I came across a report published by the Australian government in 1973, with the title ‘Economic growth: is it worth having?’. The answer of the authors to this question: absolutely! There may have been a few radicals who argued that growth causes global warming, pollution, and other problems, but we would no doubt be able to find a solution.

That was nearly 50 years ago. Five of the nine limits of our planet have now been breached. There is no prospect of a path that will bring our economy back within these limits. And there are still economists and policymakers who believe that economic growth can continue in a green fashion.

That conviction is based on fine plans that in practice are not being implemented and on theoretical assumptions that prove incorrect in practice.

Those fine plans are supposed to ensure that the real costs of economic activities are taken into account. That pollution and emissions are taxed, regulation is improved, standards are set, etc. They have been around for decades, but in practice it is proving impossible to carry them out. Successful lobbying and political unwillingness are putting a very effective stop to that.

And then we have all those theoretical assumptions that prove incorrect in practice. In addition to the unproven but absolute faith in technological solutions, there are two main misassumptions. The first one is that we are able to take rational decisions about the future. But in practice this turns out to be impossible. Financial markets look no further ahead than six years at the most, so much of the trouble that lies ahead has not yet been priced in. The result: we are consuming and producing too cheaply, at the cost of the future.

The second big misassumption is that of endless replacement options. In our growth calculations, if natural resources become scarcer, everything can be replaced by, for instance, capital. In theory, there are virtually no limits to capital. But in practice there are. Even the fanciest fishing vessel cannot catch fish in an empty sea.

If theoretical assumptions and solutions fail in practice, it is time to get out of the palace of mirrors and accept the hard limits and laws of nature. Of course, it would be great if growth could continue. Then we would not have to worry about the future of our welfare state or about how we are going to pay for more sustainability. But as hard-core economist Milton Friedman said in 1975: There is no such thing as a free lunch. It is uncomfortable but true: there is also no such thing as green growth. It is tempting to hope for, but perverse to present this as a scientifically proven possibility. Brown contraction, let’s start with that for now.

This is a translation of Hans Stegeman's column in Het Financieele Dagblad, published June 14th, 2022.