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The Strange Necessity of Infinite Economic Growth
Nov 13, 2018
Despite intuitive claims to the contrary, infinite economic growth is not just possible — it’s essential for human flourishing.
In an article for Foreign Policy, the anthropologist Jason Hickel has recently called for an end to global economic growth, as the only way to avoid total ecological destruction. He argues that so called ‘green growth’ — the idea that we can decouple intensive resource use from economic growth — is a myth. George Monbiot has shared a similar concern, echoing previous warnings by influential writers Naomi Klein and Paul Ehrlich.
I’m going to focus on Hickel’s work, since it contains several related misconceptions that are nonetheless highly intuitive. In his article and across his other writings, Hickel makes three key basic claims:
There are hard physical limits to how efficiently we can use resources. It follows that infinite economic growth is impossible on our physically finite planet.
Empirical studies are showing that we cannot ‘decouple’ resource use from economic growth, meaning we will run out of resources if economic growth continues.
We can maintain high living standards even with zero global economic growth.
Let’s look at each claim in turn.
In his article, Hickel claims that there are strict physical limits to how efficiently we can use resources, which means pursuing economic growth in the form of rising GDP will eventually exhaust all resources on the planet. Hickel relies on conclusions from three empirical studies that purport to demonstrate this, which I will unpack in my response to his second claim. But here I just want to clarify what exactly economic growth is. By doing so we can understand why economic growth does not in principle depend on unsustainable resource depletion, before examining if such future growth is an empirical plausibility.
‘Economic growth’ refers to the increase in, and improvement of, goods and services that are useful to human beings. This is often conflated with what is called ‘extractivism’: which is the obviously finite process of extracting material resources from the Earth to sell on the market. The former is a necessary process for the continuous flourishing of humanity, the latter erroneously conceives of nature as, in Naomi Klein’s words, a ‘bottomless vending machine’.
Since the Earth consists only of a finite amount of matter and energy, we clearly cannot indefinitely consume its contents without eventually drowning in waste or starving to death. But even this obvious insight contains a misconception. We never actually ‘consume’ matter and energy in the first place. We are forever bound by the first law of thermodynamics, which dictates that matter and energy are never created or destroyed, only transformed.
This brings us back to economic growth. Fundamentally, it is the process of human beings transforming matter and energy into more valuable forms via the development of theoretical and practical knowledge. It is ‘economic value’ which increases exponentially, measured (very)roughly by GDP. The crucial point is that while the extraction of finite physical resources cannot increase indefinitely on a finite planet, economic growth actually can.
Steven Pinker describes the infinite potential of economic growth eloquently in his book Enlightenment Now:
‘…it’s a fallacy to think that people “need resources” in the first place. They need ways of growing food, moving around, lighting their homes, displaying information, and other sources of well-being. They satisfy these needs with ideas: with recipes, formulas, techniques, blueprints, and algorithms for manipulating the physical world to give them what they want. The human mind, with its recursive combinatorial power, can explore an infinite space of ideas, and is not limited by the quantity of any particular kind of stuff in the ground.’
Of course, it’s abundantly clear from history that most civilisations have failed miserably to generate and implement the requisite knowledge to provide for the needs and desires of their citizens. This brings us to Hickel’s empirical claim: that our own current trajectory is leading us to disaster.
One might reasonably suspect that the promise of infinite economic growth would only be plausible for a sufficiently advanced civilisation — particularly one that has managed to wean itself off fossil fuels. We should therefore ask if decoupling economic growth from resource use is likely to be feasible given our relatively primitive level of technological development.
On Hickel’s account, things are not looking good. He cites several studies which suggest there is no way to avoid running out of resources if we continue with our current rate of economic growth.
The main problem with these studies is that they tend to presume a certain fixed ‘biocapacity’ of the Earth. This concept and the corresponding notion of humanity’s ‘ecological footprint’ have many problems, the most fundamental of which is that they depend arbitrarily on our current level of scientific and technological development. This is because the maximum level of human consumption that our planet can support is not fixed by some natural law — it depends entirely on the sophistication of our technology to convert raw materials efficiently into life-supporting forms.
The very same lump of matter and energy has vastly different properties to us humans depending on the level of and quality of our knowledge. Major scientific breakthroughs therefore allow us to do dramatically more with less. One kilogram of uranium contains two to three million times more energy than the same amount of coal or oil, but this fact went completely unnoticed by everyone up until fundamental breakthroughs in physics in the 20th century.
Similarly, the invention of desalination techniques unlocked the effectively boundless supply of seawater. While the rest of the Middle East suffers water shortages, Israel has a surplus — thanks to advances that have reduced the costs of desalination by two-thirds since 1990.
One study mentioned by Hickel calculated that we’ll be using 95 billion metric tons of resources globally in 2050. But this figure is meaningless without a corresponding estimate of what fraction that is of the Earth’s total resources. And we can’t know what Earth’s total resources are because we cannot predict future fundamental technological advances.
At one point Hickel declares that the sustainable level of global resource use is about 50 billion metric tons a year, without citing any source or justification. The authors of the 2012 study he references cited this same figure as a possible upper limit on global resource extraction, being roughly the level of extraction there was in 1992. But why choose this year? Because that was the year of the first United Nations Conference on Environment and Development. In other words, it was picked out of a hat.
Even where these studies make allowances for future improvements in how efficiently we use resources, they only allow for greater efficiency in the use of resources we currently know about. If the future is anything like the past, we will discover whole new ways to build and power things, and replace whole classes of raw materials we currently depend upon.
