#221. Strategies for a post-growth economy


Under current conditions, it’s increasingly hard to understand why the inevitability of economic contraction remains so very much a minority point of view.

Many of us have long understood why past growth in material prosperity has gone into reverse.

Here, with the SEEDS economic model, we can go still further, quantifying past trends, and charting a future in which economies get poorer, living standards are squeezed by rises in the real cost of energy-intensive essentials, and the financial system buckles under the weight of its own contradictions.

None of this has to be a disaster, but the management of involuntary economic ‘de-growth’ requires innovative strategies, most obviously in business and government.

The aim here is to concentrate on the PNFC (private non-financial corporate) sector, evaluating strategies that could mitigate the worst effects of economic contraction.

Other sectors – government, households and the financial system – may be the subject of future instalments, whilst the role of technology might merit separate discussion.

Don’t over-simplify

Readers are reminded that this site does not provide investment advice, and must not be used for this purpose.

In any case, it would be an over-simplification to assume that the decline in prosperity must crush discretionary sectors whilst leaving suppliers of essentials largely unscathed.

In fact, suppliers of intermediate (and intermediary) services are at even greater risk than businesses which supply products and services that the consumer might want, but doesn’t need.

Rather, future trends will be more nuanced than a simple decline in all forms of discretionary consumption.

What emerges from this analysis is that businesses will need – and will be pressured by market forces – to front-run the process of de-complexification that will parallel contraction in the size of the material economy.           

To be clear about this, we’ve reached a point at which there are no easy choices, and certainly no painless ‘fixes’.

Transition to renewable energy (RE) alternatives to fossil fuels, imperative though it is on environmental and economic grounds, isn’t going to restore the energy abundance of the past. It would be wholly irrational to expect financial stimulus to produce a supply of low-cost energy that does not exist in nature.

The idea that technology can solve all problems is one of the greatest delusions of the age.  

Strategically, the critical point is that the ever-increasing complexity which has accompanied two centuries of growth has now become a liability rather than an asset.

During the quarter-century precursor period which has preceded the onset of de-growth, this problem has been exacerbated by the expansion of unproductive complexity, a consequence of policies which have promoted activity (as measured by GDP) without adding value.

Just as businesses now need to front-run a process of de-complexification that will accompany de-growth, there’s a corresponding requirement for governments to reset priorities, and increase efficiency as resource availability declines.

The reality of involuntary de-growth

For the purposes of this discussion, it’s going to be assumed that readers understand the inevitability of de-growth.

The fundamental principle is that prosperity is a function of the supply, value and cost of energy. The relentless rise in the ECoEs – the Energy Costs of Energy – of fossil fuels has put prior economic expansion into reverse.

Efforts to counter this material problem with financial responses have failed, in the process creating enormous risk by driving a wedge between the ‘real’ economy of goods and services and the ‘financial’ economy of money and credit.

At the same time that the prosperity of the average person is declining, the cost of essentials is rising, not least because the supply of so many necessities is energy-intensive.

Essentials make the first call on prosperity, which means that other uses of economic resources are being compressed by this process. One of these ‘other uses’ is capital investment, meaning the addition and replacement of productive capacity.

The other is the supply of discretionary (non-essential) goods and services to the consumer.

Meanwhile, and because prices are where the material and the financial intersect, rising inflation is a logical consequence of the imbalance between the ‘two economies’ of energy and money.

The authorities face unenviable choices, mainly because the costs of necessities (including energy and food) are rising within a broader inflationary context. What’s being called the “cost of living crisis” has far-reaching political implications.

Unchecked, it could open the door to ‘left-populist’ parties offering to provide subsidies (paid for by “the rich”), perhaps reinforced with promises to nationalize “fat-cat” utilities.

The lack of logic in such broad-brush proposals cannot be counted upon to reduce their popular appeal.

Letting events take their course risks undermining what consumers can afford to spend on discretionary (non-essential) goods and services, a process which can’t be guaranteed to tame inflation, but would be certain to drive unemployment higher, and induce a recession.

Much the same applies to raising interest rates from deeply negative real levels, which would have the added consequence of triggering sharp falls in the prices of stocks, bonds, property and other assets.

