Action to ensure compliance with climate protection goals: The question remains as to how fundamentally the system needs to change.
Photo: imago/Martin Müller
Germany is facing a major problem: its economic output is no longer increasing, and gross domestic product (GDP) is likely to shrink again in the second half of the year. Politicians are looking for countermeasures to boost the economy, from tax cuts to subsidies. Parallel to the negative reports, there is a debate as to whether lasting economic growth is at all compatible with climate protection and sustainability – everything increasingly indicates that this is not the case. Politicians intervene in this debate by agreeing with the growth critics on the one hand and at the same time making it clear that growth will not be shaken.
German economic output stagnated in the second quarter, the Federal Statistical Office reported on Friday. This means: In the period from April to June, only as much was produced as in the period from January to March. “The German economy is not moving anywhere,” commented VP Bank. The reasons for this are a weak global economy, from which German industry is »suffering«. In view of the increased cost of living, private households are being forced to save, which can be seen from a massive real drop in retail sales. The poverty of the people has become the brake on the economy.
German GDP had already fallen slightly in the winter months, now it is stagnating, and overall economic output is currently only as high as it was before the corona pandemic. And things don’t look good for the near future. In surveys, companies have recently expressed pessimism. “Germany’s economy is in a downward spiral,” the Deka-Bank sounds the alarm. Measures to promote growth are being debated in politics. The Ministry of Finance wants to relieve companies of taxes, the Ministry of Economic Affairs relies on subsidies for future technologies, Deutsche Bank calls for “reforms to meet the new growth challenge”.
Separately, in a parallel world so to speak, there is a discussion about whether economic output should not shrink at all in view of the climate catastrophe. This discussion now has a broad public and attracts celebrities. In May, for example, the EU Parliament organized a “Beyond Growth” conference. A multi-NGO manifesto released at the conference criticized “our obsession with the endless pursuit of growth and profit” that “is at odds with finite planetary limits and human well-being. We must put an end to this!«
EU Commission President Ursula von der Leyen also made an appearance at the conference, demonstrating how such a debate can be turned in the desired direction. At the beginning she stated to thunderous applause that »a growth model based on fossil fuels is obsolete«. Then she continued, “We need to decarbonize our economies as soon as possible. And for this we have presented our European Green Deal. The Green Deal should not only be our program to fight climate change. It is also our new growth model for a flourishing, responsible and resilient economy.« This is how the EU Commission President managed to save the growth imperative.
The Federal Ministry responsible for both the economy and climate protection in Germany has also apparently gone under the criticism of growth. As in 2022, the BMWK’s latest annual economic report also contains a special chapter on “Welfare measurement and social progress”.. The starting point of the ministry is that economic growth should not be the only decisive yardstick, because there are “other aspects of welfare and sustainability”. According to the ministry, individual and thus also the welfare of society as a whole depend on much more than just the basic economic data and cites a whole range of factors: from economic output per inhabitant, to inequality, labor productivity and employment rate to issues such as health, education, accessibility of social facilities, greenhouse gas emissions and so on.
At first it seems as if the importance of economic growth is being put into perspective here. In fact, however, it appears again and again in the report as a self-evident condition of all economic activity. According to the annual economic report, »the quality of life of people in Germany is largely based on the country’s economic performance. It secures and creates new material prosperity«. This economic efficiency, in turn, is “decisively shaped by labor productivity and the scope of work”. This means that »increasing productivity is a key driver of prosperity development in the long term«. According to the BMWK, productivity must therefore increase, more GDP must be generated per hour worked in order to ensure “long-term economic growth and competitiveness”. Under this proviso, it is then only a question of “taking into account the ecological limits at the same time”.
So in the report, growth is first downgraded to one factor among many, but then rehabilitated as a necessary condition for prosperity and quality of life and innovation – according to the logic: growth is not everything, but without growth everything is nothing, which is why it is green growth give no alternative. As with von der Leyen, this is based on the assumption that capitalist growth can be reconciled with climate protection. Not only eco-activists doubt that, but also Thieß Petersen, Senior Advisor at the Bertelsmann Foundation. In the latest issue of the renowned economics magazine »Wirtschaftsdienst« Petersen makes a simple calculation – and draws a remarkable conclusion from it.
According to Petersen, the sustainability of economic growth depends on whether growth can be decoupled from environmental pollution – i.e. whether GDP can increase without greenhouse gas emissions also increasing. According to Petersen, this was achieved to some extent in Germany between 1990 and 2022: the average annual growth rate of real GDP was 1.25 percent. At the same time, the issue volume decreased by an average of 1.58 percent per year. “The fact that the volume of emissions fell despite rising real GDP is due to the fact that the decrease in emissions intensity, at an average of 2.84 percent per year, was greater than the percentage increase in GDP,” says Petersen. “So green growth has already been a reality for the German economy over the past three decades.”
That’s the good news. The bad: “The current pace of decoupling is by no means sufficient to achieve the goal of climate neutrality by 2045.” If GDP continues to grow as before by an average of 1.25 percent per year – which is considered a weak value – then “the emission intensity would fall by an average of 11.3 percent every year, four times as much as in the past 30 years«. However, if emissions intensity only decreases by 2045 at the rate of the past three decades, i.e. by 2.84 percent per year, Germany will only achieve the goal of climate neutrality in 2045 if real GDP falls by an average of more than seven percent every year from now on. But that shouldn’t be the case due to the “considerable loss of income” to be expected and the “related effects on prosperity and the labor market”. According to Petersen, economic policy priority in Germany should therefore have measures that promote the decoupling of greenhouse gas emissions from economic activity – i.e. precisely those measures that have not worked sufficiently in the past.
The argument follows the pattern of the debate that has been common for decades: First, it is established that growth only works if it is decoupled from environmental consumption. Then, secondly, it is determined that the decoupling is probably not enough, which is why, thirdly, an economic contraction would be necessary, but fourthly, it must not be, why fifthly, we must carry on as before and hope for the best.
The central question of why material prosperity depends on increasing it in the prevailing economic system plays no role here – why standing still does not mean stability, but crisis, unemployment and poverty. Petersen touches on this point briefly when he states that a contracting GDP “does not necessarily have to be negative for people’s welfare. If, for example, the lifespan of washing machines doubles, the long-term demand and production for this consumer product will be halved. This means that real GDP falls – but this does not mean a deterioration in people’s living conditions, because the performance provided by the washing machine remains unchanged. Nevertheless, a widespread reduction in economic activities would result in a number of social problems. Above all, there is rising unemployment and growing conflicts over distribution.«
In terms of household needs for clean laundry, a durable washing machine is sufficient. However, companies’ need for growth regularly requires the purchase of new washing machines, because otherwise sales and profits will not increase and companies will therefore lay off their workforces – after all, these workforces only exist as a means of profit and growth. This contradiction could only be resolved if production were subordinated to the needs of the people and the necessity of “growth” was thereby taken away.
Germany cut off
While economic output in Germany stagnated in the second quarter, things went better in other large EU countries. France reported growth in gross domestic product of 0.5 percent compared to the previous quarter. In Spain there was an increase of 0.4 percent. The countries in southern Europe benefit from a good tourism season.
According to forecasts by the International Monetary Fund (IMF), the German economy will shrink by 0.3 percent over the entire current year. Commerzbank even expects a minus of 0.5 percent. Overall, growth in the richer industrialized countries will decline from 2.7 to 1.5 percent this year and will not exceed 1.4 percent next year either, according to the IMF.you
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