. And that’s before we think about the possibilities of fridges connected to the internet or able to detect food labels so they can alert you when food needs eating or you’re about to run out of stuff. So yes, there’s plenty of scope for a better fridge.
And that illustrates the fundamental problem with post-growth/no-growth doom-mongers: The arguments invariably ignore the possibilities offered by ever improving technological progress.
Might the data on homelessness, food insecurity/permanent hunger, reduced UK life expectancy, global over heating, wars for natural resources control etc. indicate that material benefits for some only have come at an unsustainable and unjustifiable price?
P. S. Might GDP is an unreliable metric becuse it includes extractions of national wealth as well as inputs?
Peter Martin identifies the hardest question in the whole piece, and it’s one the article doesn’t really answer: redistribution requires political will, and our electoral geography makes that genuinely complicated.
But the social liberal tradition has been here before. What Denis Mollison gestures towards in Beveridge is part of a longer lineage, running through Hobhouse and the New Liberals, grounded in the idea that freedom without material security is meaningless. The needs-based framing isn’t a new import from post-growth academia. It’s where liberalism came from, before the Orange Book tendency decided markets were the answer to every question and the price of white goods at retail parks was sufficient evidence that everything was basically fine.
The policy architecture that fills the gap Rodrigo leaves open does exist. At A Just Society (ajustsociety.uk) we’ve been working through exactly this: a wealth levy targeting genuinely excessive accumulation, not median earners or professional-class homeowners, but wealth that compounds faster than anyone could spend, combined with a Universal Basic Income that decouples income security from growth. Degrowth without an income floor is just austerity with better footnotes. With one, it becomes a politics of sufficiency rather than scarcity.
That’s the serious answer to Peter’s challenge. It won’t fit on a Focus leaflet, but it’s where the intellectual tradition points, and it’s where we think the Liberal Democrats should be going.
@Tanya
Thanks for that. Much to agree with, but on one specific point …
Richard Murphy, who is writing a lot in this area, themed on a ‘politics of care’ (www.taxresearch.org.uk/Blog/), provides convincing arguments on the difficulty of taxing wealth directly, and suggests instead taxing the income of the wealthy more fairly – see taxingwealth.uk
Might this article be of relevant interest and, possibly, use?
https://www.taxresearch.org.uk/Blog/2026/03/30/economic-questions-the-viktor-frankl-question/
P. S. The Viktor Frankl question is about what gives human life purpose and meaning, without some grasp of which economic theories and their applications are incomplete.
@Denis
Richard Murphy’s work is important and we agree on a great deal – the UK tax system is genuinely regressive once you account for wealth accumulation, and his reforms to existing taxes are long overdue. But I’d draw a distinction between taxing the flows from wealth and addressing the stock itself. Even a perfectly reformed CGT regime leaves the underlying concentration intact – the political influence, the intergenerational transfer, the compounding power of extreme accumulation. The case for a Limitarianist levy isn’t primarily about revenue. It’s about the fact that wealth beyond a certain threshold functions as a democratic problem, not just a fiscal one. We need something that addresses what extreme concentration of wealth does to a society over time.
@Tanya
I don’t disagree, and I don’t think Richard Murphy does either. He just points out – and remember he has long experience of how taxes work in practice – that taxing wealth is very difficult; whereas the taxes on income from wealth, which largely consist of getting the various alternatives to income tax used by the rich (e.g. dividends, capital gains) taxed at the same rate as income tax (+NI), would be much easier to achieve.
It does seem ridiculous that the rich can arrange that their effective marginal rates of income tax are substantially less than for those on ordinary incomes.
“Even a perfectly reformed CGT regime leaves the underlying concentration intact”. So does a wealth tax unless it is set at a level above the return on large concentrations of wealth and nobody is proposing one at that level.
@Tanya Park. I find myself very much in agreement with your argument for targeting excessive accumulations of income and wealth. That there may be practical issues as far as actually collecting these taxes in concerned is widely understood. But this article was largely about creating a zero growth economy. If I understand you correctly, you suggest that the revenue from these new wealth taxes could be used to protect ordinary citizens from the threat to their standard of living that a static economy might present. If we are constantly chipping away at the assets of the wealthy, surely we will reach the point where revenue declines and the model disintegrates ? Or is this the gift that keeps on giving, as it were ? Your thoughts ?
