On economic growth

Yes! There will be growth in the spring!

Chance, the gardener in the film Being There (1979)

It is a truth universally acknowledged that economic growth is a good thing. Well, not quite universally, but it’s the view you’ll find in the mainstream media and on the lips of pretty much every politician and pundit. Usually this growth is denoted in annual gross domestic product (GDP). There are a number of problems with that measure, not least that it ignores economic activity that doesn’t involve money changing hands, but it’s the one that everyone uses. The real point about GDP is that it is a number which is used – however wrongly – to capture the size of the economy, and it is expected (or at least hoped) that this number will increase year on year.

Two questions immediately arise from this expectation: (1) What are the grounds for believing it to be true? {2) If it were true, is it a good idea? Very few people actually ask these questions, because most of us go with the flow – after all, economists all seem to say this, and they’re supposed to understand this stuff, so it’s probably fine. (Some don’t, of course – Herman Daly would be an obvious example, but when was the last time you saw him interviewed on TV?) Nevertheless they strike me as questions that need to be addressed, and that is what I intend to do here.

Why do we expect growth to continue?

We can only predict the future on the basis of what happened in the past and what we know to be fundamental patterns (also known as natural laws). Economics as a discipline emerged at the onset of the first Industrial Revolution, and it often seems to treat that epoch as if it constituted the beginning of time. At any rate, the explosive growth (not just in GDP but also in population) that began at that time is treated as though it were normal, without reference to the vast majority of human history when it has been anything but normal.

The Industrial Revolution was made possible by the harnessing of energy sources that had not hitherto been much used: initially coal and later petroleum and natural gas as well. People had been burning coal for a long time, of course, but they’d been using it for heating and cooking, not as fuel for steam engines. Coal continues to be mined and used extensively, mostly to generate electricity these days. Oil was a latecomer to the party, but now completely dominates the transportation sector, amongst other things. Natural gas is a massive contributor to domestic and industrial energy use, both directly and via generated electricity.

What do all these energy sources have in common? They are non-renewable. The coal in the world right now is all the coal there is ever going to be, now that bacteria have evolved capable of digesting lignin. Once it’s gone, it’s gone. The same goes for oil and natural gas. Yes, there’s still a lot of it in the ground, but there’s a finite amount, and we’re getting through it at a stupendous rate. Naturally, the high-quality stuff that’s cheap and easy to access was extracted first, with the result that much of what is left is expensive, dangerous and hard to get at, and also of lower quality. The same goes, incidentally, for many other resources that we extract to feed the industrial economy; copper, for example.

Now the usual response to this issue is substitutability. A common lamp fuel used to be whale-oil; then it was found you could substitute kerosene, and get cheaper, brighter and less smelly lighting – good news for everyone, apart from the whaling industry. Similarly we used to power railways with steam; in most countries this has now been replaced by electricity, diesel, or a combination of the two. As the saying goes, the stone age didn’t end because we ran out of stones.

That all sounds reasonable, until you get down to specifics. Where are the cheap highly-concentrated energy sources we need if we’re going to keep the party going? Most of the suggested answers to this focus on generating electricity, and we certainly consume plenty of that, but even if the electricity generation problem were solved overnight, it would help less than you might think.

Let me wave a magic wand and remove all the technical obstacles from nuclear fusion as a power source. With a second wave of my wand I shall also replace all the existing power stations in the world with shiny new fusion plants overnight – using no money, energy, or natural resources in the process, because I’m in a generous mood. Where does that leave us?

As I discussed in a previous post, our economy is based on extracting raw materials, applying energy to those raw materials to create products, and shipping those products around the world for people to consume. Electricity “too cheap to meter” does essentially zero to help with transportation – as of this writing, it is not possible to buy a single electric lorry, anywhere – and not that much for the extraction or manufacturing processes. (Those hoping I will wave my wand a third time and remove the resource issues involved in all-electric transportation should consider this presentation. There are limits to my generosity.) It would be massively helpful for internet companies and aluminium-smelters, but not so much for the rest of the economy.

Economists tend to regard human ingenuity as the universal solvent, and plenty of it has been applied to oil and natural gas extraction in particular. The results have not been too encouraging, however. Traditionally, oil was extracted by finding a suitable reservoir of oil, drilling down into it, and getting the oil out ideally under its own pressure. That requires comparatively little investment to do, either financially or in terms of energy. Compare that with the outlay for something like the Deepwater Horizon, which went on to blow up and sink into the Gulf of Mexico.

A lot of energy and money goes into fracking, which involves drilling many short-lived wells, detonating explosives, and frantic pumping, all to extract oil that is too light to provide the diesel which is needed by much of our global transport fleet (to say nothing of agriculture or mining). It does not appear that anyone has ever managed to produce fracked oil cheaply enough to make a profit. To put it another way, when the price of oil is high enough for fracking to be profitable, oil is too expensive for the economy to be able to afford it.

Falling off a cliff is not a problem. The problem is hitting the ground.

Huge amounts of money and energy are being invested in fracking even though it is a losing proposition, simply because there is no alternative in sight. The spice must flow. But it is not hard to foresee the point at which it will have to cease. At that point we won’t even be able to run the economy at the rate we do now, let alone grow it exponentially.

Is perpetual growth a good thing?

As ever with questions like this, you need to ask: good for whom? A lot of people benefit from our current economic arrangements, although as I’ll discuss in a future post those benefits are by no means distributed equally. When the current arrangements go away, those people are going to suffer in proportion to how much they benefit at the moment.

Those people who are more or less disconnected from the global economic nexus will not be greatly inconvenienced. I don’t just mean undiscovered tribes in the Amazon rainforest. Those with access to local networks of economic production which can meet their basic needs will survive. Some of them will even thrive.

Economic growth causes an immense amount of collateral damage to the natural systems of the planet, and by its nature the longer it goes on the more damage it will do. When organic systems grow normally, their growth is limited. The illustration at the top of this post shows cancer cells multiplying: that is what unlimited growth looks like.

You hear a lot of people saying that we need to transition to a low-carbon economy. We are going to be doing that because physics demands it, and if physics and economics argue, physics will win. But as Wile E. Coyote reminds us, some transitions are more comfortable than others.

A moment ago I pointed out that we can all be placed on a spectrum, depending on how tightly integrated our lives are with the modern global economy. At one end might be a subsistence farmer in sub-Saharan Africa, at the other – well, most of us in “developed” countries, to a greater extent that we might like to acknowledge. Disentangling one’s life from the economic webs that surround us is not a quick or easy process, but anything you can do to nudge yourself in the direction of that African farmer is going to pay off down the road.

In the immortal words of John Michael Greer: “Collapse now, and avoid the rush.”

Comments are welcome, but I do pre-moderate them to make sure they comply with the house rules.

One thought on “On economic growth

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: