The End of Something But Surely Not History


Note: Here I argue that the economy cannot grow in real terms forever, due to ecological constraints. An old idea, but one that is continually dismissed.

Originally published:

When philosopher Francis Fukuyama wrote that liberal democracy heralds the ‘end of history’, neo-conservatives loved the idea, because then we could get on with business.

It was not the lofty notions of ‘liberal’ or ‘democracy’ that were seen as the intellectual victors. The real winner was the free market. Fukuyama wrote that history was now driven by the ‘satisfaction of sophisticated consumer demands’ and would end in ‘the ineluctable spread of consumerist Western culture’.

The neo-cons tell us that this is a good thing because unfettered free markets will bring wealth to all. Every soul in China, India and beyond will be lifted out of their miserable poverty and have flat-screen tv’s, air-conditioners and hybrid cars.

We have nothing to fear. Unlimited economic expansion will lift the rest of the world to our level. We will not fall to theirs.

This expansionist apple-cart is tipping over, for the simple reason that we’ve run into basic math. If you keep subtracting finite resources, eventually you’ll end up with zero.

Evidence that the economy faces hard constraints surrounds us.

The fish are almost gone. Virtually all credible science on the issue predicts the collapse of every major fishery in the next fifty years. What happened to the cod in Newfoundland is happening all over the oceans.

Food from farms isn’t disappearing, but increasingly is in short supply. Food riots over high prices are becoming common, and grain stores are at all-time lows. Once-fertile land shows the stress of the Green Revolution, a farming system that requires too many inputs from decreasing supplies of fertilizers, pesticides and oil-based energy.

Even water is running out. Farmers  dig a kilometer deep around Beijing to find it as the water tables drop, and in North America the vast Midwestern aquifer is disappearing beneath our feet.

If peak oil is not upon us, it surely is just around the corner. SUV’S are going out of fashion faster than bellbottoms did in the Eighties. The era of cheap fossil fuel is at an end.

Global warming imposes a different constraint. Burning all that oil – or replacing it with coal – looks like a worse idea every day.  The atmosphere feels finite. It really is thin as saran wrap on a beach ball.

These issues are related. Crops need fertilizer and water. Fertilizers need oil.  Global warming brings drought to Australia’s wheat-fields. Food competes with biofuels.

These are not isolated incidents, but connected signs that something is seriously wrong with the expansionist thesis.

Even a serious thinker like John Kenneth Galbraith was ridiculed when he proposed zero-growth economics as the only sustainable model. Conservative economists dismissed his liberal views as naive. In their view, sophisticated scholars recognized that economies float free of the merely physical, finite or earthly. Human creativity will respond in ways that keep economies booming.

It’s true that we humans are creative. Techno-fixes for some problems are available. I’m a venture capitalist in renewable energy and I wouldn’t invest if I didn’t see growth in that area. Fish farms may be growth sectors, as well as agriculture with higher-yielding crops.

But these options are temporary band-aids. Fish farms need food. Higher-yielding crops need fertilizer. Renewables are coming online far too slowly to mitigate global warming.

It’s true that the market responds to scarcity, but it does so by limiting access to the resource. The advent of the hundred dollar tuna steak – or the two hundred dollar barrel of oil – will slow consumption, but then these commodities such as these will be reserved for the wealthy as they disappear.

Scarcity provides opportunity, inspires creativity and creates new industries and smart money will find these.

But that is not the neo-con promise that the economy itself will always grow. The promise of real growth means more stuff for everyone – more air conditioners, more cars and more tuna. The promise of creative solutions to resource scarcity will be viable only in the context of a new economic paradigm, based on a different cutting up of a finite resource pie.

The fact of basic constraint on growth seems obvious to most Canadians but it’s vigorously denied by the business community, ignored by most serious economists and avoided by all politicians.

Like the crowds in the fable The Emperor has No Clothes, the professional classes have agreed to the collective illusion that our economic model is fine, and continued growth won’t  land us in deep trouble.

Growth is a requirement of our economic model. The moment capital cannot generate a real return it evaporates. Factories close, stocks plummet, and the economic machine breaks down.

What does zero-growth imply?  From a practical perspective, it means that all goods are recycled and only sustainable amounts are taken from our forests, oceans and farms.

It means we must finally do away with the myth of the free market. Its always been a myth, conveniently trotted out when regulation gets in the way of profit. We’ve always had contract law, and regulated trade based on perceived moral goods. You can’t sell cocaine, for example, or break a promise without penalty. That is a regulated market. What zero-growth means is just further regulation of other areas of interest.

We are beginning to see the sorts of options available for this kind of regulation as it relates to carbon emissions. We can tax emissions, set up a cap-and-trade market, strictly regulate or we can settle on a mix of these options. But we cannot let the market run on unhindered.

At its most basic, our economic system is premised on the idea that capital will always grow in real terms. That will no longer be the case – some capital will increase, some will not, but the total average growth of capital will be zero. It is this most basic shift in thinking that will be most difficult to accommodate.

There are no easy solutions, but then there are no options, either. Zero economic growth is coming, and we need to start talking about it if we are to land gently.

Share   Comment (0)

Leave a Reply

Your email address will not be published. Required fields are marked *