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Degrowing China—By Collapse, Redistribution, or Planning?

AE Solar Factory in China (April 1, 2017)

AE Solar Factory in China (April 1, 2017). By AE Solar - AE Solar, CC BY-SA 3.0, Link.

Minqi Li is a professor of economics at the University of Utah. Li can be reached at [email protected].

In recent years, degrowth theory has gained popularity among a growing number of ecological economists and social activists. Degrowth theorists argue that humanity’s consumption of material resources and impact on environment have overshot the earth’s ecological capacity, and that the restoration of ecological sustainability requires rapid and massive reduction of material and energy throughput in the global economy. Empirical evidence suggests that positive economic growth has been usually associated with rising material consumption and environmental impact. “Absolute decoupling” between economic growth and environmental impact (that is, a situation in which positive economic growth rate happens, together with absolute reduction of resources consumption and environmental impact) has happened only in specific countries during relatively short periods of time, and is unlikely to happen on a global scale at a sufficiently rapid pace. Degrowth theorists are convinced that global ecological sustainability cannot be restored without abandoning the pursuit of infinite economic growth.1

While degrowth theorists have made a reasonably strong case on why increasing economic growth cannot be made compatible with ecological sustainability, they continue to debate on how exactly degrowth can be accomplished. In the earlier literature, researchers in favor of degrowth were often ambivalent on whether degrowth can be achieved within the institutional framework of capitalism. In a paper that summarizes the earlier research on degrowth, the authors cited several studies attempting to demonstrate that degrowth can happen without abandoning a market economy based on private ownership of the means of production. In the section on “The Economics of Degrowth,” the authors recognized that “a fundamental question here is whether capitalist economies could really function without growth.” Nevertheless, the authors maintained that “there is nothing in neoclassical models to suggest that zero or negative growth is incompatible with full employment or economic stability” and “market mechanisms [can] bring about an efficient and stable steady-state economy.” While the authors did cite one study that advocated “collective firm ownership,” there was no discussion of social ownership and planned use of the means of production undertaken by the society as a whole (in this paper, the term “social ownership” of the means of production refers to the ownership of the means of production by the society as a whole including state ownership as long as state continues to exist).2

In contrast, Marxist scholars inspired by ecological perspectives have argued that the capitalist economic system is fundamentally incompatible with the requirements of ecological sustainability. For ecological Marxists, social control over the means of production and the society’s surplus product is an essential precondition to achieve a sustainable society with zero or negative growth in material consumption. John Bellamy Foster argues that capitalism with degrowth is “an impossibility theorem.”3 Fred Magdoff and Foster have pointed out that capitalism is a system that must continually expand, and “no-growth capitalism is an oxymoron.” A hypothetical “no-growth capitalism” would inevitably lead to massive unemployment.4

Some degrowth theorists have advocated anticapitalist or ecosocialist strategies toward degrowth. For example, Jason Hickel, a leading degrowth scholar, argues that “the core feature of degrowth economics is that it requires a progressive distribution of existing income.” Hickel proposes “a series of integrated policy reforms,” such as shortening the working week, implementing universal basic income, a living wage policy, the protection of “small businesses,” and investment in “public services” (health care, education, transportation, and affordable housing) funded by taxes on carbon, wealth, and profits.5 In a paper recently published in Monthly Review, Alejandro Pedregal and Juan Bordera advocate economic policies oriented toward deaccumulation and decommodification. The authors call for a “radical democratic planning from below” to dismantle socially undesirable sectors such as military and fossil fuel production, break up monopolies, decentralize the economy to favor local cooperatives, drastically reduce working hours, and rebalance the rural-urban relationship.6

Despite their socialist orientation, many degrowth theorists have not advocated social ownership of the means of production in material production sectors such as agriculture, mining, manufacturing, and construction (as supposed to public-service sectors such as health care, education, or transportation). When degrowth theorists talk about “planning,” they often use the term to refer to a coordinated and organized process of transition to degrowth, rather than as a society-wide mechanism in a future mode of production. In some cases, degrowth theorists seem to use the term “planning” simply to mean regulation of capitalist enterprises, rather than socially determined allocation of productive resources. In a recent paper, the authors argue that the influence of neoclassical steady-state economics or post-Keynesian postgrowth economics, reliance on market mechanisms and instruments, as well as a possible bias toward localism, may have prevented degrowth theorists from approaching planning in a substantial and effective manner.7

The policies of deaccumulation and decommodification proposed by degrowth theorists, such as taxes on wealth and profits, shortening the work day, universal basic income, and the expansion of public services, will substantially undermine the material interests of the capitalist class and lead to ferocious resistance from the capitalists. In an economic system that remains based on private ownership of the mean of production and market forces, the capitalists would inevitably respond with economically destructive actions, such as capital flight and investment strike, threatening society with economic collapse. However, the existing degrowth literature has largely failed to address how a progressive government committed to degrowth can effectively respond to the capitalist counter-degrowth activities.

China is currently the world’s largest economy measured by purchasing power parity, as well as the world’s largest energy consumer and carbon dioxide emitter. Thus, any discussion about degrowth and global sustainability would be largely fruitless without serious consideration of how China can be “de-grown.” This article discusses the possibility of “degrowing” China and considers what policies and institutional changes would be required for such a possibility to materialize.

