The capitalist system is flawed and must be modified. This is an increasingly prevalent viewpoint among younger generations, whose future prospects have been dimmed by economic crises, disease, and conflict. However, several other utopian narratives have acquired hold in the wake of the covid threat despite ignoring some of its most fundamental lessons, with disastrous implications.
The ideology of degrowth is based on a single extreme. Fear of a climate catastrophe and indications that vital infrastructure is already collapsing under record temperatures have prompted proposals to curtail economic growth and consumption patterns to reduce carbon emissions more quickly. The impact of lockdowns on 2020 emissions has given this proposal from the 1970s fresh relevance. In Spain, where a 2016 poll found that 37% of people favor ignoring or halting development to help the environment, a member of the ruling coalition has recently endorsed degrowth as a policy.
On the opposite end of the spectrum is the libertarian philosophy underlying cryptocurrencies and decentralized finance (DeFi). It criticizes centralized institutions such as financial systems and governments as barriers to wealth and development, promoting instead a utopia of semi-anonymous networks that do not require trusted third parties.
Covid fueled this doom-laden “cypherpunk” narrative by warning irritated, locked-down merchants that they were running out of time to escape hyperinflation and elite financial mismanagement. The results have been manifestly poisonous, from hacking and fraud to energy waste and faulty theory, yet missionaries continue to promise future rewards to those who uphold the religion.
Degrowth and DeFi are totally different actions with completely different histories, however, as Venezuelan-British economist Carlota Perez describes them, they’re turning into increasingly recognized as the brand new financial rebellions of our day. “Degrowthers must eradicate capitalists, and crypto enthusiasts must eradicate the state,” “In a June interview with the French publication L’Express, she advocated a transfer of economic and technological advantages to reduce inequality.
Perez has some extent. Degrowth advocates are correct to criticize unsustainable consumption patterns and the slow rate of emissions reductions. However, they underestimate the power of investment and innovation to do more with less, such as extending the lifespan of items while reducing their carbon footprint. Government policy and subsidies are necessary for decarbonization, but a comprehensive command system is not a panacea: The silver lining of the epidemic was not the sight of societies collapsing, but the public-private development of mRNA vaccines.
Politically, the opposite situation exists. It is difficult to envision how a state deprived of development and resources might ensure that they are distributed, which is one reason why most governments are hesitant to promote degrowth as a policy option for voters. Observe the present indignant attitude of a number of nations, such as Spain, to the European Commission’s call for a 15% EU-wide reduction in fuel consumption, viewed as an unfair demand that southern European societies de-grow little to help Germany avoid de-growing substantially. Social cohesion difficulties.
As for crypto and DeFi, even if the assumption that the financial system is riddled with self-dealing and inefficiencies is true, removing the guardrails and central authority is a prescription for even greater inequality. The boom-and-bust volatility of cryptocurrencies has exacerbated, not mitigated, the effects of inflation.
As degrowthers disregard the natural drive for standing and development, so do DeFiers disregard the natural urge of sick actors to employ uncontrolled practices. Flawed utopias will not be limited to Generation Z. ESG greenwashing has humbled the Davos set’s devotion to “stakeholder capitalism.” The end of the Cold Battle was marked by a faith in the “end of the past” for free markets, whereas the Davos set’s attachment to “stakeholder capitalism” has been diminished by ESG greenwashing.
Better counternarratives can be found in economist Alessio Terzi’s book Development For Good, which calls for an energy transition that does not reject development, but does require further government support, global coordination, and social cohesiveness to ensure no one is left behind.
Or, as Brazilian game developer Mark Venturelli recently put it, the solution to monetary inequality is not to waste country-sized amounts of power trying to bypass trustworthy middlemen, but rather to supply more trusted and human-centric intermediaries. As economist Eswar Prasad has observed, central bank-issued digital currencies may offer such advantages.
This will not amount to a brick in the figurative window, but it pays homage to Perez’s perspective as “the economics of optimism.” And if there is one thing that younger generations have more of than their elders, it is optimism.
Lionel Laurent is a Bloomberg Opinion columnist protecting digital currencies, the European Union and France.