Nominal rates will need to be increased – though this might do little or nothing towards pushing the real cost of capital back into positive territory – and asset prices cannot be propped up indefinitely.

But monetary policy offers no “magic bullet” fix for financial instability.

In these circumstances, subsidizing the cost of living might, to decision-makers, seem the least-bad policy option. But this would send already-elevated public debt soaring, with the almost inevitable consequence of monetization by central banks.

Not for nothing has inflation been called “the hard drug of the capitalist system” – though market economies certainly have no monopoly on the debasement of the purchasing power of money.

The implications for business

Where strategies are concerned, we need to be clear about two things.

First, the rapid economic growth of an Industrial Age powered by fossil fuels was accompanied by ever-greater complexity, making it inevitable that involuntary quantitative ‘de-growth’ will be accompanied by a process of de-complexification.  

Second, policy trends during a growth climacteric which began in the 1990s have added unproductive complexity to the economy.

Efforts to use monetary expansion to stem the onset of economic deceleration and contraction have boosted activity (measured as GDP) without improving the delivery of value.

Where businesses and governments are concerned, this has had the effect of adding to complexity without improving profitability, efficiency or resilience.

From a business perspective, the issues have at least the merit of clarity. Consumer prosperity is deteriorating, whilst resource constraints are the primary factor driving business costs upwards. The appropriate responses are (a) cost control and (b) the pursuit of resilience. These need to be seen as distinct but connected challenges.

There are two stand-out risks to business resilience.

The first of these is adverse utilization effects. As sales volumes shrink, the unit equivalent of fixed costs increases, and passing on these unit cost rises to customers in higher prices is likely to exacerbate the decline in volumes.

The copybook example here is a road bridge, which has high fixed expenses and low user-variable costs. If, say, fixed costs are $10m, and 2 million customers use the facility, a cost of $5.00 has to be incorporated into tariffs. If user numbers fall to 1 million, the fixed cost per user rises to $10. The consequent increase in tariffs may cause further declines in user numbers.

This is a simplistic example, but no business is free from fixed overheads which, of course, include management and promotional expenses, and the servicing of capital.

Importantly, this trend has adverse effects, not just for the bridge operator in our example, but also for nearby businesses whose employees rely on the bridge to get to their place of work, and whose suppliers rely on the bridge for deliveries.

The second risk to resilience is loss of critical mass, where components, inputs or services either cease to be available, or their cost becomes prohibitive. When calculating fade rates for the economy of the future, these factors need to be considered in tandem.

The counter to both of these risks is simplification, which applies both to product offerings and to processes.

Reducing the variety of products offered to customers – from, say, twenty different types of widget to five – streamlines operations, simplifies delivery, and boosts efficiency.

Simplifying the way in which widgets are manufactured (or services are supplied) makes production less expensive, and simultaneously reduces dependency on the supply of inputs. If the number of inputs required in the manufacture of a widget is halved, so, logically, is the risk associated with the loss of access to their supply. 

Carried forward, simplification will reduce managerial and other overheads, and will lead to de-layering, where external service inputs are reduced, taken in-house, or eliminated altogether.


Globally, SEEDS analysis shows that prosperity increased by only 31% between 2000 and 2020, whilst the estimated cost of essentials rose by 80%.

At the aggregate level, prosperity excluding essentials (PXE) was essentially flat over that period, but PXE per capita turned downwards in 2007, since when it has declined – making people feel poorer – by 18%.

By 2030 – with top-line prosperity deteriorating, and the real cost of essentials continuing to rise – even the aggregate PXE number is likely to be 28% lower than it was in 2020.

Logically, this relentless squeeze on PXE implies that the greatest pressures will be imposed on sectors supplying discretionary goods and services to consumers.

But – and even if it were appropriate to do so here – we cannot simply list discretionary sectors ranked by their exposure to contraction or, for that matter, to the rising cost of energy and other inputs.  

Any such listing would be based on the mistaken assumption that neither businesses nor governments will react to declining prosperity and the rising cost of essentials – which, of course, they will.