China: Ecological Overshoot

China accounts for about one-fifth of the global economic output, making it world’s largest economy, measured by purchasing power parity.8 According to China’s official statistics, the Chinese economy grew at an average annual rate of 8.6 percent from 2001 to 2021 and the size of the Chinese economy increased by more than fivefold over the past two decades.9

China’s rapid economic growth has been achieved with massive social and environmental costs. China has some of the world’s most air-polluted cities. In December 2013, a severe air pollution episode affected six provinces in East China and the municipalities of Shanghai and Tianjin, causing major disruptions to transportation and daily activities.10 Since then, the Chinese government has undertaken a national campaign to reduce air pollution, and air quality has improved markedly in some cities. Nevertheless, heavy smog persists in some industrial centers and 1.4 million people died prematurely due to air pollution in 2019.11

China is also confronted by a severe water crisis. While Southern China has access to relatively abundant water resources, water availability in Northern China is estimated to be 40 percent below the threshold for acute water scarcity, as defined by the United Nations. Some scholars estimate that, by 2030, China could face a water supply gap (the ratio of water shortage relative to potential demand) of up to 25 percent. A severe water crisis in China may lead to major reduction of food production and electricity output and cause serious disruptions to global supply chains.12 China’s water scarcity is exacerbated by pollution. Much of China’s water supply is polluted by dumping of human and industrial waste. Only 60 percent of China’s surface water is considered safe for drinking and about eight hundred thousand people die each year due to drinking unsafe water.13

China also suffers from widespread soil erosion and pollution. More than 40 percent of China’s soil is degraded from overuse, erosion, and pollution. A nationwide survey in 2014 found that about one-fifth of China’s agricultural land was contaminated by heavy metals and metalloids.14

China’s capitalist-style economic expansion has not only damaged China’s own environment, but also relied upon massive consumption of mineral and agricultural resources. China consumes about one-half of the world’s annual production of steel, aluminum, and cement, as well as one-third of rice, one-quarter of corn, one-third of cotton, and one-half of pork.15

According to the Global Footprint Network, China’s “ecological footprint” (a country’s demand for land and water area required to meet its consumption of resources and absorb the waste it generates) in 2018 was 3.8 “global hectares” per person (a “global hectare” is a standardized measure of land and water area with world average biological productivity). However, China’s biocapacity was only 0.9 “global hectares” per person, meaning that China had an ecological deficit of 2.9 “global hectares.” This implies that to sustain China’s current level of resources consumption and waste generation, it would need to use up the biological resources of four “Chinas.”16 Clearly, China’s current level of resource consumption and environmental impact have overwhelmed its own ecological capacity. If the overshoot is not corrected within a reasonable period of time, China’s ecological systems will collapse, with devastating consequences for the Chinese people and the rest of the world.17

Degrowing China: The Imperative

Climate change is perhaps the single most important global environmental challenge confronting the humanity. In 2022, the global average surface temperature was 1.16°C higher than the average temperature of 1880–1920 (the interval used as a proxy for the pre-industrial temperature). By 2024, the global average surface temperature is likely to reach 1.4–1.5°C higher than in the pre-industrial period.18

Many climate scientists agree that, if the global average surface temperature rises to more than 2°C above the pre-industrial temperature, there will be various long-term climate feedbacks through changes in oceans and terrestrial ecological systems. Beyond that point, climate change will be largely out of human beings’ control. Runaway global warming will lead to the destruction of rainforests and many other ecological systems, widespread drought, a decline in food production, and catastrophic sea level rise. Billions of people may become environmental refugees. In the worst case, much of the earth may no longer be suitable for human habitation.19

Therefore, climate change poses an existential threat to the humanity. Neither global nor national ecological sustainability can be achieved without a serious commitment to reduce carbon dioxide emissions rapidly and sufficiently in accordance with the requirements of reasonable climate stabilization, meaning a stabilization of the earth’s climate under conditions consistent with the long-term sustainability of human civilization.

I have estimated that to limit global warming by the end of the twenty-first century to no more than 2°C relative to the pre-industrial time, global cumulative emissions from 2019 to 2100 (known as the global emissions budget) should be less than 1.41 trillion metric tons.20 From 2019 to 2021, about 110 billion tons of carbon dioxide were emitted due to global energy consumption.21 Assuming that global carbon dioxide emissions in 2022 were the same as in 2021, cumulative global emissions from 2019 to 2022 would have been more than 140 billion tons. Thus, about 0.14 trillion tons need to be subtracted from the global emissions budget. The cumulative global carbon dioxide emissions from 2023 to 2100 should not exceed 1.27 trillion tons in order to limit global warming by the end of this century to no more than 2°C.

For countries to find out their own emission reduction obligations, the global emissions budget needs to be divided into national emissions budgets. In earlier studies, two politically plausible principles to divide up the global emissions budget between countries have been proposed: the inertia principle and the equity principle. Under the inertia principle, each country is entitled to a share of the global emissions budget that equals its current share in global emissions. Under the equity principle, each county is entitled to a share of the global emissions budget that equals its current share in global population. The inertia principle favors “developed” capitalist countries, as well as some large carbon dioxide emitters. The equity principle is more favorable for “developing” countries. Other conceivable proposals to divide up the global emissions budget are likely to fall within the range defined by the inertia principle and the equity principle.22

If the global emissions budget was to be divided according to the equity principle, China would be entitled to about 18 percent of the global emissions budget, based on China’s share of the world population. This implies that China’s cumulative carbon dioxide emissions from 2023 to 2100 should not exceed 230 billion tons. If the global emissions budget were to be divided according to the inertia principle, China would be entitled to about 31 percent of the global emissions budget, based on China’s share of global emissions. This implies that China’s cumulative carbon dioxide emissions from 2023 to 2100 should not exceed 390 billion tons.

Chart 1 shows China’s historical carbon dioxide emissions from 2000 to 2021 and projected carbon dioxide emissions under three different scenarios: equity, inertia, and “business as usual.” The equity and inertia scenarios refer to emission reduction pathways consistent with the equity and inertia principles, respectively. The “business as usual” scenario will be explained in the next section.

Chart 1. China’s Carbon Dioxide Emissions (historical and projected, billion metric tons, 2000–2100)

Chart 1. China’s Carbon Dioxide Emissions (historical and projected, billion metric tons, 2000–2100)

Sources: Historical carbon dioxide emissions are from BP, Statistical Review of World Energy 2022 (London: BP, 2022). Projections are author’s calculations.