Then there’s the fact that these studies’ predicted improvements in resource efficiency are themselves woefully pessimistic. The most optimistic prediction in the studies Hickel mentions is that resource efficiency will double by 2050. But almost any consumer product we use today requires far fewer resources to build and run than their equivalent 32 years ago. While it’s a somewhat trite example, take the iPhone. This one product has replaced landline push-button phones, pagers, cameras and camcorders, calendars, alarm clocks, audio-recorders, flashlights, maps, GPS, credit cards, and more. We should only expect this kind of dematerialization to accelerate over the next 32 years, given the rapid advances being made in nanotechnology and materials science.
This fundamental fallacy driving the pessimism of these studies was eloquently captured by David Deutsh in his book The Beginning of Infinity. In the chapter ‘Unsustainable’, Deutsch reflects on Paul Erlich warning his high school class in 1971 of the impending global ecological collapse, a tragedy which never came to pass:
‘Ehrlich thought that he was investigating a planet’s physical resources and predicting their rate of decline. In fact he was prophesying the content of future knowledge. And, by envisaging a future in which only the best knowledge of 1971 was deployed, he was implicitly assuming that only a small and rapidly dwindling set of problems would ever be solved again.’
It’s perfectly acceptable and prudent to make predictions about future resource scarcity, so long as you remember that such predictions are based on our current level of scientific knowledge. Such analyses play a crucial role in motivating us to invest more in advancing our knowledge, but Hickel mistakenly interprets their findings as fatalistic signs that we must cease economic growth altogether. And this, as I’ll show below, is simply not an option.
How might the world look if Hickel has his way, and global economic growth is brought to a halt? He thinks we’ll be just fine, claiming that ‘our planet provides more than enough for all of us; the problem is that its resources are not equally distributed.’
It’s a claim often made: that the world is plenty rich enough for everyone, if only those wealthy fat-cats had the empathy to share their billions with the rest of humanity. Recently the distinguished British physicist Sir Martin Rees similarly exclaimed:
‘We have a billion people in the world in abject poverty, which could be alleviated by the wealth of the thousand richest people on the planet. That we allow that to continue surely says something significant about how much — or little — moral progress we’ve made since medieval times.’
In his critique of Hickel’s argument, Noah Smith dismissed the panacea of global wealth redistribution as a political and logistical impossibility. In his response, Hickel reassured Smith that we can indeed distribute global wealth with policies like introducing a global minimum wage, democratizing global economic governance institutions, implementing subsidies and tariffs in developing countries, cancelling national debts, or rolling out a global basic income.
Hickel appreciates the political difficulties of implementing these policies, but the more important question is whether such measures can actually achieve their intended aims in principle.
The notion that redistributing world income is the solution to global poverty is both intuitively plausible and spectacularly false. It makes sense to us on an emotional level when we are confronted with images of billionaires swanning around on mega-yachts on the Mediterranean, juxtaposed with children starving in a war-induced famine in Yemen. But we need to put this visceral imagery aside for a moment and look at some stark numerical realities.
How much wealth is there in the whole world? Credit Suisse puts it currently at around $317 trillion USD. How much would each person in the world have if that were divided equally among all 7.6 billion of us? $41,710.
To be clear, this is the amount of cash each human being would have if everything of economic value (houses, cars, furniture, spectacles, intellectual property, everything) was traded to aliens for cash in return. (Try to ignore the logical and inflationary issues of aliens forging vast amounts of US currency — it’s just a thought experiment).
As is comically depicted by Tim Urban on his blog Wait But Why, we would then all just be huddled naked together next to our equal piles of cash, which we would then presumably try to eat or burn for warmth. But suppose we could actually buy goods and services back from the aliens, at their current day prices. What could each of us afford? Perhaps a new car and some tanks of fuel, enough basic food supplies for a few years, a decent tent, warm clothes, and other survival equipment. That’s about it.
No houses. No electricity. No internet. No schools, no hospitals, no government.
In other words, we would all be living in what is generally considered today to be dire poverty. And this is presuming that all wealth is somehow convertible into cash, which it isn’t. Thus the aliens. In reality the vast majority of economic wealth does not exist in fungible, divisible, monetary form.
Take the approximately one trillion dollars of value that the company Apple represents. You can’t divide up ownership of such a company equally among the world population and expect it to still exist in any recognisable form. And a company is one of the more abstract kinds of things one can own. Forget about divvying up something more physically tangible like a toy-making factory or a uranium mine.
Economic wealth is something that needs to be created, by people, wherever they are situated. People in impoverished countries need better knowledge, skills, and institutions to create more economic wealth, if they are going to reach the living standards enjoyed in OECD countries. Those in advanced economies need to keep increasing their wealth in order to be able to tackle the increasingly complex challenges they’ll be facing in the future.
This doesn’t mean that we shouldn’t give generously to people in need. But we need to keep in mind the end goal: assisting them to achieve sustainable economic growth. Indeed merely redistributing wealth can end up crowding out the development of sustainable local economies, as the philosopher Larry Temkin has discussed.
Going forward, there is no alternative to huge increases in global economic growth. Contrary to our strong intuitions, infinite economic growth is both logically and practically possible on our finite planet, and utterly necessary if we want to provide every person on Earth with a decent lifestyle. We should not be taken in by prophesies to the contrary, which have come and gone since the beginning of human progress itself.