As we’ve seen, the likelihood is that businesses will react along the lines of the taxonomy of de-growth, shown below. Though different, more positive-sounding phraseology will no doubt be employed, the operative trends can be listed as simplification of products and processes, de-layering and cost reduction within the general theme of de-complexification.  

This predictable trend nuances the outlook, such that the greatest pressures are likely to be exerted, not just on discretionary sectors, but at least equally on those intermediate and intermediary stages capable of de-layering, reduction and elimination. 

Without being sector-specific, this situation has particular implications for technology, of which, as a general proposition, far too much is expected.

Technologies which improve the efficiency (and, specifically, the energy-efficiency) of household and business users can make a premium contribution during de-complexification.

But the future is bleak for technologies which promote new ways of putting energy to discretionary use. 

209 thoughts on “#221. Strategies for a post-growth economy

  1. Gail Tverberg New Post

    “Today, we are starting to see that renewables are not able to live up to the promise modelers hoped they would have. Exactly how the situation will play out is not entirely clear, but it looks like we will all have front row seats in finding out.”

    Don Stewart
    PS. Also makes a point I agree with wholeheartedly about the necessity for wholistic models, rather than reductionist models.

    • Indeed so! While any one of our problems may be readily solved, it is the totality and interconnection which is the hard part.

      Many a martial artist can defend against one foe at a time. Few can defend against many.

  2. “In short, I think the time has arrived for concrete forecasts.”


    When will earths human population reach 7 billion?

    My guess. 1/1/23

    • Wow! 800 million excess deaths in less than the next 11 months? That seems fairly quick. It would require a big war, a much more deadly pandemic or total economic collapse. All of those are possible, but I am skeptical that any one is likely this year.

      If population does decline that quickly, I’ll be much too busy to get back to you at the end of the year with my congratulations on your forecasting skill (if there would even be an internet). And if dramatic events that cause that much death actually do happen, it may not be possible to even know how many people died, or why. We’ll all be fumbling around in an information blackout.

    • I have to say that my forecasts, though in some ways pretty drastic, aren’t as drastic as accelerating mortality -not yet, anyway.

      My expectations are that migrant flows will accelerate as hardship worsens in the world’s poorest countries, whilst deteriorating prosperity, and the rising cost of essentials, will drive worsening discontent in the West, probably with political consequences.

    • “Consequently, it would seem realistic to conclude that the Earth could
      support a population of 10-11 billion people during the next century. But
      this basically hopeful assessment should not be seen as a reason for complacency. While the appraisals may be conservative and while the outlined
      transformations need not falter for lack of natural resources or ecosystem
      services, there is nothing automatic about such achievements. Again, analogies with more rational use of energy are instructive”. Vaclav Smil. How many people can the Earth Feed 2013.

      Click to access PDR1994.pdf

      World War II was the deadliest military conflict in history in terms of total dead, with some 75 million people casualties including military and civilians, or around 3% of the world’s population at the time.
      A die off of 800m in less than a year Pintada is delusional, barring an Asteroid strike of mammoth proportions or Nuclear Holocaust.

    • 800 million is a lot and it seems unlikely to happen this year but………if food production collapses then it only takes a few weeks for people to starve to death.

      The systems to feed the world without fossil fuel inputs just doesn’t exist at the moment and would take time to create. It all depends if fossil fuel decline is slow or if it drops off a cliff.

    • The implication intended in my post was that the courageous reader would supply his own date. Just saying that my date is wrong doesn’t seem very concrete.

      Of the four responses: one is expectedly and properly conservative, one is unintelligible, and two (Mr. Clarkson and Mr Adams) agree that my date is possible. Interesting.

      Don’t be shy. Lets see more dates!

    • Red provided a thoughtful response, “ Over the next few years, if present trends continue wide spread famine will follow. My guess on depopulation 2 billion by the end of the decade. So six billion and dropping like flies by 2030.”

  3. Enlightening post, Tim. Thank you for taking the time to write it.

    If I could be so bold to offer topic ideas for your future writing …

    – the systematic nature of elitism; do all human communities result in a elitist class of some ultimately emerging?;

    • Thank you.

      This does form part of my current thinking. What I might call “interim” conclusions are that (a) we will always have elites, but that (b) the proportionate and absolute wealth and power of the current elites cannot possibly be sustained.