For both the equity and inertia scenarios, I assume that China’s carbon dioxide emissions will stay constant from 2022 to 2025 at about 10.5 billion tons and that China will start serious emissions reduction after 2025. Under the equity scenario, starting in 2026, China’s carbon dioxide emissions will decline by 5 percent each year until 2100. Under the inertia scenario, starting in 2026, China’s carbon dioxide emissions will decline by 2.4 percent each year until 2100.

From 2001 to 2021, the Chinese economy grew at an average annual rate of 8.6 percent and China’s carbon dioxide emissions grew at an average annual rate of 5.6 percent.23 This implies that China’s emission intensity of GDP (carbon dioxide emissions per unit of real GDP) during this period declined at an average annual rate of 2.8 percent (1.086/1.056 –1 = 0.028). By comparison, during the same period, the emission intensity of GDP in the OECD countries (including all developed capitalist countries and a few so-called “emerging economies”) declined at an average annual rate of 2.4 percent and the emission intensity of GDP in the rest of the world (the world economy excluding China and OECD countries) declined at an average annual rate of 1.5 percent.24 Thus, China has enjoyed a comparatively rapid pace of decline in its emission intensity of GDP.

Assuming that China can maintain its historical pace of declining emission intensity of GDP, China’s future economic growth rate needs to slow down to 0.4 percent in order to reduce emissions in accordance with the inertia scenario, and the Chinese economy needs to decline by 2.3 percent each year from 2026 to 2100 to stay on the equity pathway. Alternatively, if the Chinese economy were to maintain zero growth after 2026, China’s future decline rate of emission intensity of GDP would need to accelerate to 5 percent a year to stay on the equity pathway. This would require a decline rate of emission intensity of GDP that is more than double the historical decline rate in the OECD countries.

Therefore, depending on the future pace of decline of emission intensity of GDP and the national emissions budget, China’s future annual economic growth rate needs to be reduced to between -2.3 percent and near zero in order to meet China’s obligations to reasonable climate stabilization.

If China succeeds in degrowth, it will help China to restore ecological sustainability within this century. China’s per capita ecological footprint in 2018 included 2.7 “global hectares” of carbon footprint and 1.1 “global hectares” of non-carbon footprint.25 If China succeeds in reducing emissions according to the equity principle, China’s per capita emissions in 2100 will be only 4 percent of the per capita emissions in 2018. China’s carbon footprint would be practically eliminated by then. In this case, even if China does not reduce its per capita non-carbon footprint between now and 2100, China’s per capita ecological footprint by 2100 will decline to about 1.2 “global hectares” (1.1 non-carbon “global hectares” plus 0.1 carbon “global hectares”).

China’s per capita biological capacity in 2018 was 0.9 “global hectares.” According to the United Nations’ “median variant” projection, China’s population is projected to fall from 1.42 billion in 2018 to less than 770 million in 2100.26 Assuming that China can maintain its total biological resources between now and the end of this century, China’s per capita biological capacity will rise to about 1.7 “global hectares” by 2100. Therefore, if China were to reduce emissions according to the equity pathway, China’s projected biological capacity would exceed the ecological footprint by a large margin toward the end of this century. In that case, China would be able to restore its ecological sustainability.

If China reduces emissions according to the inertia principle, China’s per capita emissions in 2100 would be 33 percent of its per capita emissions in 2018. It follows that China’s per capita ecological footprint by 2100 will be about 2 “global hectares” (1.1 non-carbon “global hectares” plus 0.9 carbon “global hectares”). China would have failed to restore ecological sustainability within this century.

Degrowth by Collapse?

The Chinese government has promised to reduce the emission intensity of GDP so that China’s carbon dioxide emissions will peak before 2030.27 However, economic growth remains the Chinese government’s top priority. At the Twentieth National Congress of the Chinese Communist Party, Xi Jinping reconfirmed the objective to raise China’s per capita GDP to the level of “medium-level developed countries” by 2035 and to make China a leading global power by 2050.28 What will be the impact on ecological sustainability if China continues pursuing economic growth in the next several decades?

China’s future economic growth depends on the growth rate of the labor force and the growth rate of labor productivity. According to the United Nations’ population projections, China’s total population is projected to decline by 46 percent between 2021 and 2100. But China’s labor force is projected to decline more rapidly. According to the United Nations’ “median variant” projection, from 2021 to 2100, China’s prime working-age population (the portion of the population between 25 and 59 years old) is projected to decline from about 750 million to about 270 million, or a decline of 64 percent.29

China’s labor productivity has grown rapidly in the past. During 2002–2011, China’s labor productivity (measured by real GDP per employed person) grew at an average annual rate of 10.2 percent. However, by the period between 2012 and 2021, the average annual growth rate of China’s labor productivity declined to about 6.7 percent.30 In the future, because of falling rates of return on investment, exhaustion of the rural surplus labor force that can be transferred to the cities, and possible restrictions of western technology transfer, China’s productivity growth is likely to slow down further.31

It would be reasonable to assume that in the future China’s labor productivity growth rate will gradually approach growth rates of other capitalist countries at similar levels of development. According to the Penn World Table, China’s current per capita real GDP is roughly comparable to the U.S. per capita real GDP in 1950. From 1950 to 2019, U.S. labor productivity grew at an average annual rate of 1.7 percent. By 1975, Japan’s per capita real GDP approached the U.S. level in 1950. From 1975 to 2019, Japan’s labor productivity grew at an average annual rate of 1.9 percent. South Korea’s per capita real GDP reached the U.S. level in 1991. South Korea enjoyed a few more years of rapid growth before the Asian Financial Crisis. From 1999 to 2019, South Korea’s labor productivity grew at an average annual rate of 2.1 percent.32 One study finds that, even with optimistic assumptions about investment and productivity growth, China’s per capita real GDP growth rate is likely to slow down to about 2 percent by the 2030s.33

Given the above information, it is reasonable to assume that China’s future labor productivity growth rate will gradually decline from its current level to about 2 percent a year. I assume that China’s labor productivity growth rate will average about 4 percent in the 2020s but fall to about 2 percent by the 2040s and stay around 2 percent for the rest of this century. I also assume that China’s future employment level will change in proportion with China’s prime working-age population. Chart 2 shows the historical and projected growth rates of the Chinese economy from 2000 to 2100 under these assumptions. Interestingly, even if China does not abandon the pursuit of economic growth, China’s economic growth rate is likely to fall to near zero over the second half of this century due to decline of the labor force and deceleration of labor productivity growth.

