The end of growth: No denying this giant Ponzi scheme | RenewEconomy

The end of growth: No denying this giant Ponzi scheme

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It is happening now. People will argue oil price spikes are being caused by political unrest, not the underlying reality of peak oil. That food shortages are caused by market inefficiencies, not the reality of climate change and the broken model of oil dependent, non renewable industrial agriculture. The worse the crisis gets, the more fanciful the excuses will become.

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This is the third in a three-part series

In Part 1 of this series, I argued it was time to face reality that economic growth as a model of progress was terminally ill as we faced up to the limits of the planet. In Part 2, we looked at China as perhaps the most compelling example of both the previous benefits, and rapidly emerging challenges, of growth. China is such an interesting example because their rapid growth brings the challenges of resource constraint and environmental impacts into such stark contrast. So while they are pursuing “green growth” with gusto and will earn many benefits from doing so, they will in the end, like us, have to face the reality that economic growth has physical limits.

We can argue about what these limits are globally and when they will hit. We can debate our capacity to make the economy more efficient and for technology to transform industries, all of which we will do. But in the end we have to face the facts – the idea of infinite growth on a finite planet is quite delusional. Just do the math and ask yourself how big do you think the economy can get? Tim Jackson, author or Prosperity without Growth did this and concluded: “The global economy is almost five times the size it was half a century ago. If it continues to grow at the same rate the economy will be 80 times that size by the year 2100.”

But this is not one of those “our children’s children” issues. This is happening on our watch. The Global Footprint Network calculates that to support our current economy, we need around 150% of the available land and sea resources on planet earth. That means we’re already burning up our capital every day just to maintain our current state, let alone support any further growth. That’s why, as I argued in Part 1, what we have today is not growth, but more of a Ponzi scheme where we are living on our capital. We know how they end.

So ask yourself, even allowing for sensational improvements in efficiency and technology, even allowing for renewable energy revolution, how big can the economy get before the physical limits are hit – before we run out of capital to burn? Twice as big as the planet’s capacity? (This is forecast for around 2030) Three times? All the assumptions made in forecasting the economy and the future growth of China, India and others, which we blindly assume is where we are heading, assumes the economy will be around four times as big as today’s by 2050. So unless we can change the laws of physics, we’re certainly going to hit the wall in our lifetime.

Many argue, and I agree, that we are actually hitting it now. We see it in oil prices, food prices, climate impacts and so on. Highly respected investment guru Jeremy Grantham says the global trend of resource constraint is best understood through the shift in broad commodity prices we have seen in the last decade. He argues this is a new long term base line, not a temporary increase, and “is in fact a Paradigm Shift — perhaps the most important economic event since the Industrial Revolution.”

Despite the clear, rational logic of our situation, and the evidence mounting all around us, denial is and will continue to be strong, as we hit various individual limits. People will argue oil price spikes are being caused by political unrest, not the underlying reality of peak oil. That food shortages are caused by market inefficiencies, not the underlying reality of climate change and the broken model of oil dependent, non renewable industrial agriculture. The worse the crisis gets, the more fanciful the excuses will become. That is the nature of denial. Given this is a serious addiction we have developed, this denial will be strong.

The biggest example of denial today is that we can keep growth going by efficiency and “green growth” as advocated by a recent report from the UN that I covered in part 1. As I argued in part 2, there are certainly enormous opportunities in green business and clean tech. Opportunities that will bring great wealth to many people and great benefit to society. I encourage and celebrate each of these developments because each one will reduce the impact of the crisis and help us get through it faster.

But in the end, this is not philosophy – it’s physics and chemistry. So unless we can quickly move to an economy where all our needs are downloaded from iTunes, the limits will be reached.

And the evidence to date makes it clear we will not change until that crisis hits. So the crisis and then a crisis response, is inevitable. We will get through this crisis, because humans are creative, adaptable and smart, but we need to recognise what’s coming.

What does the future hold out the other side of the crisis? What does a post growth society look like? We will explore this in future columns, but let’s be clear this is not a new idea. When I was writing my book, The Great Disruption on these topics I was surprised to find just have far back the questioning of infinite growth goes. Back to Keynes, Adam Smith and even John Stuart Mill! (You can read more of that interesting history and about the Steady State economy on the CASSE website.)

In more recent times, many have been arguing the case, with Herman Daly, perhaps one of the longest serving advocates and one who has thought deeply about the practical implications of how a post growth economy would work. In recent years he has been joined by many others, including Tim Jackson, whom I referred to earlier, and Richard Heinberg, whose new book “The End of Growth” draws in the current debt crisis and explains how the world economy might work in a post growth world. The work of the New Economics Foundation is particularly interesting as they focus not just on what the world economy might look like but how we can get there from here.

The most important thing we have to understand today though is that the future will be very different from the picture being painted in most economic and political analysis. There is much excitement and opportunity to be had in the brave new world that will unfold instead, but we better get our thinking caps on. It’s coming a lot faster than most people think and will be the defining issue of the 21st century.

 

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