    • Richial.

      The Dawn of Everything
      by David Graeber and David Wengrow is a good read on such matters.

      The book suggests that the answer to your question is “sometimes”🙂.

    • David Graeber’s ‘Debt the first 5,000 years’ and Michael Hudson’s books address this question suggesting that debt is the root of it all, always outstriping ability to pay = debt jubilee or rapid collapse.

    • Natasha,
      There is a reason that inequality cannot be corrected completely: it is biological in all social mammals, and in all living systems. The best societies can do is to manage it. Some homogeneous societies have succeeded, particularly if they are small scale ones. Feedback is better as values are the same and anonymity is difficult. People have less resistance helping extended family members, and deviants are corrected more easily. If all debts were erased, assets of pensions and savings would be hugely affected. Within a short time, the more clever and disciplined would begin building assets once again.

  4. A Few Thoughts Triggered by Gail Tverberg’s Article
    *In the US we are going through a political process which puts “America First”. From what I read, the same thing may be happening in China. That is, corporations are seen as franchise holders: governments give the corporations franchises to extract money from a defined population in return for subservience to a central authority. This is in contrast to the “globalization” agenda which was dominant 25 years ago. Corporations at that time were seen as global organizations seeking the best return on capital. 70 years ago corporations were seen as serving the state and vice versa…Engine Charlie Wilson said, during the Eisenhower years, “what’s good for General Motors is good for the USA”.
    *So if the nation state is now increasingly seen as something to be optimized, the question is how to do it. And, broadly speaking, that can be done in four different ways: military power; control over limited resources such as fossil fuels or scarce minerals; minimum cost of production (e.g. quality of workforce, availability of infrastructure, etc.); access to reserve currency.

    Gail’s post mostly tends to function in terms of looking at the resources.

    Another way of analyzing things is contained in this brief comment:
    “Only 2%–5% of current-day hunter gatherers are overweight and less than 1% are obese (Gurven et al., 2013; Kirchengast, 1998; Remis and Jost Robinson, 2014; Walker et al., 2006). This is in contrast with industrialized countries such as the United States, where 74% of people are overweight and approximately 40% are obese (Hales et al., 2020; Malik et al., 2020). This trend is increasing worldwide with increasing industrialization (Malik et al., 2020). Therefore, our ongoing relationship with food in industrialized countries could be considered a form of maladaptation in terms of its quantity, quality, and frequency.” The gist of that is that modernization and high income per capita come with costs which may more than offset any benefits.

    There are plenty of people looking at Geopolitical maneuvering. And occasionally somebody dares to mention the potential for an upheaval in reserve currencies.

    My suggestion is that the difference between seeing Apple or Facebook as global corporations or as vehicles of the US government is a profound distinction which frequently gets muddled. Silicon Valley has had a love/hate relationship with regard to being arms of the US Government. The fact that Saudi Arabia produces surplus oil is perhaps important, but there is seldom a distinction between enriching the princes and promoting the general welfare of Saudis. An economist would point out that any oil produced in Saudi which is not sold to the highest bidder leaves money on the table. Gail states several times that only surplus energy will be exported. So she is representing the “nation state” viewpoint rather than the globalized capital viewpoint.

    As I see it, from a US perspective, much of the discussion around debt and money is intimately tied to the reserve currency. The US has an “extravagant privilege” whereby foreigners pay for our waste. But continued waste in the magnitude we currently produce it may lead to a catastrophic failure.

    In terms of the military angle, the US may have produced an “obese” military by spending more money than the rest of the world combined.

    My overall suggestion is that analyses need to strive for clarity in terms of exactly how they are dealing with relative advantage when it comes to nation states…or corporations, in a globalist model. Simply extrapolating current relationships into the future is probably not a good idea.