Chart 2. Growth Rates of China’s Real GDP (historical and projected, 2000–2100)

Chart 2. Growth Rates of China’s Real GDP (historical and projected, 2000–2100)

Sources: Historical economic growth rates are from the National Bureau of Statistics, “Indices of Gross Domestic Product,” China Statistical Yearbook 2022 (Beijing: China Statistics Press, 2022), section 3-5. Projections are the author’s calculations.

Assuming that China’s emission intensity of GDP will decline by 2.8 percent each year (based on the historical decline rate of emission intensity of GDP), it can be projected that China’s carbon dioxide emissions will peak in 2027 at about 11 billion tons, meeting the official objective of peak emissions before 2030, declining to about 8 billion tons by 2050 and further, to 2.5 billion tons, by 2100. This is shown as the “business as usual” scenario in Chart 1.

Under the “business as usual” scenario, China’s cumulative carbon dioxide emissions from 2023 to 2100 will be about 510 billion tons, substantially above China’s emissions budget under either the equity or the inertia principle.

Moreover, based on the “business as usual” scenario, China’s per capita emissions in 2100 will only decline by about 52 percent from the per capita emissions in 2018. Under this scenario, China’s per capita ecological footprint by 2100 will be about 2.4 “global hectares” (1.1 non-carbon “global hectares” plus 1.3 carbon “global hectares”). China’s ecological footprint will overshoot its biocapacity by very large margins through the rest of this century. This will greatly increase the risk of collapse of China’s ecological systems. Moreover, as China (being the world’s largest carbon dioxide emitter) exceeds substantially its national emissions budget, prevention of global climate catastrophes would be virtually impossible.

In addition to the risk of ecological collapse, the “business as usual” scenario also carries the significant risk of economic and social collapse. China’s current model of economic growth depends heavily on the ruthless exploitation of a large, cheap labor force. According to information from Our World in Data, in 2017, an average worker in China worked about 2,200 hours a year, an average worker in India worked about 2,100 hours a year, an average worker in the United States worked about 1,800 hours a year, an average worker in Japan worked about 1,700 hours a year, an average worker in France worked about 1,500 hours a year, and an average worker in Germany worked about 1,400 hours a year.34

Thus according to Our World in Data, the Chinese workers’ annual working hours are among the longest in the world. A total of 2,200 annual working hours is equivalent to forty-four weekly working hours if one assumes that a worker works fifty weeks a year. However, other research suggests that the actual working hours of Chinese workers are likely to be much longer than what is reported in Our World in Data. A survey conducted in 2010 found that an average factory worker in the Pearl River Delta worked fifty-seven hours a week, and in the Yangzi River Delta, such an individual worked fifty-five hours a week.35 In China’s high-tech companies, the general practice is for the workers to work according to the so-called “996” schedule, which is equivalent to seventy-two weekly working hours (working twelve hours daily from nine in the morning to nine in the evening, six days a week).36 According to China’s National Bureau of Statistics, in 2022, workers in the Chinese business sector on average worked forty-eight hours a week.37 Assuming that the workers work fifty weeks a year, forty-eight weekly working hours are equivalent to 2,400 annual working hours.

Excessively long working hours have deprived Chinese workers of time for rest, leisure, personal activities, and even sleep. Because of enormous stress and physical exhaustion, many have suffered from physical or mental breakdown. According to the World Health Organization, long working hours tend to cause deaths from heart disease and stroke. A study finds that working fifty-five or more hours per week is associated with an estimated 35 percent higher risk of stroke and 17 percent higher risk of dying from ischemic heart disease, compared to working 35–40 hours a week.38 The Chinese government does not provide an official estimate of the annual deaths caused by excess work. However, according to China’s National Center of Cardiovascular Diseases, each year there are more than five hundred thousand cases of sudden death caused by cardiovascular diseases in China.39 Sudden death caused by cardiovascular diseases is the most frequently observed direct medical cause of death related to excess work.40

In the past, Chinese workers tolerated excessively long working hours in anticipation of rapid growth in income and a substantially higher standard of living for their children. In recent years, a new generation of Chinese workers has begun rejecting working long hours in pursuit of illusory material consumption. A new attitude known as Tang Ping, or “lying flat,” has become a popular strategy of life adopted by many young people. According to a report by Radio France International, “lying flat” can be summarized as six “Nos”—“do not buy a house, do not buy cars, do not date anyone, do not marry, do not have children, do not consume unnecessarily.” For some, it has become a form of resistance against China’s existing economic and social regime: “just maintain the minimum subsistence, not making (ourselves) into machines to make money or slaves to be exploited by the capitalists.”41 As more and more young workers “lie flat” to avoid unnecessary consumption or “investment” (such as “investment” in housing), they have become increasingly emboldened to reject the capitalist demand to work extra hours.42

In the future, as China’s rural surplus labor force is depleted and economic growth slows down, more and more workers may find it pointless to accept the current regime of relentless exploitation. As newer generations of workers increasingly adopt the attitude of “lying flat,” the Chinese economy may suffer from a sudden collapse of the effective labor supply if millions of workers refuse to work excessively long hours.

Suppose that, as a result of working-class struggle, the average annual working hours of Chinese workers fall from 2,400 hours in 2022 to 1,800 hours (similar to the current annual working hours in the United States) by 2050. This will reduce China’s effective labor supply by 25 percent over a twenty-eight-year period, decreasing China’s average annual economic growth rate over the period by about 1 percentage point. Given that China’s economic growth rate is projected to fall to near zero by the mid-twenty-first century under “business as usual” conditions, an additional reduction of China’s growth rate by 1 percentage point would push the Chinese economy into negative growth.