Finally, if we aim for degrowth and our neighbours do not, do we loose such competitive advantage that our economy goes into a tail spin ? And if we act unilaterally, the benefits for the environment are very limited. So degrowth needs to be adopted globaly, and how would you rate the chances of India and China signing up ?
@Chris
There’s a simple truth here that gets lost in the economics jargon. Money that sits at the top doing nothing is dead weight. Money that circulates — through wages, through services, through people actually spending it – creates real value at every step. Redistribution isn’t just the fair thing to do, it’s the productive thing to do.
On whether the model eventually runs out of road – yes, and that’s fine. The point was never to extract from extreme wealth forever. It’s to move it. Once you’ve done that, you’re left with a healthier economy, not a hollowed-out one.
Your degrowth point is the genuinely difficult one, and I won’t pretend otherwise. But I’d separate the two arguments – you don’t have to sign up to unilateral degrowth to believe that hoarding wealth at the top is bad for everyone. That case stands on its own.
@ Tanya,
The argument you’ll hear from some heterodox/ Keynesian/MMT economists is that money that is sitting there “doing nothing” is actually economically inert and therefore is not going to create extra fiscal space if we remove it from circulation in taxation.
This would be fair enough if the wealthy stored their extra cash in the form of government bonds. They might do that to some extent but in the main they do actually keep it moving by buying up land, real estate, stocks, shares, and gold bullion. This is the problem. It still creates inflation. It may not show up in the usual inflation indices but it particularly causes a problem to our your people who may want to set up home.
It’s not the wages of the working class that have driven the rise in house prices.
I take a heterodox view on macroeconomics but I don’t agree with those who argue against having wealth taxes.
@Tanya. Money that circulates doesn’t directly create value. It creates demand (for whatever the people spending the money are spending it on). What creates value is businesses responding to that demand by supplying those goods – but that is only possible if the appropriate spare capacity exists in the economy. If the capacity doesn’t exist, then the result will mostly be not added value, but added inflation.
@Peter Martin: Yes, I would be one of those arguing that money sitting doing nothing is inert (and therefore doesn’t directly contribute to inequality in the distribution of actual resources). You’re right to point out that’s not the case if people hold their wealth in the form of land – because then they are effectively hogging a finite resource. That is surely an argument for a land value tax, not a general wealth tax.
First of all, I’d just like to say a massive thank you for everybody’s comments. I am overwhelmed by the amount of engagement which my article has received, so thank you! Again, this work is all based on research I do in my spare time, so I am not an expert in post-growth or ecological economics in any way.
However, I do know enough to understand that the idea of exponential growth on a finite planet is a dangerous fairytale. Kenneth Boulding puts it frankly as “anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.”
Our economy doesn’t just rely on harnessing solar energy. We don’t photosynthesise! We require a physical, material support system to have a functioning service economy. When we go for exponential growth, our material throughput will naturally extend far far beyond sustainable scale. The extent of inequality in our societies shows us that this disproportionately benefits the rich and powerful few.
So clearly some of our economic models have got seriously gaping holes of knowledge within them. Our current economic system needs to be updated to reflect this reality which they currently don’t, with ecological/biophysical economics doing the heavy lifting.
For those who have the argument that growth has enabled us to become wealthier, and more technologically advanced as a civilisation, yes. You are right. Without growth, our societies would not have the fundamental material and technological basis they require in order to thrive.
But the key question is, especially in developed economies in the western world – *to what extent do we require further growth?* The economy is an entropically dissipative system. With exponential economic growth comes increasing costs of environmental pollution, which also leads to increasing societal costs in terms of health and wellbeing.
There is debate as to how much money can buy happiness, with different studies saying different things. However, I think we can all agree that exponential monetary gain due to growth does not always lead to exponential outcomes of happiness. There are certainly ways of having fun with less stuff. *Excessive* materialism and its subsequent negative cultural and societal consequences are directly and actively incentivised by an economy pursuing exponential growth.