    Don Stewart

  5. Global grain production will prove to be our Achilles heel. 2014 was the last year the UNFAO produced a world total grain in reserve number. All we get now are some country by country numbers and optimistic projections for the coming harvests. If you pay close attention to the major grain growing regions on the globe you may notice major disruptions in individual farming regions from things like extreme rain events and heat waves causing nasty declines in the harvest compared to previous projections. On top of that I’m starting to notice the quality of the grains declining markedly in some high yield areas. What isn’t discussed in the agricultural reports and journals is the night time temperatures. These numbers have to hit certain lows for the plants to rest. Too many hot nights of too warm and the seed production suffers measurably. The huge areas that we see being hit by strange weather events are not being offset by the areas that luck out. Wide spread grain shortages are already starting to bite. Over the next few years, if present trends continue wide spread famine will follow. My guess on depopulation 2 billion by the end of the decade. So six billion and dropping like flies by 2030.

    • I can’t but marvel at the speed we in the northern hemisphere manage to forget last summer, it was only 6 months ago that extreme weather, wildfires and flash floods were wreaking havoc, California’s water supply was visibly dwindling and farming was in trouble across North America,
      I appreciate the respite of winter but have little doubt that similar conditions will be repeated this summer, the clearing of the Amazon forest will continue with a knock on effect to the hydrology of that continent which impacts agriculture but also hydroelectric generation,
      I can’t shake the feeling that we are watching our species slowly stupid itself to death.

    • I agree. Darwin Awards are deserved by most of us. It takes strong feedback to alter the accumulated baggage we carry, and the lessons are usually painful.

    • Matt:

      Your comment about “watching our species slowly stupid itself to death” reminds me of the words of the song: “Space-Age technology, Stone-Age emotions”. Depending, apparently, on how these things are counted, we’re in the Fifth or the Sixth Great Extinction, but this is the first one that’s been self-inflicted.

      Realistically, we have two paramount problems. The first is that an economy that supports 8 billion people is deteriorating. The second is that an environment that supports those same 8 billion is in big trouble.

      Looking, not just at the media but at the wider public debate, what proportion of the discourse is devoted to these paramount issues? The proportion is extraordinarily small. The economy, we’re told, will carry on growing indefinitely, whilst renewables will “save the planet”.

      This consensus line is self-deluding drivel. The economy is already deteriorating behind a smoke-screen of financial gimmickry. Renewables cannot provide a greener but otherwise like-for-like replacement for energy from fossil fuels, because REs require inputs that can only be made available through the use of FFs.

      ECoEs are critical here. If FF ECoE is 5%, we produce 95 units of energy prosperity but 100 units of CO2. At 10%, prosperity falls to 90 units, but CO2 remains at 100. ECoE thus shapes the relationship between prosperity and environmental harm. As FF ECoEs rise, so do the costs of the inputs required for RE transition.

  6. Headline in the Guardian this morning: “UK economy grew 7.5% in 2021, fastest since second world war.”

    • To the vast majority of people, this demonstrates the growth is still working and there is no need to change anything. Rather, do more (and more and more) of the same to stimulate growth. Deeply frustrating.

    • Why is this kind of growth not “productive”? If the government pays 50 people to dig 100 holes in the ground and another 50 people to fill them up again and pays them all for this – nonsensical – work, they all receive money that is effective as a claim on energy and on goods made from energy and resources, so would that not add to their prosperity, at least on a personal level (as long as the currency is credible and not destroyed by inflation)?

    • The poor guy – such depressing work. I send him $5 per month for his effort with the effect that I no longer read his daily emails. They don’t much help me figure out what to do today for the future.

  7. Hi Tim—

    Have not commented much but have been following your posts here for a long time and really appreciate the thoughtful work you do.

    Nate Hagens, whom you may or may not be familiar with, is very active in the energy/economic/environmental space in the US, and has recently started a podcast called The Great Simplification. Would you consider going on to speak with him? I think it might be a great way to help get your message out. I’ve talked with him and he’d love to have you on and I can put you in touch. Please let me know.

    • I agree Mr Hagens has been looking at our predicament for at least a couple of decades and is able to explain it is relatively simple terms. I am sure most here will know of his work. He is expecting a “Great Simplification” by or before 2030. One of his current projects is trying to write an action plan for those in leadership positions for whom this enormous crash will come as a surprise. SEEDs knowledge could undoubtedly contribute a lot to this. My only criticism of Mr Hagens latest podcast work is that he knows so much about this topic, and has spent so much time trying to teach it, that it is not the usual podcast format of an enquiring interviewer (journalist) with a guest (subject expert) exploring a topic, as much as Mr Hagens trying again to explain the vast interconnectedness of the predicament with his guest present. That’s not to take anything away from him and his excellent work. Just an observation.