Now imagine that the Chinese capitalists resist the reduction of working hours. After one or two decades, newer generations of Chinese workers will demand more economic and social rights, eventually forcing a drastic reduction of annual working hours over a relatively short period of time. A reduction of annual working hours by 25 percent over a ten-year period would reduce effective labor supply, and therefore China’s economic output, at an average annual rate of 2.8 percent. Such a massive and rapid reduction could lead to the collapse of capitalist investment and widespread social instability.

Instead of waiting for the economy to be “degrown” by economic, social, and ecological collapse, it would be wise for the Chinese leadership to organize an orderly transition to degrowth through institutional change.

Degrowth by Redistribution?

In the rest of this article, I assume that in the near-future political conditions can be created in China that would help to organize an orderly transition to zero growth. This implicitly assumes that zero growth of economic output would be sufficient for achieving ecological sustainability. If the future pace of technological progress fails to meet the expectation, ecological sustainability would require negative growth rather than zero growth. In that case, more radical policy and institutional changes would be needed.

Degrowth theorists have argued that “the core feature of degrowth economics” is redistribution of income and wealth.43 They have proposed policies including shortening working hours, universal basic income, and investment in public services financed by carbon taxes and taxes on capitalist profits. However, degrowth theorists have not explained how a progressive or a socialist government can effectively respond if the capitalist class reacts to degrowth policies with destructive economic actions such as capital flight and investment strike.

Degrowth theorists correctly point out that the necessary condition for degrowth is for the economy to have zero net investment.44 For China, the magnitude of net investment is massive relative to the national economy. In 2021, China’s gross capital formation was about 43 percent of China’s GDP and, after subtracting depreciation, net capital formation, or net investment, was about 28 percent of China’s GDP.45

If the net investment that equals 28 percent of GDP is removed from the economy, then to sustain effective demand at the previous level, consumption must rise by an equal amount to compensate for the loss of demand. China’s household consumption was 38 percent of GDP in 2021. How can household consumption increase by 28 percent of GDP? There are two possibilities: either through an increase in household income, or through an increase in household or government debt.

If the goal is to increase household consumption by raising household income, theoretically this may be done either by raising the working-class household income or by raising the capitalists’ income. But if capitalists’ income increases, a large fraction of that would be turned into savings, without contributing to consumption. Moreover, under conditions of zero economic growth, if capitalists’ income is raised, it would have to take place by reducing either working-class income or government income. Lower working-class income would reduce, rather than increase, consumption. Lower government income would undermine the government’s capacity to finance social programs and public services.

Suppose that the working-class income is raised to provide higher consumption. This may be accomplished either by increasing the workers’ total wages, or by redistribution measures such as universal basic income. Let us first consider the possibility of raising the workers’ total wages. To raise household consumption by 28 percent of GDP, the workers’ total wages need to be increased by 28 percent of GDP if one assumes that each additional yuan of the workers’ income will be spent as one more yuan of consumption. If one assumes that the workers will save a small fraction of their new income, then the increase in total wages required will be more than 28 percent of GDP. If the workers’ total wages were to be raised by more than 28 percent of GDP, unless there is a massive reduction of government taxes—which would create other unsustainable economic and social problems—capitalist total profit would have to fall by more than 28 percent of GDP. If a redistribution scheme such as universal basic income is created to raise working-class income, and if the redistribution scheme is financed by higher government taxes on the capitalists, the effect on capitalist profit would be the same as raising the workers’ total wages.

China’s total capitalist profit is estimated to be about 27 percent of GDP.46 Therefore, the “redistribution” that would be necessary to bring China’s net investment to zero would eliminate the entirety of capitalist profit. Would Chinese capitalists sit and wait for the government and workers to take away their entire profit? Obviously not. They will try to make desperate attempts to change the course politically (through a coup or manipulation of power struggle). If that fails, some of them will try to send capital abroad. If the progressive or socialist government imposes strict capital control, making it very difficult for capitalists to send abroad, the mobile part of their capital (mainly financial assets), the capitalists within the country can still undertake an investment strike. They would sharply reduce investment, not only eliminating all net investment but also stopping much of the investment needed to replace depreciation. In other words, they would stop not only “expanded reproduction,” but also “simple reproduction” (in Karl Marx’s words). For bourgeois economists, this would be a situation where capitalist “confidence” or “animal spirit” has collapsed.

What about raising consumption by increasing household debt? There are obvious practical limits to household borrowing. Even without considering long-term limits to household debt, at any given point, net borrowing is likely to be a relatively small fraction of the total household spending. Given that China’s current household consumption is less than 40 percent of GDP, it is highly unlikely that household net borrowing can be increased by more than 4 percent of GDP (or more than 10 percent of the household consumption). This is obviously insufficient to finance an increase of consumption by 28 percent of GDP.

What about having the government borrow from the capitalists and then spend the money? But can government deficit be increased to 28 percent of GDP without leading to a major debt crisis? In fact, if we have zero economic growth but real interest rate remains positive, mathematically, any government primary deficit (government deficit less net interest payment) that is greater than zero would be unsustainable in the long run.47

If one is committed to an economic system based on private ownership of the means of production, there is no way to escape the above contradictions. It may be argued that China is a special case, and that other capitalist countries that do not have very large net investment and zero growth may not require elimination of all capitalist profit. But the purpose of transition to zero economic growth is to achieve global ecological sustainability. China is the world’s largest carbon dioxide emitter. Without China’s commitment to zero economic growth, there will not be global ecological sustainability. While it is true that most developed capitalist countries now have a net investment that is only a few percentage points of GDP, global ecological sustainability may very well require not just zero growth, but negative growth of developed capitalist economies. In that case, the investment decline that developed capitalist countries will have to undertake could still demand such a large increase of the working-class income that it can only be achieved if the capitalists give up most (if not all) of their profit.