What we do know however, is that people value their health. Like a lot. And a growth economy can often present situations in which economic growth and health directly conflict. Not only this, but a growth economy actively reinforces the patriarchy by systematically undervaluing the care work done by mostly women in our societies. Please read Tim Jackson’s great book, “The Care Economy” for more about this.
For those who argue that my argument overlooks the possibility of technological progress, I don’t. Technology is key to this transition being successful. I fully support technological progress to improve the efficiency such as required with the circular economy.
However, the circular economy is not a panacea to overconsumption, which is structurally promoted under economic growth. Technology may improve efficiency, but technology does not allow us to escape thermodynamic constraints. Landauer’s principle shows us that processing any form of information has an energy cost, and service economies rely on a digital infrastructure which requires the processing of information with data centres, for example. So technology cannot fully decouple growth from physical systems.
Even if value creation and material throughput follow a non-linear relationship, economic activity still relies on material, physical flows. The problem isn’t necessarily opportunities for decoupling. The problem is that structurally and systematically, growth tends to demand material inputs beyond sustainable scale. Such a dilemma would not exist in a steady-state economy, where the priority is stability within biophysical limits.
So what we begin to find is that in “developed” western economies, *the extent of the environmental and social costs greatly outweighs the potential benefits of growth, thus we should consider an alternative option.*
For those who highlight political challenges, you are also absolutely right. But that doesn’t stop us having the discussion now, or at least beginning to move in the right direction. A successful implementation of a steady-state economy does require overcoming challenging political circumstances, and is something which I am also aware and thinking about. I hope to write something about this in future.
I am also thankful for @Tanya’s comment – I am glad that we are discussing wealth redistribution, which is essential in order for this to work. I also agree with your idea of a wealth tax, and I will take a look at your website.
To properly reflect an individual’s impact on the natural environment, we could introduce taxes on resource use rather than tax on labour or income. This would be a disincentive for overconsumption and reduce material throughput. Everybody would have to pay the same for resource use, so it does risk being regressive. To ensure this isn’t the case, we could also introduce government programmes that ensure such taxation doesn’t hit the poorest in our society the most.
No economic system is perfect. Every economic system has its trade-offs. But we can certainly, certainly do much better than we are now. I strongly moving towards a steady-state economy in the long-run is the way to go.
@Peter
You’re right, and that’s a sharper version of the argument than I made. It’s not that wealth sits inert – it’s that it moves in ways that distort rather than generate. Asset price inflation priced an entire generation out of housing while barely troubling the standard indices. That’s not neutral.
@Simon
The inflation point is fair, and it’s actually one of the strongest arguments for universal services alongside redistribution rather than cash transfers alone. You build supply capacity for housing, care, and healthcare, so that increased demand meets increased provision rather than just pushing prices up.
On land value tax – LVT only taxes the land itself. A progressive property tax on total market value is broader – it captures the building and improvements, not just the plot. But neither of them touches financial wealth: shares, bonds, cash holdings. That’s what a wealth tax does.
@ Simon @ Tanya @ Joe,
I’ve disagreed with Joe in the past but his earlier comment on this thread is, I would say, very much to the point.
” the productive economy where workers gain moderately over time as productivity increases and the extractive economy of a wealthy elite that extracts the lion’s share of productivity gains via essentials such as housing rents and mortgage interest”
I’d add the desire of the wealthy elite to have the government de-risk their investments. You can get much more risk free that the rolling stock companies who buy from the manufacturers and then sell on to now, or soon to be, nationalised rail companies with a nice not-so little mark up! Why do we need these “middle men” ?
So, as Joe says in the last paragraph, we need to tackle levels of inequality to be able to sell the idea of a non growing economy. We know that a no-growth economy, will otherwise mean that those at the bottom will lose their jobs whilst those who are in a position to extract more income from their existing wealth will continue to do nicely.
https://www.rmt.org.uk/news/publications/the-rosco-racket-why-its-time-to-take-control-of-uk-rolling/
Growth as a word has so many interpretations that it is meaningless. What is actually growing? People’s wealth, GDP or inequality? Government’s role is to balance these different definitions and create a society where some people can become wealthier and all live happier more productive lives.