The No-Nonsense Guide to Degrowth and Sustainability. Wayne Ellwood
faces collapse. We’re hostage to the way our economy is structured. And we know what that means. We’ve seen ample evidence of the human pain and suffering that faltering growth can bring since the economic downturn of 2008. Mass unemployment, a shrinking tax base, slashed public services, shuttered factories and shops, increasing homelessness and hunger.
In the Eurozone, hard-pressed countries like Greece and Spain have been hammered by European Union austerity measures. The rationale is that short-term pain will bring long-term gain. In 2010 nearly a million Spaniards depended on the Catholic charity Caritas for food and the number has jumped since then. In that same year more than 22 per cent of Spanish households were living in poverty and nearly 600,000 of them had no income at all. With youth unemployment over 50 per cent, scavenging has become so common that the town of Girona has installed locks on supermarket garbage bins as a public health precaution.6 The situation is no better in Greece, where the recent financial crisis has caused around a quarter of the country’s workers to lose their jobs, driving thousands of protesters into the streets.
Relentless rise
The total value of goods and services produced worldwide doubled from 1991 to 2011 – to nearly $78 trillion. In the decade before the 2008 slump the global economy grew by an average 4% annually. Western industrial economies typically grew about 3% in the decade before the recession. But by 2011 that had fallen to just 1.6%. Growth in developing economies suffered less during the recent recession. They grew 6% annually in the decade before the 2008 recession and 6.2% in 2011.
Gross World Product, 1950-2011
Yet by any standard GDP is a faulty measure of prosperity. It distinguishes neither between the costs and benefits of growth nor between its quality and quantity. You might say it measures what can be counted rather than what counts, confusing ‘goods’ with ‘bads’. Any economic activity that has a price tag attached is rolled into the calculation of GDP. The cost of car accidents, pollution abatement, heart operations, cancer care, making weapons: they’re all included. For example, Hurricane Katrina, one of the worst natural disasters in American history, cost the US government an estimated $114 billion and resulted in scores of deaths, hundreds of homes destroyed and thousands of lives disrupted. No matter. It all helped to boost the US GDP. On the other hand, growth leaves out all kinds of good things that can’t be easily ‘monetized’ and absorbed by the market economy – for example, the value of housework and childcare, or the worth of clean air, or the aesthetic value of old-growth forests. The limits of GDP accounting and what constitutes ‘success’ in a growth economy will also be addressed in Chapter 6.
Exponential growth explained
When economists talk about growth what they really mean is exponential growth. If a number grows yearly by a certain fixed amount it will double in size after so many years. It all depends on the percentage growth rate: the higher the rate, the faster the doubling time. Statisticians use a rough method of measuring doubling times called the ‘rule of 70’. Divide the rate of growth into 70 and you’ll come up with the time needed for the initial quantity to double. If an economy is growing at 5 per cent a year, for example, it will take 14 years for it to double. An economy growing at 10 per cent will take 7 years to double. You see what exponential growth can do.
Let’s take China’s recent phenomenal growth to illustrate what this means in the real world. Over the past decade China’s economy has been growing by double digits. Recent turmoil in the global economy has knocked back GDP growth to just under eight per cent. Still, the country’s economy is doubling approximately every ten years. What does this mean in terms of resource consumption and pollution? Lester Brown of the Earth Policy Institute has crunched the numbers. China already consumes more grain, meat, coal and steel than the US – though on a per-capita basis China’s consumption is, of course, a lot less. However, Brown estimates that at current growth rates Chinese per-capita income will equal the US 2011 level by 2035. And when that happens? Assuming the Chinese will spend their income like Americans, Brown says that China would then consume 80 per cent as much paper as is produced globally today and 70 per cent of the yearly grain harvest. He also estimates the country would have 1.1 billion automobiles (the world now has just over a billion) and would need to pave two-thirds of its rice-growing land for roads and parking lots. To power this leap in consumption would require 85 billion barrels of oil a day (the world currently produces 86 billion barrels).
Oil consumption in the United States and China, 2010, with projections for 2035
Source: Earth Policy Institute
According to the Earth Policy Institute: ‘What China is teaching us is that the Western economic model – the fossil-fuel-based, automobile-centered, throwaway economy – will not work for the world. If it does not work for China, it will not work for India, which by 2035 is projected to have an even larger population than China. Nor will it work for the other three billion people in developing countries who are also dreaming the “American dream”. And, in an increasingly integrated global economy where we all depend on the same grain, oil, and steel, the Western economic model will no longer work for the industrial countries either.’7
It’s important to understand exponential growth because we don’t think about it in our normal fretting about GDP and it is not self-evident. When most of us think of growth we think of linear growth. Things increase incrementally but by a steady number so the amount being added is always constant. The number series 1,2,3,4,5,6 and so on is an example of linear growth. So is 2,4,6,8,10,12 etc. But exponential growth (also called geometric growth or sometimes compounding growth) is very different. An exponential growth rate of 100 per cent for example would look like this: 1,2,4,8,16,32,64,128 etc. Plotted on a graph the action starts slowly, and then skyrockets dramatically. It’s what investment advisors refer to as the ‘miracle of compound growth’. For example, if you invest $1,000 at a 4.5-per-cent annual interest rate, you’ll wind up with $1,045.94 at the end of one year. The second year’s interest is then 4.5 per cent of $1,045.94 and so on. At the end of 30 years you’d have a total of $3,847.70. But exponential growth really begins to explode as time increases. If somehow you discovered the fountain of youth and lived to 150, your initial $1,000 would have ballooned to $736,959.41!
The UK-based New Economics Foundation (NEF) uses the analogy of a hamster whose weight doubles weekly to illustrate the concept of compound growth.
‘From birth to puberty a hamster doubles its weight each week. If, then, instead of leveling-off in maturity as animals do, the hamster continued to double its weight each week, on its first birthday we would be facing a 9-billion-tonne hamster. If it kept eating at the same ratio of food to body weight, by then its daily intake would be greater than the total annual amount of maize produced worldwide. There is a reason that in nature things do not grow indefinitely.’8
In nature, of course, growth is inevitably constrained by physical limits and a complex interplay of natural relationships. If the food supply for one species increases, then the population of that species will multiply to take advantage of the available food. Soon more predators will be attracted to the expanding numbers and the growing population will eventually deplete the food source and numbers will plummet. Nature is a hard taskmaster. A boom is always tempered by a bust.
Malthus and Mill
Herein lies our dilemma. Our current economic model is based on the notion of endless growth. Yet we live in a bounded, finite world, a world with physical limits. In the end the two are irreconcilable. How can increases of population, industrial production and limitless consumption continue, forever, on a finite planet?
The Reverend Thomas Malthus was one of the first thinkers to address this question in An Essay on the Principle of Population, first published around 1800. Malthus, an Anglican