However, if one is willing to consider these questions beyond the narrow constraints of the capitalist framework, it should not be too difficult to find the proper way to respond to the capitalist economic rebellion. In extreme cases, a socialist government can simply confiscate the property of large capitalists and undertake a direct transition to socialism.

Under more “peaceful” circumstances, a socialist government may first adopt the redistribution policies advocated for by degrowth theorists, but stay prepared for a massive capitalist economic rebellion. At some point, as working-class income and consumption keep rising, capitalist investment will begin to collapse. Theoretically, so long as the decline of capitalist investment is offset by the rise of working-class consumption, the socialist government does not need to intervene. Once the society’s total investment falls below the level necessary to replace depreciation, the socialist government should begin raising public investment and keep the society-wide investment level high enough to compensate for depreciation. In practice, the process could be messy and chaotic, and it may be necessary for the socialist government to increase public investment preemptively to maintain effective demand at the desired level.

After the first phase of transition described above is completed, national income will have been radically redistributed in favor of the working class. Total capitalist profit would have been either eliminated or greatly reduced. Public investment now would account for a much bigger share of society’s total investment compared to the share it had before the transition. But this remains an unstable situation.

As long as a substantial part of the society’s total investment remains in the hands of private capitalists, they can choose to invest or not invest. If capitalists choose to invest at levels beyond what is necessary to replace depreciation, this will lead to positive economic growth. To prevent this from happening, the socialist government should undertake additional redistribution measures to further squeeze capitalist profit and investment.

If capitalists choose to invest just enough to replace the depreciation and save a fraction of their profits, the socialist government would need to borrow capitalists’ savings and spend the money in order to stabilize effective demand. If the socialist government borrows from the capitalists and uses the money for consumption or non-productive public investment (such as spending on health care or education, which does not generate revenue higher than costs), it will lead to rising government debt which would be unsustainable under the conditions of zero economic growth (see explanation above). If the socialist government borrows from capitalists and invests in productive industries (such as material production sectors), future revenues from socially owned productive enterprises will help pay back the debt. However, in this case, the society’s total investment will rise above the level that is needed just to replace depreciation. To keep the total investment at the level consistent with zero growth, the socialist government needs to use additional measures (such as carbon taxes) to further “crowd out” capitalist investment and make room for socialist public investment.48

Most likely, after the first phase of the transition, the majority of capitalists will find that their profits have fallen to such low levels that the remaining profits (or losses) could no longer justify the investment risk. In this case, the capitalists will further reduce their investment, making it necessary for the socialist government to further increase public investment to stabilize effective demand and maintain society’s simple reproduction.

Therefore, once a society is committed to zero economic growth, the underlying logic of transition will step by step eliminate most (if not all) capitalist private investment and replace it with public investment. Investment means obtaining either new capital assets or new means of production. Once the public investment accounts for most of society’s total investment, over time most of the means of production will be under social ownership through the government.

Degrowth by Planning?

The previous section argues that, if the socialist government is serious in its commitment to zero growth and sustainability, the transition to zero economic growth will inevitably lead to gradual replacement of capitalist private ownership by social ownership

Some argue that a future zero growth economy can be built on the basis of worker-owned, small, collective firms.49 From the society’s point of view, worker-owned collective firms remain “private” enterprises in the sense that certain means of production are exclusively owned by a group of individual workers, with access denied to the rest of the society.

Worker-owned collective enterprises are enterprises within a market economy and subject to the constant pressure of market competition. To gain advantage or to survive competition, each worker-owned enterprise will be either strongly motivated or forced to use a large portion of their surplus income to invest in and expand production, leading to economic growth. If some worker-owned enterprises become bankrupt, the unemployed workers may be hired by more prosperous worker-owned enterprises as wage workers. Thus, an economy based on worker-owned enterprises is inherently unstable and has an underlying tendency to evolve into some form of capitalism.

A future zero growth economy can only be built on the basis of social ownership of the means of production. This would require that the society as a whole (through some form of democratic government) own all or most of the means of production. The social ownership of the means of production implies that, as far as investment needed to replace the existing capital assets is concerned, the allocation of investment resources has to be carried out by planning through direct government decision-making. Such allocation may still take place in terms of monetary units (for example, so many billions of yuan are invested in this or that industry), but the allocation decision is no longer driven by the pursuit of monetary profit. Instead, it is guided by long-term social objectives such as ecological sustainability and people’s basic needs, which are to be determined through democratic decision-making.

The question is, after the means of production have been allocated and installed, how day-to-day production and consumption can be organized. One possibility is simply to leave it to the market. Government-owned enterprises would interact and compete with each other in the market. Workers’ and managers’ wages would largely depend on the performance of the enterprise in which they are hired. Some form of democratic governance may be introduced into these enterprises so that the various stakeholders (such as government, community, and workers) may have their representatives sitting on the boardsF of directors. Profits of government-owned enterprises would be collected by the society as a whole and used for health care, education, public recreation, sustainability projects, and scientific research.

The possible advantage of such an arrangement is that movement of market demand and supply can provide both the signal and the incentive to guide the managers and workers in government-owned enterprises to allocate inputs to produce products demanded by the market and adopt the product mix (within the technical constraints of the available means of production) that can best meet consumer preferences.

Such an arrangement also has some serious drawbacks. The most important shortcoming is that as workers’ incomes in different enterprises, industries, and regions are determined by market demand and supply, some workers may become exceptionally rich simply because there is a sudden surge of market demand or a sudden contraction of supply (for example, due to natural disasters) for the products they are producing, and some others may suffer from unexpected declines of income due to factors beyond their control. This would not only result in inequitable distribution of income but also create the potential for widening inequality over time. For example, well-to-do households may lend money to impoverished households and receive interest. If the government imposes taxes to redistribute income from the well-to-do households to poor households, it will undermine the very incentive that supposedly motivates people to work hard and efficiently in a market economy.