    • Hi Jeff, and thanks.

      I’m certainly familiar with Nate, I admire his work, and would be honoured to take part in his podcast.

      Perhaps this is the right time to admit that I’ve been a bit slow on the whole podcast thing. I have a number of invitations pending, and want to start doing this after my next one or two articles.

      Of these, the first will set out forecasts for the economy. The second, if I can put it together with the necessary brevity, will look at broader forecasting, necessarily including the political.

    • Prof. Steve Keen also has and outstanding invitation with you I believe and would also offer great value to this Blog and vice versa – although, Steve’s not in the best of health of late. A link up with Bill Mitchell would also be of interest to many who visit this Blog.

    • Thanks Christopher

      I’m not aware of an outstanding invitation from Prof. Keen, but I’d be very happy to discuss things with him.

      If memory serves, I have five outstanding podcast invitations. If those remain outstanding, I’d hope to take them up in March, after my economic and planned broader forecasting projects. Those projects should add materially to the things we have to talk about.

  8. Wolfs howling to the moon
    Of comfort and ever more
    At the gates economists n shit
    With children occupied
    They too will learn soon
    They’re not at the core
    Of those who have tried

  9. Dr Tim.

    With a rising ECoE what actions do you think Governments should follow?

    I seems to me that if the economy is reliant on energy, then so is government/bureaucracy. As the available energy declines, so does the ability of government to act.

    What are the policies that government needs to implement as de-growth starts to bite?

    • In the West, the highest priority now should be to ensure that the essentials are available and affordable for all.

      Forget about propping up stock and property markets, and look instead to the welfare and economic security of the ‘average’ person. They should also try to front-run (pre-manage) the coming financial correction, to minimise the consequences when asset prices fall and defaults cascade through the system.

      It seems to me that the quality of Western government has reached a historic low. Part of this might be that governments simply don’t grasp the reality of a post-growth economy. Censorship and coercion seem to have become first resorts in the face of popular discontent, whilst borrowing is seen as the panacea for all economic problems.

    • I think it’s difficult for governments to be proactive. Every decision will be a reaction to a changing reality. Damage limitation.

      The public are ill-informed. The energy crunch is going to cause a lot of discontent unless people are presented with the facts.

      Beyond more money creation, how does a government guarantee that everyone gets the essentials they need?

    • My guess – in a European context – is redistribution, combined with selective nationalisation. Re-allocating energy use will be central to any workable plan. Whether we like it or not, any such plan looks pretty left-wing (in economic terms).

      If governments don’t do something about essentials, they will face massive hardship and worsening discontent.

      After I’ve completed my current project – economic forecasting – I’m hoping to look at non-economic forecasts, including government and politics.

  10. For me it is very simple. Western governments have rejected the factually correct truth and are universally following the politically correct doctrine. ie the poor are all good and blamless, the middle classes are sharp elbowed oppressors and need to be held back, business is about fat cats with their noses in the trough, poverty is caused by racism and disadvantage, the West must atone for it’s past mistakes, the third world can do no wrong,inherent differences in IQ and ability do not exist, crime is caused by poverty and disadvantage not wickedness, a complete overreaction to a virus little more deadly than a flu virus that was cooked up in a Chinese laboratory etc…..the list of Western self inflicted harm is endless. A nation can take alot of ruin but this much

    This poisonous thinking is slowly destroying us …the elites are trying to cover up the damage by inflating the financial economy but that’s reachning the end of the road. Rising crime, family breakdonw and the general decay of the fabric of society are harder to conceal

    • Ken Moore

      I’m not sure I agree with your analysis.

      Here in the UK, the poor aren’t portrayed as “good and blameless”. In the MSM, the poor are “lazy, benefit scroungers, stupid and feckless”.

      I would be here all night debating/questioning the other assertions you make.

      Playing groups off against eachother is a diversion by those pulling the strings. Don’t fall for it.

      I’m not sure what “factual correct truth, ” you believe in?

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