Market mechanisms can also generate some perverse incentives. Because the means of production are owned by the society as a whole, there may be little incentive for the workers and managers to properly maintain and operate these means of production. Instead, they may be primarily motivated to use the means of production to pursue their short-term self-interest, leading to premature breakdowns of socially owned assets. Inefficiency in this form alone may more than offset whatever limited efficiency that may be gained through day-to-day market activities. While socialist society can promote socialist consciousness by educating people to pursue society’s long-term interests, the dependence on market incentives in day-to-day economic activities inevitably encourages the pursuit of self-interest and undermines society’s attempt to promote socialist consciousness.

Alternatively, in the future zero growth society, the entire economy can operate under the management of democratic planning. In a democratically planned economy, not only investment but also most of the society’s output targets, input allocations, and important prices are determined by the society as a whole through explicitly democratic decision-making.

While bourgeois economists and some market socialists argue that planned socialist economies are hopelessly inefficient based on their understanding of the historical experience of socialism in the Soviet Union, Eastern Europe, and China, many have pointed out that even the historical bureaucratic socialism achieved spectacular success in meeting people’s basic needs and the widely publicized inefficiency of socialist planning was greatly exaggerated.50

In the future, democratic governance in combination with new computer and network technologies may help to substantially improve the efficiency of socialist planning. In any case, the previous sections have argued that the requirements of ecological sustainability with zero growth necessitate social ownership of the means of production and planned allocation of investment resources. Investment in fixed assets will largely determine a society’s allocation of productive capacity between different industries and sectors. Given these physical and institutional constraints, whatever differences in efficiency that may arise because of different arrangements of day-to-day production and consumption activities are likely to be small.

A society based on democratic planning is likely to be much more egalitarian in income distribution compared to a society where day-to-day production and consumption activities are driven by the market. Having removed market mechanisms from most economic activities, individuals in a planned society are much less likely to be motivated by short-term self-interest and are more inclined to behave in accordance with long-term social interests.

All the possible benefits and disadvantages, as well as opportunities and risks, will have to be weighed and deliberated by the people who are building the future socialist society with zero growth. What is clear is that ecological sustainability requires degrowth and degrowth demands socialism.


  1. An earlier draft of this paper was shared with Jason Hickel, who provided many thoughtful comments and suggestions. The author would like to thank Hickel and has made revisions taking into account his comments. On degrowth theories and the absence of “absolute decoupling,” see Joan Martinez Alier, “Social Sustainable Economic De-growth,” Development and Change 40, no. 6 (2009): 1099–119; European Environmental Bureau, Decoupling Debunked—Evidence and Arguments against Green Growth as a Sole Strategy for Sustainability, July 8, 2019; Alberto Garzón Espinosa, “The Limits to Growth: Ecosocialism or Barbarism,” Monthly Review 74, no. 3 (July–August 2022): 35–53; Jason Hickel, “Degrowth: A Theory of Radical Abundance,” Real-World Economic Review 87 (2019): 54–68; Jason Hickel and Giorgos Kallis, “Is Green Growth Possible?,” New Political Economy 25 no. 4 (2020): 469–86; Andrew K. Jorgenson and Brett Clark, “Are the Economy and the Environment Decoupling?: A Comparative International Study, 1960–2005,” American Journal of Sociology 118, no.1 (2012): 1–44; Giorgos Kallis et al., “Research on Degrowth,” Annual Review of Environment and Resources 43 (2018): 291–316; Jeroen C. J. M. Van den Bergh and Giorgos Kallis, “Growth, A-Growth or Degrowth to Stay within Planetary Boundaries?,” Journal of Economic Issues XLVI, no. 4 (2012): 909–19.
  2. Kallis et al., “Research on Degrowth.”
  3. John Bellamy Foster, “Capitalism and Degrowth: An Impossibility Theorem,” Monthly Review 62, no. 8 (January 2011): 26–33.
  4. Fred Magdoff and John Bellamy Foster, “What Every Environmentalist Needs to Know about Capitalism,” Monthly Review 61, no. 10 (March 2010): 1–30.
  5. Hickel, “Degrowth: A Theory of Radical Abundance.”
  6. Alejandro Pedregal and Juan Bordera, “Toward an Ecosocialist Degrowth: From the Materially Inevitable to the Socially Desirable,” Monthly Review 74, no. 2 (June 2022): 41–53.
  7. Cédric Durand, Elena Hofferberth, and Matthias Schmelzer, “Planning Beyond Growth: The Case for Economic Democracy within Limits,” Political Economy Working Paper 2023/1, Université de Genève, January 25, 2023,
  8. World Bank, “World Development Indicators,”
  9. National Bureau of Statistics, China Statistical Yearbook 2022 (Beijing: China Statistics Press, 2022),
  10. “Zhongguo Zhongdongbu Zao Wumai Qinxi, Duodi Kongqi Zhiliang Wei Zhongdu Wuran [Eastern and Central China Suffers from Invasion of Smog, Air Quality in Several Provinces Deteriorates to Heavy Pollution],” Zhong Xin Wang (China News Agency), December 4, 2013.
  11. “China Must Raise Air Quality Standards as Smog Persists, Task Force Says,” Reuters, April 22, 2022.
  12. Gabriel Collins and Gopal Reddy, “How China’s Water Challenges Could Lead to A Global Food and Supply Chain Crisis,” Center for Energy Studies, Baker Institute for Public Policy, Rice University, Houston, Texas, November 14, 2022,
  13. Running Out of Water,” US-China Institute Newsletter, University of Southern California, April 22, 2021,, accessed January 15, 2023.
  14. Karen Mancl, “Reclaiming China’s Worn-out Farmland: Don’t Treat Soil Like Dirt,” New Security Beat: The Blog of the Environmental Change and Security Program, May 2, 2019,; Fang-Jie Zhao et al., “Soil Contamination in China: Current Status and Mitigation Strategies,” Environmental Science and Technology 49, no. 2 (2015): 750–59.
  15. Jeff Desjardins, “China’s Staggering Demand for Commodities,” Visual Capitalist, March 2, 2018,
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  17. On the consequences of ecological overshoot, see Jorgen Randers, 2052: A Global Forecast for the Next Forty Years (Chelsea, Vermont: Chelsea Green Publishing, 2012).
  18. James Hansen, Makiko Sato, and Reto Ruedy, “Global Temperature in 2022,” Climate Science, Awareness and Solutions Program, The Earth Institute, Columbia University, January 12, 2023.
  19. On the long-term consequences of global warming by more than 2°C relative to the pre-industrial period, see James Hansen, Storms of My Grandchildren: The Truth about the Coming Climate Catastrophe and Our Last Chance to Save Humanity (London: Bloomsbury, 2007); Steven C. Sherwood and Matthew Huber, “An Adaptability Limit to Climate Change due to Heat Stress,” Proceedings of the National Academy of Sciences 107, no. 21: 9552–55, May 25, 2010; David Spratt and Philip Sutton, Climate Code Red: The Case for A Sustainability Emergency (Fitzroy, Australia: Friends of the Earth, 2008).
  20. Minqi Li, “Anthropocene, Emissions Budget, and the Structural Crisis of the Capitalist World System,” Journal of World Systems Research 26, no. 2 (2020): 288–317.
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  22. Glen P. Peters, Robbie M. Andrew, Susan Solomon, and Pierre Friedlingstein, “Measuring a Fair and Ambitious Climate Agreement Using Cumulative Emissions,” Environmental Research Letters 10, no. 10 (2015): 105004–12.
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  24. Calculated using data from BP, “World Development Indicators,” Statistical Review of World Energy 2022.
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  27. “China Issues Plan to Hit Carbon Emission Peak Before 2030,” Reuters, October 26, 2021.
  28. Xi Jinping, “Gaoju Zhongguo Tese Shehuizhuyi Weida Qizhi, Wei Quanmian Jianshe Shehuizhuyi Xiandaihua Guojia er Tuanjie Fendou [Raise High the Great Banner of Socialism with Chinese Characteristics, Unite and Strive for the Comprehensive Building of A Socialist Modernized Country],” report at the Twentieth National Congress of the Chinese Communist Party, October 25, 2022.
  29. UN Department of Economic and Social Affairs Population Division, World Population Prospects 2022.
  30. National Bureau of Statistics, China Statistical Yearbook 2022.
  31. Roland Rajah and Alyssa Leng, “Revising Down the Rise of China,” Lowy Institute, March 14, 2022,
  32. Penn World Table, Version 10.01, University of Groningen Growth and Development Centre, Netherlands, January 23, 2023,
  33. Matthew Higgins, “China’s Growth Outlook: Is High-Income Status in Reach?,” Economic Policy Review 26, no. 4 (2020): 69–98.
  34. Charlie Giattino, Esteban Ortiz-Ospina, and Max Roser, “Working Hours,” Our World in Data, last revised December 2020, org.
  35. Liu Linping, Yong Xin, and Shu Fenfen, “Laodong Quanyi de Diqu Chayi—Jiyu dui Zhusanjiao he Changsanjiao Diqu Wailaigong de Wenjuan Diaocha [Regional Differences in Labor Rights and Benefits—A Questionnaire Survey of Migrant Workers in Pearl River Delta and Yangzi River Delta],” Service Centre for China Studies, Chinese University of Hong Kong, August 2011,
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  38. “Long Working Hours Increasing Deaths from Heart Disease and Stroke,” World Health Organization, May 17, 2021.
  39. National Center of Cardiovascular Diseases, National Medical Care and Health Committee, People’s Republic of China, Report of Cardiovascular Diseases in China 2018 (Beijing: China Encyclopedia Press, 2019),
  40. “Dagongren Nantao Guolao Shidai: Meitian Jiaban 3 Xiaoshi, Xinzangbing Fengxian Gao 60% [Workers Cannot Escape Era of Excess Work: Work Three Extra Hours Every Day, Risk of Cardiovascular Diseases Higher by 60 Percent],” Xinlang Wang (Sina Network), January 5, 2021.
  41. “Tangping Zhuyi Weixian Ma [Is Lying-Flatism Dangerous]?,” Radio France International Chinese Edition, June 1, 2021.
  42. Fenghuang Wang, “Jujue Jiaban de 95 Hou [Those Born After 1995 Who Refuse to Work Extra Time],” Phoenix Network, January 18, 2022.
  43. Hickel, “Degrowth: A Theory of Radical Abundance.”
  44. Kallis et al., “Research on Degrowth.”
  45. National Bureau of Statistics, China Statistical Yearbook 2022.
  46. Minqi Li, Profit, Accumulation, and Crisis in Capitalism: Long-Term Trends in the UK, US, Japan, and China, 1855–2018 (London: Routledge, 2020), 85.
  47. Julio Escolano, “A Practical Guide to Public Debt Dynamics, Fiscal Sustainability, and Cyclical Adjustment of Budgetary Aggregates,” International Monetary Fund Fiscal Affairs Department, January 2010,
  48. Could the capitalist class as a whole use their entire profit for consumption and maintain zero savings? At the macro level, this is extremely unlikely to happen. Individual capitalists usually belong to the highest income group in the population that has a higher savings rate than the socially average savings rate. If, somehow, the capitalists collectively use all of their profits just for consumption, neither saving nor investing, then why does the society need to have a capitalist class at all?
  49. Steffen Lange, Macroeconomics without Growth: Sustainable Economies in Neoclassical, Keynesian, and Marxian Theories (Marburg: Metropolis, 2018), 477–80.
  50. On the economic and social achievements of historical socialism, see Robert C. Allen, Farm to Factory: A Reinterpretation of the Soviet Industrial Revolution (Oxford: Oxford University Press, 2003) and Vincente Navarro, “Has Socialism Failed?: An Analysis of Health Indicators,” Science & Society 57, no.1: 6–30. On the environmental record of historical socialism, see Salvatore Engel-Di Mauro, Socialist States and the Environment (London: Pluto, 2021).
2023, Volume 75, Number 03 (July-August 2023)
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